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HF 2943

as introduced - 89th Legislature (2015 - 2016) Posted on 03/10/2016 03:36pm

KEY: stricken = removed, old language.
underscored = added, new language.

Bill Text Versions

Engrossments
Introduction Posted on 03/10/2016

Current Version - as introduced

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A bill for an act
relating to taxation; making policy changes to income and corporate franchise
taxes, property taxes, local government aids, and other miscellaneous taxes and
tax provisions; amending Minnesota Statutes 2014, sections 270.12, subdivision
4; 273.372, subdivision 1; 289A.09, subdivision 2; 289A.18, subdivision 1,
by adding a subdivision; 289A.20, subdivision 2; 289A.31, subdivision 1;
289A.35; 289A.37, subdivision 2; 290.068, subdivision 2; 290.31, subdivision 1;
477A.0124, by adding a subdivision; proposing coding for new law in Minnesota
Statutes, chapter 273; repealing Minnesota Rules, parts 8092.1400; 8100.0700.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

ARTICLE 1

INCOME AND CORPORATE FRANCHISE TAXES

Section 1.

Minnesota Statutes 2014, section 289A.09, subdivision 2, is amended to read:


Subd. 2.

Withholding statement.

(a) A person required to deduct and withhold
from an employee a tax under section 290.92, subdivision 2a or 3, or 290.923, subdivision
2
, or who would have been required to deduct and withhold a tax under section 290.92,
subdivision 2a
or 3, or persons required to withhold tax under section 290.923, subdivision
2
, determined without regard to section 290.92, subdivision 19, if the employee or payee
had claimed no more than one withholding exemption, or who paid wages or made
payments not subject to withholding under section 290.92, subdivision 2a or 3, or 290.923,
subdivision 2
, to an employee or person receiving royalty payments in excess of $600,
or who has entered into a voluntary withholding agreement with a payee under section
290.92, subdivision 20, must give every employee or person receiving royalty payments in
respect to the remuneration paid by the person to the employee or person receiving royalty
payments during the calendar year, on or before January 31 of the succeeding year, or, if
employment is terminated before the close of the calendar year, within 30 days after the
date of receipt of a written request from the employee if the 30-day period ends before
January 31, a written statement showing the following:

(1) name of the person;

(2) the name of the employee or payee and the employee's or payee's Social Security
account number;

(3) the total amount of wages as that term is defined in section 290.92, subdivision
1
, paragraph (1); the total amount of remuneration subject to withholding under section
290.92, subdivision 20; the amount of sick pay as required under section 6051(f) of the
Internal Revenue Code; and the amount of royalties subject to withholding under section
290.923, subdivision 2; and

(4) the total amount deducted and withheld as tax under section 290.92, subdivision
2a
or 3, or 290.923, subdivision 2.

(b) The statement required to be furnished by paragraph (a) with respect to any
remuneration must be furnished at those times, must contain the information required, and
must be in the form the commissioner prescribes.

(c) The commissioner may prescribe rules providing for reasonable extensions of
time, not in excess of 30 days, to employers or payers required to give the statements to
their employees or payees under this subdivision.

(d) A duplicate of any statement made under this subdivision and in accordance
with rules prescribed by the commissioner, along with a reconciliation in the form the
commissioner prescribes of the statements for the calendar year, including a reconciliation
of the quarterly returns required to be filed under subdivision 1, must be filed with the
commissioner on or before deleted text begin February 28deleted text end new text begin January 31new text end of the year after the payments were
made.

(e) If an employer cancels the employer's Minnesota withholding account number
required by section 290.92, subdivision 24, the information required by paragraph (d),
must be filed with the commissioner within 30 days of the end of the quarter in which
the employer cancels its account number.

(f) The employer must submit the statements required to be sent to the commissioner
in the same manner required to satisfy the federal reporting requirements of section
6011(e) of the Internal Revenue Code and the regulations issued under it. An employer
must submit statements to the commissioner required by this section by electronic means
if the employer is required to send more than 25 statements to the commissioner, even
though the employer is not required to submit the returns federally by electronic means.
For statements issued for wages paid in 2011 and after, the threshold is ten. All statements
issued for withholding required under section 290.92 are aggregated for purposes of
determining whether the electronic submission threshold is met.

(g) A "third-party bulk filer" as defined in section 290.92, subdivision 30, paragraph
(a), clause (2), must submit the returns required by this subdivision and subdivision 1,
paragraph (a), with the commissioner by electronic means.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for wages paid after December 31,
2015.
new text end

Sec. 2.

Minnesota Statutes 2014, section 289A.18, is amended by adding a subdivision
to read:


new text begin Subd. 2a. new text end

new text begin Annual withholding returns; eligible employers. new text end

new text begin (a) An employer who
deducts and withholds an amount required to be withheld by section 290.92 may file an
annual return and make an annual payment of the amount required to be deducted and
withheld for that calendar year if the employer has received a notification under paragraph
(b). The ability to elect to file an annual return continues through the year following the
year where an employer is required to deduct and withhold more than $500.
new text end

new text begin (b) The commissioner is authorized to determine which employers are eligible to
file an annual return and to notify employers who newly qualify to file an annual return
because the amount an employer is required to deduct and withhold for that calendar year
is $500 or less based on the most recent period of four consecutive quarters for which the
commissioner has compiled data on that employer's withholding tax for that period. At the
time of notification, eligible employers may still decide to file returns and make deposits
quarterly. An employer who decides to file returns and make deposits quarterly is required
to make all returns and deposits required by this chapter and, notwithstanding paragraph
(a), is subject to all applicable penalties for failing to do so.
new text end

new text begin (c) If, at the end of any calendar month other than the last month of the calendar
year, the aggregate amount of undeposited tax withheld by an employer who has elected to
file an annual return exceeds $500, the employer must deposit the aggregate amount with
the commissioner within 30 days of the end of the calendar month.
new text end

new text begin (d) If an employer who has elected to file an annual return ceases to pay wages
for which withholding is required, the employer must file a final return and deposit any
undeposited tax within 30 days of the end of the calendar month following the month in
which the employer ceased paying wages.
new text end

new text begin (e) An employer not subject to paragraph (c) or (d) who elects to file an annual
return must file the return and pay the tax not previously deposited before February 1 of
the year following the year in which the tax was withheld.
new text end

new text begin (f) A notification to an employer regarding eligibility to file an annual return under
Minnesota Rules, part 8092.1400, is considered a notification under paragraph (a).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015.
new text end

Sec. 3.

Minnesota Statutes 2014, section 289A.20, subdivision 2, is amended to read:


Subd. 2.

Withholding from wages, entertainer withholding, withholding
from payments to out-of-state contractors, and withholding by partnerships, small
business corporations, trusts.

(a) new text begin Except as provided in section 289A.18, subdivision 2a,
new text end a tax required to be deducted and withheld during the quarterly period must be paid on
or before the last day of the month following the close of the quarterly period, unless an
earlier time for payment is provided. A tax required to be deducted and withheld from
compensation of an entertainer and from a payment to an out-of-state contractor must be
paid on or before the date the return for such tax must be filed under section 289A.18,
subdivision 2
. Taxes required to be deducted and withheld by partnerships, S corporations,
and trusts must be paid on a quarterly basis as estimated taxes under section 289A.25 for
partnerships and trusts and under section 289A.26 for S corporations.

(b) An employer who, during the previous quarter, withheld more than $1,500 of
tax under section 290.92, subdivision 2a or 3, or 290.923, subdivision 2, must deposit tax
withheld under those sections with the commissioner within the time allowed to deposit
the employer's federal withheld employment taxes under Code of Federal Regulations,
title 26, section 31.6302-1, as amended through December 31, 2001, without regard to the
safe harbor or de minimis rules in paragraph (f) or the one-day rule in paragraph (c)(3).
Taxpayers must submit a copy of their federal notice of deposit status to the commissioner
upon request by the commissioner.

(c) The commissioner may prescribe by rule other return periods or deposit
requirements. In prescribing the reporting period, the commissioner may classify payors
according to the amount of their tax liability and may adopt an appropriate reporting
period for the class that the commissioner judges to be consistent with efficient tax
collection. In no event will the duration of the reporting period be more than one year.

(d) If less than the correct amount of tax is paid to the commissioner, proper
adjustments with respect to both the tax and the amount to be deducted must be made,
without interest, in the manner and at the times the commissioner prescribes. If the
underpayment cannot be adjusted, the amount of the underpayment will be assessed and
collected in the manner and at the times the commissioner prescribes.

(e) If the aggregate amount of the tax withheld is $10,000 or more in a fiscal year
ending June 30, the employer must remit each required deposit for wages paid in all
subsequent calendar years by electronic means.

(f) A third-party bulk filer as defined in section 290.92, subdivision 30, paragraph
(a), clause (2), who remits withholding deposits must remit all deposits by electronic
means as provided in paragraph (e), regardless of the aggregate amount of tax withheld
during a fiscal year for all of the employers.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015.
new text end

Sec. 4.

Minnesota Statutes 2014, section 289A.31, subdivision 1, is amended to read:


Subdivision 1.

Individual income, fiduciary income, mining company, corporate
franchise, and entertainment taxes.

(a) Individual income, fiduciary income, mining
company, and corporate franchise taxes, and interest and penalties, must be paid by the
taxpayer upon whom the tax is imposed, except in the following cases:

(1) The tax due from a decedent for that part of the taxable year in which the
decedent died during which the decedent was alive and the taxes, interest, and penalty
due for the prior years must be paid by the decedent's personal representative, if any.
If there is no personal representative, the taxes, interest, and penalty must be paid by
the transferees, as defined in section 270C.58, subdivision 3, to the extent they receive
property from the decedent;

(2) The tax due from an infant or other incompetent person must be paid by the
person's guardian or other person authorized or permitted by law to act for the person;

(3) The tax due from the estate of a decedent must be paid by the estate's personal
representative;

(4) The tax due from a trust, including those within the definition of a corporation, as
defined in section 290.01, subdivision 4, must be paid by a trustee; and

(5) The tax due from a taxpayer whose business or property is in charge of a receiver,
trustee in bankruptcy, assignee, or other conservator, must be paid by the person in charge of
the business or property so far as the tax is due to the income from the business or property.

(b) Entertainment taxes are the joint and several liability of the entertainer and the
entertainment entity. The payor is liable to the state for the payment of the tax required to
be deducted and withheld under section 290.9201, subdivision 7, and is not liable to the
entertainer for the amount of the payment.

(c) The deleted text begin taxdeleted text end new text begin taxesnew text end imposed under deleted text begin sectiondeleted text end new text begin sections 289A.35 andnew text end 290.0922 on
partnerships deleted text begin isdeleted text end new text begin arenew text end the joint and several liability of the partnership and the general partners.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2014, section 289A.35, is amended to read:


289A.35 ASSESSMENTS ON RETURNS.

(a) The commissioner may audit and adjust the taxpayer's computation of federal
taxable income, items of federal tax preferences, or federal credit amounts to make them
conform with the provisions of chapter 290 or section 298.01. If a return has been filed,
the commissioner shall enter the liability reported on the return and may make any audit
or investigation that is considered necessary.

new text begin (b) Upon petition by a taxpayer, and when the commissioner determines that it is in
the best interest of the state, the commissioner may allow S corporations and partnerships
to receive orders of assessment issued under section 270C.33, subdivision 4, on behalf
of their owners, and to pay liabilities shown on such orders. In such cases, the owners'
liability must be calculated using the method provided in section 289A.08, subdivision 7,
paragraph (b).
new text end

new text begin (c) A taxpayer may petition the commissioner for the use of the method described
in paragraph (b) after the taxpayer is notified that an audit has been initiated and before
an order of assessment has been issued.
new text end

new text begin (d) A determination of the commissioner under paragraph (b) to grant or deny the
petition of a taxpayer cannot be appealed to the Tax Court or any other court.
new text end

deleted text begin (b)deleted text end new text begin (e)new text end The commissioner may audit and adjust the taxpayer's computation of
tax under chapter 291. In the case of a return filed pursuant to section 289A.10, the
commissioner shall notify the estate no later than nine months after the filing date, as
provided by section 289A.38, subdivision 2, whether the return is under examination
or the return has been processed as filed.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 6.

Minnesota Statutes 2014, section 290.068, subdivision 2, is amended to read:


Subd. 2.

Definitions.

For purposes of this section, the following terms have the
meanings given.

(a) "Qualified research expenses" means (i) qualified research expenses and basic
research payments as defined in section 41(b) and (e) of the Internal Revenue Code, except
it does not include expenses incurred for qualified research or basic research conducted
outside the state of Minnesota pursuant to section 41(d) and (e) of the Internal Revenue
Code; and (ii) contributions to a nonprofit corporation established and operated pursuant
to the provisions of chapter 317A for the purpose of promoting the establishment and
expansion of business in this state, provided the contributions are invested by the nonprofit
corporation for the purpose of providing funds for small, technologically innovative
enterprises in Minnesota during the early stages of their development.

(b) "Qualified research" means qualified research as defined in section 41(d) of the
Internal Revenue Code, except that the term does not include qualified research conducted
outside the state of Minnesota.

(c) "Base amount" means base amount as defined in section 41(c) of the Internal
Revenue Code, except that the average annual gross receipts new text begin and aggregate gross receipts
new text end must be calculated using Minnesota sales or receipts under section 290.191 and the
definitions contained in deleted text begin clausesdeleted text end new text begin paragraphsnew text end (a) and (b) shall apply.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 7.

Minnesota Statutes 2014, section 290.31, subdivision 1, is amended to read:


Subdivision 1.

Partners, not partnership, subject to tax.

new text begin Except as provided
under section 289A.35, paragraph (b),
new text end a partnership as such shall not be subject to the
income tax imposed by this chapter, but is subject to the tax imposed under section
290.0922. Persons carrying on business as partners shall be liable for income tax only
in their separate or individual capacities.

Sec. 8. new text begin REPEALER.
new text end

new text begin Minnesota Rules, part 8092.1400, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015, except that notifications from the Department of Revenue to
employers regarding eligibility to file an annual return for taxes withheld in calendar
year 2016 remain in force.
new text end

ARTICLE 2

PROPERTY TAX AND LOCAL AIDS

Section 1.

Minnesota Statutes 2014, section 270.12, subdivision 4, is amended to read:


Subd. 4.

Public utility property.

For purposes of equalization only, public utility
personal property shall be treated as a separate class of property.new text begin After making the
apportionment provided in Minnesota Rules, part 8100.0600, the commissioner must
equalize the values of the operating property to the level accepted by the State Board of
Equalization if the appropriate sales ratio for each county, as conducted by the Department
of Revenue pursuant to subdivision 2, clause (6), is outside the range accepted by the State
Board of Equalization. The commissioner must not equalize the value of the operating
property if the sales ratio determined pursuant to this subdivision is within the range
accepted by the State Board of Equalization.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2016.
new text end

Sec. 2.

Minnesota Statutes 2014, section 273.372, subdivision 1, is amended to read:


Subdivision 1.

Scope.

(a) As provided in this section, an appeal by a utility or
railroad company concerning property for which the commissioner of revenue has provided
the city or county assessor with valuations by order, or for which the commissioner
has recommended values to the city or county assessor, must be brought against the
commissionerdeleted text begin ,deleted text end and deleted text begin not againstdeleted text end the county or taxing district where the property is located.
new text begin Service must be made on the commissioner only, and not on the county or taxing district.
new text end

(b) This section governs administrative appeals and appeals to court of a claim that
utility or railroad operating property has been partially, unfairly, or unequally assessed,
or assessed at a valuation greater than its real or actual value, misclassified, or that the
property is exempt. This section applies only to property described in sections 270.81,
subdivision 1
, 273.33, 273.35, 273.36, and 273.37, and only with regard to taxable net tax
capacities that have been provided to the city or county by the commissioner and which
have not been changed by city or county. If the taxable net tax capacity being appealed is
not the taxable net tax capacity established by the commissioner, or if the appeal claims
that the tax rate applied against the parcel is incorrect, or that the tax has been paid, this
section does not apply.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for appeals of valuations made in
assessment year 2017 and thereafter.
new text end

Sec. 3.

new text begin [273.88] EQUALIZATION OF PUBLIC UTILITY STRUCTURES.
new text end

new text begin After making the apportionment provided in Minnesota Rules, part 8100.0600, the
commissioner must equalize the values of the operating structures to the level accepted by
the State Board of Equalization if the appropriate sales ratio for each county, as conducted
by the Department of Revenue pursuant to section 270.12, subdivision 2, clause (6), is
outside the range accepted by the State Board of Equalization. The commissioner must
not equalize the value of the operating structures if the sales ratio determined pursuant to
this subdivision is within the range accepted by the State Board of Equalization.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2016.
new text end

Sec. 4.

Minnesota Statutes 2014, section 477A.0124, is amended by adding a
subdivision to read:


new text begin Subd. 7. new text end

new text begin County aid calculations. new text end

new text begin Data used in calculating aids to counties under
this section shall be the most recently available data as of January 1 in the year in which
the aid is calculated.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with aid payable in 2017.
new text end

Sec. 5. new text begin REPEALER.
new text end

new text begin Minnesota Rules, part 8100.0700, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2016.
new text end

ARTICLE 3

MISCELLANEOUS

Section 1.

Minnesota Statutes 2014, section 289A.18, subdivision 1, is amended to read:


Subdivision 1.

Individual income, fiduciary income, corporate franchise, and
entertainment taxes; partnership and S corporation returns; information returns;
mining company returns.

The returns required to be made under sections 289A.08 and
289A.12 must be filed at the following times:

(1) returns made on the basis of the calendar year must be filed on April 15 following
the close of the calendar year, except that returns of corporationsnew text begin and partnershipsnew text end must be
filed on the due date for filing the federal income tax return;

(2) returns made on the basis of the fiscal year must be filed on the 15th day of the
fourth month following the close of the fiscal year, except that returns of corporationsnew text begin and
partnerships
new text end must be filed on the due date for filing the federal income tax return;

(3) returns for a fractional part of a year must be filed on the due date for filing the
federal income tax return;

(4) in the case of a final return of a decedent for a fractional part of a year, the return
must be filed on the 15th day of the fourth month following the close of the 12-month
period that began with the first day of that fractional part of a year;

(5) in the case of the return of a cooperative association, returns must be filed on or
before the 15th day of the ninth month following the close of the taxable year;

(6) if a corporation has been divested from a unitary group and files a return for
a fractional part of a year in which it was a member of a unitary business that files a
combined report under section 290.17, subdivision 4, the divested corporation's return
must be filed on the 15th day of the third month following the close of the common
accounting period that includes the fractional year;

(7) returns of entertainment entities must be filed on April 15 following the close of
the calendar year;

(8) returns required to be filed under section 289A.08, subdivision 4, must be filed
on the 15th day of the fifth month following the close of the taxable year;

(9) returns of mining companies must be filed on May 1 following the close of the
calendar year; and

(10) returns required to be filed with the commissioner under section 289A.12,
subdivision 2
, 4 to 10, or 16 must be filed within 30 days after being demanded by the
commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2014, section 289A.37, subdivision 2, is amended to read:


Subd. 2.

Erroneous refunds.

deleted text begin An erroneous refund is considered an underpayment
of tax on the date made. An assessment of a deficiency arising out of an erroneous refund
may be made at any time within two years from the making of the refund. If part of the
refund was induced by fraud or misrepresentation of a material fact, the assessment may
be made at any time.
deleted text end new text begin (a) Except as provided in paragraph (b), an erroneous refund occurs
when the commissioner issues a payment to a person that exceeds the amount the person
is entitled to receive under law. An erroneous refund is considered an underpayment
of tax on the date issued.
new text end

new text begin (b) To the extent that the amount paid does not exceed the amount claimed by the
taxpayer, an erroneous refund does not include the following:
new text end

new text begin (1) any amount of a refund or credit paid pursuant to a claim for refund filed by
a taxpayer, including but not limited to refunds of claims made under section 290.06,
subdivision 23; 290.067; 290.0671; 290.0672; 290.0674; 290.0675; 290.0677; 290.068;
290.0681; or 290.0692; or chapter 290A; or
new text end

new text begin (2) any amount paid pursuant to a claim for refund of an overpayment of tax filed
by a taxpayer.
new text end

new text begin (c) The commissioner may make an assessment to recover an erroneous refund at
any time within two years from the issuance of the erroneous refund. If all or part of
the erroneous refund was induced by fraud or misrepresentation of a material fact, the
assessment may be made at any time.
new text end

new text begin (d) Assessments of amounts that are not erroneous refunds under paragraph (b)
must be conducted under section 289A.38.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies retroactively to all refunds issued on, before, or after that date, but does not apply to
the refunds at issue in Connexus Energy et al. v. Commissioner of Revenue, 868 N.W.2d
234 (Minn. 2015). Notwithstanding any law to the contrary, the changes in this section do
not invalidate any assessments made by the commissioner prior to this effective date.
new text end