HF 1540

as introduced - 90th Legislature (2017 - 2018) Posted on 02/22/2017 11:47am

A bill for an act
relating to state government; economic development; establishing a private letter
ruling program; modifying tax assessment and penalty provisions; providing a
small business tax collection refund; providing funding for small business
development; appropriating money; amending Minnesota Statutes 2016, sections
270C.33, by adding a subdivision; 270C.34, subdivision 1; 289A.60, subdivision
1; proposing coding for new law in Minnesota Statutes, chapters 270C; 297A.

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

Section 1.

new text begin [270C.075] PRIVATE LETTER RULINGS.
new text end

new text begin Subdivision 1. new text end

new text begin Program established. new text end

new text begin By January 1, 2018, the commissioner shall
establish and implement a program for issuing private letter rulings to taxpayers to provide
guidance as to how the commissioner will apply Minnesota tax law to a specific transaction,
arrangement, or other fact situation of the applying taxpayer. In establishing the terms of
the program, the commissioner may provide that rulings will not be issued in specified
subject areas, for categories of transactions, or under specified provisions of law, if the
commissioner determines doing so is in the best interests of the state and sound tax
administration.
new text end

new text begin Subd. 2. new text end

new text begin Application procedure; fees. new text end

new text begin (a) The commissioner shall establish an
application procedure and forms for a taxpayer to request a private letter ruling. The
commissioner may require the taxpayer to provide any supporting factual information and
certifications that the commissioner determines necessary or appropriate to issue a private
letter ruling. The requirements may vary based on the type of ruling requested.
new text end

new text begin (b) The commissioner may charge an applicant for the actual cost of preparing the private
letter ruling, including the cost of employee time, but the charge may not exceed $1,000
per private letter ruling. Any fees collected under this section must be deposited in the
Revenue Department service and recovery special revenue fund, established under section
270C.15, and are appropriated to the commissioner to offset the cost of issuing private letter
rulings and related administrative costs.
new text end

new text begin (c) If the commissioner fails to issue a ruling to the taxpayer within 90 days after the
taxpayer's filing of a completed application, the commissioner must refund the application
fee to the taxpayer; however, the commissioner must issue a private letter ruling unless the
taxpayer withdraws the request.
new text end

new text begin Subd. 3. new text end

new text begin Effect. new text end

new text begin (a) A private letter ruling is binding on the commissioner with respect
to the taxpayer to whom the ruling is issued, if:
new text end

new text begin (1) there was no misstatement or omission of material facts in the application or other
information provided to the commissioner;
new text end

new text begin (2) the facts that subsequently developed were not materially different from the facts
upon which the ruling was based;
new text end

new text begin (3) the applicable statute, administrative rule, federal law referenced by state law, or
other relevant law has not changed; and
new text end

new text begin (4) the taxpayer acted in good faith in applying for and relying on the ruling.
new text end

new text begin (b) Private letter rulings have no precedential effect and may not be relied upon by a
taxpayer other than as provided by paragraph (a).
new text end

new text begin Subd. 4. new text end

new text begin Public access. new text end

new text begin The commissioner shall make private letter rulings issued under
this section available to the public on the department's Web site. The published rulings must
redact any information that would permit identification of the requesting taxpayer.
new text end

new text begin Subd. 5. new text end

new text begin Legislative report. new text end

new text begin (a) By January 31 of each odd-numbered year, the
commissioner shall report, in writing, to the legislature the following information for the
immediately preceding two calendar years:
new text end

new text begin (1) the number of applications for private letter rulings;
new text end

new text begin (2) the number of private letter rulings issued, including the number issued within the
90-day time period under subdivision 2, paragraph (c);
new text end

new text begin (3) the amount of application fees refunded, if any;
new text end

new text begin (4) the tax types for which rulings were requested;
new text end

new text begin (5) the types and characteristics of taxpayers applying for rulings; and
new text end

new text begin (6) any other information that the commissioner considers relevant to legislative oversight
of the private letter ruling program.
new text end

new text begin (b) The report must be filed as provided in section 3.195, and copies must be provided
to the chairs and ranking minority members of the committees of the house of representatives
and the senate with jurisdiction over taxes and appropriations to the Department of Revenue.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment, except
that the first legislative report under subdivision 5 is due January 31, 2020.
new text end

Sec. 2.

Minnesota Statutes 2016, section 270C.33, is amended by adding a subdivision to
read:

new text begin Subd. 4a. new text end

new text begin Limitations; sales, corporate, and income taxes. new text end

new text begin (a) The provisions of this
subdivision are a limitation on the assessment authority of the commissioner under this
section.
new text end

new text begin (b) The commissioner must not assess additional tax due under chapter 290 or 297A if
each of the following requirements are met:
new text end

new text begin (1) the tax reported by the taxpayer is consistent with and based on past reporting or
other practices of the taxpayer that were fully disclosed to the commissioner and were
approved, in writing, to the taxpayer by the commissioner, including by issuing an audit
assessing no additional tax liability with respect to that item for a prior taxable period; and
new text end

new text begin (2) effective for a taxable period beginning after the period covered by clause (1), neither
the statute or administrative rule on which the reporting or other practice is based has been
materially changed, nor has the commissioner issued a revenue notice or directly notified
the taxpayer, in writing, of a change in the commissioner's position as to the proper reporting
or other treatment of the relevant income, transaction, deduction, or other item.
new text end

new text begin (c) For an audit of a prior taxable period by the commissioner, paragraph (b), clause (1),
applies only to the issues within the scope of and specifically addressed by the audit.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for assessments made after June 30,
2017.
new text end

Sec. 3.

Minnesota Statutes 2016, section 270C.34, subdivision 1, is amended to read:

Subdivision 1.

Authority.

(a) The commissioner may abate, reduce, or refund any penalty
or interest that is imposed by a law administered by the commissioner, or imposed by section
270.0725, subdivision 1 or 2, or 270.075, subdivision 2, as a result of the late payment of
tax or late filing of a return, or any part of an additional tax charge under section 289A.25,
subdivision 2, or 289A.26, subdivision 4, if the failure to timely pay the tax or failure to
timely file the return is due to reasonable cause, or if the taxpayer is located in a presidentially
declared disaster or in a presidentially declared state of emergency area or in an area declared
to be in a state of emergency by the governor under section 12.31.

(b) The commissioner shall abate any part of a penalty or additional tax charge under
section 289A.25, subdivision 2, or 289A.26, subdivision 4, attributable to erroneous advice
given to the taxpayer in writing by an employee of the department acting in an official
capacity, if the advice:

(1) was reasonably relied on and was in response to a specific written request of the
taxpayer; and

(2) was not the result of failure by the taxpayer to provide adequate or accurate
information.

new text begin (c) In addition to the authority under paragraphs (a) and (b), the commissioner may
decline to impose or may abate any penalty under section 289A.60 or other law, or an
additional tax change under section 289A.25, subdivision 2, or 289A.26, subdivision 4.
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. 4.

Minnesota Statutes 2016, section 289A.60, subdivision 1, is amended to read:

Subdivision 1.

Penalty for failure to pay tax.

(a) If a corporate franchise, fiduciary
income, mining company, estate, partnership, S corporation, or nonresident entertainer tax
is not paid within the time specified for payment, a penalty of six percent is added to the
unpaid tax, except that if a corporation or mining company meets the requirements of section
289A.19, subdivision 2, the penalty is not imposed.

(b) For the taxes listed in paragraph (a), in addition to the penalty in that paragraph,
whether imposed or not, if a return or amended return is filed after the due date, without
regard to extensions, and any tax reported as remaining due is not remitted with the return
or amended return, a penalty of five percent of the tax not paid is added to the tax. If the
commissioner issues an order assessing additional tax for a tax listed in paragraph (a), and
the tax is not paid within 60 days after the mailing of the order or, if appealed, within 60
days after final resolution of the appeal, a penalty of five percent of the unpaid tax is added
to the tax.

(c) If an individual income tax is not paid within the time specified for payment, a penalty
of four percent is added to the unpaid tax. There is a presumption of reasonable cause for
the late payment if the individual: (i) pays by the due date of the return at least 90 percent
of the amount of tax, after credits other than withholding and estimated payments, shown
owing on the return; (ii) files the return within six months after the due date; and (iii) pays
the remaining balance of the reported tax when the return is filed.

(d) If the commissioner issues an order assessing additional individual income tax, and
the tax is not paid within 60 days after the mailing of the order or, if appealed, within 60
days after final resolution of the appeal, a penalty of four percent of the unpaid tax is added
to the tax.

(e) If a withholding or sales or use tax is not paid within the time specified for payment,
a penalty must be added to the amount required to be shown as tax. The penalty is five
percent of the tax not paid on or before the date specified for payment of the tax if the failure
is for not more than 30 days, with an additional penalty of five percent of the amount of tax
remaining unpaid during each additional 30 days or fraction of 30 days during which the
failure continues, not exceeding 15 percent in the aggregate.

new text begin (f) No penalty applies under this subdivision if the total calculated penalty that would
otherwise apply under paragraphs (a) to (e) is less than $150.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for penalties imposed after June 30,
2017.
new text end

Sec. 5.

new text begin [297A.816] SMALL BUSINESS COLLECTION CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Eligibility. new text end

new text begin A retailer or seller that is a small business may apply to the
commissioner for a refund for the annual cost of employing a certified service provider or
a certified automated system to collect and remit the appropriate amount of sales taxes
collected on their sales.
new text end

new text begin Subd. 2. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms have the
meanings given in this subdivision.
new text end

new text begin (b) "Certified service provider" and "certified automated system" have the meanings
given in article II of the Streamlined Sales and Use Tax Agreement, as amended through
December 16, 2016.
new text end

new text begin (c) "Small business" means a small business as defined in section 645.445.
new text end

new text begin Subd. 3. new text end

new text begin Application; administration. new text end

new text begin Upon application on forms prescribed by the
commissioner, a refund of the costs under subdivision 1 must be paid to the qualifying small
business. The application must provide sufficient information to permit the commissioner
to verify that the business qualifies and to document the actual costs incurred. An applicant
may file one application per calendar year for expenses incurred in its latest fiscal year
ending prior to the date of application.
new text end

new text begin Subd. 4. new text end

new text begin Interest. new text end

new text begin Interest must be paid on the refund at the rate in section 270C.405,
from 90 days after the refund claim is filed with the commissioner.
new text end

new text begin Subd. 5. new text end

new text begin Appropriation. new text end

new text begin The amount required to pay the refunds under this section is
appropriated to the commissioner from the general fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with costs incurred after June
30, 2017.
new text end

Sec. 6. new text begin APPROPRIATIONS; ECONOMIC DEVELOPMENT.
new text end

new text begin Subdivision 1. new text end

new text begin Small business development centers. new text end

new text begin $7,000,000 in fiscal year 2018 is
appropriated from the general fund to the commissioner of employment and economic
development for grants to initiative foundations to provide financing for business start-ups,
expansions, and maintenance and for business ownership transition and succession. Of the
amount appropriated:
new text end

new text begin (1) $1,000,000 is for a grant to the Southwest Initiative Foundation;
new text end

new text begin (2) $1,000,000 is for a grant to the West Central Initiative Foundation;
new text end

new text begin (3) $1,000,000 is for a grant to the Southern Minnesota Initiative Foundation;
new text end

new text begin (4) $1,000,000 is for a grant to the Northwest Minnesota Foundation;
new text end

new text begin (5) $1,000,000 is for a grant to the Initiative Foundation;
new text end

new text begin (6) $1,000,000 is for a grant to the Northland Foundation; and
new text end

new text begin (7) $1,000,000 is for a grant to the Urban Initiative Board under Minnesota Statutes,
chapter 116M. Funds available under this clause are allocated as follows:
new text end

new text begin (i) 50 percent of the funds to projects in the counties of Dakota, Ramsey, and Washington;
and
new text end

new text begin (ii) 50 percent of the funds to projects in the counties of Anoka, Carver, Hennepin, and
Scott.
new text end

new text begin Subd. 2. new text end

new text begin Initiative foundations. new text end

new text begin $....... in fiscal year 2018 and $....... in fiscal year 2019
are appropriated from the general fund to the commissioner of employment and economic
development for expansion of business assistance services provided by business development
specialists located in the northwest region, northeast region, west central region, southwest
region, southeast region, and Twin Cities metropolitan region offices established throughout
the state. Funds under this section may be used to provide services including but not limited
to business start-ups, expansion, location or relocation, finance, regulatory and permitting
assistance, and other services determined by the commissioner. Business development
specialists must, to the extent feasible, contact owners of new or expanded businesses within
90 days of the business start-up or expansion to offer follow-up or consultative services, or
other services or assistance upon request. The commissioner may also use funds under this
section to increase the number of business development specialists in each region of the
state, increase and expand the services provided through each regional office, and publicize
the services available and provide outreach to communities in each region regarding services
and assistance available through the business development specialist program.
new text end

new text begin Subd. 3. new text end

new text begin Business development specialists. new text end

new text begin (a) $500,000 in fiscal year 2018 is
appropriated from the general fund to the commissioner of employment and economic
development for small business development center services to support business transition
planning. For the purposes of this section, business transition planning includes but is not
limited to:
new text end

new text begin (1) succession planning for next generation proprietors. For the purposes of this clause,
"next generation proprietors" does not include immediate family members of the current
business owner;
new text end

new text begin (2) matching business owners seeking to sell existing businesses with aspiring business
owners. Matching services under this clause may be targeted to small businesses located in
economically disadvantaged communities or areas of declining population. For the purposes
of this clause, "economically disadvantaged communities" means communities in which
the average household income is less than 80 percent of the statewide median household
income as measured by the United States Census Bureau or communities that contain two
or more contiguous census tracts in which the average household income is less than 80
percent of the statewide median household income as measured by the Unites States Census
Bureau; and
new text end

new text begin (3) providing information and counseling services to business owners, prospective
owners, and others regarding the importance of business transition and succession planning,
the transition and succession process, and financing options and requirements related to the
business transition and succession process.
new text end

new text begin (b) Funds available under this section may be used to:
new text end

new text begin (1) provide the necessary information and services under paragraph (a);
new text end

new text begin (2) build small business development center staff capacity to provide business transition
and succession planning services; and
new text end

new text begin (3) match funds under the federal Small Business Development Center Program under
United States Code, title 15, section 648, and other federal, state, or local funds available
for the purposes of this section.
new text end

new text begin Subd. 4. new text end

new text begin Bureau of small business promotion activities. new text end

new text begin $....... in fiscal year 2018 and
$....... in fiscal year 2019 are appropriated from the general fund to the commissioner of
employment and economic development to enhance the outreach and public awareness
activities of the Bureau of Small Business under Minnesota Statutes, section 116J.68.
new text end

new text begin Subd. 5. new text end

new text begin Private letter ruling program. new text end

new text begin $....... in fiscal year 2018 and $....... in fiscal
year 2019 are appropriated from the general fund to the commissioner of revenue to establish
and administer the private letter ruling program under Minnesota Statutes, section 270C.075.
The amounts of these appropriations are reduced by any amounts collected by the
commissioner under Minnesota Statutes, section 270C.075, subdivision 2, paragraph (b),
and deposited in the special revenue fund during the applicable fiscal year.
new text end