SF 2346

as introduced - 93rd Legislature (2023 - 2024) Posted on 03/02/2023 10:02am

A bill for an act
relating to taxation; individual income; providing an exemption for income earned
by certain nonresident employees; proposing coding for new law in Minnesota
Statutes, chapter 290.

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

Section 1.

new text begin [290.0811] INCOME OF CERTAIN NONRESIDENTS.
new text end

new text begin Subdivision 1. new text end

new text begin Exemption allowed. new text end

new text begin Notwithstanding section 290.081, compensation
received by a qualifying nonresident individual for employment duties in Minnesota is
excluded from gross income, subject to the limitations in this section.
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.
new text end

new text begin (b) "Employee" and "employer" have the meanings given in section 290.92, subdivision
1.
new text end

new text begin (c) "Employment duties" means professional or personal services performed for an
employer by an employee who is a qualifying nonresident individual.
new text end

new text begin (d) "Entertainer" has the meaning given in section 290.9201.
new text end

new text begin (e) "Qualifying nonresident individual" means an individual:
new text end

new text begin (1) whose residence, place of abode, and place customarily returned to at least once a
month is in another state;
new text end

new text begin (2) who is paid wages for employment duties, excluding duties performed as an
entertainer, in Minnesota on 30 or fewer days in the taxable year;
new text end

new text begin (3) who performed employment duties in more than one state during the calendar year;
and
new text end

new text begin (4) whose state of residence provides a substantially similar exclusion or does not impose
an individual income tax, or whose income is exempt from taxation in Minnesota under the
United States Constitution, or the Internal Revenue Code.
new text end

new text begin (f) "Time and attendance system" means a system through which an employee is required,
on a contemporaneous basis, to record the employee's work location for every day worked
outside the state where the employee's employment duties are primarily performed and is
designed to allow the employer to allocate the employee's compensation for income tax
purposes among all states in which the employee performs employment duties for the
employer.
new text end

new text begin Subd. 3. new text end

new text begin Withholding exemption; limitation. new text end

new text begin (a) Wages paid to a qualifying nonresident
individual are exempt from the withholding requirements under section 290.92, and the
filing requirements under section 289A.09, subject to the limitations of paragraph (b).
new text end

new text begin (b) If during the taxable year, the number of days an employee spends performing
employment duties in Minnesota exceeds the 30-day threshold under subdivision 1, the
withholding requirements under section 290.92, and the filing requirements under section
289A.09, apply for every day in that calendar year, including the first 30 days, on which
the employee performs employment duties in Minnesota.
new text end

new text begin Subd. 4. new text end

new text begin Employers; application of penalties. new text end

new text begin The commissioner shall not apply
penalties or interest otherwise applicable under chapter 289A for failing to deduct and
withhold income taxes as required under section 290.92, if when determining whether
withholding was required, the employer met either of the following conditions:
new text end

new text begin (1) the employer at its sole discretion maintains a time and attendance system and relied
on data from that system; or
new text end

new text begin (2) if the employer does not maintain a time and attendance system, and the employer
relies on either:
new text end

new text begin (i) the employer's own records maintained in the regular course of business of the
employee's location; or
new text end

new text begin (ii) the employee's reasonable determination of the time the employee expected to spend
performing employment duties in Minnesota, the employer has no actual knowledge of
fraud by employee in making the determination, and the employer and the employee did
not collude to evade taxation in making the determination.
new text end

new text begin Subd. 5. new text end

new text begin Timing of employment duties performed. new text end

new text begin For the purposes of this section,
an employee shall be considered to be performing employment duties within Minnesota for
a day if the employee performs more of the employee's employment duties in Minnesota
than in any other state during that day. Any portion of the day during which the employee
is in transit must not be considered in determining the location of an employee's performance
of employment duties.
new text end

new text begin Subd. 6. new text end

new text begin Severability. new text end

new text begin If any provision of this section or the application of a provision
of this section to any person or circumstance is held to be unconstitutional, then all other
provisions of this section shall remain valid and any rights, remedies, and privileges that
have been otherwise accrued by this section shall remain in effect, and may be proceeded
with and concluded under the provisions of this chapter or other applicable law.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2023.
new text end