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Minnesota Legislature

Office of the Revisor of Statutes

SF 1522

as introduced - 91st Legislature (2019 - 2020) Posted on 02/21/2019 02:38pm

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - as introduced

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A bill for an act
relating to taxation; partnership audits; providing requirements for reporting federal
audit adjustments; making technical changes;amending Minnesota Statutes 2018,
sections 270C.445, subdivision 6; 289A.31, subdivision 1; 289A.37, subdivision
2; 289A.38, subdivision 10; 289A.42; 297F.17, subdivision 6; 297G.16, subdivision
7; 469.319, subdivision 4; Minnesota Statutes 2019 Supplement, sections 289A.60,
subdivision 24; 290.31, subdivision 1; proposing coding for new law in Minnesota
Statutes, chapter 289A; repealing Minnesota Statutes 2018, section 289A.38,
subdivisions 7, 8, 9.

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

ARTICLE 1

PARTNERSHIP TAX; POLICY CHANGES

Section 1.

new text begin [289A.381] DEFINITIONS; PARTNERSHIPS; FEDERAL
ADJUSTMENTS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions relating to federal adjustments. new text end

new text begin Unless otherwise specified,
the definitions in this section apply for the purposes of sections 289A.381 to 289A.385.
new text end

new text begin Subd. 2. new text end

new text begin Administrative adjustment request. new text end

new text begin "Administrative adjustment request"
means an administrative adjustment request filed by a partnership under section 6227 of
the Internal Revenue Code.
new text end

new text begin Subd. 3. new text end

new text begin Audited partnership. new text end

new text begin "Audited partnership" means a partnership subject to a
federal adjustment resulting from a partnership-level audit.
new text end

new text begin Subd. 4. new text end

new text begin Corporate partner. new text end

new text begin "Corporate partner" means a partner that is subject to tax
under section 290.02.
new text end

new text begin Subd. 5. new text end

new text begin Direct partner. new text end

new text begin "Direct partner" means a partner that holds an immediate legal
ownership interest in a partnership or pass-through entity.
new text end

new text begin Subd. 6. new text end

new text begin Exempt partner. new text end

new text begin "Exempt partner" means a partner that is exempt from taxes
on its net income under section 290.05, subdivision 1.
new text end

new text begin Subd. 7. new text end

new text begin Federal adjustment. new text end

new text begin "Federal adjustment" means any change in an amount
calculated under the Internal Revenue Code, whether to income, gross estate, a credit, an
item of preference, or any other item that is used by a taxpayer to compute a tax administered
under this chapter for the reviewed year whether that change results from action by the
Internal Revenue Service or other competent authority, including a partnership-level audit,
or the filing of an amended federal return, federal refund claim, or an administrative
adjustment request by the taxpayer.
new text end

new text begin Subd. 8. new text end

new text begin Federal adjustments report. new text end

new text begin "Federal adjustments report" includes a method
or form prescribed by the commissioner for use by a taxpayer to report federal adjustments,
including an amended Minnesota tax return or a uniform multistate report.
new text end

new text begin Subd. 9. new text end

new text begin Federal partnership representative. new text end

new text begin "Federal partnership representative"
means the person the partnership designates for the taxable year as the partnership's
representative, or the person the Internal Revenue Service has appointed to act as the
partnership representative, pursuant to section 6223(a) of the Internal Revenue Code.
new text end

new text begin Subd. 10. new text end

new text begin Final determination date. new text end

new text begin "Final determination date" means:
new text end

new text begin (1) for a federal adjustment arising from an audit by the Internal Revenue Service or
other competent authority, the first day on which no federal adjustment arising from that
audit remains to be finally determined, whether by agreement, or, if appealed or contested,
by a final decision with respect to which all rights of appeal have been waived or exhausted;
new text end

new text begin (2) for a federal adjustment arising from the filing of an amended federal return, a federal
refund claim, or the filing by a partnership of an administrative adjustment request, the day
which the amended return, refund claim, or administrative adjustment request was filed; or
new text end

new text begin (3) for agreements required to be signed by the Internal Revenue Service and the taxpayer,
the date on which the last party signed the agreement.
new text end

new text begin Subd. 11. new text end

new text begin Final federal adjustment. new text end

new text begin "Final federal adjustment" means a federal
adjustment for which the final determination date for that federal adjustment has passed.
new text end

new text begin Subd. 12. new text end

new text begin Indirect partner. new text end

new text begin "Indirect partner" means either:
new text end

new text begin (1) a partner in a partnership or pass-through entity that itself holds an immediate legal
ownership interest in another partnership or pass-through entity; or
new text end

new text begin (2) a partner in a partnership or pass-through entity that holds an indirect interest in
another partnership or pass-through entity through another indirect partner.
new text end

new text begin Subd. 13. new text end

new text begin Partner. new text end

new text begin "Partner" means a person that holds an interest directly or indirectly
in a partnership or other pass-through entity.
new text end

new text begin Subd. 14. new text end

new text begin Partnership. new text end

new text begin The term "partnership" has the meaning provided under section
7701(a)(2) of the Internal Revenue Code.
new text end

new text begin Subd. 15. new text end

new text begin Partnership-level audit. new text end

new text begin "Partnership-level audit" means an examination by
the Internal Revenue Service at the partnership level pursuant to subtitle F, chapter 63,
subchapter C, of the Internal Revenue Code, which results in federal adjustments including
reallocation adjustments and adjustments to partnership-related items.
new text end

new text begin Subd. 16. new text end

new text begin Pass-through entity. new text end

new text begin "Pass-through entity" means an entity, other than a
partnership, that is not subject to the tax imposed under section 290.02. The term pass-through
entity includes but is not limited to S corporations, estates, and trusts other than grantor
trusts.
new text end

new text begin Subd. 17. new text end

new text begin Reallocation adjustment. new text end

new text begin "Reallocation adjustment" means a federal
adjustment, or final federal adjustment, that changes the shares of items of partnership
income, gain, loss, expense, or credit allocated to direct partners. The term positive
reallocation adjustment means reallocation adjustments that would increase state taxable
income for direct partners, and the term negative reallocation adjustment means reallocation
adjustments that would decrease state taxable income for direct partners.
new text end

new text begin Subd. 18. new text end

new text begin Resident partner. new text end

new text begin "Resident partner" means an individual direct partner or
individual indirect partner who is a resident of Minnesota under section 290.01, subdivision
7.
new text end

new text begin Subd. 19. new text end

new text begin Reviewed year. new text end

new text begin "Reviewed year" means the taxable year of a partnership that
is subject to a partnership-level audit from which federal adjustments arise.
new text end

new text begin Subd. 20. new text end

new text begin Tiered partner. new text end

new text begin "Tiered partner" means any partner that is a partnership or
pass-through entity.
new text end

new text begin Subd. 21. new text end

new text begin Unrelated business taxable income. new text end

new text begin "Unrelated business taxable income"
has the same meaning as defined in section 512 of the Internal Revenue Code.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

Sec. 2.

new text begin [289A.382] REPORTING FEDERAL ADJUSTMENTS; GENERAL RULE.
new text end

new text begin (a) Within 180 days of a final determination date, a taxpayer must file a federal adjustment
report with the commissioner reporting all final federal adjustments by the Internal Revenue
Service or other competent authority.
new text end

new text begin (b) Within 180 days of a final determination date, a taxpayer must file a federal adjustment
report with the commissioner reporting any federal adjustments reported by the taxpayer
to the Internal Revenue Service, including but not limited to:
new text end

new text begin (1) federal refund claims;
new text end

new text begin (2) a change reported on a timely filed amended federal income tax return; and
new text end

new text begin (3) a change reported on an amended return filed pursuant to section 6225(c) of the
Internal Revenue Code.
new text end

new text begin (c) In the case of a final federal adjustment arising from a partnership-level audit or an
administrative adjustment request filed by a partnership under section 6227 of the Internal
Revenue Code, a taxpayer must report adjustments as provided for under section 289A.383,
and not this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

Sec. 3.

new text begin [289A.383] REPORTING AND PAYMENT REQUIREMENTS.
new text end

new text begin Subdivision 1. new text end

new text begin State partnership representative. new text end

new text begin (a) With respect to an action required
or permitted to be taken by a partnership under this section, or in a proceeding under section
270C.35 or 271.06, the state partnership representative for the reviewed year has the sole
authority to act on behalf of the partnership, and its direct partners and indirect partners are
bound by those actions.
new text end

new text begin (b) The state partnership representative for the reviewed year is the partnership's federal
partnership representative unless the partnership, in a form and manner prescribed by the
commissioner, designates another person as its state partnership representative.
new text end

new text begin Subd. 2. new text end

new text begin Reporting and payment requirements for partnerships and tiered
partners.
new text end

new text begin (a) Unless an audited partnership makes the election in subdivision 3, then, for
all final federal adjustments the audited partnership must comply with paragraph (b) and
each direct partner of the audited partnership, other than a tiered partner, must comply with
paragraph (c).
new text end

new text begin (b) No later than 90 days after the final determination date, the audited partnership must:
new text end

new text begin (1) file a completed federal adjustment report, including all partner-level information
required under section 289A.12, subdivision 3, with the commissioner;
new text end

new text begin (2) notify each of its direct partners of their distributive share of the adjustments;
new text end

new text begin (3) file an amended composite report for all direct partners who were included in a
composite return under section 289A.08, subdivision 7, in the reviewed year, and pay the
additional amount that would have been due had the federal adjustments been reported
properly as required; and
new text end

new text begin (4) file amended withholding reports for all direct partners who were or should have
been subject to nonresident withholding under section 290.92, subdivision 4b, in the reviewed
year, and pay the additional amount that would have been due had the federal adjustments
been reported properly as required.
new text end

new text begin (c) No later than 180 days after the final determination date, each direct partner, other
than a tiered partner, that is subject to a tax administered under this chapter, other than the
sales tax, must:
new text end

new text begin (1) file a federal adjustment report reporting their distributive share of the adjustments
reported to them under paragraph (b), clause (2); and
new text end

new text begin (2) pay any additional amount of tax due as if the final federal adjustment had been
properly reported, plus any penalty and interest due under this chapter, and less any credit
for related amounts paid or withheld and remitted on behalf of the direct partner under
paragraph (b), clauses (3) and (4).
new text end

new text begin Subd. 3. new text end

new text begin Election; partnership or tiered partners pay. new text end

new text begin (a) An audited partnership may
make an election under this subdivision to pay its assessment at the entity level. If an audited
partnership makes an election to pay its assessment at the entity level it must:
new text end

new text begin (1) no later than 90 days after the final determination date, file a completed federal
adjustment report, including the residency information for all individual direct partners, and
information pertaining to all other direct partners as prescribed by the commissioner, and
notify the commissioner that it is making the election under this subdivision; and
new text end

new text begin (2) no later than 180 days after the final determination date, pay an amount, determined
as follows, in lieu of taxes on partners:
new text end

new text begin (i) exclude from final federal adjustments and any positive reallocation adjustments the
distributive share of these adjustments made to a direct exempt partner that is not unrelated
business taxable income;
new text end

new text begin (ii) exclude from final federal adjustments and any positive reallocation adjustments the
distributive share of these adjustments made to a direct partner that has filed a federal
adjustment report and paid the applicable tax, as required under subdivision 2, for the
distributive share of adjustments reported on a federal return under section 6225(c) of the
Internal Revenue Code;
new text end

new text begin (iii) allocate and apportion at the partnership level using sections 290.17 to 290.20 the
total distributive share of the remaining final federal adjustments plus positive reallocation
adjustments for the reviewed year attributed to direct corporate partners and direct exempt
partners, multiply the total by the highest tax rate in section 290.06, subdivision 1, for the
reviewed year, and calculate interest and penalties as applicable under this chapter;
new text end

new text begin (iv) allocate at the partnership level using section 290.17, subdivision 1, the total
distributive share of all final federal adjustments plus positive reallocation adjustments
attributable to resident direct partners, multiply the total by the highest tax rate in section
290.06, subdivision 2c, for the reviewed year, and calculate interest and penalties as
applicable under this chapter;
new text end

new text begin (v) allocate and apportion at the partnership level using sections 290.17 to 290.20 the
total distributive share of the remaining final federal adjustments plus positive reallocation
adjustments attributable to nonresident individual direct partners and direct partners who
are an estate or a trust, and multiply the total by the highest tax rate in section 290.06,
subdivision 2c, for the reviewed year, and calculate interest and penalties as applicable
under this chapter;
new text end

new text begin (vi) for the total distributive share of the remaining final federal adjustments plus positive
reallocation adjustments attributable to tiered partners:
new text end

new text begin (A) determine the amount of the adjustments which would be apportioned using sections
290.17 to 290.20, and then determine the portion of this amount which would be apportioned
to this state;
new text end

new text begin (B) determine the amount of the adjustments which are of a type which are fully sourced
to the taxpayer's state of residency under section 290.17, subdivision 2;
new text end

new text begin (C) determine the portion of the amount determined in subitem (B) that can be established,
under rules or procedures issued by the commissioner, to be properly allocable to nonresident
indirect partners or other partners not subject to tax on the adjustments; and
new text end

new text begin (D) multiply the total of the amounts determined in subitems (A) and (B) reduced by
the amount determined in subitem (C) by the highest tax rate in section 290.06, subdivision
2c, for the reviewed year, and calculate interest and penalties as applicable under this chapter;
and
new text end

new text begin (vii) add the amounts determined in items (iii) to (vi), and pay all applicable taxes,
penalties, and interest to the commissioner.
new text end

new text begin (b) An audited partnership may not make an election under this subdivision to report:
new text end

new text begin (1) a federal adjustment, including a positive reallocation adjustment, that results in
unitary business income to a corporate partner required to file as a member of a combined
report under section 290.17, subdivision 4; or
new text end

new text begin (2) any final federal adjustments resulting from an administrative adjustment request.
new text end

new text begin Subd. 4. new text end

new text begin Tiered partners and indirect partners. new text end

new text begin The direct and indirect partners of an
audited partnership that are tiered partners, and all of the partners of those tiered partners
that are subject to tax under chapter 290 are subject to the reporting and payment
requirements contained in subdivision 2 and the tiered partners are entitled to make the
election provided in subdivision 3. The tiered partners or their partners shall make required
reports and payments no later than 90 days after the time for filing and furnishing of
statements to tiered partners and their partners as established by the Internal Revenue Service
under section 6226 of the Internal Revenue Code. The commissioner may promulgate rules
to establish procedures for the reports and payments required by tiered partners and their
partners and for making elections under this section.
new text end

new text begin Subd. 5. new text end

new text begin Effects of election by partnership or tiered partner and payment of amount
due.
new text end

new text begin (a) Unless the commissioner determines otherwise, the election under subdivision 3
is irrevocable.
new text end

new text begin (b) If an audited partnership or tiered partner properly reports and pays an amount
determined in subdivision 3, the amount will be treated as paid in lieu of taxes owed by the
partnership's direct partners and indirect partners on the same final federal adjustments. The
direct partners and indirect partners of the partnership who are not resident partners may
not take any deduction or credit for this amount or claim a refund of the amount in this state.
new text end

new text begin (c) Nothing in this subdivision precludes resident partners from claiming a credit against
taxes paid under section 290.06, on any amounts paid by the audited partnership or tiered
partners on the resident partner's behalf to another state or local tax jurisdiction.
new text end

new text begin Subd. 6. new text end

new text begin Failure of partnership or tiered partner to report or pay. new text end

new text begin Nothing in this
section prevents the commissioner from assessing direct partners or indirect partners for
taxes they owe in the event that, for any reason, a partnership or tiered partner fails to timely
make any report or payment required by this section.
new text end

new text begin Subd. 7. new text end

new text begin Modified reporting and payment method. new text end

new text begin The commissioner shall adopt
procedures for an audited partnership or tiered partner to enter into an agreement with the
commissioner to use an alternative reporting and payment method, including applicable
time requirements or any other provision of this section. The audited partnership or tiered
partner must demonstrate that the requested method will reasonably provide for the reporting
and payment of taxes, penalties, and interest due under the provisions of this section.
Application for approval of an alternative reporting and payment method must be made by
the audited partnership or tiered partner within the time for making an election as provided
in subdivision 3 or 4, as appropriate.
new text end

new text begin Subd. 8. new text end

new text begin De minimis exception. new text end

new text begin The commissioner may adopt rules under chapter 14
to establish a de minimis amount upon which a taxpayer shall not be required to comply
with sections 289A.382 and 289A.383.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

Sec. 4.

new text begin [289A.384] ASSESSMENT OF TAX, INTEREST, PENALTIES, AND
ADDITIONAL AMOUNTS.
new text end

new text begin Subdivision 1. new text end

new text begin Assessment of additional tax, interest, and penalties. new text end

new text begin The commissioner
may assess, in accordance with subdivisions 2 and 3, additional tax, interest, and penalties
following a final federal adjustment:
new text end

new text begin (1) arising from an audit by the Internal Revenue Service, including a partnership-level
audit;
new text end

new text begin (2) reported by the taxpayer on an amended federal tax return; or
new text end

new text begin (3) as part of an administrative adjustment request on or before the dates provided in
this section.
new text end

new text begin Subd. 2. new text end

new text begin Timely and untimely reported federal adjustments. new text end

new text begin If a taxpayer files a
federal adjustment report, within or after the periods prescribed in section 289A.382 or
289A.383, the commissioner may only assess additional Minnesota amounts related to the
federal adjustments including in-lieu-of amounts, taxes, interest, and penalties at the later
of:
new text end

new text begin (1) the expiration of the period of limitations in section 289A.38; or
new text end

new text begin (2) the expiration of the one-year period following the date of the filing with the
commissioner of the federal adjustments report.
new text end

new text begin Subd. 3. new text end

new text begin Unreported reported federal adjustments. new text end

new text begin If the taxpayer fails to file a federal
adjustments report, the commissioner may only assess additional amounts related to the
federal adjustments including in-lieu-of amounts, taxes, penalties, and interest, at the later
of:
new text end

new text begin (1) the expiration of the period of limitations in section 289A.38; or
new text end

new text begin (2) the expiration of the six-year period following the final determination date.
new text end

new text begin Subd. 4. new text end

new text begin Estimated tax payments during the course of a federal audit. new text end

new text begin The
commissioner shall prescribe a process for a taxpayer to make estimated payments to the
commissioner of the tax expected to result from a pending audit by the Internal Revenue
Service. The taxpayer may make estimated payments prior to the due date of the federal
adjustment report and without the taxpayer having to file the report with the commissioner.
The commissioner must credit the estimated tax payments against any tax liability of the
taxpayer ultimately found to be due to the commissioner. The estimated payments limit the
accrual of further statutory interest on that amount. If the estimated tax payments exceed
the final tax liability and statutory interest ultimately determined to be due, the taxpayer is
entitled to a refund or credit for the excess, provided the taxpayer files a federal adjustment
report or claim for refund or credit of tax pursuant to section 289A.385.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

Sec. 5.

new text begin [289A.385] CLAIMS FOR REFUND OR CREDITS OF STATE TAX
ARISING FROM FINAL FEDERAL ADJUSTMENTS MADE BY THE INTERNAL
REVENUE SERVICE.
new text end

new text begin Notwithstanding the general period of limitations on claims for refund in section 289A.40,
taxpayers subject to the reporting requirements of sections 289A.382 and 289A.383 may
file claims for refund related to federal adjustments made by the Internal Revenue Service
on or before the last day for the assessment of tax under section 289A.384.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

Sec. 6.

Minnesota Statutes 2018, section 289A.42, is amended to read:


289A.42 CONSENT TO EXTEND STATUTE.

Subdivision 1.

Extension agreement.

If before the expiration of time prescribed in
sections 289A.38new text begin to 289A.384new text end and 289A.40 for the assessment of tax or the filing of a claim
for refund, both the commissioner and the taxpayer have consented in writing to the
assessment or filing of a claim for refund after that time, the tax may be assessed or the
claim for refund filed at any time before the expiration of the agreed-upon period. The
period may be extended by later agreements in writing before the expiration of the period
previously agreed upon. The taxpayer and the commissioner may also agree to extend the
period for collection of the tax.new text begin The time periods provided in sections 289A.382 and
289A.383 may be extended automatically, upon written notice to the commissioner, by 60
days for an audited partnership or tiered partner which has 10,000 or more direct partners.
new text end

Subd. 2.

Federal extensions.

When a taxpayer consents to an extension of time for the
assessment of federal withholding or income taxes, the period in which the commissioner
may recompute the tax is also extended, notwithstanding any period of limitations to the
contrary, deleted text beginas follows:
deleted text end

deleted text begin (1)deleted text end for the deleted text beginperiodsdeleted text endnew text begin adjustmentsnew text end provided in section deleted text begin289A.38, subdivisions 8 and 9;deleted text endnew text begin
289A.384, subdivisions 2 and 3.
new text end

deleted text begin (2) for six months following the expiration of the extended federal period of limitations
when no change is made by the federal authority. If no change is made by the federal
authority, and, but for this subdivision, the commissioner's time period to adjust the tax has
expired, and if the commissioner has completed a field audit of the taxpayer, no additional
changes resulting in additional tax due or a refund may be made. For purposes of this
subdivision, "field audit" has the meaning given it in section 289A.38, subdivision 9.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

Sec. 7. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2018, section 289A.38, subdivisions 7, 8, and 9, new text end new text begin are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

ARTICLE 2

PARTNERSHIP TAX; TECHNICAL CHANGES

Section 1.

Minnesota Statutes 2018, section 270C.445, subdivision 6, is amended to read:


Subd. 6.

Enforcement; administrative order; penalties; cease and desist.

(a) The
commissioner may impose an administrative penalty of not more than $1,000 per violation
of subdivision 3 or 5, or section 270C.4451, provided that a penalty may not be imposed
for any conduct for which a tax preparer penalty is imposed under section 289A.60,
subdivision 13
. The commissioner may terminate a tax preparer's authority to transmit
returns electronically to the state, if the commissioner determines the tax preparer engaged
in a pattern and practice of violating this section. Imposition of a penalty under this paragraph
is subject to the contested case procedure under chapter 14. The commissioner shall collect
the penalty in the same manner as the income tax. There is no right to make a claim for
refund under section 289A.50 of the penalty imposed under this paragraph. Penalties imposed
under this paragraph are public data.

(b) In addition to the penalty under paragraph (a), if the commissioner determines that
a tax preparer has violated subdivision 3 or 5, or section 270C.4451, the commissioner may
issue an administrative order to the tax preparer requiring the tax preparer to cease and
desist from committing the violation. The administrative order may include an administrative
penalty provided in paragraph (a).

(c) If the commissioner issues an administrative order under paragraph (b), the
commissioner must send the order to the tax preparer addressed to the last known address
of the tax preparer.

(d) A cease and desist order under paragraph (b) must:

(1) describe the act, conduct, or practice committed and include a reference to the law
that the act, conduct, or practice violates; and

(2) provide notice that the tax preparer may request a hearing as provided in this
subdivision.

(e) Within 30 days after the commissioner issues an administrative order under paragraph
(b), the tax preparer may request a hearing to review the commissioner's action. The request
for hearing must be made in writing and must be served on the commissioner at the address
specified in the order. The hearing request must specifically state the reasons for seeking
review of the order. The date on which a request for hearing is served by mail is the postmark
date on the envelope in which the request for hearing is mailed.

(f) If a tax preparer does not timely request a hearing regarding an administrative order
issued under paragraph (b), the order becomes a final order of the commissioner and is not
subject to review by any court or agency.

(g) If a tax preparer timely requests a hearing regarding an administrative order issued
under paragraph (b), the hearing must be commenced within ten days after the commissioner
receives the request for a hearing.

(h) A hearing timely requested under paragraph (e) is subject to the contested case
procedure under chapter 14, as modified by this subdivision. The administrative law judge
must issue a report containing findings of fact, conclusions of law, and a recommended
order within ten days after the completion of the hearing, the receipt of late-filed exhibits,
or the submission of written arguments, whichever is later.

(i) Within five days of the date of the administrative law judge's report issued under
paragraph (h), any party aggrieved by the administrative law judge's report may submit
written exceptions and arguments to the commissioner. Within 15 days after receiving the
administrative law judge's report, the commissioner must issue an order vacating, modifying,
or making final the administrative order.

(j) The commissioner and the tax preparer requesting a hearing may by agreement
lengthen any time periods prescribed in paragraphs (g) to (i).

(k) An administrative order issued under paragraph (b) is in effect until it is modified
or vacated by the commissioner or an appellate court. The administrative hearing provided
by paragraphs (e) to (i) and any appellate judicial review as provided in chapter 14 constitute
the exclusive remedy for a tax preparer aggrieved by the order.

(l) The commissioner may impose an administrative penalty, in addition to the penalty
under paragraph (a), up to $5,000 per violation of a cease and desist order issued under
paragraph (b). Imposition of a penalty under this paragraph is subject to the contested case
procedure under chapter 14. Within 30 days after the commissioner imposes a penalty under
this paragraph, the tax preparer assessed the penalty may request a hearing to review the
penalty order. The request for hearing must be made in writing and must be served on the
commissioner at the address specified in the order. The hearing request must specifically
state the reasons for seeking review of the order. The cease and desist order issued under
paragraph (b) is not subject to review in a proceeding to challenge the penalty order under
this paragraph. The date on which a request for hearing is served by mail is the postmark
date on the envelope in which the request for hearing is mailed. If the tax preparer does not
timely request a hearing, the penalty order becomes a final order of the commissioner and
is not subject to review by any court or agency. A penalty imposed by the commissioner
under this paragraph may be collected and enforced by the commissioner as an income tax
liability. There is no right to make a claim for refund under section 289A.50 of the penalty
imposed under this paragraph. A penalty imposed under this paragraph is public data.

(m) If a tax preparer violates a cease and desist order issued under paragraph (b), the
commissioner may terminate the tax preparer's authority to transmit returns electronically
to the state. Termination under this paragraph is public data.

(n) A cease and desist order issued under paragraph (b) is public data when it is a final
order.

(o) Notwithstanding any other law, the commissioner may impose a penalty or take other
action under this subdivision against a tax preparer, with respect to a return, within the
period to assess tax on that return as provided by deleted text beginsectiondeleted text endnew text begin sectionsnew text end 289A.38new text begin to 289A.384new text end.

(p) Notwithstanding any other law, the imposition of a penalty or any other action against
a tax preparer under this subdivision, other than with respect to a return, must be taken by
the commissioner within five years of the violation of statute.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

Sec. 2.

Minnesota Statutes 2018, section 289A.31, subdivision 1, is amended to read:


Subdivision 1.

Individual income, fiduciary income, mining company, corporate
franchise, and entertainment taxes.

(a) Individual income, fiduciary income, mining
company, and corporate franchise taxes, and interest and penalties, must be paid by the
taxpayer upon whom the tax is imposed, except in the following cases:

(1) the tax due from a decedent for that part of the taxable year in which the decedent
died during which the decedent was alive and the taxes, interest, and penalty due for the
prior years must be paid by the decedent's personal representative, if any. If there is no
personal representative, the taxes, interest, and penalty must be paid by the transferees, as
defined in section 270C.58, subdivision 3, to the extent they receive property from the
decedent;

(2) the tax due from an infant or other incompetent person must be paid by the person's
guardian or other person authorized or permitted by law to act for the person;

(3) the tax due from the estate of a decedent must be paid by the estate's personal
representative;

(4) the tax due from a trust, including those within the definition of a corporation, as
defined in section 290.01, subdivision 4, must be paid by a trustee; and

(5) the tax due from a taxpayer whose business or property is in charge of a receiver,
trustee in bankruptcy, assignee, or other conservator, must be paid by the person in charge
of the business or property so far as the tax is due to the income from the business or property.

(b) Entertainment taxes are the joint and several liability of the entertainer and the
entertainment entity. The payor is liable to the state for the payment of the tax required to
be deducted and withheld under section 290.9201, subdivision 7, and is not liable to the
entertainer for the amount of the payment.

(c) The taxes imposed under sections 289A.35new text begin, paragraph (b), 289A.383, subdivision
3,
new text end and 290.0922 on partnerships are the joint and several liability of the partnership and the
general partners.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

Sec. 3.

Minnesota Statutes 2018, section 289A.37, subdivision 2, is amended to read:


Subd. 2.

Erroneous refunds.

(a) Except as provided in paragraph (b), an erroneous
refund occurs when the commissioner issues a payment to a person that exceeds the amount
the person is entitled to receive under law. An erroneous refund is considered an
underpayment of tax on the date issued.

(b) To the extent that the amount paid does not exceed the amount claimed by the
taxpayer, an erroneous refund does not include the following:

(1) any amount of a refund or credit paid pursuant to a claim for refund filed by a
taxpayer, including but not limited to refunds of claims made under section 290.06,
subdivision 23; 290.067; 290.0671; 290.0672; 290.0674; 290.0675; 290.0677; 290.068;
290.0681; or 290.0692; or chapter 290A; or

(2) any amount paid pursuant to a claim for refund of an overpayment of tax filed by a
taxpayer.

(c) The commissioner may make an assessment to recover an erroneous refund at any
time within two years from the issuance of the erroneous refund. If all or part of the erroneous
refund was induced by fraud or misrepresentation of a material fact, the assessment may
be made at any time.

(d) Assessments of amounts that are not erroneous refunds under paragraph (b) must be
conducted under deleted text beginsectiondeleted text endnew text begin sectionsnew text end 289A.38new text begin to 289A.384new text end.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

Sec. 4.

Minnesota Statutes 2018, section 289A.38, subdivision 10, is amended to read:


Subd. 10.

Incorrect determination of federal adjusted gross income.

Notwithstanding
any other provision of this chapter, if a taxpayer whose net income is determined under
section 290.01, subdivision 19, omits from income an amount that will under the Internal
Revenue Code extend the statute of limitations for the assessment of federal income taxes,
or otherwise incorrectly determines the taxpayer's federal adjusted gross income resulting
in adjustments by the Internal Revenue Service, then the period of assessment and
determination of tax will be that under the Internal Revenue Code. When a change is made
to federal income during the extended time provided under this subdivision, the provisions
under deleted text beginsubdivisions 7 to 9deleted text endnew text begin sections 289A.381 to 289A.384new text end regarding additional extensions
apply.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

Sec. 5.

Minnesota Statutes 2018, section 289A.60, subdivision 24, is amended to read:


Subd. 24.

Penalty for failure to notify of federal change.

If a person fails to report to
the commissioner a change or correction of the person's federal return in the manner and
time prescribed in deleted text beginsection 289A.38, subdivision 7deleted text endnew text begin sections 289A.382 and 289A.383new text end, there
must be added to the tax an amount equal to ten percent of the amount of any underpayment
of Minnesota tax attributable to the federal change.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

Sec. 6.

Minnesota Statutes 2018, section 290.31, subdivision 1, is amended to read:


Subdivision 1.

Partners, not partnership, subject to tax.

Except as provided under
deleted text begin sectiondeleted text endnew text begin sectionsnew text end 289A.35, paragraph (b),new text begin and 289A.383, subdivision 3,new text end a partnership as such
shall not be subject to the income tax imposed by this chapter, but is subject to the tax
imposed under section 290.0922. Persons carrying on business as partners shall be liable
for income tax only in their separate or individual capacities.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

Sec. 7.

Minnesota Statutes 2018, section 297F.17, subdivision 6, is amended to read:


Subd. 6.

Time limit for bad debt refund.

Claims for refund must be filed with the
commissioner during the one-year period beginning with the timely filing of the taxpayer's
federal income tax return containing the bad debt deduction that is being claimed. Claimants
under this subdivision are subject to the notice requirements of deleted text beginsection 289A.38, subdivision
7
deleted text endnew text begin sections 289A.382 and 289A.383new text end.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

Sec. 8.

Minnesota Statutes 2018, section 297G.16, subdivision 7, is amended to read:


Subd. 7.

Time limit for a bad debt deduction.

Claims for refund must be filed with
the commissioner within one year of the filing of the taxpayer's income tax return containing
the bad debt deduction that is being claimed. Claimants under this subdivision are subject
to the notice requirements of deleted text beginsection 289A.38, subdivision 7deleted text endnew text begin sections 289A.38 to 289A.384new text end.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

Sec. 9.

Minnesota Statutes 2018, section 469.319, subdivision 4, is amended to read:


Subd. 4.

Repayment procedures.

(a) For the repayment of taxes imposed under chapter
290 or 297A or local taxes collected pursuant to section 297A.99, a business must file an
amended return with the commissioner of revenue and pay any taxes required to be repaid
within 30 days after becoming subject to repayment under this section. The amount required
to be repaid is determined by calculating the tax for the period or periods for which repayment
is required without regard to the exemptions and credits allowed under section 469.315.

(b) For the repayment of taxes imposed under chapter 297B, a business must pay any
taxes required to be repaid to the motor vehicle registrar, as agent for the commissioner of
revenue, within 30 days after becoming subject to repayment under this section.

(c) For the repayment of property taxes, the county auditor shall prepare a tax statement
for the business, applying the applicable tax extension rates for each payable year and
provide a copy to the business and to the taxpayer of record. The business must pay the
taxes to the county treasurer within 30 days after receipt of the tax statement. The business
or the taxpayer of record may appeal the valuation and determination of the property tax to
the Tax Court within 30 days after receipt of the tax statement.

(d) The provisions of chapters 270C and 289A relating to the commissioner's authority
to audit, assess, and collect the tax and to hear appeals are applicable to the repayment
required under paragraphs (a) and (b). The commissioner may impose civil penalties as
provided in chapter 289A, and the additional tax and penalties are subject to interest at the
rate provided in section 270C.40. The additional tax shall bear interest from 30 days after
becoming subject to repayment under this section until the date the tax is paid. Any penalty
imposed pursuant to this section shall bear interest from the date provided in section 270C.40,
subdivision 3
, to the date of payment of the penalty.

(e) If a property tax is not repaid under paragraph (c), the county treasurer shall add the
amount required to be repaid to the property taxes assessed against the property for payment
in the year following the year in which the auditor provided the statement under paragraph
(c).

(f) For determining the tax required to be repaid, a reduction of a state or local sales or
use tax is deemed to have been received on the date that the good or service was purchased
or first put to a taxable use. In the case of an income tax or franchise tax, including the credit
payable under section 469.318, a reduction of tax is deemed to have been received for the
two most recent tax years that have ended prior to the date that the business became subject
to repayment under this section. In the case of a property tax, a reduction of tax is deemed
to have been received for the taxes payable in the year that the business became subject to
repayment under this section and for the taxes payable in the prior year.

(g) The commissioner may assess the repayment of taxes under paragraph (d) any time
within two years after the business becomes subject to repayment under subdivision 1, or
within any period of limitations for the assessment of tax under deleted text beginsection 289A.38deleted text endnew text begin sections
289A.38 to 289A.384
new text end, whichever period is later. The county auditor may send the statement
under paragraph (c) any time within three years after the business becomes subject to
repayment under subdivision 1.

(h) A business is not entitled to any income tax or franchise tax benefits, including
refundable credits, for any part of the year in which the business becomes subject to
repayment under this section nor for any year thereafter. Property is not exempt from tax
under section 272.02, subdivision 64, for any taxes payable in the year following the year
in which the property became subject to repayment under this section nor for any year
thereafter. A business is not eligible for any sales tax benefits beginning with goods or
services purchased or first put to a taxable use on the day that the business becomes subject
to repayment under this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for federal adjustments that have a final
determination date after June 30, 2019.
new text end

APPENDIX

Repealed Minnesota Statutes: 19-2939

289A.38 LIMITATIONS ON TIME FOR ASSESSMENT OF TAX.

Subd. 7.

Federal tax changes.

If the amount of income, items of tax preference, deductions, or credits for any year of a taxpayer, or the wages paid by a taxpayer for any period, as reported to the Internal Revenue Service is changed or corrected by the commissioner of Internal Revenue or other officer of the United States or other competent authority, or where a renegotiation of a contract or subcontract with the United States results in a change in income, items of tax preference, deductions, credits, or withholding tax, or, in the case of estate tax, where there are adjustments to the taxable estate, the taxpayer shall report the change or correction or renegotiation results in writing to the commissioner. The report must be submitted within 180 days after the final determination and must be in the form of either an amended Minnesota estate, withholding tax, corporate franchise tax, or income tax return conceding the accuracy of the federal determination or a letter detailing how the federal determination is incorrect or does not change the Minnesota tax. An amended Minnesota income tax return must be accompanied by an amended property tax refund return, if necessary. A taxpayer filing an amended federal tax return must also file a copy of the amended return with the commissioner of revenue within 180 days after filing the amended return.

Subd. 8.

Failure to report change or correction of federal return.

If a taxpayer fails to make a report as required by subdivision 7, the commissioner may recompute the tax, including a refund, based on information available to the commissioner. The tax may be recomputed within six years after the report should have been filed, notwithstanding any period of limitations to the contrary.

Subd. 9.

Report made of change or correction of federal return.

If a taxpayer is required to make a report under subdivision 7, and does report the change or files a copy of the amended return, the commissioner may recompute and reassess the tax due, including a refund (1) within one year after the report or amended return is filed with the commissioner, notwithstanding any period of limitations to the contrary, or (2) within any other applicable period stated in this section, whichever period is longer. The period provided for the carryback of any amount of loss or credit is also extended as provided in this subdivision, notwithstanding any law to the contrary. If the commissioner has completed a field audit of the taxpayer, and, but for this subdivision, the commissioner's time period to adjust the tax has expired, the additional tax due or refund is limited to only those changes that are required to be made to the return which relate to the changes made on the federal return. This subdivision does not apply to sales and use tax.

For purposes of this subdivision and section 289A.42, subdivision 2, a "field audit" is the physical presence of examiners in the taxpayer's or taxpayer's representative's office conducting an examination of the taxpayer with the intention of issuing an assessment or notice of change in tax or which results in the issuing of an assessment or notice of change in tax. The examination may include inspecting a taxpayer's place of business, tangible personal property, equipment, computer systems and facilities, pertinent books, records, papers, vouchers, computer printouts, accounts, and documents.