1.1                          A bill for an act
  1.2             relating to taxation; requiring registration of 
  1.3             third-party bulk filers; providing standards for 
  1.4             registration; providing a civil penalty; amending 
  1.5             Minnesota Statutes 1996, sections 270B.02, by adding a 
  1.6             subdivision; and 290.92, by adding a subdivision. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 1996, section 270B.02, is 
  1.9   amended by adding a subdivision to read: 
  1.10     Subd. 6.  [CLIENT LISTS; THIRD-PARTY BULK FILERS.] Client 
  1.11  lists required under section 290.92, subdivision 30, are 
  1.12  classified as private data on individuals or nonpublic data, as 
  1.13  defined in section 13.02, subdivisions 9 and 12. 
  1.14     Sec. 2.  Minnesota Statutes 1996, section 290.92, is 
  1.15  amended by adding a subdivision to read: 
  1.16     Subd. 30.  [REGISTRATION; THIRD-PARTY BULK FILER.] (a) For 
  1.17  purposes of this subdivision, the following terms have the 
  1.18  meanings given: 
  1.19     (1) Notwithstanding section 290.01, "person" means an 
  1.20  individual, fiduciary, partnership, corporation, limited 
  1.21  liability company, association, or other entity organized under 
  1.22  the laws of this state or any other jurisdiction. 
  1.23     (2) "Third-party bulk filer" means a person that collects 
  1.24  withholding taxes from more than one employer for the purpose of 
  1.25  filing returns and depositing the withheld taxes with the 
  1.26  commissioner.  
  2.1      (b) A person shall not act as a third-party bulk filer 
  2.2   unless the person is registered with the commissioner under this 
  2.3   subdivision. 
  2.4      (c) A person may apply to the commissioner, on a form 
  2.5   prescribed by the commissioner, for registration as a 
  2.6   third-party bulk filer under this subdivision, and the 
  2.7   commissioner shall grant the application if the application 
  2.8   indicates that the person will comply with this subdivision. 
  2.9      (d) A third-party bulk filer must: 
  2.10     (1) keep client funds held for payment of federal or state 
  2.11  withholding taxes or other purposes in an account separate from 
  2.12  the third-party bulk filer's own funds; 
  2.13     (2) permit the commissioner to conduct scheduled or 
  2.14  unscheduled audits of the third-party bulk filer's books and 
  2.15  records relating to compliance with this subdivision and fully 
  2.16  cooperate with the audits or, at the discretion of the 
  2.17  commissioner, submit an audit conducted by a certified public 
  2.18  accountant; 
  2.19     (3) file returns electronically and make deposits 
  2.20  electronically with the commissioner in compliance with the 
  2.21  commissioner's requirements for electronic filing and 
  2.22  depositing; 
  2.23     (4) provide to the commissioner at least monthly, in the 
  2.24  form requested by the commissioner, an updated client list that 
  2.25  includes at least the name, address, tax identification number, 
  2.26  and federal deposit frequency of each client.  The address 
  2.27  listed for the client must be the client's actual street or post 
  2.28  office box address and not the third-party bulk filer's address; 
  2.29     (5) disclose in writing to prospective clients that: 
  2.30     (i) the third-party bulk filer may invest client funds 
  2.31  prior to depositing them with the commissioner and with the 
  2.32  Internal Revenue Service and that earnings from those 
  2.33  investments will be the property of the third-party bulk filer; 
  2.34     (ii) if the third-party bulk filer incurs losses on those 
  2.35  investments or uses the client's funds for other purposes, the 
  2.36  third-party bulk filer will still be liable to the client for 
  3.1   the amounts withheld but will be able to make required tax 
  3.2   deposits on behalf of the client only by using the third-party 
  3.3   bulk filer's own funds to replace the funds lost through the 
  3.4   investments or used for other purposes; and 
  3.5      (iii) no state or federal agency monitors or assumes any 
  3.6   responsibility for the financial solvency of third-party bulk 
  3.7   filers; 
  3.8      (6) timely file all returns and timely make all tax 
  3.9   deposits required under its contracts with its clients; 
  3.10     (7) upon request, provide to the commissioner, within the 
  3.11  time specified in the request, a copy of any contract with a 
  3.12  client; and 
  3.13     (8) comply with all other requirements of this section or 
  3.14  of rules adopted under this section. 
  3.15     (e) When the commissioner sends an order of assessment 
  3.16  issued under section 289A.37, in either paper or electronic 
  3.17  form, to a third-party bulk filer regarding a client, the 
  3.18  commissioner shall also send a paper copy of the order of 
  3.19  assessment to the client. 
  3.20     (f) If the commissioner determines that a required deposit 
  3.21  appears not to have been made, the commissioner shall send a 
  3.22  written notice of the delinquency, in electronic or paper form, 
  3.23  to the third-party bulk filer, and a copy to the client as 
  3.24  required under paragraph (e). 
  3.25     (g) If the commissioner determines that a required deposit 
  3.26  has not been made, and that continued operation of the 
  3.27  third-party bulk filer would present a risk of loss to its 
  3.28  clients, the commissioner may, upon ten business days' written 
  3.29  notice by certified mail to the third-party bulk filer, suspend 
  3.30  the registration of the third-party bulk filer for an indefinite 
  3.31  period, and notify the third-party bulk filer's clients that the 
  3.32  registration has been suspended.  A registration may not be 
  3.33  suspended if the failure to make a deposit was caused by the 
  3.34  client's failure to deposit funds or provide the information 
  3.35  necessary to calculate appropriate tax withholding payments.  
  3.36  The commissioner shall, upon request, provide the third-party 
  4.1   bulk filer with the opportunity for an administrative appeal 
  4.2   under section 289A.65, subdivisions 1, 4, and 10, prior to 
  4.3   suspension; the hearing, if any, on the administrative appeal 
  4.4   must occur within the ten-day period unless the commissioner, in 
  4.5   the commissioner's sole discretion, agrees to delay the 
  4.6   suspension to permit a later hearing.  The 60-day period 
  4.7   specified in section 289A.65, subdivision 4, does not apply to a 
  4.8   proceeding under this paragraph.  Within 30 days after the 
  4.9   beginning of a suspension under this paragraph, the commissioner 
  4.10  may commence a proceeding to suspend or revoke under paragraph 
  4.11  (h); if the commissioner fails to do so, the suspension under 
  4.12  this paragraph terminates. 
  4.13     (h) If the commissioner determines, in compliance with 
  4.14  paragraph (i), that a third-party bulk filer has violated this 
  4.15  section without reasonable cause or is no longer eligible for 
  4.16  registration under this subdivision, the commissioner may 
  4.17  suspend or revoke the third-party bulk filer's registration or 
  4.18  may assess a civil penalty upon the third-party bulk filer, not 
  4.19  to exceed $5,000 per violation.  A suspension of registration 
  4.20  may be for any period of less than six months and may include 
  4.21  conditions for reinstatement.  If the commissioner revokes the 
  4.22  registration, the third-party bulk filer may not apply for 
  4.23  reregistration for six months after the revocation.  If the 
  4.24  commissioner suspends or revokes a registration, the 
  4.25  commissioner shall notify the former registrant's clients that 
  4.26  the registration has been suspended or revoked.  If the 
  4.27  commissioner assesses a civil penalty, the commissioner shall 
  4.28  not notify the third-party bulk filer's clients of the 
  4.29  assessment. 
  4.30     (i) Prior to a suspension, revocation, or assessment of a 
  4.31  civil penalty under paragraph (h), the commissioner shall first 
  4.32  provide 30 days' written notice to the third-party bulk filer, 
  4.33  specifying the violations and informing the third-party bulk 
  4.34  filer that the commissioner intends, based upon those 
  4.35  violations, to take action against the third-party bulk filer as 
  4.36  permitted under this paragraph and paragraph (h).  The notice 
  5.1   shall advise the third-party bulk filer of the right to contest 
  5.2   the suspension, revocation, or assessment of a civil penalty and 
  5.3   of the general procedures for a contested case hearing under 
  5.4   chapter 14.  The notice may be served personally or by mail in 
  5.5   the manner prescribed for service of an order of assessment 
  5.6   issued under section 289A.37.  A suspension or revocation of 
  5.7   registration under this paragraph is effective when the 
  5.8   commissioner serves a notice of suspension or revocation upon 
  5.9   the third-party bulk filer after 30 days have passed following 
  5.10  the date of the notice of intent to suspend or revoke without 
  5.11  the third-party bulk filer requesting a hearing.  If a hearing 
  5.12  is timely requested and held, the suspension or revocation is 
  5.13  effective upon service by the commissioner of an order of 
  5.14  suspension or revocation under section 14.62, subdivision 1. 
  5.15     (j) A third-party bulk filer may terminate its registration 
  5.16  by written notice to the commissioner, but the termination does 
  5.17  not affect the commissioner's authority to begin or continue a 
  5.18  proceeding to take action permitted under paragraph (h).  The 
  5.19  commissioner shall notify the third-party bulk filer's clients 
  5.20  of a termination of registration under this paragraph. 
  5.21     (k) The commissioner shall remind employers at least 
  5.22  annually, through the department's regular informational 
  5.23  publications that it sends to employers, that employers may 
  5.24  telephone the department to determine whether a required filing 
  5.25  or deposit has been made by a third-party bulk filer. 
  5.26     Sec. 3.  [EFFECTIVE DATE.] 
  5.27     Section 1 is effective the day following final enactment.  
  5.28  Section 2 is effective January 1, 1998.