HF 486

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to taxation; exempting publicly traded
partnerships from the withholding requirements;
amending Minnesota Statutes 2004, section 290.92,
subdivision 4b.

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

Section 1.

Minnesota Statutes 2004, section 290.92,
subdivision 4b, is amended to read:

Subd. 4b.

Withholding by partnerships.

(a) A partnership
shall deduct and withhold a tax as provided in paragraph (b) for
nonresident individual partners based on their distributive
shares of partnership income for a taxable year of the
partnership.

(b) The amount of tax withheld is determined by multiplying
the partner's distributive share allocable to Minnesota under
section 290.17, paid or credited during the taxable year by the
highest rate used to determine the income tax liability for an
individual under section 290.06, subdivision 2c, except that the
amount of tax withheld may be determined by the commissioner if
the partner submits a withholding exemption certificate under
subdivision 5.

(c) The commissioner may reduce or abate the tax withheld
under this subdivision if the partnership had reasonable cause
to believe that no tax was due under this section.

(d) Notwithstanding paragraph (a), a partnership is not
required to deduct and withhold tax for a nonresident partner if:

(1) the partner elects to have the tax due paid as part of
the partnership's composite return under section 289A.08,
subdivision 7;

(2) the partner has Minnesota assignable federal adjusted
gross income from the partnership of less than $1,000; or

(3) the partnership is liquidated or terminated, the income
was generated by a transaction related to the termination or
liquidation, and no cash or other property was distributed in
the current or prior taxable year; deleted text begin or
deleted text end

(4) the distributive shares of partnership income are
attributable to:

(i) income required to be recognized because of discharge
of indebtedness;

(ii) income recognized because of a sale, exchange, or
other disposition of real estate, depreciable property, or
property described in section 179 of the Internal Revenue Code;
or

(iii) income recognized on the sale, exchange, or other
disposition of any property that has been the subject of a basis
reduction pursuant to section 108, 734, 743, 754, or 1017 of the
Internal Revenue Code

to the extent that the income does not include cash received or
receivable or, if there is cash received or receivable, to the
extent that the cash is required to be used to pay indebtedness
by the partnership or a secured debt on partnership property new text begin ; or
new text end

new text begin (5) the partnership is a publicly traded partnership, as
defined in section 7704(b) of the Internal Revenue Code new text end .

(e) For purposes of subdivision 6a, and sections 289A.09,
subdivision 2, 289A.20, subdivision 2, paragraph (c), 289A.50,
289A.56, 289A.60, and 289A.63, a partnership is considered an
employer.

(f) To the extent that income is exempt from withholding
under paragraph (d), clause (4), the commissioner has a lien in
an amount up to the amount that would be required to be withheld
with respect to the income of the partner attributable to the
partnership interest, but for the application of paragraph (d),
clause (4). The lien arises under section 270.69 from the date
of assessment of the tax against the partner, and attaches to
that partner's share of the profits and any other money due or
to become due to that partner in respect of the partnership.
Notice of the lien may be sent by mail to the partnership,
without the necessity for recording the lien. The notice has
the force and effect of a levy under section 270.70, and is
enforceable against the partnership in the manner provided by
that section. Upon payment in full of the liability subsequent
to the notice of lien, the partnership must be notified that the
lien has been satisfied.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable
years beginning after December 31, 2004.
new text end