HF 3910

as introduced - 81st Legislature (1999 - 2000) 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 1998, 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 1998, sections 
  1.12            270B.06, subdivision 3; 289A.63, subdivision 5; 
  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 1998, section 289A.09, 
  1.16  subdivision 1, is amended to read: 
  1.17     Subdivision 1.  [RETURNS.] (a) An employer who is required 
  1.18  to deduct and withhold tax under section 290.92, subdivision 2a 
  1.19  or 3, and A 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      Sec. 2.  Minnesota Statutes 1998, section 289A.09, 
  2.9   subdivision 2, is amended to read: 
  2.10     Subd. 2.  [WITHHOLDING STATEMENT TO EMPLOYEE OR PAYEE AND 
  2.11  TO COMMISSIONER.] (a) A person required to deduct and withhold 
  2.12  from an employee a tax under section 290.92, subdivision 2a or 
  2.13  3, or 290.923, subdivision 2, or who would have been required to 
  2.14  deduct and withhold a tax under section 290.92, subdivision 2a 
  2.15  or 3, or persons required to withhold tax under section 290.923, 
  2.16  subdivision 2, determined without regard to section 290.92, 
  2.17  subdivision 19, if the employee or payee had claimed no more 
  2.18  than one withholding exemption, or who paid wages or made 
  2.19  payments not subject to withholding under section 290.92, 
  2.20  subdivision 2a or 3, or 290.923, subdivision 2, to an employee 
  2.21  or a person receiving royalty payments in excess of $600, or who 
  2.22  has entered into a voluntary withholding agreement with a payee 
  2.23  under section 290.92, subdivision 20, must give every employee 
  2.24  or person receiving royalty payments in respect to the 
  2.25  remuneration paid by the person to the employee or person 
  2.26  receiving royalty payments during the calendar year, on or 
  2.27  before January 31 of the succeeding year, or, if employment is 
  2.28  terminated before the close of the calendar year, within 30 days 
  2.29  after the date of receipt of a written request from the employee 
  2.30  if the 30-day period ends before January 31, a written statement 
  2.31  showing the following: 
  2.32     (1) name of the person; 
  2.33     (2) the name of the employee or payee and the employee's or 
  2.34  payee's social security account number; 
  2.35     (3) the total amount of wages as that term is defined in 
  2.36  section 290.92, subdivision 1, paragraph (1); the total amount 
  3.1   of remuneration subject to withholding under section 290.92, 
  3.2   subdivision 20; the amount of sick pay as required under section 
  3.3   6051(f) of the Internal Revenue Code; and the amount of 
  3.4   royalties subject to withholding under section 290.923, 
  3.5   subdivision 2; and 
  3.6      (4) the total amount deducted and withheld as tax under 
  3.7   section 290.92, subdivision 2a or 3, or 290.923, subdivision 2. 
  3.8      (b) The statement required to be furnished by this 
  3.9   paragraph with respect to any remuneration must be furnished at 
  3.10  those times, must contain the information required, and must be 
  3.11  in the form the commissioner prescribes. 
  3.12     (c) The commissioner may prescribe rules providing for 
  3.13  reasonable extensions of time, not in excess of 30 days, to 
  3.14  employers or payers required to give the statements to their 
  3.15  employees or payees under this subdivision. 
  3.16     (d) A duplicate of any statement made under this 
  3.17  subdivision and in accordance with rules prescribed by the 
  3.18  commissioner, along with a reconciliation in the form the 
  3.19  commissioner prescribes of the statements for the calendar year, 
  3.20  including a reconciliation of the quarterly returns required to 
  3.21  be filed under subdivision 1, must be filed with the 
  3.22  commissioner on or before February 28 of the year after the 
  3.23  payments were made.  
  3.24     (e) If an employer cancels the employer's Minnesota 
  3.25  withholding account number required by section 290.92, 
  3.26  subdivision 24, the information required by paragraph (d), must 
  3.27  be filed with the commissioner within 30 days of the end of the 
  3.28  quarter in which the employer cancels its account number. 
  3.29     (f) The employer must submit the statements required to be 
  3.30  sent to the commissioner on magnetic media, if the magnetic 
  3.31  media was required to satisfy the federal reporting requirements 
  3.32  of section 6011(e) of the Internal Revenue Code and the 
  3.33  regulations issued under it. 
  3.34     (g) A "third-party bulk filer" as defined in section 
  3.35  290.92, subdivision 30, paragraph (a), clause (2), must submit 
  3.36  the returns required by this subdivision and subdivision 1, 
  4.1   paragraph (a), with the commissioner by electronic means. 
  4.2      Sec. 3.  Minnesota Statutes 1998, section 289A.20, 
  4.3   subdivision 2, is amended to read: 
  4.4      Subd. 2.  [WITHHOLDING FROM WAGES, ENTERTAINER WITHHOLDING, 
  4.5   WITHHOLDING FROM PAYMENTS TO OUT-OF-STATE CONTRACTORS, AND 
  4.6   WITHHOLDING BY PARTNERSHIPS AND SMALL BUSINESS CORPORATIONS.] 
  4.7   (a) A tax required to be deducted and withheld during the 
  4.8   quarterly period must be paid on or before the last day of the 
  4.9   month following the close of the quarterly period, unless an 
  4.10  earlier time for payment is provided.  A tax required to be 
  4.11  deducted and withheld from compensation of an entertainer and 
  4.12  from a payment to an out-of-state contractor must be paid on or 
  4.13  before the date the return for such tax must be filed under 
  4.14  section 289A.18, subdivision 2.  Taxes required to be deducted 
  4.15  and withheld by partnerships and S corporations must be paid on 
  4.16  or before the date the return must be filed under section 
  4.17  289A.18, subdivision 2. 
  4.18     (b) An employer A person who, during the previous quarter, 
  4.19  withheld more than $1,500 of tax under section 290.92, 
  4.20  subdivision 2a or 3, or 290.923, subdivision 2, must deposit tax 
  4.21  withheld under those sections with the commissioner within the 
  4.22  time allowed to deposit the employer's federal withheld 
  4.23  employment taxes under Treasury Regulation, section 31.6302-1, 
  4.24  without regard to the safe harbor or de minimis rules in 
  4.25  subparagraph (f) or the one-day rule in subsection (c), clause 
  4.26  (3).  Taxpayers must submit a copy of their federal notice of 
  4.27  deposit status to the commissioner upon request by the 
  4.28  commissioner. 
  4.29     (c) The commissioner may prescribe by rule other return 
  4.30  periods or deposit requirements.  In prescribing the reporting 
  4.31  period, the commissioner may classify payors according to the 
  4.32  amount of their tax liability and may adopt an appropriate 
  4.33  reporting period for the class that the commissioner judges to 
  4.34  be consistent with efficient tax collection.  In no event will 
  4.35  the duration of the reporting period be more than one year. 
  4.36     (d) If less than the correct amount of tax is paid to the 
  5.1   commissioner, proper adjustments with respect to both the tax 
  5.2   and the amount to be deducted must be made, without interest, in 
  5.3   the manner and at the times the commissioner prescribes.  If the 
  5.4   underpayment cannot be adjusted, the amount of the underpayment 
  5.5   will be assessed and collected in the manner and at the times 
  5.6   the commissioner prescribes. 
  5.7      (e) If the aggregate amount of the tax withheld during a 
  5.8   fiscal year ending June 30 under section 290.92, subdivision 2a 
  5.9   or 3, is equal to or exceeds the amounts established for 
  5.10  remitting federal withheld taxes pursuant to the regulations 
  5.11  promulgated under section 6302(h) of the Internal Revenue Code, 
  5.12  the employer must remit each required deposit in the subsequent 
  5.13  calendar year by means of a funds transfer as defined in section 
  5.14  336.4A-104, paragraph (a).  The funds transfer payment date, as 
  5.15  defined in section 336.4A-401, must be on or before the date the 
  5.16  deposit is due.  If the date the deposit is due is not a funds 
  5.17  transfer business day, as defined in section 336.4A-105, 
  5.18  paragraph (a), clause (4), the payment date must be on or before 
  5.19  the funds transfer business day next following the date the 
  5.20  deposit is due. 
  5.21     (f) A third-party bulk filer as defined in section 290.92, 
  5.22  subdivision 30, paragraph (a), clause (2), who remits 
  5.23  withholding deposits must remit all deposits by means of a funds 
  5.24  transfer as provided in paragraph (e), regardless of the 
  5.25  aggregate amount of tax withheld during a fiscal year for all of 
  5.26  the employers. 
  5.27     Sec. 4.  [289A.251] [ESTIMATED TAX ON WAGES.] 
  5.28     Subdivision 1.  [ESTIMATED TAX.] An employee receiving 
  5.29  wages, as those terms are defined in section 290.92, shall make 
  5.30  payments of estimated tax.  The term "estimated tax" means the 
  5.31  amount the employee estimates is the sum of the taxes imposed by 
  5.32  chapter 290 for the taxable year. 
  5.33     Subd. 2.  [REQUIRED INSTALLMENTS.] There are 12 monthly 
  5.34  required installments for a taxable year.  Each installment is 
  5.35  due on the 15th day of the month following the end of the month 
  5.36  for which the installment is required. 
  6.1      Subd. 3.  [AMOUNT OF INSTALLMENT.] (a) The amount of the 
  6.2   installment required to be paid shall be determined by estimated 
  6.3   tax tables prescribed by the commissioner under section 290.92, 
  6.4   subdivision 2a. 
  6.5      (b) Notwithstanding paragraph (a), no payments of estimated 
  6.6   tax are required if the estimated tax, as defined in this 
  6.7   section, less the credits allowed against the tax is less than 
  6.8   ....... 
  6.9      Subd. 4.  [ADDITION TO TAX FOR UNDERPAYMENT.] In the case 
  6.10  of any underpayment of estimated tax by an employee, except as 
  6.11  provided in subdivision 5, there is added to and becomes part of 
  6.12  the taxes imposed by chapter 290 for the taxable year for the 
  6.13  period of the underpayment, an amount determined under section 
  6.14  270.75 on the amount of the underpayment. 
  6.15     Subd. 5.  [PERIOD OF UNDERPAYMENT.] (a) The period of the 
  6.16  underpayment runs from the date the installment was required to 
  6.17  be paid to the earlier of the following dates: 
  6.18     (1) the 15th day of the fourth month following the close of 
  6.19  the taxable year. 
  6.20     (2) with respect to any part of the underpayment, the date 
  6.21  on which that part is paid.  For purposes of this clause, a 
  6.22  payment of estimated tax on an installment date is considered a 
  6.23  payment of any unpaid required installments in the order in 
  6.24  which the installments are required to be paid. 
  6.25     (b) If, on or before January 31 of the following taxable 
  6.26  year, the taxpayer files a return for the taxable year and pays 
  6.27  in full the amount computed on the return as payable, then no 
  6.28  addition to tax is imposed under subdivision 4 with respect to 
  6.29  any underpayment of the last required installment for the 
  6.30  taxable year. 
  6.31     Sec. 5.  Minnesota Statutes 1998, section 289A.31, 
  6.32  subdivision 5, is amended to read: 
  6.33     Subd. 5.  [WITHHOLDING TAX, WITHHOLDING FROM PAYMENTS TO 
  6.34  OUT-OF-STATE CONTRACTORS, AND WITHHOLDING BY PARTNERSHIPS AND 
  6.35  SMALL BUSINESS CORPORATIONS.] (a) Except as provided in 
  6.36  paragraph (b), an employer or a person withholding tax under 
  7.1   section 290.92 or 290.923, subdivision 2, who fails to pay to or 
  7.2   deposit with the commissioner a sum or sums required by those 
  7.3   sections to be deducted, withheld, and paid, is personally and 
  7.4   individually liable to the state for the sum or sums, and added 
  7.5   penalties and interest, and is not liable to another person for 
  7.6   that payment or payments.  The sum or sums deducted and withheld 
  7.7   under section 290.92, subdivision 2a or 3, or 290.923, 
  7.8   subdivision 2, must be held as a special fund in trust for the 
  7.9   state of Minnesota.  
  7.10     (b) If the employer or person withholding tax under section 
  7.11  290.92 or 290.923, subdivision 2, fails to deduct and withhold 
  7.12  the tax in violation of those sections, and later the taxes 
  7.13  against which the tax may be credited are paid, the tax required 
  7.14  to be deducted and withheld will not be collected from the 
  7.15  employer.  This does not, however, relieve the employer from 
  7.16  liability for any penalties and interest otherwise applicable 
  7.17  for failure to deduct and withhold.  
  7.18     (c) Liability for payment of withholding taxes includes a 
  7.19  responsible person or entity described in the personal liability 
  7.20  provisions of section 270.101.  
  7.21     (d) Liability for payment of withholding taxes includes a 
  7.22  third party lender or surety described in section 290.92, 
  7.23  subdivision 22.  
  7.24     (e) A partnership or S corporation required to withhold and 
  7.25  remit tax under section 290.92, subdivisions 4b and 4c, is 
  7.26  liable for payment of the tax to the commissioner, and a person 
  7.27  having control of or responsibility for the withholding of the 
  7.28  tax or the filing of returns due in connection with the tax is 
  7.29  personally liable for the tax due. 
  7.30     (f) (e) A payor of sums required to be withheld under 
  7.31  section 290.9705, subdivision 1, is liable to the state for the 
  7.32  amount required to be deducted, and is not liable to an 
  7.33  out-of-state contractor for the amount of the payment. 
  7.34     Sec. 6.  Minnesota Statutes 1998, section 289A.38, 
  7.35  subdivision 14, is amended to read: 
  7.36     Subd. 14.  [FAILURE TO TIMELY FILE WITHHOLDING 
  8.1   RECONCILIATION.] If an employer a person fails to timely file 
  8.2   the reconciliation required by section 289A.09, subdivision 2, 
  8.3   paragraph (d), withholding taxes may be assessed within the 
  8.4   period prescribed in subdivision 1, or within one year from the 
  8.5   date the reconciliation is filed with the commissioner, 
  8.6   whichever is later. 
  8.7      Sec. 7.  Minnesota Statutes 1998, section 289A.50, 
  8.8   subdivision 3, is amended to read: 
  8.9      Subd. 3.  [WITHHOLDING TAX AND ENTERTAINER WITHHOLDING TAX 
  8.10  REFUNDS.] When there is an overpayment of withholding tax by an 
  8.11  employer or a person making royalty payments, or an overpayment 
  8.12  of entertainer withholding tax by the payor, a refund allowable 
  8.13  under this section is limited to the amount of the overpayment 
  8.14  that was not deducted and withheld from employee wages or from 
  8.15  the royalty payments, or from the compensation of an entertainer.
  8.16     Sec. 8.  Minnesota Statutes 1998, section 289A.60, 
  8.17  subdivision 11, is amended to read: 
  8.18     Subd. 11.  [PENALTIES RELATING TO INFORMATION REPORTS, 
  8.19  WITHHOLDING.] (a) When a person required under section 289A.09, 
  8.20  subdivision 2, to give a statement to an employee or a payee and 
  8.21  a duplicate statement to the commissioner, or to give a 
  8.22  reconciliation of the statements and quarterly returns to the 
  8.23  commissioner, gives a false or fraudulent statement to an 
  8.24  employee or a payee or a false or fraudulent duplicate statement 
  8.25  or reconciliation of statements and quarterly returns to the 
  8.26  commissioner, or fails to give a statement or the reconciliation 
  8.27  in the manner, when due, and showing the information required by 
  8.28  section 289A.09, subdivision 2, or rules prescribed by the 
  8.29  commissioner under that section, that person is liable for a 
  8.30  penalty of $50 for an act or failure to act.  The total amount 
  8.31  imposed on the delinquent person for failures during a calendar 
  8.32  year must not exceed $25,000.  
  8.33     (b) In addition to any other penalty provided by law, an 
  8.34  employee who gives a withholding exemption certificate or a 
  8.35  residency affidavit to an employer that the employee has reason 
  8.36  to know contains a materially incorrect statement is liable to 
  9.1   the commissioner of revenue for a penalty of $500 for each 
  9.2   instance.  
  9.3      (c) In addition to any other penalty provided by law, an 
  9.4   employer who fails to submit a copy of a withholding exemption 
  9.5   certificate or a residency affidavit required by section 290.92, 
  9.6   subdivision 5a, clause (1)(a), (1)(b), or (2) is liable to the 
  9.7   commissioner of revenue for a penalty of $50 for each instance.  
  9.8      (d) An employer or payor who fails to file an application 
  9.9   for a withholding account number, as required by section 290.92, 
  9.10  subdivision 24, is liable to the commissioner for a penalty of 
  9.11  $100.  
  9.12     Sec. 9.  Minnesota Statutes 1998, section 290.92, 
  9.13  subdivision 1, is amended to read: 
  9.14     Subdivision 1.  [DEFINITIONS.] (1)  [WAGES.] For purposes 
  9.15  of this section, the term "wages" means the same as that term is 
  9.16  defined in section 3401(a) and (f) of the Internal Revenue Code. 
  9.17     (2)  [PAYROLL PERIOD.] For purposes of this section the 
  9.18  term "payroll period" means a period for which a payment of 
  9.19  wages is ordinarily made to the employee by the employee's 
  9.20  employer, and the term "miscellaneous payroll period" means a 
  9.21  payroll period other than a daily, weekly, biweekly, 
  9.22  semimonthly, monthly, quarterly, semiannual, or annual payroll 
  9.23  period. 
  9.24     (3)  [EMPLOYEE.] For purposes of this section the term 
  9.25  "employee" means any resident individual performing services for 
  9.26  an employer, either within or without, or both within and 
  9.27  without the state of Minnesota, and every nonresident individual 
  9.28  performing services within the state of Minnesota, the 
  9.29  performance of which services constitute, establish, and 
  9.30  determine the relationship between the parties as that of 
  9.31  employer and employee.  As used in the preceding sentence, the 
  9.32  term "employee" includes an officer of a corporation, and an 
  9.33  officer, employee, or elected official of the United States, a 
  9.34  state, or any political subdivision thereof, or the District of 
  9.35  Columbia, or any agency or instrumentality of any one or more of 
  9.36  the foregoing. 
 10.1      (4)  [EMPLOYER.] For purposes of this section the term 
 10.2   "employer" means any person, including individuals, fiduciaries, 
 10.3   estates, trusts, partnerships, limited liability companies, and 
 10.4   corporations transacting business in or deriving any income from 
 10.5   sources within the state of Minnesota for whom an individual 
 10.6   performs or performed any service, of whatever nature, as the 
 10.7   employee of such person, except that if the person for whom the 
 10.8   individual performs or performed the services does not have 
 10.9   legal control of the payment of the wages for such services, the 
 10.10  term "employer," except for purposes of paragraph (1), means the 
 10.11  person having legal control of the payment of such wages.  As 
 10.12  used in the preceding sentence, the term "employer" includes any 
 10.13  corporation, individual, estate, trust, or organization which is 
 10.14  exempt from taxation under section 290.05 and further includes, 
 10.15  but is not limited to, officers of corporations who have legal 
 10.16  control, either individually or jointly with another or others, 
 10.17  of the payment of the wages. 
 10.18     (5)  [NUMBER OF WITHHOLDING ESTIMATED TAX EXEMPTIONS 
 10.19  CLAIMED.] For purposes of this section, the term "number 
 10.20  of withholding estimated tax exemptions claimed" means the 
 10.21  number of withholding estimated tax exemptions claimed in a 
 10.22  withholding exemption certificate in effect under subdivision 5, 
 10.23  except that if no such certificate is in effect, the number of 
 10.24  withholding exemptions claimed shall be considered to be 
 10.25  zero for purposes of filing estimated taxes on wages under 
 10.26  section 289A.251.  The employee may claim a number of estimated 
 10.27  tax exemptions not to exceed the number of withholding 
 10.28  exemptions that the employee claims and that are allowable 
 10.29  pursuant to section 3402(f)(1), (m), and (n) of the Internal 
 10.30  Revenue Code for federal withholding purposes. 
 10.31     Sec. 10.  Minnesota Statutes 1998, section 290.92, 
 10.32  subdivision 2a, is amended to read: 
 10.33     Subd. 2a.  [COLLECTION AT SOURCE ESTIMATED TAX TABLES.] (1) 
 10.34  [DEDUCTIONS.] Every employer making payment of wages shall 
 10.35  deduct and withhold upon such wages a tax as provided in this 
 10.36  section. 
 11.1      (2)  [WITHHOLDING ON PAYROLL PERIOD.] The employer shall 
 11.2   withhold the tax on the basis of each payroll period or as 
 11.3   otherwise provided in this section. 
 11.4      (3)  [WITHHOLDING TABLES.] Unless the amount of tax to be 
 11.5   withheld is determined as provided in subdivision 3, The amount 
 11.6   of tax to be withheld for each individual estimated taxes on 
 11.7   wages payable under section 289A.251 shall be based upon 
 11.8   estimated tax tables to be prepared and distributed by the 
 11.9   commissioner.  The tables shall be computed for the several 
 11.10  permissible withholding periods and shall take account of 
 11.11  exemptions allowed under this section; and the amounts 
 11.12  computed for withholding shall be such that the amount withheld 
 11.13  for any individual during the individual's taxable year shall 
 11.14  approximate in the aggregate as closely as possible the tax 
 11.15  which is levied and imposed under this chapter for that taxable 
 11.16  year, upon the individual's salary, wages, or compensation for 
 11.17  personal services of any kind for the employer. 
 11.18     (4)  [MISCELLANEOUS PAYROLL PERIOD.] If wages are paid with 
 11.19  respect to a period which is not a payroll period, the amount to 
 11.20  be deducted and withheld shall be that applicable in the case of 
 11.21  a miscellaneous payroll period containing a number of days, 
 11.22  including Sundays and holidays, equal to the number of days in 
 11.23  the period with respect to which such wages are paid. 
 11.24     (5)  [MISCELLANEOUS PAYROLL PERIOD.] (a) In any case in 
 11.25  which wages are paid by an employer without regard to any 
 11.26  payroll period or other period, the amount to be deducted and 
 11.27  withheld shall be that applicable in the case of a miscellaneous 
 11.28  payroll period containing a number of days equal to the number 
 11.29  of days, including Sundays and holidays, which have elapsed 
 11.30  since the date of the last payment of such wages by such 
 11.31  employer during the calendar year, or the date of commencement 
 11.32  of employment with such employer during such year, or January 1 
 11.33  of such year, whichever is the later. 
 11.34     (b) In any case in which the period, or the time described 
 11.35  in clause (a), in respect of any wages is less than one week, 
 11.36  the commissioner, under rules prescribed by the commissioner, 
 12.1   may authorize an employer to determine the amount to be deducted 
 12.2   and withheld under the tables applicable in the case of a weekly 
 12.3   payroll period, in which case the aggregate of the wages paid to 
 12.4   the employee during the calendar week shall be considered the 
 12.5   weekly wages. 
 12.6      (6)  [WAGES COMPUTED TO NEAREST DOLLAR.] If the wages 
 12.7   exceed the highest bracket, in determining the amount to be 
 12.8   deducted and withheld under this subdivision, the wages may, at 
 12.9   the election of the employer, be computed to the nearest dollar. 
 12.10     (7)  [RULES ON WITHHOLDING.] The commissioner may, by rule, 
 12.11  authorize employers: 
 12.12     (a) to estimate the wages which will be paid to any 
 12.13  employee in any quarter of the calendar year; 
 12.14     (b) to determine the amount to be deducted and withheld 
 12.15  upon each payment of wages to such employee during such quarter 
 12.16  as if the appropriate average of the wages so estimated 
 12.17  constituted the actual wages paid; and 
 12.18     (c) to deduct and withhold upon any payment of wages to 
 12.19  such employee during such quarter such amount as may be 
 12.20  necessary to adjust the amount actually deducted and withheld 
 12.21  upon wages of such employee during such quarter to the amount 
 12.22  required to be deducted and withheld during such quarter without 
 12.23  regard to this paragraph (7). 
 12.24     (8)  [ADDITIONAL WITHHOLDING.] The commissioner is 
 12.25  authorized to provide by rule for increases or decreases in the 
 12.26  amount of withholding otherwise required under this section in 
 12.27  cases where the employee requests the changes.  Such additional 
 12.28  withholding shall for all purposes be considered tax required to 
 12.29  be deducted and withheld under this section. 
 12.30     (9)  [TIPS.] In the case of tips which constitute wages, 
 12.31  this subdivision shall be applicable only to such tips as are 
 12.32  included in a written statement furnished to the employer 
 12.33  pursuant to section 6053 of the Internal Revenue Code and only 
 12.34  to the extent that the tax can be deducted and withheld by the 
 12.35  employer, at or after the time such statement is so furnished 
 12.36  and before the close of the calendar year in which such 
 13.1   statement is furnished, from such wages of the employee 
 13.2   (excluding tips, but including funds turned over by the employee 
 13.3   to the employer for the purpose of such deduction and 
 13.4   withholding) as are under the control of the employer; and an 
 13.5   employer who is furnished by an employee a written statement of 
 13.6   tips (received in a calendar month) pursuant to section 6053 of 
 13.7   the Internal Revenue Code to which subdivision 1 is applicable 
 13.8   may deduct and withhold the tax with respect to such tips from 
 13.9   any wages of the employee (excluding tips) under the employer's 
 13.10  control, even though at the time such statement is furnished the 
 13.11  total amount of the tips included in statements furnished to the 
 13.12  employer as having been received by the employee in such 
 13.13  calendar month in the course of employment by such employer is 
 13.14  less than $20.  Such tax shall not at any time be deducted and 
 13.15  withheld in an amount which exceeds the aggregate of such wages 
 13.16  and funds as are under the control of the employer minus any tax 
 13.17  required by other provisions of state or federal law to be 
 13.18  collected from such wages and funds.  
 13.19     (10)  [VEHICLE FRINGE BENEFITS.] An employer shall not 
 13.20  deduct and withhold any tax under this section with respect to 
 13.21  any vehicle fringe benefit provided to an employee if the 
 13.22  employer has so elected for federal purposes and the requirement 
 13.23  of and the definition contained in section 3402(s) of the 
 13.24  Internal Revenue Code are complied with. 
 13.25     Sec. 11.  Minnesota Statutes 1998, section 290.92, 
 13.26  subdivision 4a, is amended to read: 
 13.27     Subd. 4a.  [TAX WITHHELD FROM NONRESIDENTS.] (1)  ["WAGES" 
 13.28  PAID TO NONRESIDENT EMPLOYEES.] For the purposes of this 
 13.29  section:, the term "wages" means all remuneration taxable under 
 13.30  this chapter including all remuneration paid to a nonresident 
 13.31  employee for services performed in this state. 
 13.32     (2)  ["EMPLOYER," "WAGES" AND "EMPLOYEE" CONCERNING 
 13.33  NONRESIDENTS.] Notwithstanding any other provision of this 
 13.34  section, under rules to be prescribed by the commissioner of 
 13.35  revenue, for purposes of this section any person having control, 
 13.36  receipt, custody, disposal or payment of compensation taxable 
 14.1   under this chapter and earned by a nonresident for personal 
 14.2   services, shall be deemed an employer, any compensation taxable 
 14.3   under this chapter and earned by a nonresident for personal 
 14.4   services shall be deemed wages, and a nonresident entitled to 
 14.5   compensation taxable under this chapter and earned by the 
 14.6   nonresident for personal services shall be deemed an employee. 
 14.7      When compensation for personal services is paid to a 
 14.8   corporation in which all or substantially all of the 
 14.9   shareholders are individual entertainers, performers or athletes 
 14.10  who gave an entertainment or athletic performance in this state 
 14.11  for which the compensation was paid, the compensation shall be 
 14.12  deemed wages of the individual entertainers, performers or 
 14.13  athletes and shall be subject to the provisions of this 
 14.14  section.  Advance payments of compensation for personal services 
 14.15  to be performed in Minnesota shall be deemed wages and subject 
 14.16  to the provisions of this section.  
 14.17     (3)  [NONRESIDENTS, EMPLOYER'S DUTY.] The employer of any 
 14.18  employee domiciled in a state with which Minnesota has 
 14.19  reciprocity under section 290.081 is not required to withhold 
 14.20  under this chapter from the wages earned by such employee in 
 14.21  this state if the employee annually submits to the employer an 
 14.22  affidavit of residency in the form prescribed by the 
 14.23  commissioner.  The affidavit must be submitted by the later of 
 14.24     (i) 30 days after the employment date or 
 14.25     (ii) August 31 for calendar year 1987 and February 28 for 
 14.26  subsequent calendar years.  
 14.27     Sec. 12.  Minnesota Statutes 1998, section 290.92, 
 14.28  subdivision 9, is amended to read: 
 14.29     Subd. 9.  [DETERMINATION OF TAX DUE.] The commissioner may 
 14.30  grant permission to employers, or persons withholding tax under 
 14.31  section 290.923, subdivision 2, who do not desire to use the 
 14.32  withholding tax tables provided in accordance with paragraph (3) 
 14.33  of subdivision 2a, or section 290.923, subdivision 2, to 
 14.34  determine the amount of tax to be withheld by use of a method of 
 14.35  withholding other than withholding tax tables, provided such 
 14.36  method will withhold from each employee or person receiving 
 15.1   royalty payments substantially the same amount of tax as would 
 15.2   be withheld by use of the withholding tax tables.  Employers, or 
 15.3   Persons withholding tax under section 290.923, subdivision 2, 
 15.4   who desire to determine the amount of tax to be withheld by a 
 15.5   method other than by use of the withholding tax tables shall 
 15.6   obtain permission from the commissioner before the beginning of 
 15.7   a payroll period for which the employer, or person withholding 
 15.8   tax under section 290.923, subdivision 2, desires to withhold 
 15.9   the tax by such other method.  Applications to use such other 
 15.10  method must be accompanied by evidence establishing the need for 
 15.11  the use of such method. 
 15.12     Sec. 13.  Minnesota Statutes 1998, section 290.92, 
 15.13  subdivision 12, is amended to read: 
 15.14     Subd. 12.  [WITHHELD AMOUNT, CREDIT AGAINST TAX.] (a) The 
 15.15  amount deducted and withheld as tax under subdivision 2a or 3 
 15.16  during a calendar year upon wages shall be allowed as a credit 
 15.17  to the recipient of the income against the taxes imposed by this 
 15.18  chapter, for a taxable year beginning in such calendar year.  If 
 15.19  more than one taxable year begins in such calendar year, such 
 15.20  amount shall be allowed as a credit against the taxes for the 
 15.21  last taxable year so beginning.  
 15.22     (b) The amount deducted and withheld under subdivisions 4b 
 15.23  and 4c and under section 290.923, subdivision 2, for 
 15.24  partnership, S corporation, or royalty income must be allowed as 
 15.25  a credit to the recipient of the income against the taxes 
 15.26  imposed by this chapter for the tax year the income is subject 
 15.27  to tax under this chapter. 
 15.28     Sec. 14.  Minnesota Statutes 1998, section 290.92, 
 15.29  subdivision 23, is amended to read: 
 15.30     Subd. 23.  [WITHHOLDING BY EMPLOYER OF DELINQUENT TAXES.] 
 15.31  (1) The commissioner may, within five years after the date of 
 15.32  assessment of the tax, or if a lien has been filed under section 
 15.33  270.69, within the statutory period for enforcement of the lien, 
 15.34  give notice to any employer deriving income which has a taxable 
 15.35  situs in this state regardless of whether the income is exempt 
 15.36  from taxation, that an employee of that employer is delinquent 
 16.1   in a certain amount with respect to any state taxes, including 
 16.2   penalties, interest, and costs.  The commissioner can proceed 
 16.3   under this subdivision only if the tax is uncontested or if the 
 16.4   time for appeal of the tax has expired.  The commissioner shall 
 16.5   not proceed under this subdivision until the expiration of 30 
 16.6   days after mailing to the taxpayer, at the taxpayer's last known 
 16.7   address, a written notice of (a) the amount of taxes, interest, 
 16.8   and penalties due from the taxpayer and demand for their 
 16.9   payment, and (b) the commissioner's intention to require 
 16.10  additional withholding by the taxpayer's employer pursuant to 
 16.11  this subdivision.  The effect of the notice shall expire 180 
 16.12  days after it has been mailed to the taxpayer provided that the 
 16.13  notice may be renewed by mailing a new notice which is in 
 16.14  accordance with this subdivision.  The renewed notice shall have 
 16.15  the effect of reinstating the priority of the original claim.  
 16.16  The notice to the taxpayer shall be in substantially the same 
 16.17  form as that provided in section 571.72.  The notice shall 
 16.18  further inform the taxpayer of the wage exemptions contained in 
 16.19  section 550.37, subdivision 14.  If no statement of exemption is 
 16.20  received by the commissioner within 30 days from the mailing of 
 16.21  the notice, the commissioner may proceed under this 
 16.22  subdivision.  The notice to the taxpayer's employer may be 
 16.23  served by mail or by delivery by an employee of the department 
 16.24  of revenue and shall be in substantially the same form as 
 16.25  provided in section 571.75.  Upon receipt of notice, the 
 16.26  employer shall withhold from compensation due or to become due 
 16.27  to the employee, the total amount shown by the notice, subject 
 16.28  to the provisions of section 571.922.  The employer shall 
 16.29  continue to withhold each pay period until the notice is 
 16.30  released by the commissioner under section 270.709.  Upon 
 16.31  receipt of notice by the employer, the claim of the state of 
 16.32  Minnesota shall have priority over any subsequent garnishments 
 16.33  or wage assignments.  The commissioner may arrange between the 
 16.34  employer and the employee for withholding a portion of the total 
 16.35  amount due the employee each pay period, until the total amount 
 16.36  shown by the notice plus accrued interest has been withheld.  
 17.1      The "compensation due" any employee is defined in 
 17.2   accordance with the provisions of section 571.921.  The maximum 
 17.3   withholding allowed under this subdivision for any one pay 
 17.4   period shall be decreased by any amounts payable pursuant to a 
 17.5   garnishment action with respect to which the employer was served 
 17.6   prior to being served with the notice of delinquency and any 
 17.7   amounts covered by any irrevocable and previously effective 
 17.8   assignment of wages; the employer shall give notice to the 
 17.9   department of the amounts and the facts relating to such 
 17.10  assignments within ten days after the service of the notice of 
 17.11  delinquency on the form provided by the department of revenue as 
 17.12  noted in this subdivision.  
 17.13     (2) If the employee ceases to be employed by the employer 
 17.14  before the full amount set forth in a notice of delinquency plus 
 17.15  accrued interest has been withheld, the employer shall 
 17.16  immediately notify the commissioner in writing of the 
 17.17  termination date of the employee and the total amount withheld.  
 17.18  No employer may discharge any employee by reason of the fact 
 17.19  that the commissioner has proceeded under this subdivision.  If 
 17.20  an employer discharges an employee in violation of this 
 17.21  provision, the employee shall have the same remedy as provided 
 17.22  in section 571.927, subdivision 2.  
 17.23     (3) Within ten days after the expiration of such pay 
 17.24  period, the employer shall remit to the commissioner, on a form 
 17.25  and in the manner prescribed by the commissioner, the amount 
 17.26  withheld during each pay period under this subdivision.  
 17.27     (4) Clauses (1), (2), and (3), except provisions imposing a 
 17.28  liability on the employer for failure to withhold or remit, 
 17.29  shall apply to cases in which the employer is the United States 
 17.30  or any instrumentality thereof or this state or any municipality 
 17.31  or other subordinate unit thereof.  
 17.32     (5) The commissioner shall refund to the employee excess 
 17.33  amounts withheld from the employee under this subdivision.  If 
 17.34  any excess results from payments by the employer because of 
 17.35  willful failure to withhold or remit as prescribed in clause 
 17.36  (3), the excess attributable to the employer's payment shall be 
 18.1   refunded to the employer.  
 18.2      (6) Employers required to withhold delinquent taxes, 
 18.3   penalties, interest, and costs under this subdivision shall not 
 18.4   be required to compute any additional interest, costs or other 
 18.5   charges to be withheld.  
 18.6      (7) The collection remedy provided to the commissioner by 
 18.7   this subdivision shall have the same legal effect as if it were 
 18.8   a levy made pursuant to section 270.70.  
 18.9      Sec. 15.  Minnesota Statutes 1998, section 290.92, 
 18.10  subdivision 24, is amended to read: 
 18.11     Subd. 24.  [APPLICATION FOR ACCOUNT NUMBER.] An employer, 
 18.12  or A person withholding tax under section 290.923, desiring to 
 18.13  engage in business in Minnesota shall file with the commissioner 
 18.14  an application for a withholding account number on or before the 
 18.15  date the employer person is required to withhold Minnesota taxes 
 18.16  under this section 290.923.  An application for an account 
 18.17  number must be made upon a form prescribed by the commissioner.  
 18.18  It must give the name of the employer or payor, the location of 
 18.19  the place or places of business, the names, addresses and social 
 18.20  security numbers of the owners or partners, or if the employer 
 18.21  or payor is a corporation of the officers, or if the employer or 
 18.22  payor is a trust of the trustees, and other information the 
 18.23  commissioner may require.  The application must be filed by the 
 18.24  owner if the employer or payor is a natural person; by a member 
 18.25  or partner if the employer or payor is an association or 
 18.26  partnership; by a trustee if the employer or payor be a trust, 
 18.27  or by a person authorized to sign the application if the 
 18.28  employer or payor is a corporation. 
 18.29     No fee shall be charged for the application. 
 18.30     The account number is not assignable. 
 18.31     Sec. 16.  Minnesota Statutes 1998, section 290.92, 
 18.32  subdivision 25, is amended to read: 
 18.33     Subd. 25.  [DELEGATION OF DUTY OF EMPLOYER OR PAYOR.] The 
 18.34  delegation to an agent, fiduciary, or employee of an employer, 
 18.35  or a person withholding tax under section 290.923, of any duty 
 18.36  prescribed for the employer or payor by this section shall not 
 19.1   relieve the employer or payor of full compliance with such duty. 
 19.2      Sec. 17.  Minnesota Statutes 1998, section 290.92, 
 19.3   subdivision 26, is amended to read: 
 19.4      Subd. 26.  [EXTENSION OF WITHHOLDING TO CERTAIN PAYMENTS 
 19.5   WHERE IDENTIFYING NUMBER NOT FURNISHED OR INACCURATE.] (a) If, 
 19.6   in the case of any reportable payment, (1) the payee fails to 
 19.7   furnish the payee's social security account number to the payor, 
 19.8   or (2) the commissioner notifies the payor that the social 
 19.9   security account number furnished by the payee is incorrect, 
 19.10  then the payor shall deduct and withhold from the payment a tax 
 19.11  equal to the amount of the payment multiplied by the highest 
 19.12  rate used in determining the income tax liability of an 
 19.13  individual under section 290.06, subdivision 2c. 
 19.14     (b)(1) In the case of any failure described in clause 
 19.15  (a)(1), clause (a) shall apply to any reportable payment made by 
 19.16  the payor during the period during which the social security 
 19.17  account number has not been furnished.  
 19.18     (2) In any case where there is a notification described in 
 19.19  clause (a)(2), clause (a) shall apply to any reportable payment 
 19.20  made by the payor (i) after the close of the 30th day after the 
 19.21  day on which the payor received the notification, and (ii) 
 19.22  before the payee furnishes another social security account 
 19.23  number.  
 19.24     (3)(i) Unless the payor elects not to have this 
 19.25  subparagraph apply with respect to the payee, clause (a) shall 
 19.26  also apply to any reportable payment made after the close of the 
 19.27  period described in paragraph (1) or (2) (as the case may be) 
 19.28  and before the 30th day after the close of the period.  
 19.29     (ii) If the payor elects the application of this 
 19.30  subparagraph with respect to the payee, clause (a) shall also 
 19.31  apply to any reportable payment made during the 30-day period 
 19.32  described in paragraph (2). 
 19.33     (iii) The payor may elect a period shorter than the grace 
 19.34  period set forth in subparagraph (i) or (ii) as the case may be. 
 19.35     (c) The provisions of section 3406 of the Internal Revenue 
 19.36  Code shall apply and shall govern when withholding shall be 
 20.1   required and the definition of terms.  The term "reportable 
 20.2   payment" shall include only those payments for personal 
 20.3   services.  No tax shall be deducted or withheld under this 
 20.4   subdivision with respect to any amount for which withholding is 
 20.5   otherwise required under this section.  For purposes of this 
 20.6   section, payments which are subject to withholding under this 
 20.7   subdivision shall be treated as if they were wages paid by an 
 20.8   employer to an employee and amounts deducted and withheld under 
 20.9   this subdivision shall be treated as if deducted and withheld 
 20.10  under subdivision 2a.  
 20.11     (d) Whenever the commissioner notifies a payor under this 
 20.12  subdivision that the social security account number furnished by 
 20.13  any payee is incorrect, the commissioner shall at the same time 
 20.14  furnish a copy of the notice to the payor, and the payor shall 
 20.15  promptly furnish the copy to the payee.  If the commissioner 
 20.16  notifies a payor under this subdivision that the social security 
 20.17  account number furnished by any payee is incorrect and the payee 
 20.18  subsequently furnishes another social security account number to 
 20.19  the payor, the payor shall promptly notify the commissioner of 
 20.20  the other social security account number furnished.  
 20.21     Sec. 18.  Minnesota Statutes 1998, section 290.92, 
 20.22  subdivision 27, is amended to read: 
 20.23     Subd. 27.  [PARI-MUTUEL WINNINGS.] Any holder of a class A, 
 20.24  B, or D license issued by the Minnesota racing commission shall 
 20.25  deduct and withhold an amount equal to the winnings multiplied 
 20.26  by the highest rate used in determining the income tax liability 
 20.27  of an individual under section 290.06, subdivision 2c, as 
 20.28  Minnesota withholding tax.  For purposes of this subdivision, 
 20.29  the term "winnings which are subject to withholding" has the 
 20.30  meaning given in section 3402(q)(3) of the Internal Revenue 
 20.31  Code.  For purposes of the provisions of this section, a payment 
 20.32  to any person of winnings which are subject to withholding must 
 20.33  be treated as if the payment was a wage paid by an employer to 
 20.34  an employee.  Every individual who is to receive a payment of 
 20.35  winnings which are subject to withholding shall furnish the 
 20.36  license holder with a statement, made under the penalties of 
 21.1   perjury, containing the name, address, and social security 
 21.2   account number of the person receiving the payment and of each 
 21.3   person entitled to any portion of such payment.  The license 
 21.4   holder is liable for the payment of the tax required to be 
 21.5   withheld under this subdivision and subdivision 28 but is not 
 21.6   liable to any person for the amount of the payment.  
 21.7      Sec. 19.  Minnesota Statutes 1998, section 290.92, 
 21.8   subdivision 28, is amended to read: 
 21.9      Subd. 28.  [PAYMENTS TO HORSERACING LICENSE HOLDERS.] 
 21.10  Effective with payments made after April 1, 1988, any holder of 
 21.11  a license issued by the Minnesota racing commission who makes a 
 21.12  payment for personal or professional services to a holder of a 
 21.13  class C license issued by the commission, except an amount paid 
 21.14  as a purse, shall deduct from the payment and withhold seven 
 21.15  percent of the amount as Minnesota withholding tax when the 
 21.16  amount paid to that individual by the same person during the 
 21.17  calendar year exceeds $600.  For purposes of the provisions of 
 21.18  this section, a payment to any person which is subject to 
 21.19  withholding under this subdivision must be treated as if the 
 21.20  payment was a wage paid by an employer to an employee.  Every 
 21.21  individual who is to receive a payment which is subject to 
 21.22  withholding under this subdivision shall furnish the license 
 21.23  holder with a statement, made under the penalties of perjury, 
 21.24  containing the name, address, and social security account number 
 21.25  of the person receiving the payment.  No withholding is required 
 21.26  if the individual presents a signed certificate from the 
 21.27  individual's employer which states that the individual is an 
 21.28  employee of that employer.  A nonresident individual who holds a 
 21.29  class C license must be treated as an athlete for purposes of 
 21.30  applying the provisions of sections 290.17, subdivision 
 21.31  2(1)(b)(ii) and 290.92, subdivision 4a.  
 21.32     Sec. 20.  Minnesota Statutes 1998, section 290.92, 
 21.33  subdivision 29, is amended to read: 
 21.34     Subd. 29.  [LOTTERY PRIZES.] Eight percent of the payment 
 21.35  of Minnesota state lottery winnings which are subject to 
 21.36  withholding must be withheld as Minnesota withholding tax.  For 
 22.1   purposes of this subdivision, the term "winnings which are 
 22.2   subject to withholding" has the meaning given in section 
 22.3   3402(q)(3) of the Internal Revenue Code.  For purposes of the 
 22.4   provisions of this section, a payment to any person of winnings 
 22.5   which are subject to withholding must be treated as if the 
 22.6   payment was a wage paid by an employer to an employee.  Every 
 22.7   individual who is to receive a payment of winnings which are 
 22.8   subject to withholding shall furnish the state lottery with a 
 22.9   statement, made under the penalties of perjury, containing the 
 22.10  name, address, and social security account number of the person 
 22.11  receiving the payment.  The Minnesota state lottery is liable 
 22.12  for the payment of the tax required to be withheld under this 
 22.13  subdivision but is not liable to any person for the amount of 
 22.14  the payment. 
 22.15     Sec. 21.  Minnesota Statutes 1998, section 290.9201, 
 22.16  subdivision 7, is amended to read: 
 22.17     Subd. 7.  [WITHHOLDING ON COMPENSATION OF ENTERTAINERS.] 
 22.18  The tax on compensation of an entertainer must be withheld at a 
 22.19  rate of two percent of all compensation paid to the 
 22.20  entertainment entity by the person or corporation having legal 
 22.21  control of the payment of the compensation.  The compensation 
 22.22  subject to withholding under this section is not subject to the 
 22.23  withholding provisions of section 290.92, subdivision 2a, 3, or 
 22.24  28, except the provisions of sections 290.92, subdivision 6a, 
 22.25  270.06, paragraph (16), 289A.09, subdivisions 1, paragraph (f), 
 22.26  and 2, 289A.60, and 289A.63 shall apply to withholding under 
 22.27  this section as if the withholding were upon wages. 
 22.28     Sec. 22.  [COMMISSIONER OF REVENUE; POWERS AND DUTIES.] 
 22.29     (a) The commissioner of revenue shall prepare a bill for 
 22.30  introduction during the 2001 legislative session making 
 22.31  technical and conforming amendments to Minnesota Statutes as 
 22.32  required by this act. 
 22.33     (b) The commissioner of revenue may adopt rules and 
 22.34  prescribe forms and tables to implement the provisions of this 
 22.35  act.  The rules may be adopted under section 14.386, except that 
 22.36  paragraph (b) does not apply, or 14.389, as determined by the 
 23.1   commissioner. 
 23.2      Sec. 23.  [REPEALER.] 
 23.3      Minnesota Statutes 1998, sections 270B.06, subdivision 3; 
 23.4   289A.63, subdivision 5; and 290.92, subdivisions 3, 5, 5a, 10, 
 23.5   16, 19, 22, and 30, are repealed. 
 23.6      Sec. 24.  [EFFECTIVE DATE.] 
 23.7      Sections 1 to 21 and 23 are effective for wages paid or 
 23.8   incurred and returns filed for taxable years beginning after 
 23.9   December 31, 2000.  Section 22 is effective the day following 
 23.10  final enactment.