as introduced - 82nd Legislature (2001 - 2002) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to taxation; abolishing withholding taxes on 1.3 wages; providing for payment of estimated taxes on 1.4 wages; amending Minnesota Statutes 2000, sections 1.5 289A.09, subdivisions 1 and 2; 289A.20, subdivision 2; 1.6 289A.31, subdivision 5; 289A.38, subdivision 14; 1.7 289A.50, subdivision 3; 289A.60, subdivision 11; 1.8 290.92, subdivisions 1, 2a, 4a, 9, 12, 23, 24, 25, 26, 1.9 27, 28, and 29; and 290.9201, subdivision 7; proposing 1.10 coding for new law in Minnesota Statutes, chapter 1.11 289A; repealing Minnesota Statutes 2000, sections 1.12 270B.06, subdivision 3; 289A.63, subdivision 5; and 1.13 290.92, subdivisions 3, 5, 5a, 10, 16, 19, 22, and 30. 1.14 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.15 Section 1. Minnesota Statutes 2000, section 289A.09, 1.16 subdivision 1, is amended to read: 1.17 Subdivision 1. [RETURNS.] (a)An employer who is required1.18to deduct and withhold tax under section 290.92, subdivision 2a1.19or 3, andA person required to deduct and withhold tax under 1.20 section 290.923, subdivision 2, must file a return with the 1.21 commissioner for each quarterly period unless otherwise 1.22 prescribed by the commissioner. 1.23 (b) A person or corporation required to make deposits under 1.24 section 290.9201, subdivision 8, must file an entertainer 1.25 withholding tax return with the commissioner. 1.26 (c) A person required to withhold an amount under section 1.27 290.9705, subdivision 1, must file a return. 1.28 (d) A partnership required to deduct and withhold tax under 1.29 section 290.92, subdivision 4b, must file a return. 2.1 (e) An S corporation required to deduct and withhold tax 2.2 under section 290.92, subdivision 4c, must also file a return. 2.3 (f) Returns must be filed in the form and manner, and 2.4 contain the information prescribed by the commissioner. Every 2.5 return for taxes withheld must be signed by the employer, 2.6 entertainment entity, contract payor, partnership, or S 2.7 corporation, or a designee. 2.8 [EFFECTIVE DATE.] This section is effective for wages paid 2.9 or incurred and returns filed for taxable years beginning after 2.10 December 31, 2001. 2.11 Sec. 2. Minnesota Statutes 2000, section 289A.09, 2.12 subdivision 2, is amended to read: 2.13 Subd. 2. [WITHHOLDING STATEMENT TOEMPLOYEE ORPAYEE AND 2.14 TO COMMISSIONER.] (a) A person required to deduct and withhold 2.15from an employeea tax under section290.92, subdivision 2a or2.163, or290.923, subdivision 2,or who would have been required to2.17deduct and withhold a tax under section 290.92, subdivision 2a2.18or 3,or persons required to withhold tax under section 290.923, 2.19 subdivision 2, determined without regard to section 290.92, 2.20 subdivision 19, if theemployee orpayee had claimed no more 2.21 than one withholding exemption, or whopaid wages ormade 2.22 payments not subject to withholding under section290.92,2.23subdivision 2a or 3, or290.923, subdivision 2, toan employee2.24ora person receiving royalty payments in excess of $600, or who 2.25 has entered into a voluntary withholding agreement with a payee 2.26 under section 290.92, subdivision 20, must give everyemployee2.27orperson receiving royalty payments in respect to the 2.28 remuneration paid by the person to theemployee orperson 2.29 receiving royalty payments during the calendar year, on or 2.30 before January 31 of the succeeding year,or, if employment is2.31terminated before the close of the calendar year, within 30 days2.32after the date of receipt of a written request from the employee2.33if the 30-day period ends before January 31,a written statement 2.34 showing the following: 2.35 (1) name of the person; 2.36 (2) the name of theemployee orpayee and theemployee's or3.1 payee's social security account number; 3.2 (3)the total amount of wages as that term is defined in3.3section 290.92, subdivision 1, paragraph (1);the total amount 3.4 of remuneration subject to withholding under section 290.92, 3.5 subdivision 20; the amount of sick pay as required under section 3.6 6051(f) of the Internal Revenue Code; and the amount of 3.7 royalties subject to withholding under section 290.923, 3.8 subdivision 2; and 3.9 (4) the total amount deducted and withheld as tax under 3.10 section290.92, subdivision 2a or 3, or290.923, subdivision 2. 3.11 (b) The statement required to be furnished by this 3.12 paragraph with respect to any remuneration must be furnished at 3.13 those times, must contain the information required, and must be 3.14 in the form the commissioner prescribes. 3.15 (c) The commissioner may prescribe rules providing for 3.16 reasonable extensions of time, not in excess of 30 days, to 3.17 employers or payers required to give the statements to their 3.18 employees or payees under this subdivision. 3.19 (d) A duplicate of any statement made under this 3.20 subdivision and in accordance with rules prescribed by the 3.21 commissioner, along with a reconciliation in the form the 3.22 commissioner prescribes of the statements for the calendar year, 3.23 including a reconciliation of the quarterly returns required to 3.24 be filed under subdivision 1, must be filed with the 3.25 commissioner on or before February 28 of the year after the 3.26 payments were made. 3.27(e) If an employer cancels the employer's Minnesota3.28withholding account number required by section 290.92,3.29subdivision 24, the information required by paragraph (d), must3.30be filed with the commissioner within 30 days of the end of the3.31quarter in which the employer cancels its account number.3.32(f) The employer must submit the statements required to be3.33sent to the commissioner on magnetic media, if the magnetic3.34media was required to satisfy the federal reporting requirements3.35of section 6011(e) of the Internal Revenue Code and the3.36regulations issued under it.4.1(g) A "third-party bulk filer" as defined in section4.2290.92, subdivision 30, paragraph (a), clause (2), must submit4.3the returns required by this subdivision and subdivision 1,4.4paragraph (a), with the commissioner by electronic means.4.5 [EFFECTIVE DATE.] This section is effective for wages paid 4.6 or incurred and returns filed for taxable years beginning after 4.7 December 31, 2001. 4.8 Sec. 3. Minnesota Statutes 2000, section 289A.20, 4.9 subdivision 2, is amended to read: 4.10 Subd. 2. [WITHHOLDING FROM WAGES,ENTERTAINER WITHHOLDING, 4.11 WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, AND 4.12 WITHHOLDING BY PARTNERSHIPS AND SMALL BUSINESS CORPORATIONS.] 4.13 (a) A tax required to be deducted and withheld during the 4.14 quarterly period must be paid on or before the last day of the 4.15 month following the close of the quarterly period, unless an 4.16 earlier time for payment is provided. A tax required to be 4.17 deducted and withheld from compensation of an entertainer and 4.18 from a payment to an out-of-state contractor must be paid on or 4.19 before the date the return for such tax must be filed under 4.20 section 289A.18, subdivision 2. Taxes required to be deducted 4.21 and withheld by partnerships and S corporations must be paid on 4.22 or before the date the return must be filed under section 4.23 289A.18, subdivision 2. 4.24 (b)An employerA person who, during the previous quarter, 4.25 withheld more than $1,500 of tax under section290.92,4.26subdivision 2a or 3, or290.923, subdivision 2, must deposit tax 4.27 withheld under those sections with the commissioner within the 4.28 time allowed to deposit the employer's federal withheld 4.29 employment taxes under Treasury Regulation, section 31.6302-1, 4.30 without regard to the safe harbor or de minimis rules in 4.31 subparagraph (f) or the one-day rule in subsection (c), clause 4.32 (3). Taxpayers must submit a copy of their federal notice of 4.33 deposit status to the commissioner upon request by the 4.34 commissioner. 4.35 (c) The commissioner may prescribe by rule other return 4.36 periods or deposit requirements. In prescribing the reporting 5.1 period, the commissioner may classify payors according to the 5.2 amount of their tax liability and may adopt an appropriate 5.3 reporting period for the class that the commissioner judges to 5.4 be consistent with efficient tax collection. In no event will 5.5 the duration of the reporting period be more than one year. 5.6 (d) If less than the correct amount of tax is paid to the 5.7 commissioner, proper adjustments with respect to both the tax 5.8 and the amount to be deducted must be made, without interest, in 5.9 the manner and at the times the commissioner prescribes. If the 5.10 underpayment cannot be adjusted, the amount of the underpayment 5.11 will be assessed and collected in the manner and at the times 5.12 the commissioner prescribes. 5.13(e) If the aggregate amount of the tax withheld during a5.14fiscal year ending June 30 under section 290.92, subdivision 2a5.15or 3, is equal to or exceeds the amounts established for5.16remitting federal withheld taxes pursuant to the regulations5.17promulgated under section 6302(h) of the Internal Revenue Code,5.18the employer must remit each required deposit for wages paid in5.19the subsequent calendar year by means of a funds transfer as5.20defined in section 336.4A-104, paragraph (a). The funds5.21transfer payment date, as defined in section 336.4A-401, must be5.22on or before the date the deposit is due. If the date the5.23deposit is due is not a funds transfer business day, as defined5.24in section 336.4A-105, paragraph (a), clause (4), the payment5.25date must be on or before the funds transfer business day next5.26following the date the deposit is due.5.27(f) A third-party bulk filer as defined in section 290.92,5.28subdivision 30, paragraph (a), clause (2), who remits5.29withholding deposits must remit all deposits by means of a funds5.30transfer as provided in paragraph (e), regardless of the5.31aggregate amount of tax withheld during a fiscal year for all of5.32the employers.5.33 [EFFECTIVE DATE.] This section is effective for wages paid 5.34 or incurred and returns filed for taxable years beginning after 5.35 December 31, 2001. 5.36 Sec. 4. [289A.251] [ESTIMATED TAX ON WAGES.] 6.1 Subdivision 1. [ESTIMATED TAX.] An employee receiving 6.2 wages, as those terms are defined in section 290.92, shall make 6.3 payments of estimated tax. The term "estimated tax" means the 6.4 amount the employee estimates is the sum of the taxes imposed by 6.5 chapter 290 for the taxable year. 6.6 Subd. 2. [REQUIRED INSTALLMENTS.] There are 12 monthly 6.7 required installments for a taxable year. Each installment is 6.8 due on the 15th day of the month following the end of the month 6.9 for which the installment is required. 6.10 Subd. 3. [AMOUNT OF INSTALLMENT.] (a) The amount of the 6.11 installment required to be paid shall be determined by estimated 6.12 tax tables prescribed by the commissioner under section 290.92, 6.13 subdivision 2a. 6.14 (b) Notwithstanding paragraph (a), no payments of estimated 6.15 tax are required if the estimated tax, as defined in this 6.16 section, less the credits allowed against the tax is less than 6.17 ....... 6.18 Subd. 4. [ADDITION TO TAX FOR UNDERPAYMENT.] In the case 6.19 of any underpayment of estimated tax by an employee, except as 6.20 provided in subdivision 5, there is added to and becomes part of 6.21 the taxes imposed by chapter 290 for the taxable year for the 6.22 period of the underpayment, an amount determined under section 6.23 270.75 on the amount of the underpayment. 6.24 Subd. 5. [PERIOD OF UNDERPAYMENT.] (a) The period of the 6.25 underpayment runs from the date the installment was required to 6.26 be paid to the earlier of the following dates: 6.27 (1) the 15th day of the fourth month following the close of 6.28 the taxable year. 6.29 (2) with respect to any part of the underpayment, the date 6.30 on which that part is paid. For purposes of this clause, a 6.31 payment of estimated tax on an installment date is considered a 6.32 payment of any unpaid required installments in the order in 6.33 which the installments are required to be paid. 6.34 (b) If, on or before January 31 of the following taxable 6.35 year, the taxpayer files a return for the taxable year and pays 6.36 in full the amount computed on the return as payable, then no 7.1 addition to tax is imposed under subdivision 4 with respect to 7.2 any underpayment of the last required installment for the 7.3 taxable year. 7.4 [EFFECTIVE DATE.] This section is effective for wages paid 7.5 or incurred and returns filed for taxable years beginning after 7.6 December 31, 2001. 7.7 Sec. 5. Minnesota Statutes 2000, section 289A.31, 7.8 subdivision 5, is amended to read: 7.9 Subd. 5. [WITHHOLDING TAX,WITHHOLDING FROM PAYMENTS TO 7.10 OUT-OF-STATE CONTRACTORS, AND WITHHOLDING BY PARTNERSHIPS AND 7.11 SMALL BUSINESS CORPORATIONS.] (a) Except as provided in 7.12 paragraph (b),an employer ora person withholding tax under 7.13 section 290.92 or 290.923, subdivision 2, who fails to pay to or 7.14 deposit with the commissioner a sum or sums required by those 7.15 sections to be deducted, withheld, and paid, is personally and 7.16 individually liable to the state for the sum or sums, and added 7.17 penalties and interest, and is not liable to another person for 7.18 that payment or payments. The sum or sums deducted and withheld 7.19 under section 290.92, subdivision 2a or 3,or 290.923, 7.20 subdivision 2, must be held as a special fund in trust for the 7.21 state of Minnesota. 7.22 (b) If the employer or person withholding tax under section 7.23 290.92 or 290.923, subdivision 2, fails to deduct and withhold 7.24 the tax in violation of those sections, and later the taxes 7.25 against which the tax may be credited are paid, the tax required 7.26 to be deducted and withheld will not be collected from the 7.27 employer. This does not, however, relieve the employer from 7.28 liability for any penalties and interest otherwise applicable 7.29 for failure to deduct and withhold. 7.30 (c) Liability for payment of withholding taxes includes a 7.31 responsible person or entity described in the personal liability 7.32 provisions of section 270.101. 7.33 (d)Liability for payment of withholding taxes includes a7.34third party lender or surety described in section 290.92,7.35subdivision 22.7.36(e)A partnership or S corporation required to withhold and 8.1 remit tax under section 290.92, subdivisions 4b and 4c, is 8.2 liable for payment of the tax to the commissioner, and a person 8.3 having control of or responsibility for the withholding of the 8.4 tax or the filing of returns due in connection with the tax is 8.5 personally liable for the tax due. 8.6(f)(e) A payor of sums required to be withheld under 8.7 section 290.9705, subdivision 1, is liable to the state for the 8.8 amount required to be deducted, and is not liable to an 8.9 out-of-state contractor for the amount of the payment. 8.10 [EFFECTIVE DATE.] This section is effective for wages paid 8.11 or incurred and returns filed for taxable years beginning after 8.12 December 31, 2001. 8.13 Sec. 6. Minnesota Statutes 2000, section 289A.38, 8.14 subdivision 14, is amended to read: 8.15 Subd. 14. [FAILURE TO TIMELY FILE WITHHOLDING 8.16 RECONCILIATION.] Ifan employera person fails to timely file 8.17 the reconciliation required by section 289A.09, subdivision 2, 8.18 paragraph (d), withholding taxes may be assessed within the 8.19 period prescribed in subdivision 1, or within one year from the 8.20 date the reconciliation is filed with the commissioner, 8.21 whichever is later. 8.22 [EFFECTIVE DATE.] This section is effective for wages paid 8.23 or incurred and returns filed for taxable years beginning after 8.24 December 31, 2001. 8.25 Sec. 7. Minnesota Statutes 2000, section 289A.50, 8.26 subdivision 3, is amended to read: 8.27 Subd. 3. [WITHHOLDING TAX AND ENTERTAINER WITHHOLDING TAX 8.28 REFUNDS.] When there is an overpayment of withholding tax byan8.29employer ora person making royalty payments, or an overpayment 8.30 of entertainer withholding tax by the payor, a refund allowable 8.31 under this section is limited to the amount of the overpayment 8.32 that was not deducted and withheldfrom employee wages orfrom 8.33 the royalty payments, or from the compensation of an entertainer. 8.34 [EFFECTIVE DATE.] This section is effective for wages paid 8.35 or incurred and returns filed for taxable years beginning after 8.36 December 31, 2001. 9.1 Sec. 8. Minnesota Statutes 2000, section 289A.60, 9.2 subdivision 11, is amended to read: 9.3 Subd. 11. [PENALTIES RELATING TO INFORMATION REPORTS, 9.4 WITHHOLDING.](a)When a person required under section 289A.09, 9.5 subdivision 2, to give a statement toan employee ora payee and 9.6 a duplicate statement to the commissioner, or to give a 9.7 reconciliation of the statements and quarterly returns to the 9.8 commissioner, gives a false or fraudulent statement toan9.9employee ora payee or a false or fraudulent duplicate statement 9.10 or reconciliation of statements and quarterly returns to the 9.11 commissioner, or fails to give a statement or the reconciliation 9.12 in the manner, when due, and showing the information required by 9.13 section 289A.09, subdivision 2, or rules prescribed by the 9.14 commissioner under that section, that person is liable for a 9.15 penalty of $50 for an act or failure to act. The total amount 9.16 imposed on the delinquent person for failures during a calendar 9.17 year must not exceed $25,000. 9.18(b) In addition to any other penalty provided by law, an9.19employee who gives a withholding exemption certificate or a9.20residency affidavit to an employer that the employee has reason9.21to know contains a materially incorrect statement is liable to9.22the commissioner of revenue for a penalty of $500 for each9.23instance.9.24(c) In addition to any other penalty provided by law, an9.25employer who fails to submit a copy of a withholding exemption9.26certificate or a residency affidavit required by section 290.92,9.27subdivision 5a, clause (1)(a), (1)(b), or (2) is liable to the9.28commissioner of revenue for a penalty of $50 for each instance.9.29(d) An employer or payor who fails to file an application9.30for a withholding account number, as required by section 290.92,9.31subdivision 24, is liable to the commissioner for a penalty of9.32$100.9.33 [EFFECTIVE DATE.] This section is effective for wages paid 9.34 or incurred and returns filed for taxable years beginning after 9.35 December 31, 2001. 9.36 Sec. 9. Minnesota Statutes 2000, section 290.92, 10.1 subdivision 1, is amended to read: 10.2 Subdivision 1. [DEFINITIONS.] (1) [WAGES.] For purposes 10.3 of this section, the term "wages" means the same as that term is 10.4 defined in section 3401(a) and (f) of the Internal Revenue Code. 10.5 (2) [PAYROLL PERIOD.] For purposes of this section the 10.6 term "payroll period" means a period for which a payment of 10.7 wages is ordinarily made to the employee by the employee's 10.8 employer, and the term "miscellaneous payroll period" means a 10.9 payroll period other than a daily, weekly, biweekly, 10.10 semimonthly, monthly, quarterly, semiannual, or annual payroll 10.11 period. 10.12 (3) [EMPLOYEE.] For purposes of this section the term 10.13 "employee" means any resident individual performing services for 10.14 an employer, either within or without, or both within and 10.15 without the state of Minnesota, and every nonresident individual 10.16 performing services within the state of Minnesota, the 10.17 performance of which services constitute, establish, and 10.18 determine the relationship between the parties as that of 10.19 employer and employee. As used in the preceding sentence, the 10.20 term "employee" includes an officer of a corporation, and an 10.21 officer, employee, or elected official of the United States, a 10.22 state, or any political subdivision thereof, or the District of 10.23 Columbia, or any agency or instrumentality of any one or more of 10.24 the foregoing. 10.25 (4) [EMPLOYER.] For purposes of this section the term 10.26 "employer" means any person, including individuals, fiduciaries, 10.27 estates, trusts, partnerships, limited liability companies, and 10.28 corporations transacting business in or deriving any income from 10.29 sources within the state of Minnesota for whom an individual 10.30 performs or performed any service, of whatever nature, as the 10.31 employee of such person, except that if the person for whom the 10.32 individual performs or performed the services does not have 10.33 legal control of the payment of the wages for such services, the 10.34 term "employer," except for purposes of paragraph (1), means the 10.35 person having legal control of the payment of such wages. As 10.36 used in the preceding sentence, the term "employer" includes any 11.1 corporation, individual, estate, trust, or organization which is 11.2 exempt from taxation under section 290.05 and further includes, 11.3 but is not limited to, officers of corporations who have legal 11.4 control, either individually or jointly with another or others, 11.5 of the payment of the wages. 11.6 (5) [NUMBER OFWITHHOLDINGESTIMATED TAX EXEMPTIONS 11.7 CLAIMED.] For purposes of this section, the term "number 11.8 ofwithholdingestimated tax exemptions claimed" means the 11.9 number ofwithholdingestimated tax exemptions claimedin a11.10withholding exemption certificate in effect under subdivision 5,11.11except that if no such certificate is in effect, the number of11.12withholding exemptions claimed shall be considered to be11.13zerofor purposes of filing estimated taxes on wages under 11.14 section 289A.251. The employee may claim a number of estimated 11.15 tax exemptions not to exceed the number of withholding 11.16 exemptions that the employee claims and that are allowable 11.17 pursuant to section 3402(f)(1), (m), and (n) of the Internal 11.18 Revenue Code for federal withholding purposes. 11.19 [EFFECTIVE DATE.] This section is effective for wages paid 11.20 or incurred and returns filed for taxable years beginning after 11.21 December 31, 2001. 11.22 Sec. 10. Minnesota Statutes 2000, section 290.92, 11.23 subdivision 2a, is amended to read: 11.24 Subd. 2a. [COLLECTION AT SOURCEESTIMATED TAX TABLES.](1)11.25[DEDUCTIONS.] Every employer making payment of wages shall11.26deduct and withhold upon such wages a tax as provided in this11.27section.11.28(2) [WITHHOLDING ON PAYROLL PERIOD.] The employer shall11.29withhold the tax on the basis of each payroll period or as11.30otherwise provided in this section.11.31(3) [WITHHOLDING TABLES.] Unless the amount of tax to be11.32withheld is determined as provided in subdivision 3,The amount 11.33 oftax to be withheld for each individualestimated taxes on 11.34 wages payable under section 289A.251 shall be based upon 11.35 estimated tax tables to be prepared and distributed by the 11.36 commissioner. The tablesshall be computed for the several12.1permissible withholding periods andshall take account of 12.2 exemptions allowed under this section; and the amounts 12.3 computedfor withholdingshall be such that the amountwithheld12.4 for any individual during the individual's taxable year shall 12.5 approximate in the aggregate as closely as possible the tax 12.6 which is levied and imposed under this chapter for that taxable 12.7 year, upon the individual's salary, wages, or compensation for 12.8 personal services of any kind for the employer. 12.9(4) [MISCELLANEOUS PAYROLL PERIOD.] If wages are paid with12.10respect to a period which is not a payroll period, the amount to12.11be deducted and withheld shall be that applicable in the case of12.12a miscellaneous payroll period containing a number of days,12.13including Sundays and holidays, equal to the number of days in12.14the period with respect to which such wages are paid.12.15(5) [MISCELLANEOUS PAYROLL PERIOD.] (a) In any case in12.16which wages are paid by an employer without regard to any12.17payroll period or other period, the amount to be deducted and12.18withheld shall be that applicable in the case of a miscellaneous12.19payroll period containing a number of days equal to the number12.20of days, including Sundays and holidays, which have elapsed12.21since the date of the last payment of such wages by such12.22employer during the calendar year, or the date of commencement12.23of employment with such employer during such year, or January 112.24of such year, whichever is the later.12.25(b) In any case in which the period, or the time described12.26in clause (a), in respect of any wages is less than one week,12.27the commissioner, under rules prescribed by the commissioner,12.28may authorize an employer to determine the amount to be deducted12.29and withheld under the tables applicable in the case of a weekly12.30payroll period, in which case the aggregate of the wages paid to12.31the employee during the calendar week shall be considered the12.32weekly wages.12.33(6) [WAGES COMPUTED TO NEAREST DOLLAR.] If the wages12.34exceed the highest bracket, in determining the amount to be12.35deducted and withheld under this subdivision, the wages may, at12.36the election of the employer, be computed to the nearest dollar.13.1(7) [RULES ON WITHHOLDING.] The commissioner may, by rule,13.2authorize employers:13.3(a) to estimate the wages which will be paid to any13.4employee in any quarter of the calendar year;13.5(b) to determine the amount to be deducted and withheld13.6upon each payment of wages to such employee during such quarter13.7as if the appropriate average of the wages so estimated13.8constituted the actual wages paid; and13.9(c) to deduct and withhold upon any payment of wages to13.10such employee during such quarter such amount as may be13.11necessary to adjust the amount actually deducted and withheld13.12upon wages of such employee during such quarter to the amount13.13required to be deducted and withheld during such quarter without13.14regard to this paragraph (7).13.15(8) [ADDITIONAL WITHHOLDING.] The commissioner is13.16authorized to provide by rule for increases or decreases in the13.17amount of withholding otherwise required under this section in13.18cases where the employee requests the changes. Such additional13.19withholding shall for all purposes be considered tax required to13.20be deducted and withheld under this section.13.21(9) [TIPS.] In the case of tips which constitute wages,13.22this subdivision shall be applicable only to such tips as are13.23included in a written statement furnished to the employer13.24pursuant to section 6053 of the Internal Revenue Code and only13.25to the extent that the tax can be deducted and withheld by the13.26employer, at or after the time such statement is so furnished13.27and before the close of the calendar year in which such13.28statement is furnished, from such wages of the employee13.29(excluding tips, but including funds turned over by the employee13.30to the employer for the purpose of such deduction and13.31withholding) as are under the control of the employer; and an13.32employer who is furnished by an employee a written statement of13.33tips (received in a calendar month) pursuant to section 6053 of13.34the Internal Revenue Code to which subdivision 1 is applicable13.35may deduct and withhold the tax with respect to such tips from13.36any wages of the employee (excluding tips) under the employer's14.1control, even though at the time such statement is furnished the14.2total amount of the tips included in statements furnished to the14.3employer as having been received by the employee in such14.4calendar month in the course of employment by such employer is14.5less than $20. Such tax shall not at any time be deducted and14.6withheld in an amount which exceeds the aggregate of such wages14.7and funds as are under the control of the employer minus any tax14.8required by other provisions of state or federal law to be14.9collected from such wages and funds.14.10(10) [VEHICLE FRINGE BENEFITS.] An employer shall not14.11deduct and withhold any tax under this section with respect to14.12any vehicle fringe benefit provided to an employee if the14.13employer has so elected for federal purposes and the requirement14.14of and the definition contained in section 3402(s) of the14.15Internal Revenue Code are complied with.14.16 [EFFECTIVE DATE.] This section is effective for wages paid 14.17 or incurred and returns filed for taxable years beginning after 14.18 December 31, 2001. 14.19 Sec. 11. Minnesota Statutes 2000, section 290.92, 14.20 subdivision 4a, is amended to read: 14.21 Subd. 4a. [TAX WITHHELD FROM NONRESIDENTS.] (1)["WAGES" 14.22 PAID TO NONRESIDENT EMPLOYEES.] For the purposes of this 14.23 section:, the term "wages" means all remuneration taxable under 14.24 this chapter including all remuneration paid to a nonresident 14.25 employee for services performed in this state. 14.26(2) ["EMPLOYER," "WAGES" AND "EMPLOYEE" CONCERNING14.27NONRESIDENTS.]Notwithstanding any other provision of this 14.28 section, under rules to be prescribed by the commissioner of 14.29 revenue, for purposes of this sectionany person having control,14.30receipt, custody, disposal or payment of compensation taxable14.31under this chapter and earned by a nonresident for personal14.32services, shall be deemed an employer, any compensation taxable 14.33 under this chapter and earned by a nonresident for personal 14.34 services shall be deemed wages, and a nonresident entitled to 14.35 compensation taxable under this chapter and earned by the 14.36 nonresident for personal services shall be deemed an employee. 15.1 When compensation for personal services is paid to a 15.2 corporation in which all or substantially all of the 15.3 shareholders are individual entertainers, performers or athletes 15.4 who gave an entertainment or athletic performance in this state 15.5 for which the compensation was paid, the compensation shall be 15.6 deemed wages of the individual entertainers, performers or 15.7 athletes and shall be subject to the provisions of this 15.8 section. Advance payments of compensation for personal services 15.9 to be performed in Minnesota shall be deemed wages and subject 15.10 to the provisions of this section. 15.11(3) [NONRESIDENTS, EMPLOYER'S DUTY.] The employer of any15.12employee domiciled in a state with which Minnesota has15.13reciprocity under section 290.081 is not required to withhold15.14under this chapter from the wages earned by such employee in15.15this state if the employee annually submits to the employer an15.16affidavit of residency in the form prescribed by the15.17commissioner. The affidavit must be submitted by the later of15.18(i) 30 days after the employment date or15.19(ii) August 31 for calendar year 1987 and February 28 for15.20subsequent calendar years.15.21 [EFFECTIVE DATE.] This section is effective for wages paid 15.22 or incurred and returns filed for taxable years beginning after 15.23 December 31, 2001. 15.24 Sec. 12. Minnesota Statutes 2000, section 290.92, 15.25 subdivision 9, is amended to read: 15.26 Subd. 9. [DETERMINATION OF TAX DUE.] The commissioner may 15.27 grant permission toemployers, orpersons withholding tax under 15.28 section 290.923, subdivision 2, who do not desire to use the 15.29 withholding tax tables provided in accordance withparagraph (3)15.30of subdivision 2a, orsection 290.923, subdivision 2, to 15.31 determine the amount of tax to be withheld by use of a method of 15.32 withholding other than withholding tax tables, provided such 15.33 method will withhold from eachemployee orperson receiving 15.34 royalty payments substantially the same amount of tax as would 15.35 be withheld by use of the withholding tax tables.Employers, or15.36 Persons withholding tax under section 290.923, subdivision 2, 16.1 who desire to determine the amount of tax to be withheld by a 16.2 method other than by use of the withholding tax tables shall 16.3 obtain permission from the commissioner before the beginning of 16.4 apayrollperiod for which theemployer, orperson withholding 16.5 tax under section 290.923, subdivision 2, desires to withhold 16.6 the tax by such other method. Applications to use such other 16.7 method must be accompanied by evidence establishing the need for 16.8 the use of such method. 16.9 [EFFECTIVE DATE.] This section is effective for wages paid 16.10 or incurred and returns filed for taxable years beginning after 16.11 December 31, 2001. 16.12 Sec. 13. Minnesota Statutes 2000, section 290.92, 16.13 subdivision 12, is amended to read: 16.14 Subd. 12. [WITHHELD AMOUNT, CREDIT AGAINST TAX.](a) The16.15amount deducted and withheld as tax under subdivision 2a or 316.16during a calendar year upon wages shall be allowed as a credit16.17to the recipient of the income against the taxes imposed by this16.18chapter, for a taxable year beginning in such calendar year. If16.19more than one taxable year begins in such calendar year, such16.20amount shall be allowed as a credit against the taxes for the16.21last taxable year so beginning.16.22(b)The amount deducted and withheld under subdivisions 4b 16.23 and 4c and under section 290.923, subdivision 2, for 16.24 partnership, S corporation, or royalty income must be allowed as 16.25 a credit to the recipient of the income against the taxes 16.26 imposed by this chapter for the tax year the income is subject 16.27 to tax under this chapter. 16.28 [EFFECTIVE DATE.] This section is effective for wages paid 16.29 or incurred and returns filed for taxable years beginning after 16.30 December 31, 2001. 16.31 Sec. 14. Minnesota Statutes 2000, section 290.92, 16.32 subdivision 23, is amended to read: 16.33 Subd. 23. [WITHHOLDING BY EMPLOYER OF DELINQUENT TAXES.] 16.34 (1) The commissioner may, within five years after the date of 16.35 assessment of the tax, or if a lien has been filed under section 16.36 270.69, within the statutory period for enforcement of the lien, 17.1 give notice to any employer deriving income which has a taxable 17.2 situs in this state regardless of whether the income is exempt 17.3 from taxation, that an employee of that employer is delinquent 17.4 in a certain amount with respect to any state taxes, including 17.5 penalties, interest, and costs. The commissioner can proceed 17.6 under this subdivision only if the tax is uncontested or if the 17.7 time for appeal of the tax has expired. The commissioner shall 17.8 not proceed under this subdivision until the expiration of 30 17.9 days after mailing to the taxpayer, at the taxpayer's last known 17.10 address, a written notice of (a) the amount of taxes, interest, 17.11 and penalties due from the taxpayer and demand for their 17.12 payment, and (b) the commissioner's intention to require 17.13additionalwithholding by the taxpayer's employer pursuant to 17.14 this subdivision. The effect of the notice shall expire 180 17.15 days after it has been mailed to the taxpayer provided that the 17.16 notice may be renewed by mailing a new notice which is in 17.17 accordance with this subdivision. The renewed notice shall have 17.18 the effect of reinstating the priority of the original claim. 17.19 The notice to the taxpayer shall be in substantially the same 17.20 form as that provided in section 571.72. The notice shall 17.21 further inform the taxpayer of the wage exemptions contained in 17.22 section 550.37, subdivision 14. If no statement of exemption is 17.23 received by the commissioner within 30 days from the mailing of 17.24 the notice, the commissioner may proceed under this 17.25 subdivision. The notice to the taxpayer's employer may be 17.26 served by mail or by delivery by an employee of the department 17.27 of revenue and shall be in substantially the same form as 17.28 provided in section 571.75. Upon receipt of notice, the 17.29 employer shall withhold from compensation due or to become due 17.30 to the employee, the total amount shown by the notice, subject 17.31 to the provisions of section 571.922. The employer shall 17.32 continue to withhold each pay period until the notice is 17.33 released by the commissioner under section 270.709. Upon 17.34 receipt of notice by the employer, the claim of the state of 17.35 Minnesota shall have priority over any subsequent garnishments 17.36 or wage assignments. The commissioner may arrange between the 18.1 employer and the employee for withholding a portion of the total 18.2 amount due the employee each pay period, until the total amount 18.3 shown by the notice plus accrued interest has been withheld. 18.4 The "compensation due" any employee is defined in 18.5 accordance with the provisions of section 571.921. The maximum 18.6 withholding allowed under this subdivision for any one pay 18.7 period shall be decreased by any amounts payable pursuant to a 18.8 garnishment action with respect to which the employer was served 18.9 prior to being served with the notice of delinquency and any 18.10 amounts covered by any irrevocable and previously effective 18.11 assignment of wages; the employer shall give notice to the 18.12 department of the amounts and the facts relating to such 18.13 assignments within ten days after the service of the notice of 18.14 delinquency on the form provided by the department of revenue as 18.15 noted in this subdivision. 18.16 (2) If the employee ceases to be employed by the employer 18.17 before the full amount set forth in a notice of delinquency plus 18.18 accrued interest has been withheld, the employer shall 18.19 immediately notify the commissioner in writing of the 18.20 termination date of the employee and the total amount withheld. 18.21 No employer may discharge any employee by reason of the fact 18.22 that the commissioner has proceeded under this subdivision. If 18.23 an employer discharges an employee in violation of this 18.24 provision, the employee shall have the same remedy as provided 18.25 in section 571.927, subdivision 2. 18.26 (3) Within ten days after the expiration of such pay 18.27 period, the employer shall remit to the commissioner, on a form 18.28 and in the manner prescribed by the commissioner, the amount 18.29 withheld during each pay period under this subdivision. 18.30 (4) Clauses (1), (2), and (3), except provisions imposing a 18.31 liability on the employer for failure to withhold or remit, 18.32 shall apply to cases in which the employer is the United States 18.33 or any instrumentality thereof or this state or any municipality 18.34 or other subordinate unit thereof. 18.35 (5) The commissioner shall refund to the employee excess 18.36 amounts withheld from the employee under this subdivision. If 19.1 any excess results from payments by the employer because of 19.2 willful failure to withhold or remit as prescribed in clause 19.3 (3), the excess attributable to the employer's payment shall be 19.4 refunded to the employer. 19.5 (6) Employers required to withhold delinquent taxes, 19.6 penalties, interest, and costs under this subdivision shall not 19.7 be required to compute any additional interest, costs or other 19.8 charges to be withheld. 19.9 (7) The collection remedy provided to the commissioner by 19.10 this subdivision shall have the same legal effect as if it were 19.11 a levy made pursuant to section 270.70. 19.12 [EFFECTIVE DATE.] This section is effective for wages paid 19.13 or incurred and returns filed for taxable years beginning after 19.14 December 31, 2001. 19.15 Sec. 15. Minnesota Statutes 2000, section 290.92, 19.16 subdivision 24, is amended to read: 19.17 Subd. 24. [APPLICATION FOR ACCOUNT NUMBER.]An employer,19.18orA person withholding tax under section 290.923, desiring to 19.19 engage in business in Minnesota shall file with the commissioner 19.20 an application for a withholding account number on or before the 19.21 date theemployerperson is required to withhold Minnesota taxes 19.22 underthissection 290.923. An application for an account 19.23 number must be made upon a form prescribed by the commissioner. 19.24 It must give the name of the employer or payor, the location of 19.25 the place or places of business, the names, addresses and social 19.26 security numbers of the owners or partners, or if the employer 19.27 or payor is a corporation of the officers, or if the employer or 19.28 payor is a trust of the trustees, and other information the 19.29 commissioner may require. The application must be filed by the 19.30 owner if the employer or payor is a natural person; by a member 19.31 or partner if the employer or payor is an association or 19.32 partnership; by a trustee if the employer or payor be a trust, 19.33 or by a person authorized to sign the application if the 19.34 employer or payor is a corporation. 19.35 No fee shall be charged for the application. 19.36 The account number is not assignable. 20.1 [EFFECTIVE DATE.] This section is effective for wages paid 20.2 or incurred and returns filed for taxable years beginning after 20.3 December 31, 2001. 20.4 Sec. 16. Minnesota Statutes 2000, section 290.92, 20.5 subdivision 25, is amended to read: 20.6 Subd. 25. [DELEGATION OF DUTY OFEMPLOYER ORPAYOR.] The 20.7 delegation to an agent, fiduciary, or employee ofan employer,20.8ora person withholding tax under section 290.923, of any duty 20.9 prescribed for theemployer orpayor by this section shall not 20.10 relieve theemployer orpayor of full compliance with such duty. 20.11 [EFFECTIVE DATE.] This section is effective for wages paid 20.12 or incurred and returns filed for taxable years beginning after 20.13 December 31, 2001. 20.14 Sec. 17. Minnesota Statutes 2000, section 290.92, 20.15 subdivision 26, is amended to read: 20.16 Subd. 26. [EXTENSION OF WITHHOLDING TO CERTAIN PAYMENTS 20.17 WHERE IDENTIFYING NUMBER NOT FURNISHED OR INACCURATE.] (a) If, 20.18 in the case of any reportable payment, (1) the payee fails to 20.19 furnish the payee's social security account number to the payor, 20.20 or (2) the commissioner notifies the payor that the social 20.21 security account number furnished by the payee is incorrect, 20.22 then the payor shall deduct and withhold from the payment a tax 20.23 equal to the amount of the payment multiplied by the highest 20.24 rate used in determining the income tax liability of an 20.25 individual under section 290.06, subdivision 2c. 20.26 (b)(1) In the case of any failure described in clause 20.27 (a)(1), clause (a) shall apply to any reportable payment made by 20.28 the payor during the period during which the social security 20.29 account number has not been furnished. 20.30 (2) In any case where there is a notification described in 20.31 clause (a)(2), clause (a) shall apply to any reportable payment 20.32 made by the payor (i) after the close of the 30th day after the 20.33 day on which the payor received the notification, and (ii) 20.34 before the payee furnishes another social security account 20.35 number. 20.36 (3)(i) Unless the payor elects not to have this 21.1 subparagraph apply with respect to the payee, clause (a) shall 21.2 also apply to any reportable payment made after the close of the 21.3 period described in paragraph (1) or (2) (as the case may be) 21.4 and before the 30th day after the close of the period. 21.5 (ii) If the payor elects the application of this 21.6 subparagraph with respect to the payee, clause (a) shall also 21.7 apply to any reportable payment made during the 30-day period 21.8 described in paragraph (2). 21.9 (iii) The payor may elect a period shorter than the grace 21.10 period set forth in subparagraph (i) or (ii) as the case may be. 21.11 (c) The provisions of section 3406 of the Internal Revenue 21.12 Code shall apply and shall govern when withholding shall be 21.13 required and the definition of terms. The term "reportable 21.14 payment" shall include only those payments for personal 21.15 services.No tax shall be deducted or withheld under this21.16subdivision with respect to any amount for which withholding is21.17otherwise required under this section. For purposes of this21.18section, payments which are subject to withholding under this21.19subdivision shall be treated as if they were wages paid by an21.20employer to an employee and amounts deducted and withheld under21.21this subdivision shall be treated as if deducted and withheld21.22under subdivision 2a.21.23 (d) Whenever the commissioner notifies a payor under this 21.24 subdivision that the social security account number furnished by 21.25 any payee is incorrect, the commissioner shall at the same time 21.26 furnish a copy of the notice to the payor, and the payor shall 21.27 promptly furnish the copy to the payee. If the commissioner 21.28 notifies a payor under this subdivision that the social security 21.29 account number furnished by any payee is incorrect and the payee 21.30 subsequently furnishes another social security account number to 21.31 the payor, the payor shall promptly notify the commissioner of 21.32 the other social security account number furnished. 21.33 [EFFECTIVE DATE.] This section is effective for wages paid 21.34 or incurred and returns filed for taxable years beginning after 21.35 December 31, 2001. 21.36 Sec. 18. Minnesota Statutes 2000, section 290.92, 22.1 subdivision 27, is amended to read: 22.2 Subd. 27. [PARI-MUTUEL WINNINGS.] Any holder of a class A, 22.3 B, or D license issued by the Minnesota racing commission shall 22.4 deduct and withhold an amount equal to the winnings multiplied 22.5 by the highest rate used in determining the income tax liability 22.6 of an individual under section 290.06, subdivision 2c, as 22.7 Minnesota withholding tax. For purposes of this subdivision, 22.8 the term "winnings which are subject to withholding" has the 22.9 meaning given in section 3402(q)(3) of the Internal Revenue 22.10 Code.For purposes of the provisions of this section, a payment22.11to any person of winnings which are subject to withholding must22.12be treated as if the payment was a wage paid by an employer to22.13an employee.Every individual who is to receive a payment of 22.14 winnings which are subject to withholding shall furnish the 22.15 license holder with a statement, made under the penalties of 22.16 perjury, containing the name, address, and social security 22.17 account number of the person receiving the payment and of each 22.18 person entitled to any portion of such payment. The license 22.19 holder is liable for the payment of the tax required to be 22.20 withheld under this subdivision and subdivision 28 but is not 22.21 liable to any person for the amount of the payment. 22.22 [EFFECTIVE DATE.] This section is effective for wages paid 22.23 or incurred and returns filed for taxable years beginning after 22.24 December 31, 2001. 22.25 Sec. 19. Minnesota Statutes 2000, section 290.92, 22.26 subdivision 28, is amended to read: 22.27 Subd. 28. [PAYMENTS TO HORSERACING LICENSE HOLDERS.] 22.28 Effective with payments made after April 1, 1988, any holder of 22.29 a license issued by the Minnesota racing commission who makes a 22.30 payment for personal or professional services to a holder of a 22.31 class C license issued by the commission, except an amount paid 22.32 as a purse, shall deduct from the payment and withhold 6.25 22.33 percent of the amount as Minnesota withholding tax when the 22.34 amount paid to that individual by the same person during the 22.35 calendar year exceeds $600.For purposes of the provisions of22.36this section, a payment to any person which is subject to23.1withholding under this subdivision must be treated as if the23.2payment was a wage paid by an employer to an employee.Every 23.3 individual who is to receive a payment which is subject to 23.4 withholding under this subdivision shall furnish the license 23.5 holder with a statement, made under the penalties of perjury, 23.6 containing the name, address, and social security account number 23.7 of the person receiving the payment. No withholding is required 23.8 if the individual presents a signed certificate from the 23.9 individual's employer which states that the individual is an 23.10 employee of that employer. A nonresident individual who holds a 23.11 class C license must be treated as an athlete for purposes of 23.12 applying the provisions of sections 290.17, subdivision 23.13 2(1)(b)(ii) and 290.92, subdivision 4a. 23.14 [EFFECTIVE DATE.] This section is effective for wages paid 23.15 or incurred and returns filed for taxable years beginning after 23.16 December 31, 2001. 23.17 Sec. 20. Minnesota Statutes 2000, section 290.92, 23.18 subdivision 29, is amended to read: 23.19 Subd. 29. [LOTTERY PRIZES.] 7.25 percent of the payment of 23.20 Minnesota state lottery winnings which are subject to 23.21 withholding must be withheld as Minnesota withholding tax. For 23.22 purposes of this subdivision, the term "winnings which are 23.23 subject to withholding" has the meaning given in section 23.24 3402(q)(3) of the Internal Revenue Code.For purposes of the23.25provisions of this section, a payment to any person of winnings23.26which are subject to withholding must be treated as if the23.27payment was a wage paid by an employer to an employee.Every 23.28 individual who is to receive a payment of winnings which are 23.29 subject to withholding shall furnish the state lottery with a 23.30 statement, made under the penalties of perjury, containing the 23.31 name, address, and social security account number of the person 23.32 receiving the payment. The Minnesota state lottery is liable 23.33 for the payment of the tax required to be withheld under this 23.34 subdivision but is not liable to any person for the amount of 23.35 the payment. 23.36 [EFFECTIVE DATE.] This section is effective for wages paid 24.1 or incurred and returns filed for taxable years beginning after 24.2 December 31, 2001. 24.3 Sec. 21. Minnesota Statutes 2000, section 290.9201, 24.4 subdivision 7, is amended to read: 24.5 Subd. 7. [WITHHOLDING ON COMPENSATION OF ENTERTAINERS.] 24.6 The tax on compensation of an entertainer must be withheld at a 24.7 rate of two percent of all compensation paid to the 24.8 entertainment entity by the person or corporation having legal 24.9 control of the payment of the compensation. The compensation 24.10 subject to withholding under this section is not subject to the 24.11 withholding provisions of section 290.92, subdivision2a, 3, or24.12 28, except the provisions of sections 290.92, subdivision 6a, 24.13 270.06, paragraph (16), 289A.09, subdivisions 1, paragraph (f), 24.14 and 2, 289A.60, and 289A.63 shall apply to withholding under 24.15 this sectionas if the withholding were upon wages. 24.16 [EFFECTIVE DATE.] This section is effective for wages paid 24.17 or incurred and returns filed for taxable years beginning after 24.18 December 31, 2001. 24.19 Sec. 22. [COMMISSIONER OF REVENUE; POWERS AND DUTIES.] 24.20 (a) The commissioner of revenue shall prepare a bill for 24.21 introduction during the 2002 legislative session making 24.22 technical and conforming amendments to Minnesota Statutes as 24.23 required by this act. 24.24 (b) The commissioner of revenue may adopt rules and 24.25 prescribe forms and tables to implement the provisions of this 24.26 act. The rules may be adopted under section 14.386, except that 24.27 paragraph (b) does not apply, or 14.389, as determined by the 24.28 commissioner. 24.29 [EFFECTIVE DATE.] This section is effective the day 24.30 following final enactment. 24.31 Sec. 23. [REPEALER.] 24.32 Minnesota Statutes 2000, sections 270B.06, subdivision 3; 24.33 289A.63, subdivision 5; and 290.92, subdivisions 3, 5, 5a, 10, 24.34 16, 19, 22, and 30, are repealed. 24.35 [EFFECTIVE DATE.] This section is effective for wages paid 24.36 or incurred and returns filed for taxable years beginning after 25.1 December 31, 2001.