SF 2906

as introduced - 89th Legislature (2015 - 2016) Posted on 03/18/2016 11:14am

A bill for an act
relating to taxation; limiting assessment authority of the commissioner of
revenue; establishing a private letter ruling program; appropriating money;
amending Minnesota Statutes 2014, sections 270C.33, by adding a subdivision;
270C.34, subdivision 1; 289A.60, subdivision 1; proposing coding for new law
in Minnesota Statutes, chapter 270C.

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

Section 1.

[270C.075] PRIVATE LETTER RULINGS.

Subdivision 1.

Program established.

By January 1, 2017, 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.

Subd. 2.

Application procedure; fees.

(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 issuing private
letter rulings. The requirements may vary based on the type of ruling requested.

(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.

(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.

Subd. 3.

Effect.

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

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

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

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

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

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

Subd. 4.

Public access.

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.

Subd. 5.

Legislative report.

(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:

(1) the number of applications for private letter rulings;

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

(3) the amount of application fees refunded, if any;

(4) the tax types for which rulings were requested;

(5) the types and characteristics of taxpayers applying for rulings; and

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

(b) The report must be filed as provided in section 3.195, and copies 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.

EFFECTIVE DATE.

This section is effective the day following final enactment,
except that the first legislative report under subdivision 5 is due January 31, 2019.

Sec. 2.

Minnesota Statutes 2014, section 270C.33, is amended by adding a subdivision
to read:

Subd. 4a.

Limitations; sales, corporate, and income taxes.

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

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

(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

(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.

EFFECTIVE DATE.

This section is effective for assessments made after June
30, 2016.

Sec. 3.

Minnesota Statutes 2014, 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.

(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 charge under section 289A.25, subdivision 2, or 289A.26, subdivision 4.

EFFECTIVE DATE.

This section is effective the day following enactment.

Sec. 4.

Minnesota Statutes 2014, 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.

(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.

EFFECTIVE DATE.

This section is effective for penalties imposed after June
30, 2016.

Sec. 5. APPROPRIATION; PRIVATE LETTER RULING PROGRAM.

$....... in fiscal year 2017 is appropriated from the general fund to the commissioner
of revenue for the cost of establishing and administering the private letter ruling program
under section 1.