SF 1503

as introduced - 90th Legislature (2017 - 2018) Posted on 02/28/2017 09:35am

A bill for an act
relating to taxation; establishing a private letter ruling program; limiting assessment
authority of the commissioner of revenue; providing expanded authority to abate
penalties and taxes; modifying penalties; appropriating money; amending Minnesota
Statutes 2016, sections 270C.31, by adding a subdivision; 270C.33, by adding
subdivisions; 270C.34, subdivision 1; 270C.35, subdivision 4; 289A.40, subdivision
1; 289A.60, subdivision 1; proposing coding for new law in Minnesota Statutes,
chapter 270C.

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

Section 1.

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

new text begin Subdivision 1. new text end

new text begin Program established. new text end

new text begin By January 1, 2018, the commissioner shall, by
administrative rule adopted under chapter 14, establish and implement a program for issuing
private letter rulings to taxpayers to provide guidance as to how the commissioner will apply
Minnesota tax law to a specific transaction or proposed transaction, arrangement, or other
fact situation of the applying taxpayer. The commissioner must include in each ruling an
explanation of the reasoning for the determination. In establishing the terms of the program,
the commissioner may provide that rulings will not be issued in specified subject areas, for
categories of transactions, or under specified provisions of law, if the commissioner
determines doing so is in the best interests of the state and sound tax administration. The
program must include a process for the representative of a taxpayer to apply for a private
letter ruling and to communicate with the commissioner regarding the requested ruling.
new text end

new text begin Subd. 2. new text end

new text begin Application procedure; fees. new text end

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

new text begin (b) The commissioner may, in the administrative rule, establish a fee schedule to recover
the department's actual cost of preparing private letter rulings. The maximum fee per private
letter ruling is $1,000. The commissioner may require the applicant to pay the required fee
for a private letter ruling before the application is considered. If the administrative rule
provides for payment of a fee as a condition for providing a private letter ruling, the rule
must provide a fee structure that varies the amount of the fee by the complexity of the request
or the number and type of issues or both.
new text end

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

new text begin (d) Any fees collected under this section must be deposited in the Revenue Department
service and recovery special revenue fund established under section 270C.15, and are
appropriated to the commissioner to offset the cost of issuing private letter rulings and
related administrative costs.
new text end

new text begin Subd. 3. new text end

new text begin Effect. new text end

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

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

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

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

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

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

new text begin Subd. 4. new text end

new text begin Public access. new text end

new text begin The commissioner shall make private letter rulings issued under
this section available to the public on the department's Web site. The commissioner must
organize the private letter rulings by tax type and must make them available in a searchable
format. The published rulings must redact any information that would permit identification
of the requesting taxpayer.
new text end

new text begin Subd. 5. new text end

new text begin Legislative report. new text end

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

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

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

new text begin (3) the amount of application fees refunded by tax type;
new text end

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

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

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

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

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2016, section 270C.31, is amended by adding a subdivision to
read:

new text begin Subd. 8. new text end

new text begin Authority to request dual examination. new text end

new text begin (a) A qualified taxpayer that is subject
to an on-site examination or audit under this section of the amount of tax due under chapter
290 or 297A may request in writing that the commissioner conduct the examination or audit
of the taxpayer's tax due under both chapters at the same time. The request must be made
within ..... days of the receipt of the commissioner's notice of intent to conduct the on-site
audit or examination in the form prescribed by the commissioner. If a qualified taxpayer
files a timely written request under this subdivision and the commissioner elects to audit or
examine the tax due under only one of the two chapters, the commissioner may not audit
or examine the tax due under the other chapter for each taxable year or period that includes
the taxable year or the period covered by the audit or examination that was conducted.
new text end

new text begin (b) For purposes of this subdivision, "qualified taxpayer" means a taxpayer that meets
each of the following requirements:
new text end

new text begin (1) the taxpayer has been issued a permit to collect tax under section 297A.84;
new text end

new text begin (2) the gross receipts of the taxpayer, as reported on the return filed under chapter 290
for the most recent taxable year, is no more than $........ In applying this clause to a taxpayer
that is member of a unitary business, as defined in section 290.17, gross receipts include
the gross receipts of all members of the unitary business; and
new text end

new text begin (3) the commissioner audited or examined the taxpayer's return filed under chapter 290
or 297A or both for a period that ended no more than ..... years prior to the taxable year or
the period for which the qualified taxpayer made the request under this subdivision, and the
commissioner determined that no more than the greater of (1) $1,000 or (2) ... percent of
the liability for tax in additional tax was owed by the taxpayer as a result of the audit or
examination.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for examinations and audits commenced
after June 30, 2017.
new text end

Sec. 3.

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

new text begin Subd. 4a. new text end

new text begin Limitations; sales taxes. new text end

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

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

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

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

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

new text begin EFFECTIVE DATE. new text end

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

Sec. 4.

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

new text begin Subd. 4b. new text end

new text begin Limit on assessments; reasonable cause for failure to collect or withhold.
new text end

new text begin (a) An assessment issued under subdivision 4 is reduced or eliminated to the extent that the
amount that would otherwise be assessed arose from the taxpayer's failure to collect or
withhold a tax from another individual or entity and the taxpayer had reasonable cause for
not collecting or withholding the tax. A taxpayer may raise this ground for prohibition of
an assessment during an audit, upon appeal from an assessment, or by refund claim following
payment of the assessment.
new text end

new text begin (b) For purposes of this subdivision and section 270C.35, subdivision 4:
new text end

new text begin (1) ignorance of the law is not reasonable cause;
new text end

new text begin (2) lack of clarity as to whether the law requires collection or withholding under the
circumstances may be reasonable cause; and
new text end

new text begin (3) failure to collect or withhold in accordance with prior written advice from the
commissioner on the specific question of the requirement to collect or withhold under the
same or similar circumstances that has not been superseded or preempted by a change in
statute or administrative rule or a subsequent written notice from the commissioner to the
taxpayer prior to commencement of the period for which the failure to collect or withhold
occurred is reasonable cause.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 5.

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

Subdivision 1.

Authority.

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

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

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

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

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

new text begin EFFECTIVE DATE. new text end

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

Sec. 6.

Minnesota Statutes 2016, section 270C.35, subdivision 4, is amended to read:

Subd. 4.

Time and content for administrative appeal.

Within 60 days after the notice
date, the taxpayer must file a written appeal with the commissioner. The appeal need not
be in any particular form but must contain the following information:

(1) name and address of the taxpayer;

(2) if a corporation, the state of incorporation of the taxpayer, and the principal place of
business of the corporation;

(3) the Minnesota identification number or Social Security number of the taxpayer;

(4) the type of tax involved;

(5) the date;

(6) the tax years or periods involved and the amount of tax involved for each year or
period;

(7) the findings in the notice that the taxpayer disputes;

(8) new text begin for a request to reduce or eliminate an assessment under section 270C.33, subdivision
4b, a statement of the taxpayer's grounds, along with a brief statement of the supporting
facts, for the assertion of reasonable cause for the failure to collect or withhold tax from
another individual or entity;
new text end

new text begin (9) new text end a summary statement that the taxpayer relies on for each exception; and

deleted text begin (9) deleted text end new text begin (10) new text end the taxpayer's signature or signature of the taxpayer's duly authorized agent.

new text begin EFFECTIVE DATE. new text end

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

Sec. 7.

Minnesota Statutes 2016, section 289A.40, subdivision 1, is amended to read:

Subdivision 1.

Time limit; generally.

new text begin (a) new text end Unless otherwise provided in this chapter, a
claim for a refund of an overpayment of state tax must be filed within 3-1/2 years from the
date prescribed for filing the return, plus any extension of time granted for filing the return,
but only if filed within the extended time, or deleted text begin one year from the date of an order assessing
tax under section 270C.33 or an order determining an appeal under section 270C.35,
subdivision 8, or one year from the date of a return made by the commissioner under section
270C.33, subdivision 3, upon payment in full of the tax, penalties, and interest shown on
the order or return made by the commissioner deleted text end new text begin two years from the time the tax was paid new text end ,
whichever period expires later. deleted text begin Claims for refund, except for taxes under chapter 297A,
filed after the 3-1/2 year period but within the one-year period are limited to the amount of
the tax, penalties, and interest on the order or return made by the commissioner and to issues
determined by the order or return made by the commissioner.
deleted text end

deleted text begin In the case of assessments under section 289A.38, subdivision 5 or 6, claims for refund
under chapter 297A filed after the 3-1/2 year period but within the one-year period are
limited to the amount of the tax, penalties, and interest on the order or return made by the
commissioner that are due for the period before the 3-1/2 year period.
deleted text end

new text begin (b) For refunds due on a report required to be filed under section 289A.38, subdivision
7, the period under paragraph (a) is extended to the due date for the report required by
section 289A.38, subdivision 7.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for claims for refund filed after the day
following final enactment.
new text end

Sec. 8.

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

Subdivision 1.

Penalty for failure to pay tax.

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

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

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

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

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

new text begin (f) No penalty applies under this section if:
new text end

new text begin (1) the total calculated penalty that would otherwise apply under paragraphs (a) to (e)
is less than $150; or
new text end

new text begin (2) for an underpayment of individual income tax under chapter 290 or sales tax under
chapter 297A, the liability for tax on which the penalty is calculated is less than $1,000 and
the taxpayer timely filed any returns required to be filed during the prior three calendar
years and was not subject to a penalty under this section, determined without regard to the
provisions of this paragraph, for any taxes on returns due during that three-year period.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 9. new text begin APPROPRIATION; PRIVATE LETTER RULING PROGRAM.
new text end

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