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HF 2871

1st Engrossment - 89th Legislature (2015 - 2016) Posted on 04/25/2016 04:16pm

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

Bill Text Versions

Engrossments
Introduction Posted on 03/10/2016
1st Engrossment Posted on 04/25/2016

Current Version - 1st Engrossment

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A bill for an act
relating to taxation; making policy, technical, and clarifying changes to property
tax, estate tax, sales tax, income and corporate franchise taxes, and other
miscellaneous taxes and tax provisions; amending Minnesota Statutes 2014,
sections 273.13, subdivision 22; 273.372, subdivision 1; 289A.09, subdivision
2; 289A.18, subdivision 1, by adding a subdivision; 289A.20, subdivision 2;
289A.31, subdivision 1; 289A.35; 289A.37, subdivision 2; 290.068, subdivision
2; 290.17, subdivision 2; 290.31, subdivision 1; 291.016, subdivisions 2, 3;
291.03, subdivision 9; 297A.61, subdivision 10; proposing coding for new law in
Minnesota Statutes, chapter 273; repealing Minnesota Rules, parts 8092.1400;
8100.0700.

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

ARTICLE 1

DEPARTMENT OF REVENUE TECHNICAL PROVISIONS:
PROPERTY, INCOME, ESTATE, AND SALES AND USE TAXES

Section 1.

Minnesota Statutes 2014, section 273.13, subdivision 22, is amended to read:


Subd. 22.

Class 1.

(a) Except as provided in subdivision 23 and in paragraphs (b)
and (c), real estate which is residential and used for homestead purposes is class 1a. In the
case of a duplex or triplex in which one of the units is used for homestead purposes, the
entire property is deemed to be used for homestead purposes. The market value of class 1a
property must be determined based upon the value of the house, garage, and land.

The first $500,000 of market value of class 1a property has a net classification rate
of one percent of its market value; and the market value of class 1a property that exceeds
$500,000 has a classification rate of 1.25 percent of its market value.

(b) Class 1b property includes homestead real estate or homestead manufactured
homes used for the purposes of a homestead by:

(1) any person who is blind as defined in section 256D.35, or the blind person and
the blind person's spouse;

(2) any person who is permanently and totally disabled or by the disabled person and
the disabled person's spouse; or

(3) the surviving spouse of a permanently and totally disabled veteran homesteading
a property classified under this paragraph for taxes payable in 2008.

Property is classified and assessed under clause (2) only if the government agency or
income-providing source certifies, upon the request of the homestead occupant, that the
homestead occupant satisfies the disability requirements of this paragraph, and that the
property is not eligible for the valuation exclusion under subdivision 34.

Property is classified and assessed under paragraph (b) only if the commissioner
of revenue or the county assessor certifies that the homestead occupant satisfies the
requirements of this paragraph.

Permanently and totally disabled for the purpose of this subdivision means a
condition which is permanent in nature and totally incapacitates the person from working
at an occupation which brings the person an income. The first $50,000 market value of
class 1b property has a net classification rate of .45 percent of its market value. The
remaining market value of class 1b property deleted text beginhas a classification rate using the rates fordeleted text endnew text begin is
classified as
new text end class 1a or class 2a property, whichever is appropriatedeleted text begin, of similar market valuedeleted text end.

(c) Class 1c property is commercial use real and personal property that abuts public
water as defined in section 103G.005, subdivision 15, and is devoted to temporary and
seasonal residential occupancy for recreational purposes but not devoted to commercial
purposes for more than 250 days in the year preceding the year of assessment, and that
includes a portion used as a homestead by the owner, which includes a dwelling occupied
as a homestead by a shareholder of a corporation that owns the resort, a partner in a
partnership that owns the resort, or a member of a limited liability company that owns the
resort even if the title to the homestead is held by the corporation, partnership, or limited
liability company. For purposes of this paragraph, property is devoted to a commercial
purpose on a specific day if any portion of the property, excluding the portion used
exclusively as a homestead, is used for residential occupancy and a fee is charged for
residential occupancy. Class 1c property must contain three or more rental units. A "rental
unit" is defined as a cabin, condominium, townhouse, sleeping room, or individual camping
site equipped with water and electrical hookups for recreational vehicles. Class 1c property
must provide recreational activities such as the rental of ice fishing houses, boats and
motors, snowmobiles, downhill or cross-country ski equipment; provide marina services,
launch services, or guide services; or sell bait and fishing tackle. Any unit in which the
right to use the property is transferred to an individual or entity by deeded interest, or the
sale of shares or stock, no longer qualifies for class 1c even though it may remain available
for rent. A camping pad offered for rent by a property that otherwise qualifies for class 1c
is also class 1c, regardless of the term of the rental agreement, as long as the use of the
camping pad does not exceed 250 days. If the same owner owns two separate parcels that
are located in the same township, and one of those properties is classified as a class 1c
property and the other would be eligible to be classified as a class 1c property if it was
used as the homestead of the owner, both properties will be assessed as a single class 1c
property; for purposes of this sentence, properties are deemed to be owned by the same
owner if each of them is owned by a limited liability company, and both limited liability
companies have the same membership. The portion of the property used as a homestead
is class 1a property under paragraph (a). The remainder of the property is classified as
follows: the first $600,000 of market value is tier I, the next $1,700,000 of market value
is tier II, and any remaining market value is tier III. The classification rates for class 1c
are: tier I, 0.50 percent; tier II, 1.0 percent; and tier III, 1.25 percent. Owners of real and
personal property devoted to temporary and seasonal residential occupancy for recreation
purposes in which all or a portion of the property was devoted to commercial purposes for
not more than 250 days in the year preceding the year of assessment desiring classification
as class 1c, must submit a declaration to the assessor designating the cabins or units
occupied for 250 days or less in the year preceding the year of assessment by January 15 of
the assessment year. Those cabins or units and a proportionate share of the land on which
they are located must be designated as class 1c as otherwise provided. The remainder of
the cabins or units and a proportionate share of the land on which they are located must be
designated as class 3a commercial. The owner of property desiring designation as class
1c property must provide guest registers or other records demonstrating that the units for
which class 1c designation is sought were not occupied for more than 250 days in the
year preceding the assessment if so requested. The portion of a property operated as a
(1) restaurant, (2) bar, (3) gift shop, (4) conference center or meeting room, and (5) other
nonresidential facility operated on a commercial basis not directly related to temporary
and seasonal residential occupancy for recreation purposes does not qualify for class 1c.

(d) Class 1d property includes structures that meet all of the following criteria:

(1) the structure is located on property that is classified as agricultural property under
section 273.13, subdivision 23;

(2) the structure is occupied exclusively by seasonal farm workers during the time
when they work on that farm, and the occupants are not charged rent for the privilege of
occupying the property, provided that use of the structure for storage of farm equipment
and produce does not disqualify the property from classification under this paragraph;

(3) the structure meets all applicable health and safety requirements for the
appropriate season; and

(4) the structure is not salable as residential property because it does not comply
with local ordinances relating to location in relation to streets or roads.

The market value of class 1d property has the same classification rates as class
1a property under paragraph (a).

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 2014, section 290.17, subdivision 2, is amended to read:


Subd. 2.

Income not derived from conduct of a trade or business.

The income of
a taxpayer subject to the allocation rules that is not derived from the conduct of a trade or
business must be assigned in accordance with paragraphs (a) to (f):

(a)(1) Subject to paragraphs (a)(2) and (a)(3), income from wages as defined in
section 3401(a) and (f) of the Internal Revenue Code is assigned to this state if, and to the
extent that, the work of the employee is performed within it; all other income from such
sources is treated as income from sources without this state.

Severance pay shall be considered income from labor or personal or professional
services.

(2) In the case of an individual who is a nonresident of Minnesota and who is an
athlete or entertainer, income from compensation for labor or personal services performed
within this state shall be determined in the following manner:

(i) The amount of income to be assigned to Minnesota for an individual who is a
nonresident salaried athletic team employee shall be determined by using a fraction in
which the denominator contains the total number of days in which the individual is under
a duty to perform for the employer, and the numerator is the total number of those days
spent in Minnesota. For purposes of this paragraph, off-season training activities, unless
conducted at the team's facilities as part of a team imposed program, are not included in
the total number of duty days. Bonuses earned as a result of play during the regular season
or for participation in championship, play-off, or all-star games must be allocated under
the formula. Signing bonuses are not subject to allocation under the formula if they are
not conditional on playing any games for the team, are payable separately from any other
compensation, and are nonrefundable; and

(ii) The amount of income to be assigned to Minnesota for an individual who is a
nonresident, and who is an athlete or entertainer not listed in clause (i), for that person's
athletic or entertainment performance in Minnesota shall be determined by assigning to
this state all income from performances or athletic contests in this state.

(3) For purposes of this section, amounts received by a nonresident as "retirement
income" as defined in section (b)(1) of the State Income Taxation of Pension Income
Act, Public Law 104-95, are not considered income derived from carrying on a trade
or business or from wages or other compensation for work an employee performed in
Minnesota, and are not taxable under this chapter.

(b) Income or gains from tangible property located in this state that is not employed
in the business of the recipient of the income or gains must be assigned to this state.

(c) Income or gains from intangible personal property not employed in the business
of the recipient of the income or gains must be assigned to this state if the recipient of the
income or gains is a resident of this state or is a resident trust or estate.

Gain on the sale of a partnership interest is allocable to this state in the ratio of the
original cost of partnership tangible property in this state to the original cost of partnership
tangible property everywhere, determined at the time of the sale. If more than 50 percent
of the value of the partnership's assets consists of intangibles, gain or loss from the sale
of the partnership interest is allocated to this state in accordance with the sales factor of
the partnership for its first full tax period immediately preceding the tax period of the
partnership during which the partnership interest was sold.

Gain on the sale of an interest in a single member limited liability company that
is disregarded for federal income tax purposes is allocable to this state as if the single
member limited liability company did not exist and the assets of the limited liability
company are personally owned by the sole member.

Gain on the sale of goodwill or income from a covenant not to compete that is
connected with a business operating all or partially in Minnesota is allocated to this state
to the extent that the income from the business in the year preceding the year of sale was
deleted text beginassignabledeleted text endnew text begin allocablenew text end to Minnesota under subdivision 3.

When an employer pays an employee for a covenant not to compete, the income
allocated to this state is in the ratio of the employee's service in Minnesota in the calendar
year preceding leaving the employment of the employer over the total services performed
by the employee for the employer in that year.

(d) Income from winnings on a bet made by an individual while in Minnesota is
assigned to this state. In this paragraph, "bet" has the meaning given in section 609.75,
subdivision 2
, as limited by section 609.75, subdivision 3, clauses (1), (2), and (3).

(e) All items of gross income not covered in paragraphs (a) to (d) and not part of the
taxpayer's income from a trade or business shall be assigned to the taxpayer's domicile.

(f) For the purposes of this section, working as an employee shall not be considered
to be conducting a trade or business.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2014, section 291.016, subdivision 2, is amended to read:


Subd. 2.

Additions.

The following amounts, to the extent deducted in computingnew text begin
or otherwise excluded from
new text end the federal taxable estate, must be added in computing the
Minnesota taxable estate:

(1) the amount of the deduction for state death taxes allowed under section 2058 of
the Internal Revenue Code;

(2) the amount of the deduction for foreign death taxes allowed under section
2053(d) of the Internal Revenue Code; and

(3) the aggregate amount of taxable gifts as defined in section 2503 of the Internal
Revenue Code, made by the decedent within three years of the date of death. For purposes
of this clause, the amount of the addition equals the value of the gift under section 2512 of
the Internal Revenue Code and excludes any value of the gift included in the federal estate.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for estates of decedents
dying after June 30, 2013.
new text end

Sec. 4.

Minnesota Statutes 2014, section 291.016, subdivision 3, is amended to read:


Subd. 3.

Subtraction.

new text begin The following amounts, to the extent included in computing
the federal taxable estate, may be subtracted in computing the Minnesota taxable estate
but must not reduce the Minnesota taxable estate to less than zero:
new text end

new text begin (1) the value of property subject to an election under section 291.03, subdivision
1d; and
new text end

new text begin (2) new text endthe value of qualified small business property under section 291.03, subdivision
9
, and the value of qualified farm property under section 291.03, subdivision 10, or the
result of $5,000,000 minus the amount for the year of death listed in deleted text beginclauses (1) to (5)
deleted text endnew text beginitems (i) to (v)new text end, whichever is lessdeleted text begin, may be subtracted in computing the Minnesota taxable
estate but must not reduce the Minnesota taxable estate to less than zero
deleted text end:

deleted text begin (1)deleted text endnew text begin (i)new text end $1,200,000 for estates of decedents dying in 2014;

deleted text begin (2)deleted text endnew text begin (ii)new text end $1,400,000 for estates of decedents dying in 2015;

deleted text begin (3)deleted text endnew text begin (iii)new text end $1,600,000 for estates of decedents dying in 2016;

deleted text begin (4)deleted text endnew text begin (iv)new text end $1,800,000 for estates of decedents dying in 2017; and

deleted text begin (5)deleted text endnew text begin (v)new text end $2,000,000 for estates of decedents dying in 2018 and thereafter.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for estates of decedents
dying after June 30, 2011.
new text end

Sec. 5.

Minnesota Statutes 2014, section 291.03, subdivision 9, is amended to read:


Subd. 9.

Qualified small business property.

Property satisfying all of the following
requirements is qualified small business property:

(1) The value of the property was included in the federal adjusted taxable estate.

(2) The property consists of the assets of a trade or business or shares of stock or other
ownership interests in a corporation or other entity engaged in a trade or business. Shares
of stock in a corporation or an ownership interest in another type of entity do not qualify
under this subdivision if the shares or ownership interests are traded on a public stock
exchange at any time during the three-year period ending on the decedent's date of death.
For purposes of this subdivision, an ownership interest includes the interest the decedent
is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue Code.

(3) During the taxable year that ended before the decedent's death, the trade or
business must not have been a passive activity within the meaning of section 469(c) of the
Internal Revenue Code, and the decedent or the decedent's spouse must have materially
participated in the trade or business within the meaning of section 469(h) of the Internal
Revenue Code, excluding section 469(h)(3) of the Internal Revenue Code and any other
provision provided by United States Treasury Department regulation that substitutes
material participation in prior taxable years for material participation in the taxable year
that ended before the decedent's death.

(4) The gross annual sales of the trade or business were $10,000,000 or less for the
last taxable year that ended before the date of the death of the decedent.

(5) The property does not deleted text beginconsist ofdeleted text endnew text begin include:
new text end

new text begin (i)new text end cashdeleted text begin,deleted text endnew text begin;
new text end

new text begin (ii)new text end cash equivalentsdeleted text begin,deleted text endnew text begin;
new text end

new text begin (iii)new text end publicly traded securitiesdeleted text begin,deleted text endnew text begin;new text end or

new text begin (iv) anynew text end assets not used in the operation of the trade or business.

new text begin (6)new text end For property consisting of shares of stock or other ownership interests in an
entity, the value of deleted text begincash, cash equivalents, publicly traded securities, or assets not used
in the operation of the trade or business held by the corporation or other entity
deleted text endnew text begin items
described in clause (5)
new text end must be deleted text begindeducted from the value of the property qualifying under
this subdivision in proportion to the decedent's share of ownership of the entity on the date
of death
deleted text endnew text begin excluded in the valuation of the decedent's interest in the entitynew text end.

deleted text begin (6)deleted text endnew text begin (7)new text end The decedent continuously owned the property, including property the
decedent is deemed to own under sections 2036, 2037, and 2038 of the Internal Revenue
Code, for the three-year period ending on the date of death of the decedent. In the case of
a sole proprietor, if the property replaced similar property within the three-year period,
the replacement property will be treated as having been owned for the three-year period
ending on the date of death of the decedent.

deleted text begin (7)deleted text endnew text begin (8)new text end For three years following the date of death of the decedent, the trade or business
is not a passive activity within the meaning of section 469(c) of the Internal Revenue Code,
and a family member materially participates in the operation of the trade or business within
the meaning of section 469(h) of the Internal Revenue Code, excluding section 469(h)(3)
of the Internal Revenue Code and any other provision provided by United States Treasury
Department regulation that substitutes material participation in prior taxable years for
material participation in the three years following the date of death of the decedent.

deleted text begin (8)deleted text endnew text begin (9)new text end The estate and the qualified heir elect to treat the property as qualified small
business property and agree, in the form prescribed by the commissioner, to pay the
recapture tax under subdivision 11, if applicable.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for estates of decedents
dying after June 30, 2011.
new text end

Sec. 6.

Minnesota Statutes 2014, section 297A.61, subdivision 10, is amended to read:


Subd. 10.

Tangible personal property.

(a) "Tangible personal property" means
personal property that can be seen, weighed, measured, felt, or touched, or that is in any
other manner perceptible to the senses. "Tangible personal property" includes, but is not
limited to, electricity, water, gas, steam, and prewritten computer software.

(b) Tangible personal property does not include:

deleted text begin (1) large ponderous machinery and equipment used in a business or production
activity which at common law would be considered to be real property;
deleted text end

deleted text begin (2)deleted text endnew text begin (1)new text end property which is subject to an ad valorem property tax;

deleted text begin (3)deleted text endnew text begin (2)new text end property described in section 272.02, subdivision 9, clauses (a) to (d);

deleted text begin (4)deleted text endnew text begin (3)new text end property described in section 272.03, subdivision 2, clauses (3) and (5); and

deleted text begin (5)deleted text endnew text begin (4)new text end specified digital products, or other digital products, transferred electronically.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

ARTICLE 2

DEPARTMENT OF REVENUE POLICY PROVISIONS:
INCOME AND CORPORATE FRANCHISE TAXES

Section 1.

Minnesota Statutes 2014, section 289A.09, subdivision 2, is amended to read:


Subd. 2.

Withholding statement.

(a) A person required to deduct and withhold
from an employee a tax under section 290.92, subdivision 2a or 3, or 290.923, subdivision
2
, or who would have been required to deduct and withhold a tax under section 290.92,
subdivision 2a
or 3, or persons required to withhold tax under section 290.923, subdivision
2
, determined without regard to section 290.92, subdivision 19, if the employee or payee
had claimed no more than one withholding exemption, or who paid wages or made
payments not subject to withholding under section 290.92, subdivision 2a or 3, or 290.923,
subdivision 2
, to an employee or person receiving royalty payments in excess of $600,
or who has entered into a voluntary withholding agreement with a payee under section
290.92, subdivision 20, must give every employee or person receiving royalty payments in
respect to the remuneration paid by the person to the employee or person receiving royalty
payments during the calendar year, on or before January 31 of the succeeding year, or, if
employment is terminated before the close of the calendar year, within 30 days after the
date of receipt of a written request from the employee if the 30-day period ends before
January 31, a written statement showing the following:

(1) name of the person;

(2) the name of the employee or payee and the employee's or payee's Social Security
account number;

(3) the total amount of wages as that term is defined in section 290.92, subdivision
1
, paragraph (1); the total amount of remuneration subject to withholding under section
290.92, subdivision 20; the amount of sick pay as required under section 6051(f) of the
Internal Revenue Code; and the amount of royalties subject to withholding under section
290.923, subdivision 2; and

(4) the total amount deducted and withheld as tax under section 290.92, subdivision
2a
or 3, or 290.923, subdivision 2.

(b) The statement required to be furnished by paragraph (a) with respect to any
remuneration must be furnished at those times, must contain the information required, and
must be in the form the commissioner prescribes.

(c) The commissioner may prescribe rules providing for reasonable extensions of
time, not in excess of 30 days, to employers or payers required to give the statements to
their employees or payees under this subdivision.

(d) A duplicate of any statement made under this subdivision and in accordance
with rules prescribed by the commissioner, along with a reconciliation in the form the
commissioner prescribes of the statements for the calendar year, including a reconciliation
of the quarterly returns required to be filed under subdivision 1, must be filed with the
commissioner on or before deleted text beginFebruary 28deleted text endnew text begin January 31new text end of the year after the payments were
made.

(e) If an employer cancels the employer's Minnesota withholding account number
required by section 290.92, subdivision 24, the information required by paragraph (d),
must be filed with the commissioner within 30 days of the end of the quarter in which
the employer cancels its account number.

(f) The employer must submit the statements required to be sent to the commissioner
in the same manner required to satisfy the federal reporting requirements of section
6011(e) of the Internal Revenue Code and the regulations issued under it. An employer
must submit statements to the commissioner required by this section by electronic means
if the employer is required to send more than 25 statements to the commissioner, even
though the employer is not required to submit the returns federally by electronic means.
For statements issued for wages paid in 2011 and after, the threshold is ten. All statements
issued for withholding required under section 290.92 are aggregated for purposes of
determining whether the electronic submission threshold is met.

(g) A "third-party bulk filer" as defined in section 290.92, subdivision 30, paragraph
(a), clause (2), must submit the returns required by this subdivision and subdivision 1,
paragraph (a), with the commissioner by electronic means.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for wages paid after December 31,
2015.
new text end

Sec. 2.

Minnesota Statutes 2014, section 289A.18, is amended by adding a subdivision
to read:


new text begin Subd. 2a. new text end

new text begin Annual withholding returns; eligible employers. new text end

new text begin (a) An employer who
deducts and withholds an amount required to be withheld by section 290.92 may file an
annual return and make an annual payment of the amount required to be deducted and
withheld for that calendar year if the employer has received a notification under paragraph
(b). The ability to elect to file an annual return continues through the year following the
year where an employer is required to deduct and withhold more than $500.
new text end

new text begin (b) The commissioner is authorized to determine which employers are eligible to
file an annual return and to notify employers who newly qualify to file an annual return
because the amount an employer is required to deduct and withhold for that calendar year
is $500 or less based on the most recent period of four consecutive quarters for which the
commissioner has compiled data on that employer's withholding tax for that period. At the
time of notification, eligible employers may still decide to file returns and make deposits
quarterly. An employer who decides to file returns and make deposits quarterly is required
to make all returns and deposits required by this chapter and, notwithstanding paragraph
(a), is subject to all applicable penalties for failing to do so.
new text end

new text begin (c) If, at the end of any calendar month other than the last month of the calendar
year, the aggregate amount of undeposited tax withheld by an employer who has elected to
file an annual return exceeds $500, the employer must deposit the aggregate amount with
the commissioner within 30 days of the end of the calendar month.
new text end

new text begin (d) If an employer who has elected to file an annual return ceases to pay wages
for which withholding is required, the employer must file a final return and deposit any
undeposited tax within 30 days of the end of the calendar month following the month in
which the employer ceased paying wages.
new text end

new text begin (e) An employer not subject to paragraph (c) or (d) who elects to file an annual
return must file the return and pay the tax not previously deposited before February 1 of
the year following the year in which the tax was withheld.
new text end

new text begin (f) A notification to an employer regarding eligibility to file an annual return under
Minnesota Rules, part 8092.1400, is considered a notification under paragraph (a).
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, 2015.
new text end

Sec. 3.

Minnesota Statutes 2014, section 289A.20, subdivision 2, is amended to read:


Subd. 2.

Withholding from wages, entertainer withholding, withholding
from payments to out-of-state contractors, and withholding by partnerships, small
business corporations, trusts.

(a) new text beginExcept as provided in section 289A.18, subdivision 2a,
new text enda tax required to be deducted and withheld during the quarterly period must be paid on
or before the last day of the month following the close of the quarterly period, unless an
earlier time for payment is provided. A tax required to be deducted and withheld from
compensation of an entertainer and from a payment to an out-of-state contractor must be
paid on or before the date the return for such tax must be filed under section 289A.18,
subdivision 2
. Taxes required to be deducted and withheld by partnerships, S corporations,
and trusts must be paid on a quarterly basis as estimated taxes under section 289A.25 for
partnerships and trusts and under section 289A.26 for S corporations.

(b) An employer who, during the previous quarter, withheld more than $1,500 of
tax under section 290.92, subdivision 2a or 3, or 290.923, subdivision 2, must deposit tax
withheld under those sections with the commissioner within the time allowed to deposit
the employer's federal withheld employment taxes under Code of Federal Regulations,
title 26, section 31.6302-1, as amended through December 31, 2001, without regard to the
safe harbor or de minimis rules in paragraph (f) or the one-day rule in paragraph (c)(3).
Taxpayers must submit a copy of their federal notice of deposit status to the commissioner
upon request by the commissioner.

(c) The commissioner may prescribe by rule other return periods or deposit
requirements. In prescribing the reporting period, the commissioner may classify payors
according to the amount of their tax liability and may adopt an appropriate reporting
period for the class that the commissioner judges to be consistent with efficient tax
collection. In no event will the duration of the reporting period be more than one year.

(d) If less than the correct amount of tax is paid to the commissioner, proper
adjustments with respect to both the tax and the amount to be deducted must be made,
without interest, in the manner and at the times the commissioner prescribes. If the
underpayment cannot be adjusted, the amount of the underpayment will be assessed and
collected in the manner and at the times the commissioner prescribes.

(e) If the aggregate amount of the tax withheld is $10,000 or more in a fiscal year
ending June 30, the employer must remit each required deposit for wages paid in all
subsequent calendar years by electronic means.

(f) A third-party bulk filer as defined in section 290.92, subdivision 30, paragraph
(a), clause (2), who remits withholding deposits must remit all deposits by electronic
means as provided in paragraph (e), regardless of the aggregate amount of tax withheld
during a fiscal year for all of the employers.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2015.
new text end

Sec. 4.

Minnesota Statutes 2014, 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 deleted text begintaxdeleted text endnew text begin taxesnew text end imposed under deleted text beginsectiondeleted text endnew text begin sections 289A.35 andnew text end 290.0922 on
partnerships deleted text beginisdeleted text endnew text begin arenew text end 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 the day following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2014, section 289A.35, is amended to read:


289A.35 ASSESSMENTS ON RETURNS.

(a) The commissioner may audit and adjust the taxpayer's computation of federal
taxable income, items of federal tax preferences, or federal credit amounts to make them
conform with the provisions of chapter 290 or section 298.01. If a return has been filed,
the commissioner shall enter the liability reported on the return and may make any audit
or investigation that is considered necessary.

new text begin (b) Upon petition by a taxpayer, and when the commissioner determines that it is in
the best interest of the state, the commissioner may allow S corporations and partnerships
to receive orders of assessment issued under section 270C.33, subdivision 4, on behalf
of their owners, and to pay liabilities shown on such orders. In such cases, the owners'
liability must be calculated using the method provided in section 289A.08, subdivision 7,
paragraph (b).
new text end

new text begin (c) A taxpayer may petition the commissioner for the use of the method described
in paragraph (b) after the taxpayer is notified that an audit has been initiated and before
an order of assessment has been issued.
new text end

new text begin (d) A determination of the commissioner under paragraph (b) to grant or deny the
petition of a taxpayer cannot be appealed to the Tax Court or any other court.
new text end

deleted text begin (b)deleted text endnew text begin (e)new text end The commissioner may audit and adjust the taxpayer's computation of
tax under chapter 291. In the case of a return filed pursuant to section 289A.10, the
commissioner shall notify the estate no later than nine months after the filing date, as
provided by section 289A.38, subdivision 2, whether the return is under examination
or the return has been processed as filed.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 6.

Minnesota Statutes 2014, section 290.068, subdivision 2, is amended to read:


Subd. 2.

Definitions.

For purposes of this section, the following terms have the
meanings given.

(a) "Qualified research expenses" means (i) qualified research expenses and basic
research payments as defined in section 41(b) and (e) of the Internal Revenue Code, except
it does not include expenses incurred for qualified research or basic research conducted
outside the state of Minnesota pursuant to section 41(d) and (e) of the Internal Revenue
Code; and (ii) contributions to a nonprofit corporation established and operated pursuant
to the provisions of chapter 317A for the purpose of promoting the establishment and
expansion of business in this state, provided the contributions are invested by the nonprofit
corporation for the purpose of providing funds for small, technologically innovative
enterprises in Minnesota during the early stages of their development.

(b) "Qualified research" means qualified research as defined in section 41(d) of the
Internal Revenue Code, except that the term does not include qualified research conducted
outside the state of Minnesota.

(c) "Base amount" means base amount as defined in section 41(c) of the Internal
Revenue Code, except that the average annual gross receipts new text beginand aggregate gross receipts
new text endmust be calculated using Minnesota sales or receipts under section 290.191 and the
definitions contained in deleted text beginclausesdeleted text endnew text begin paragraphsnew text end (a) and (b) shall apply.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 7.

Minnesota Statutes 2014, section 290.31, subdivision 1, is amended to read:


Subdivision 1.

Partners, not partnership, subject to tax.

new text beginExcept as provided
under section 289A.35, paragraph (b),
new text enda 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.

Sec. 8. new text begin REPEALER.
new text end

new text begin Minnesota Rules, part 8092.1400, new text end new text begin is repealed.
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, 2015, except that notifications from the Department of Revenue to
employers regarding eligibility to file an annual return for taxes withheld in calendar
year 2016 remain in force.
new text end

ARTICLE 3

DEPARTMENT OF REVENUE POLICY PROVISIONS:
PROPERTY TAX

Section 1.

Minnesota Statutes 2014, section 273.372, subdivision 1, is amended to read:


Subdivision 1.

Scope.

(a) As provided in this section, an appeal by a utility or
railroad company concerning property for which the commissioner of revenue has provided
the city or county assessor with valuations by order, or for which the commissioner
has recommended values to the city or county assessor, must be brought against the
commissionerdeleted text begin,deleted text end and deleted text beginnot againstdeleted text end the county or taxing district where the property is located.
new text beginService must be made on the commissioner only, and not on the county or taxing district.
new text end

(b) This section governs administrative appeals and appeals to court of a claim that
utility or railroad operating property has been partially, unfairly, or unequally assessed,
or assessed at a valuation greater than its real or actual value, misclassified, or that the
property is exempt. This section applies only to property described in sections 270.81,
subdivision 1
, 273.33, 273.35, 273.36, and 273.37, and only with regard to taxable net tax
capacities that have been provided to the city or county by the commissioner and which
have not been changed by city or county. If the taxable net tax capacity being appealed is
not the taxable net tax capacity established by the commissioner, or if the appeal claims
that the tax rate applied against the parcel is incorrect, or that the tax has been paid, this
section does not apply.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for appeals of valuations made in
assessment year 2017 and thereafter.
new text end

Sec. 2.

new text begin [273.88] EQUALIZATION OF PUBLIC UTILITY STRUCTURES.
new text end

new text begin After making the apportionment provided in Minnesota Rules, part 8100.0600, the
commissioner must equalize the values of the operating structures to the level accepted by
the State Board of Equalization if the appropriate sales ratio for each county, as conducted
by the Department of Revenue pursuant to section 270.12, subdivision 2, clause (6), is
outside the range accepted by the State Board of Equalization. The commissioner must
not equalize the value of the operating structures if the sales ratio determined pursuant to
this subdivision is within the range accepted by the State Board of Equalization.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2016.
new text end

Sec. 3. new text begin REPEALER.
new text end

new text begin Minnesota Rules, part 8100.0700, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with assessment year 2016.
new text end

ARTICLE 4

DEPARTMENT OF REVENUE POLICY PROVISIONS: MISCELLANEOUS

Section 1.

Minnesota Statutes 2014, section 289A.18, subdivision 1, is amended to read:


Subdivision 1.

Individual income, fiduciary income, corporate franchise, and
entertainment taxes; partnership and S corporation returns; information returns;
mining company returns.

The returns required to be made under sections 289A.08 and
289A.12 must be filed at the following times:

(1) returns made on the basis of the calendar year must be filed on April 15 following
the close of the calendar year, except that returns of corporationsnew text begin and partnershipsnew text end must be
filed on the due date for filing the federal income tax return;

(2) returns made on the basis of the fiscal year must be filed on the 15th day of the
fourth month following the close of the fiscal year, except that returns of corporationsnew text begin and
partnerships
new text end must be filed on the due date for filing the federal income tax return;

(3) returns for a fractional part of a year must be filed on the due date for filing the
federal income tax return;

(4) in the case of a final return of a decedent for a fractional part of a year, the return
must be filed on the 15th day of the fourth month following the close of the 12-month
period that began with the first day of that fractional part of a year;

(5) in the case of the return of a cooperative association, returns must be filed on or
before the 15th day of the ninth month following the close of the taxable year;

(6) if a corporation has been divested from a unitary group and files a return for
a fractional part of a year in which it was a member of a unitary business that files a
combined report under section 290.17, subdivision 4, the divested corporation's return
must be filed on the 15th day of the third month following the close of the common
accounting period that includes the fractional year;

(7) returns of entertainment entities must be filed on April 15 following the close of
the calendar year;

(8) returns required to be filed under section 289A.08, subdivision 4, must be filed
on the 15th day of the fifth month following the close of the taxable year;

(9) returns of mining companies must be filed on May 1 following the close of the
calendar year; and

(10) returns required to be filed with the commissioner under section 289A.12,
subdivision 2
, 4 to 10, or 16 must be filed within 30 days after being demanded by the
commissioner.

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 2014, section 289A.37, subdivision 2, is amended to read:


Subd. 2.

Erroneous refunds.

deleted text begin An erroneous refund is considered an underpayment
of tax on the date made. An assessment of a deficiency arising out of an erroneous refund
may be made at any time within two years from the making of the refund. If part of the
refund was induced by fraud or misrepresentation of a material fact, the assessment may
be made at any time.
deleted text end new text begin (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.
new text end

new text begin (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:
new text end

new text begin (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
new text end

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

new text begin (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.
new text end

new text begin (d) Assessments of amounts that are not erroneous refunds under paragraph (b)
must be conducted under section 289A.38.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies retroactively to all refunds issued on, before, or after that date, but does not apply to
the refunds at issue in Connexus Energy et al. v. Commissioner of Revenue, 868 N.W.2d
234 (Minn. 2015). Notwithstanding any law to the contrary, the changes in this section do
not invalidate any assessments made by the commissioner prior to this effective date.
new text end