Minnesota Legislature
HF 1084
1st Engrossment - 87th Legislature (2011 - 2012) Posted on 05/02/2011 03:09pm
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A bill for an act
relating to taxation; individual income; directing commissioner to negotiate a
reciprocity agreement with state of Wisconsin and permitting its termination only
by law; requiring a study; amending Minnesota Statutes 2010, sections 270B.12,
by adding a subdivision; 290.081.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2010, section 270B.12, is amended by adding a
subdivision to read:
new text begin Subd. 14. new text end
new text begin
Wisconsin secretary of revenue; income tax reciprocity benchmark
study.
new text end
new text begin
The commissioner may disclose return information to the secretary of revenue
of the state of Wisconsin for the purpose of conducting a joint individual income tax
reciprocity study.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective the day following final enactment.
new text end
Sec. 2.
Minnesota Statutes 2010, section 290.081, is amended to read:
290.081 INCOME OF NONRESIDENTS, RECIPROCITY.
new text begin Subdivision 1. new text end
new text begin Reciprocity with other states. new text end
(a) The compensation received for
the performance of personal or professional services within this state by an individual
whose residence, place of abode, and place customarily returned to at least once a month
is in another state, shall be excluded from gross income to the extent such compensation is
subject to an income tax imposed by the state of residence; provided that such state allows
a similar exclusion of compensation received by residents of Minnesota for services
performed therein.
(b) When it is deemed to be in the best interests of the people of this state, the
commissioner may determine that the provisions of paragraph (a) shall not applynew text begin , as they
relate to all states except Wisconsin. The provisions of paragraph (a) apply with respect
to Wisconsin only for taxable years in which a reciprocity agreement with Wisconsin is
in effect as provided by this sectionnew text end . As long as the provisions of paragraph (a) apply
between Minnesota and Wisconsin, the provisions of paragraph (a) shall apply to any
individual who is domiciled in Wisconsin.
(c) For the purposes of paragraph (a), whenever the Wisconsin tax on Minnesota
residents which would have been paid Wisconsin without paragraph (a) exceeds the
Minnesota tax on Wisconsin residents which would have been paid Minnesota without
paragraph (a), or vice versa, then the state with the net revenue loss resulting from
paragraph (a) must be compensated by the other state as provided in the agreement under
paragraph (d). This provision shall be effective for all years beginning after December 31,
1972. The data used for computing the loss to either state shall be determined on or before
September 30 of the year following the close of the previous calendar year.
(d) Interest is payable on all amounts calculated under paragraph (c) relating to
taxable years beginning after December 31, 2000new text begin and before January 1, 2010new text end . Interest
accrues from July 1 of the taxable year.
new text begin (e) new text end The deleted text begin commissioner of revenue is authorized to enter into agreementsdeleted text end new text begin reciprocity
agreementnew text end with the state of Wisconsin deleted text begin specifyingdeleted text end new text begin must specifynew text end the compensation required
under paragraph (b), deleted text begin thedeleted text end new text begin one or more new text end reciprocity payment due deleted text begin date,deleted text end new text begin dates for the revenue
loss relating to each taxable year, with one or more estimated payment due dates in the
same fiscal year in which the revenue loss occurred, and a final payment in the following
fiscal year, new text end conditions constituting delinquency, interest rates, and a method for computing
interest due. new text begin Interest is payable from July 1 of the taxable year on final payments made in
the following fiscal year. new text end Calculation of compensation under the agreement must specify
if the revenue loss is determined before or after the allowance of each state's credit for
taxes paid to the other state.
deleted text begin (e)deleted text end new text begin (f)new text end If an agreement cannot be reached as to the amount of the loss, the
commissioner of revenue and the taxing official of the state of Wisconsin shall each
appoint a member of a board of arbitration and these members shall appoint the third
member of the board. The board shall select one of its members as chair. Such board may
administer oaths, take testimony, subpoena witnesses, and require their attendance, require
the production of books, papers and documents, and hold hearings at such places as are
deemed necessary. The board shall then make a determination as to the amount to be paid
the other state which determination shall be final and conclusive.
deleted text begin (f)deleted text end new text begin (g)new text end The commissioner may furnish copies of returns, reports, or other information
to the taxing official of the state of Wisconsin, a member of the board of arbitration, or a
consultant under joint contract with the states of Minnesota and Wisconsin for the purpose
of making a determination as to the amount to be paid the other state under the provisions
of this section. Prior to the release of any information under the provisions of this section,
the person to whom the information is to be released shall sign an agreement which
provides that the person will protect the confidentiality of the returns and information
revealed thereby to the extent that it is protected under the laws of the state of Minnesota.
new text begin
(h) Any reciprocity agreement entered into under this section continues in effect
until terminated by Minnesota or Wisconsin law. The commissioner may agree to modify
the timing or method of calculating the state payments to be made under the agreement,
consistent with the requirements of paragraphs (c) and (e), but may not terminate the
agreement.
new text end
new text begin Subd. 2. new text end
new text begin New reciprocity agreement with Wisconsin. new text end
new text begin
(a) The commissioner of
revenue is directed to initiate negotiations with the secretary of revenue of Wisconsin,
with the objective of entering into an income tax reciprocity agreement effective for tax
years beginning after December 31, 2011. The agreement must satisfy the conditions of
subdivision 1, with one or more estimated payment due dates and a final payment due
date specified so that the state with a net revenue loss as a result of the agreement receives
estimated payments from the other state, in the same fiscal year as that in which the net
revenue loss occurred and a final payment with interest in the following fiscal year.
new text end
new text begin
(b) The commissioner may not enter into an income tax reciprocity agreement
with Wisconsin under this section until after Wisconsin has paid in full with interest the
amount due to Minnesota under the income tax reciprocity agreement in effect for taxable
years beginning before January 1, 2010.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
Subdivision 2 is effective the day following final enactment.
The changes to subdivision 1 are effective for taxable years beginning after December 31
of the year of the agreement, contingent upon agreement from the state of Wisconsin to a
reciprocity arrangement in which estimated payments are made in the same fiscal year in
which a change in revenue occurs, and a final payment is made in the following fiscal year.
new text end
Sec. 3. new text begin INCOME TAX RECIPROCITY BENCHMARK STUDY.
new text end
new text begin
(a) The Department of Revenue, in conjunction with the Wisconsin Department of
Revenue, must conduct a study to determine at least the following:
new text end
new text begin
(1) the number of residents of each state who earn income from personal services in
the other state;
new text end
new text begin
(2) the total amount of income earned by residents of each state who earn income
from personal services in the other state; and
new text end
new text begin
(3) the change in tax revenue in each state if an income tax reciprocity arrangement
were resumed between the two states under which the taxpayers were required to pay
income taxes on the income only in their state of residence.
new text end
new text begin
(b) The study must be conducted as soon as practicable, using information obtained
from each state's income tax returns for tax year 2011, and from any other source of
information the departments determine is necessary to complete the study.
new text end
new text begin
(c) No later than March 1, 2013, the Department of Revenue must submit a report
containing the results of the study to the governor and to the chairs and ranking minority
members of the legislative committees having jurisdiction over taxes.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective the day following final enactment.
new text end