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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

  

                         Laws of Minnesota 1985 

                        CHAPTER 210-H.F.No. 1045
           An act relating to taxation; making administrative and 
          technical changes to income tax and property tax 
          refund provisions; amending Minnesota Statutes 1984, 
          sections 60A.13, subdivision 1a; 80A.09, subdivision 
          1; 136D.28, subdivision 4; 136D.741, subdivision 7; 
          136D.89, subdivision 4; 270.67, by adding a 
          subdivision; 270.75, subdivision 4; 290.06, 
          subdivision 3d; 290.069, subdivision 5; 290.08, 
          subdivision 8; 290.09, subdivision 4; 290.095, 
          subdivision 10; 290.101, subdivision 1; 290.172; 
          290.18, subdivision 2; 290.42; 290.50, subdivision 2; 
          290.523, subdivision 2; 290.92, subdivisions 5a, 6, 
          19, and 28; 290.97; 290.9726, subdivision 2; 290A.03, 
          subdivisions 3 and 11; 290A.11, subdivision 2, and by 
          adding a subdivision; 290A.19; repealing Laws 1983, 
          chapters 213, section 2; and 247, section 122; and 
          Laws 1984, chapter 514, article 2, section 13. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                               ARTICLE 1 

                             ADMINISTRATIVE 
    Section 1.  Minnesota Statutes 1984, section 60A.13, 
subdivision 1a, is amended to read: 
    Subd. 1a.  In addition, on or before March 1 of each year, 
an insurance company, including fraternal beneficiary 
associations and reciprocal exchanges, doing business in 
Minnesota shall file with the commissioner of revenue a copy of 
the annual statement required by subdivision 1.  A company that 
fails to file a copy of the statement with the commissioner is 
subject to the penalties in section 72A.061.  
    Sec. 2.  Minnesota Statutes 1984, section 80A.09, 
subdivision 1, is amended to read: 
    Subdivision 1.  The following securities may be registered 
by notification: 
    (a) any industrial revenue bond, the interest on which is 
exempt from tax under chapter 290; issued by the state of 
Minnesota or any of its political subdivisions, municipalities, 
governmental agencies, or instrumentalities; and 
    (b) any securities issued by a person organized exclusively 
for social, religious, educational, benevolent, fraternal, 
charitable, reformatory, athletic, chamber of commerce, trade, 
industrial development, or professional association purposes and 
not for pecuniary gain, and no part of the net earnings of which 
inures to the benefit of any private stockholder or individual; 
provided that no securities issued by any person offering and 
furnishing a burial service or funeral benefit, directly or 
indirectly for financial consideration, may be registered under 
this section.  
    Sec. 3.  Minnesota Statutes 1984, section 136D.28, 
subdivision 4, is amended to read: 
    Subd. 4.  [TAX EXEMPT SECURITIES.] When lawfully issued, 
the bonds of the board may be purchased by the state board of 
investment for any fund administered by the board, shall be 
deemed authorized securities within the provisions of section 
50.14, and shall be deemed and treated as instruments of a 
public governmental agency, and as such the bonds and the 
interest thereon shall be exempt from taxation, including 
taxation by or under any provisions of chapter 290, or any act 
amendatory thereof or supplemental thereto. 
    Sec. 4.  Minnesota Statutes 1984, section 136D.741, 
subdivision 7, is amended to read: 
    Subd. 7.  [TAX EXEMPT SECURITIES.] In all other respects 
chapter 475, shall apply and said bonds shall be deemed 
authorized securites within the provisions of section 50.14, and 
shall be deemed instruments of a public governmental agency and 
exempt from taxation under provisions of chapter 290, or any 
other act similar thereto. 
    Sec. 5.  Minnesota Statutes 1984, section 136D.89, 
subdivision 4, is amended to read: 
    Subd. 4.  [TAX EXEMPT SECURITIES.] When lawfully issued, 
the bonds of the board may be purchased by the state board of 
investment for any fund administered by the board, shall be 
deemed authorized securities within the provisions of section 
50.14, and shall be deemed and treated as instruments of a 
public governmental agency, and as such the bonds and the 
interest thereon shall be exempt from taxation, including 
taxation by or under any provisions of chapter 290, or any act 
amendatory thereof or supplemental thereto.  
    Sec. 6.  Minnesota Statutes 1984, section 270.67, is 
amended by adding a subdivision to read: 
    Subd. 3.  [CONSENT AGREEMENT.] A taxpayer shall have the 
right at any time, whether or not an order has been issued, to 
sign and deliver to the commissioner a written consent to a 
change in tax liability which waives the requirement of any 
additional notice and all rights of appeal to the tax court 
concerning the assessment and collection of any part or all of 
the tax liability. 
    Sec. 7.  Minnesota Statutes 1984, section 270.75, 
subdivision 4, is amended to read: 
    Subd. 4.  There shall be added to the amount of any 
underpayment of estimated income tax, computed pursuant to 
chapter 290, an amount in lieu of interest determined at the 
rate of 12 percent per annum.  For taxable years beginning after 
December 31, 1981, the amount in lieu of interest shall be 
determined at the rate of 20 percent per annum.  For taxable 
years beginning after December 31, 1982,.  The amount in lieu of 
interest for that taxable year shall be the amount determined in 
subdivision 5 for January 1 on which begins the taxable year or 
precedes the beginning of the taxable year.  The amount in lieu 
of interest does not bear interest after the due date of the 
return for that taxable year. 
    Sec. 8.  Minnesota Statutes 1984, section 290.08, 
subdivision 8, is amended to read:  
    Subd. 8.  [INTEREST FROM UNITED STATES OR STATE OF 
MINNESOTA.] (a) Interest upon obligations of the United States, 
its possessions, its agencies, or its instrumentalities, so far 
as immune from state taxation under federal law; and interest 
upon obligations of the state of Minnesota, any of its political 
or governmental subdivisions, any of its municipalities, or any 
of its governmental agencies or instrumentalities.  This 
subdivision shall paragraph does not apply to corporations 
taxable under sections 290.02 or 290.361 or to individuals, 
estates, or trusts. 
    (b) The interest on any bond issued under the provisions of 
any local or special law enacted prior to January 1, 1985, is 
subject to tax as provided in this chapter, notwithstanding the 
provisions of the local or special law.  
    Sec. 9.  Minnesota Statutes 1984, section 290.09, 
subdivision 4, is amended to read: 
    Subd. 4.  [TAXES.] Taxes paid or accrued within the taxable 
year, except (a) income, excise, or franchise taxes imposed by 
this chapter and income, excise, or franchise taxes paid to any 
other state or to any province or territory of Canada for which 
a credit is allowed under section 290.081; (b) taxes assessed 
against local benefits of a kind deemed in law to increase the 
value of the property assessed; (c) federal income taxes 
(including the windfall profit tax on domestic crude oil), by 
corporations, national and state banks; (d) income, excise, or 
franchise taxes based on net income paid by a corporation to 
another state, to a political subdivision of another state, or 
to the District of Columbia; and (e) tax paid by any corporation 
or national or state bank to any foreign country or possession 
of the United States to the extent that a credit against federal 
income taxes is allowed under the provisions of the Internal 
Revenue Code of 1954, as amended through December 31, 1983.  If 
the taxpayer's foreign tax credit consists of both foreign taxes 
deemed paid and foreign taxes actually paid or withheld, it will 
be conclusively presumed that foreign taxes deemed paid were 
first used by the taxpayer in its foreign tax credit.  Minnesota 
gross income shall include the amount of foreign tax paid which 
had been allowed as a deduction in a previous year, provided 
such foreign tax is later allowed as a credit against federal 
income tax.  
    Taxes imposed upon a shareholder's interest in a 
corporation which are paid by the corporation without 
reimbursement from the shareholder shall be deductible only by 
such corporation. 
    Property taxes shall be allowed as a deduction to the same 
taxpayer and in the same manner as provided in section 164 of 
the Internal Revenue Code of 1954, as amended through December 
31, 1983, notwithstanding the provisions of section 272.31.  
    Sec. 10.  Minnesota Statutes 1984, section 290.18, 
subdivision 2, is amended to read: 
    Subd. 2.  [FEDERAL INCOME TAX PAYMENTS AND REFUNDS.] The 
adjusted gross income shall be computed by deducting from the 
gross income assignable to this state under section 290.17, the 
deduction for allowable federal income taxes determined under 
the provisions of sections 290.10 (8), (9) or (10), and 290.18.  
For purposes of the preceding sentence, federal income tax shall 
include the foreign tax credit allowed under section 33 27 of 
the Internal Revenue Code of 1954, as amended through December 
31, 1983 1984, reduced by the amount of any foreign tax credit 
allowed for taxes payable to a province or territory of Canada 
for which a credit is allowed under section 290.081.  
    This deduction shall be allowed to individuals, estates, or 
trusts (i) for taxable years beginning after December 31, 1980 
in the taxable year to which the liability applies.  Such 
liability includes the portion of self-employment tax allowed 
under section 290.10, clause (8).  The self-employment tax must 
be deducted by the person who is deriving the income.  When the 
federal tax liability is joint and several under the computation 
of a joint federal return of husband and wife, the federal tax 
liability must be split between the spouses in the same ratio 
that the federal adjusted gross income of that spouse bears to 
the total federal adjusted gross income.  For purposes of the 
preceding sentence, "federal adjusted gross income" includes the 
ordinary income portion of a lump sum distribution as defined in 
section 402(e) of the Internal Revenue Code of 1954, as amended 
through December 31, 1983.  
    (ii) Taxes paid for a taxable year beginning before January 
1, 1981 shall be allowed as follows:  
    (1) Those taxes paid in a taxable year beginning before 
January 1, 1981, shall be claimed in the year in which the 
payment was made.  
    (2) Those paid in a taxable year beginning after December 
31, 1980 but before January 1, 1983 shall be divided and 
deducted in equal installments reflected by the yearly periods 
beginning with the first day of the taxable year in which the 
payment was made and ending December 31, 1986.  For an amount 
which remains to be deducted in a taxable year beginning after 
December 31, 1982, where the federal tax liability for the year 
in which the payment was made is joint and several under the 
computation of a joint federal return of husband and wife, the 
remaining amounts to be deducted shall be claimed by the same 
spouse and in the same dollar amount as the deduction was 
claimed in the first taxable year beginning after December 31, 
1981.  
    (3) Those paid in a taxable year beginning after December 
31, 1982 shall be claimed in the year in which the payment was 
made.  This amount shall be apportioned between spouses as 
provided in clause (i) and shall be allocated for exempt income 
under the provisions of section 290.10, clause (9) or (10) as 
though the payment was part of the federal tax liability for the 
year in which the payment was made.  
            (4) In the case of a person who was self employed during 
all or a portion of the taxable year, the federal income tax 
liability for purposes of this clause shall be increased by the 
self-employment tax allowed under section 290.10, clause (8).  
The self-employment tax shall be deducted in the year paid as 
provided in paragraph (1), (2), or (3).  The self-employment tax 
must be deducted by the person who earned the income.  
Self-employment tax paid in a taxable year beginning after 
December 31, 1982 shall be allocated for exempt income as 
provided in paragraph (3).  
           (iii) If a taxpayer's federal tax liability is eventually 
not paid by reason of compromise, discharge, or court order, the 
deduction allowed pursuant to this subdivision shall be 
disallowed for the taxable year in which the liability was 
accrued.  
          (iv) In the event a federal tax liability for a taxable 
year commencing after December 31, 1980 is increased, decreased 
or modified, and such increase, decrease or modification has 
resulted in a change in the amount of Minnesota income tax in 
the year to which such increase, decrease or modification is 
attributable, the taxpayer's deduction under this subdivision 
shall be modified for such year.  
           (v) If the readjustments required in (iii) or (iv) are for 
taxes reflected in the transition rule described in (ii)(2), the 
readjustment shall be made equally to the remaining installments 
and if a reduction to such installments is required under this 
readjustment which exceeds the total of all remaining 
installments, the remaining installments will be reduced to zero 
and the excess included in income as a federal income tax refund.
    (vi) Refunds which are not involved with any readjustments 
under the transition rule shall be included in income under 
Minnesota Statutes 1982, section 290.01, subdivision 20a, clause 
(6) if it is from a year beginning before January 1, 1981.  
    (vii) Refunds of taxes for years beginning after December 
31, 1980, shall be used to adjust the deduction in the taxable 
year of the liability unless that year is closed by statute and 
no other adjustments are to be required or allowable in which 
case such refund shall be reportable in the year received. 
    Sec. 11.  Minnesota Statutes 1984, section 290.50, 
subdivision 2, is amended to read: 
    Subd. 2.  [DENIAL OF CLAIM, COURT PROCEEDINGS.] If the 
claim is denied in whole or in part, the commissioner shall mail 
an order of denial to the taxpayer in the manner prescribed in 
section 290.46.  An appeal from this order may be taken to the 
Minnesota tax court in the manner prescribed in section 271.06, 
or the taxpayer may commence an action against the commissioner 
to recover the denied overpayment. Such action may be brought in 
the district court of the district in which lies the county of 
his residence or principal place of business or if an estate or 
trust, of the principal place of its administration, or in the 
district court for Ramsey county.  The action in the district 
court shall be commenced within 18 months following the mailing 
of the order of denial to the taxpayer.  If a claim for refund 
is filed by a taxpayer and no order of denial is issued within 
six months of the filing, the taxpayer may commence an action in 
the district court as in the case of a denial, but the action 
shall be commenced within two four years of the date that the 
claim for refund was filed; provided that the commissioner and 
the taxpayer may agree to extend this period beyond four years. 
    Sec. 12.  Minnesota Statutes 1984, section 290.92, 
subdivision 5a, is amended to read: 
    Subd. 5a.  [VERIFICATION OF WITHHOLDING EXEMPTIONS; 
APPEAL.] (1) An employer shall submit to the commissioner a copy 
of any withholding exemption certificate received from an 
employee on which the employee claims any of the following:  
     (a) a total number of withholding exemptions in excess of 
14 or a number prescribed by the commissioner, or 
     (b) a status that would exempt the employee from Minnesota 
withholding, including where the employee is a nonresident 
exempt from withholding under subdivision 4a, clause (3), except 
where the employer reasonably expects, at the time that the 
certificate is received, that the employee's wages under 
subdivision 1 from the employer will not then usually exceed 
$200 per week, or 
     (c) any number of withholding exemptions which the employer 
has reason to believe is in excess of the number to which the 
employee is entitled.  
     (2) Copies of exemption certificates required to be 
submitted by clause (1) shall be submitted to the commissioner 
within 30 days after receipt by the employer unless the employer 
is also required by federal law to submit copies to the Internal 
Revenue Service, in which case the employer may elect to submit 
the copies to the commissioner at the same time that he is 
required to submit them to the Internal Revenue Service.  
     (3) An employer who submits a copy of a withholding 
exemption certificate in accordance with clause (1) shall honor 
the certificate until notified by the commissioner that the 
certificate is invalid.  The commissioner shall mail a copy of 
any such notice to the employee.  Upon notification that a 
particular certificate is invalid, the employer shall not honor 
that certificate or any subsequent certificate unless instructed 
to do so by the commissioner.  The employer shall allow the 
employee the number of exemptions and compute the withholding 
tax as instructed by the commissioner in accordance with clause 
(4).  
    (4) The commissioner may require an employee to verify that 
he or she is entitled to the number of exemptions or to the 
exempt status claimed on the withholding exemption certificate 
or, that he or she is a nonresident.  The employee shall be 
allowed at least 30 days to submit the verification, after which 
time the commissioner shall, on the basis of the best 
information available to him, determine the employee's status 
and allow the employee the maximum number of withholding 
exemptions allowable under this chapter.  The commissioner shall 
mail a notice of this determination to the employee at the 
address listed on the exemption certificate in question or to 
the last known address of the employee.  Notwithstanding the 
provisions of section 290.61, the commissioner may notify the 
employer of this determination and instruct the employer to 
withhold tax in accordance with the determination. 
    However, where the commissioner has reasonable grounds for 
believing that the employee is about to remove himself from this 
state or that the collection of any tax due under this chapter 
will be jeopardized by delay, the commissioner may immediately 
notify the employee and the employer, notwithstanding section 
290.61, that the certificate is invalid, and the employer must 
not honor that certificate or any subsequent certificate unless 
instructed to do so by the commissioner.  The employer shall 
allow the employee the number of exemptions and compute the 
withholding tax as instructed by the commissioner. 
    (5) The commissioner's determination under clause (4) shall 
be appealable to tax court in accordance with section 271.06, 
and shall remain in effect for withholding tax purposes pending 
disposition of any appeal. 
    Sec. 13.  Minnesota Statutes 1984, section 290.92, 
subdivision 6, is amended to read: 
    Subd. 6.  [RETURNS, DEPOSITS.] (1) (a) [RETURNS.] Every 
employer who is required to deduct and withhold tax under 
subdivision 2a or 3 shall file a return with the commissioner 
for each quarterly period, on or before the last day of the 
month following the close of each quarterly period, unless 
otherwise prescribed by the commissioner.  Any tax required to 
be deducted and withheld during the quarterly period shall be 
paid with the return unless an earlier time for payment is 
provided.  However, any return may be filed on or before the 
tenth day of the second calendar month following the period if 
the return shows timely deposits in full payment of the taxes 
due for that period.  For the purpose of the preceding sentence, 
a deposit which is not required to be made within the return 
period, may be made on or before the last day of the first 
calendar month following the close of the period.  Every 
employer, in preparing a quarterly return, shall take credit for 
monthly deposits previously made in accordance with this 
subdivision. 
    The return shall be in the form and contain the information 
prescribed by the commissioner.  The commissioner may grant a 
reasonable extension of time for filing the return and paying 
the tax, but no extension shall be granted for more than six 
months.  
    (b) [ADVANCE DEPOSITS REQUIRED IN CERTAIN CASES.] (i) 
Unless clause (ii) is applicable, if during any calendar month, 
other than the last month of the calendar quarter, the aggregate 
amount of the tax withheld during that quarter under subdivision 
2a or 3 exceeds $500, the employer shall deposit the aggregate 
amount with the commissioner within 15 days after the close of 
the calendar month.  (ii) If at the close of any eighth-monthly 
period the aggregate amount of undeposited taxes is $3,000 or 
more, the employer shall deposit the undeposited taxes with the 
commissioner within three banking days after the close of the 
eighth-monthly period.  For purposes of this subparagraph, the 
term "eighth-monthly period" means the first three days of a 
calendar month, the fourth day through the seventh day of a 
calendar month, the eighth day through the 11th day of a 
calendar month, the 12th day through the 15th day of a calendar 
month, the 16th day through the 19th day of a calendar month, 
the 20th day through the 22nd day of a calendar month, the 23rd 
day through the 25th day of a calendar month, or the portion of 
a calendar month following the 25th day of the month.  
    (c) [OTHER METHODS.] The commissioner may by rule prescribe 
other return periods or deposit requirements.  In prescribing 
the reporting period, the commissioner may classify employers 
according to the amount of their tax liability and may adopt an 
appropriate reporting period for each class which he deems to be 
consistent with efficient tax collection.  In no event shall the 
duration of the reporting period be more than one year, provided 
that for employers with annual withholding tax liabilities of 
less than $1,200 the reporting period shall be no more frequent 
than quarterly. 
    (2) 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, shall be made, without interest, 
in the manner and at the times as the commissioner prescribes.  
If the underpayment cannot be adjusted, the amount of the 
underpayment shall be assessed and collected in the manner and 
at the times as the commissioner prescribes. 
    (3) If any employer fails to make and file any return 
required by paragraph (1) at the time prescribed, or makes and 
files a false or fraudulent return, the commissioner shall make 
for him a return from his own knowledge and from information he 
obtains through testimony, or otherwise, and assess a tax on the 
basis of it.  The amount of tax shown on it shall be paid to the 
commissioner at the times as the commissioner prescribes.  Any 
return or assessment made by the commissioner shall be prima 
facie correct and valid, and the employer shall have the burden 
of establishing its incorrectness or invalidity in any action or 
proceeding in respect to it. 
    (4) If the commissioner, in any case, has reason to believe 
that the collection of the tax provided for in paragraph (1) of 
this subdivision, and any added penalties and interest, if any, 
will be jeopardized by delay, he may immediately assess the tax, 
whether or not the time otherwise prescribed by law for making 
and filing the return and paying the tax has expired. 
    (5) Any assessment under this subdivision shall be made by 
recording the liability of the employer in the office of the 
commissioner in accordance with rules prescribed by the 
commissioner.  Upon request of the employer, the commissioner 
shall furnish the employer a copy of the record of assessment. 
    (6) Any assessment of tax under this subdivision shall be 
made within 3-1/2 years after the due date of the return 
required by paragraph (1), or the date the return was filed, 
whichever is later.  In the case of a false or fraudulent return 
or failure to file a return, the tax may be assessed at any 
time.  The tax may be assessed within six and one-half years 
after the due date of the return or the date the return was 
filed, whichever is later, where the employer omitted 
withholding tax from the return which is properly includable 
therein and the omitted withholding tax is in excess of 25 
percent of the amount of withholding tax stated on the return. 
    (7) (a) Except as provided in (b) of this paragraph, every 
employer who fails to pay to or deposit with the commissioner 
any sum or sums required by this section to be deducted, 
withheld and paid, shall be personally and individually liable 
to the state for the sum or sums (and any added penalties and 
interest).  Any sum or sums deducted and withheld in accordance 
with the provisions of subdivision 2a or subdivision 3 shall be 
held to be a special fund in trust for the state of Minnesota. 
    (b) If the employer, in violation of this section, fails to 
deduct and withhold the tax under this section, and thereafter 
the taxes against which the tax may be credited are paid, the 
tax required to be deducted and withheld shall not be collected 
from the employer; but this does not relieve the employer from 
liability for any penalties and interest otherwise applicable 
for failure to deduct and withhold. 
     (8) Upon the failure of any employer to pay to or deposit 
with the commissioner, within the time provided by paragraphs 
(1), (2), or (3) of this subdivision, any tax required to be 
withheld in accordance with the provisions of subdivision 2a or 
subdivision 3, or if the commissioner has assessed a tax 
pursuant to paragraph (4), the tax shall become immediately due 
and payable, and the commissioner may deliver to the attorney 
general a certified statement of the tax, penalties and interest 
due from the employer.  The statement shall also give the 
address of the employer owing the tax, the period for which the 
tax is due, the date of the delinquency, and any other 
information required by the attorney general.  The attorney 
general shall institute legal action in the name of the state to 
recover the amount of the tax, penalties, interest and costs.  
The commissioner's certified statement to the attorney general 
shall for all purposes and in all courts be prima facie evidence 
of the facts stated in it and that the amount shown in it is due 
from the employer named in the statement.  If an action is 
instituted, the court shall, upon application of the attorney 
general, appoint a receiver of the property and business of the 
delinquent employer for the purpose of impounding it as security 
for any judgment which has been or may be recovered.  Any action 
shall be brought within five years after the due date of the 
return or deposit required by paragraph (1), or the date the 
return was filed, or deposit made whichever is later.  In the 
case of failure to make and file the return or if the return is 
false or fraudulent, or the deposit is not made, the action may 
be brought at any time.  
    (8a) The period of time during which a tax must be assessed 
or collection proceedings commenced under this subdivision shall 
be suspended during the period from the date of filing of a 
petition in bankruptcy until 30 days after the commissioner of 
revenue receives notice that the bankruptcy proceedings have 
been closed or dismissed or the automatic stay has been 
terminated or has expired.  
    The suspension of the statute of limitations under this 
subdivision shall apply to the person against whom the petition 
in bankruptcy is filed and all other persons who may also be 
wholly or partially liable for the tax under this chapter.  
    (9) Either party to an action for the recovery of any tax, 
interest or penalties under this subdivision may appeal the 
judgment as in other civil cases. 
    (10) No suit shall lie to enjoin the assessment or 
collection of any tax imposed by this section, or the interest 
and penalties added to it. 
    Sec. 14.  Minnesota Statutes 1984, section 290.92, 
subdivision 19, is amended to read: 
    Subd. 19.  [EMPLOYEES INCURRING NO INCOME TAX LIABILITY.] 
Notwithstanding any other provision of this section, except the 
provisions of subdivision 5a, an employer shall not be required 
to deduct and withhold any tax under this chapter upon a payment 
of wages to an employee if there is in effect with respect to 
such payment a withholding exemption certificate, in such form 
and containing such other information as the commissioner may 
prescribe, furnished to the employer by the employee certifying 
that the employee 
    (a) incurred no liability for income tax imposed under this 
chapter for his preceding taxable year, and 
    (b) anticipates that he will incur no liability for income 
tax imposed under this chapter for his current taxable year.  
When an employee anticipates no liability for the current 
taxable year because of the provision contained in section 
290.06, subdivision 3d, no withholding shall be required, clause 
(a) notwithstanding, except for the provisions of subdivision 
5a.  The commissioner shall by regulations rule provide for the 
coordination of the provisions of this subdivision with the 
provisions of subdivision 7. 
    Sec. 15.  Minnesota Statutes 1984, section 290.92, 
subdivision 28, is amended to read: 
    Subd. 28.  Effective with payments made after April 1, 
1988, any holder of a class A or B license issued by the 
Minnesota racing commission who makes a payment for personal or 
professional services to a holder of a class C license issued by 
the commission, except an amount paid as a purse, shall deduct 
from the payment and withhold seven percent of the amount as 
Minnesota withholding tax when the amount paid to that 
individual by the same person during the calendar year exceeds 
$600.  For purposes of the provisions of this section, a payment 
to any person which is subject to withholding under this 
subdivision must be treated as if the payment was a wage paid by 
an employer to an employee.  Every individual who is to receive 
a payment which is subject to withholding under this subdivision 
shall furnish the license holder with a statement, made under 
the penalties of perjury, containing the name, address, and 
social security account number of the person receiving the 
payment.  No withholding is required if the individual presents 
a signed certificate from his employer which states that the 
individual is an employee of that employer.  A nonresident 
individual who holds a class C license must be treated as an 
athlete for purposes of applying the provisions of sections 
290.17, subdivision 2(1)(b)(ii) and 290.92, subdivision 4a.  
    Sec. 16.  Minnesota Statutes 1984, section 290.97, is 
amended to read: 
    290.97 [CONTRACTS WITH STATE; WITHHOLDING.] 
    No department of the state of Minnesota, nor any political 
or governmental subdivision of the state shall make final 
settlement with any contractor under a contract requiring the 
employment of employees for wages by said contractor and by 
subcontractors whose business location is outside of the state 
of Minnesota, until satisfactory showing is made that said 
contractor or out-of-state subcontractor has complied with the 
provisions of section 290.92.  A certificate by the commissioner 
of revenue shall satisfy this requirement with respect to the 
contractor or out-of-state subcontractor.  If, at the time of 
final settlement, there are any unpaid withholding taxes, 
penalties, or interest arising from the government contract, the 
department shall issue a certification to the contractor or 
out-of-state subcontractor upon payment, with certified funds, 
of any unpaid withholding taxes, penalties, and interest. 
Payment is received by the department upon delivery of the 
certified funds to the central office located in St. Paul, or 
any district or subdistrict office located throughout the state. 
    Sec. 17.  Minnesota Statutes 1984, section 290A.03, 
subdivision 11, is amended to read: 
    Subd. 11.  [RENT CONSTITUTING PROPERTY TAXES.] "Rent 
constituting property taxes" means the amount of gross rent 
actually paid in cash, or its equivalent, which is attributable 
(a) to the property tax paid on the unit or (b) to the amount 
paid in lieu of property taxes, in any calendar year by a 
claimant for the right of occupancy of his Minnesota homestead 
in the calendar year, and which rent constitutes the basis, in 
the succeeding calendar year of a claim for relief under this 
chapter by the claimant.  The amount of rent attributable to 
property taxes paid or payments in lieu made on the unit shall 
be determined by multiplying the net tax on the property where 
the unit is located by a fraction, the numerator of which is the 
gross rent paid by the claimant for the calendar year for the 
unit and the denominator of which is the gross rent paid for the 
calendar year for the property in which the unit is located.  In 
no case may the rent constituting property taxes exceed 50 
percent of the gross rent paid by the claimant during that 
calendar year.  In the case of a claimant who resides in a unit 
for which (1) a rent subsidy is paid pursuant to section 8 of 
the United States Housing Act of 1937, as amended, or under 
another state or federal program providing rent supplements or 
reduced rent for low and moderate income families to, or for, 
the claimant based on the income of the claimant or the 
claimant's family, or (2) a subsidy is paid to a public housing 
authority that owns or operates the claimant's rental unit, 
pursuant to United States Code, title 42, section 1437c, 20 
percent of gross rent actually paid in cash or its equivalent 
shall be the claimant's "rent constituting property taxes paid." 
For purposes of this subdivision, "rent subsidy" does not 
include any housing assistance received under aid to families 
with dependent children, general assistance, Minnesota 
supplemental assistance, supplemental security income, or 
similar income maintenance programs. 
    Sec. 18.  Minnesota Statutes 1984, section 290A.11, 
subdivision 2, is amended to read: 
    Subd. 2.  [FRAUDULENT CLAIM; PENALTY.] In any case in which 
it is determined that the claim is or was excessive and was 
filed with fraudulent intent, the claim shall be disallowed in 
full.  If the claim has been paid, the amount disallowed shall 
be recovered by assessment and collection in the manner provided 
in chapter 290 for collection of income tax.  The assessment 
shall bear interest from the date the claim is paid by the state 
until the date of repayment by the claimant, at the rate 
specified in section 270.75.  
    Any person who knowingly prepares, assists in preparing, or 
files a false or excessive claim or claims with the intent of 
defrauding the state of Minnesota, is guilty of an offense and 
may be sentenced as follows:  
    (1) to imprisonment for not more than ten years or to 
payment of a fine of not more than $20,000; or both, if the 
amount of the claim or claims, aggregated within any 12-month 
period, exceeds $2,500; or 
    (2) to imprisonment for not more than five years or to 
payment of a fine of not more than $10,000; or both, if the 
amount of the claim or claims, aggregated within any 12-month 
period, is more than $300, but not more than $2,500; or 
    (3) to imprisonment for not more than one year or to 
payment of a fine of not more than $3,000; or both, if the 
amount of the claim or claims does not exceed $300.  
    Notwithstanding the provisions of section 628.26, or any 
other provisions of the criminal laws of this state, an 
indictment may be found and filed upon any criminal offense 
specified in this subdivision, in the proper court within six 
years after the commission of the offense.  
    Sec. 19.  Minnesota Statutes 1984, section 290A.11, is 
amended by adding a subdivision to read: 
    Subd. 5.  [ASSIGNMENT OF REFUND.] The commissioner shall 
not honor an assignment by the claimant to another person or 
entity of a property tax refund prior to the refund check being 
presented to the claimant. 
    Sec. 20.  Minnesota Statutes 1984, section 290A.19, is 
amended to read: 
     290A.19 [OWNER OR MANAGING AGENT TO FURNISH RENT 
CERTIFICATE; PENALTY.] 
     (a) The owner or managing agent of any property for which 
rent is paid for occupancy as a homestead shall furnish a 
certificate of rent constituting property tax to each person who 
is a renter on December 31, in the form prescribed by the 
commissioner.  If the renter moves prior to December 31, the 
owner or managing agent shall at his option either provide the 
certificate to the renter at the time he moves, or mail the 
certificate to the forwarding address if an address has been 
provided by the renter.  The certificate shall be made available 
to the renter not later than January 31 of the year following 
the year in which the rent was paid.  Any owner or managing 
agent who willfully fails to furnish a certificate as provided 
herein shall be liable to the commissioner for a penalty of $20 
for each act or failure to act.  The penalty shall be assessed 
and collected in the manner provided in chapter 290 for the 
assessment and collection of income tax. 
     (b) If the owner or managing agent elects to provide the 
renter with the certificate at the time he moves, rather than 
after December 31, the amount of rent constituting property 
taxes shall be computed as follows: 
     (i) The net tax shall be reduced by 1/12th for each month 
remaining in the calendar year. 
     (ii) In calculating the denominator of the fraction 
pursuant to section 290A.03, subdivision 11, the gross rent paid 
through the last month of claimant's occupancy shall be 
substituted for "the gross rent paid for the calendar year for 
the property in which the unit is located." 
    (c) The certificate of rent constituting property taxes 
shall include the address of the property, including the county, 
and the property tax parcel identification number and any 
additional information which the commissioner determines is 
appropriate. 
    (d) If the owner or managing agent fails to provide the 
renter with a certificate of rent constituting property taxes, 
the commissioner shall allocate the net tax on the building to 
the unit on a square footage basis or other appropriate basis as 
the commissioner determines.  The renter shall supply the 
commissioner with a statement from the county treasurer which 
gives the amount of property tax on the parcel, the address and 
property tax parcel identification number of the property, and 
the number of units in the building. 
    (e) Effective January 1, 1986 Notwithstanding the 
provisions of section 290A.17, the commissioner shall provide to 
the commissioner of energy and economic development a copy of 
all certificates of rent constituting property taxes that have 
been filed with the department.  No certificates of rent 
constituting property taxes for any county need be given to the 
commissioner of energy and economic development by the 
commissioner if a book has been published detailing the property 
taxes for each parcel in the county for the given year.  The 
copies of the certificates shall be provided by June 1 of each 
year February 1 of the year following the year in which the 
property tax refund return was filed.  
    Sec. 21.  [REPEALER.] 
    Laws 1983, chapter 213, section 2, is repealed. 
    Sec. 22.  [EFFECTIVE DATE.] 
    Sections 2 to 5, 8, and 21 are effective for income earned 
after June 30, 1985.  Sections 1, 6, 12 to 16, 18, and 19 are 
effective the day after final enactment.  Sections 7 and 10 are 
effective for taxable years beginning after December 31, 1983. 
Section 9 is effective the day after final enactment, and 
applies to all taxable years of a corporation for which the time 
for additional assessment or refund has not yet expired except 
that the amendment in clause (d) is effective for taxable years 
beginning after December 31, 1982.  Section 11 is effective for 
any claim for refund which was filed with the department after 
January 1, 1983.  Section 17 is effective for claims based on 
rent paid in 1985 and thereafter.  Section 20 is effective 
January 1, 1986. 

                               ARTICLE 2 

                               TECHNICAL 
    Section 1.  Minnesota Statutes 1984, section 290.06, 
subdivision 3d, is amended to read: 
    Subd. 3d.  [LOW INCOME CREDIT.] A claimant as defined in 
section 290.012 must pay the tax computed under subdivision 2c 
as reduced by this credit and by any nonrefundable credits 
provided in this chapter which may not be carried back or 
carried over to other taxable years. 
    (1) The credit provided in this subdivision equals the tax 
liability for the following claimants:  
    (a) An unmarried claimant with an income of $5,800 or less; 
    (b) A claimant with one dependent, with an income of $7,400 
or less;  
     (c) A claimant with two dependents, with an income of 
$8,800 or less;  
     (d) A claimant with three dependents, with an income of 
$10,000 or less;  
     (e) A claimant with four dependents, with an income of 
$10,500 or less; and 
     (f) A claimant with five or more dependents, with an income 
of $11,000 or less.  
     (2) In the case of a claimant with an income in excess of 
that set forth in the appropriate category of clause (1), he may 
pay a tax equal to 15 percent of that portion of his income that 
is in excess of the amount set forth in the appropriate category 
of clause (1), or his tax obligation as it would have been in 
the absence of section 290.012 and this subdivision, whichever 
is less.  
     (3) The total income for the entire calendar year of the 
claimant and his spouse, if any, including income not assignable 
to this state, shall be the figure employed for the purposes of 
this subdivision.  No individual dependent upon and receiving 
his chief support from any other individual may be a claimant 
under section 290.012 and this subdivision.  The commissioner of 
revenue shall prescribe the additional forms or alterations in 
existing forms as necessary to comply with the provisions of 
section 290.012 and this subdivision.  All claimants shall 
submit their returns on these forms.  
    Sec. 2.  Minnesota Statutes 1984, section 290.069, 
subdivision 5, is amended to read: 
    Subd. 5.  [CARRYOVER; OTHER CONDITIONS.] If the amount of 
the allowable credit pursuant to subdivision 2 or 3 for the 
taxable year exceeds the taxpayer's tax liability or if the 
limitation contained in subdivision 4, clause (a)(3) applies, 
the unused credit for the taxable year is a carryover to each of 
the succeeding five taxable years.  The entire amount of the 
unused credit must be carried to the earliest of the taxable 
years to which it may be carried.  "Tax liability" means the tax 
imposed by this chapter reduced by the sum of the nonrefundable 
credits allowed under this chapter except the credit allowed by 
section 290.068 any nonrefundable credits which may be carried 
back to a prior tax year.  The credits allowed by subdivisions 2 
and 3 shall only be available to corporations and banks whose 
tax is computed pursuant to section 290.06, subdivision 1. 
    The maximum limitations on the amount of credits pursuant 
to subdivisions 2, 3, and 4 shall be determined by aggregating 
together the credits of all the corporations in the controlled 
group of corporations with the taxpayer.  In order to facilitate 
compliance with and enforcement of this provision the 
commissioner may require the taxpayer to claim the credit on a 
combined report of the unitary business or to file a copy of the 
consolidated federal return with the state return or both.  
    Sec. 3.  Minnesota Statutes 1984, section 290.095, 
subdivision 10, is amended to read: 
    Subd. 10.  [PRODUCT LIABILITY LOSS CARRYBACK.] In the case 
of a taxpayer which has a product liability loss, as defined in 
section 172(i) (j) of the Internal Revenue Code of 1954 as 
amended through December 31, 1983, for a taxable year beginning 
after September 30, 1979 (referred to as "loss year"), the 
product liability loss shall be a net operating loss carryback 
to each of the ten taxable years preceding the loss year.  
    Sec. 4.  Minnesota Statutes 1984, section 290.101, 
subdivision 1, is amended to read: 
    Subdivision 1.  No taxpayer who receives or has received 
rental income from a substandard building located in this state 
is allowed a deduction for interest and depreciation authorized 
under sections section 290.089, 290.09, or 290.01, subdivisions 
20 to 20f which relate to that substandard building other than 
buildings used for agricultural purposes or owner-occupied 
buildings with four dwelling units or less.  
    Sec. 5.  Minnesota Statutes 1984, section 290.172, is 
amended to read: 
    290.172 [COMMISSIONER OF REVENUE.] 
    The commissioner of revenue shall represent the state of 
Minnesota on the multistate tax commission.  The commissioner 
may be represented on the commission by an alternate designated 
by him.  The alternate shall be a deputy or assistant 
commissioner in an employee of the department of revenue.  
    Sec. 6.  Minnesota Statutes 1984, section 290.42, is 
amended to read: 
     290.42 [FILING RETURNS, DATE.] 
     The returns required to be made under sections 290.37 to 
290.39 and 290.41, other than those under section 290.41, 
subdivisions 3 and 4, which shall be made within 30 days after 
demand therefor by the commissioner, shall be filed at the 
following times: 
     (1) Returns made on the basis of the calendar year shall be 
filed on the fifteenth day of April, following the close of the 
calendar year, except that returns of corporations shall be 
filed on the fifteenth day of March following the close of the 
calendar year; 
     (2) Returns made on the basis of the fiscal year shall be 
filed on the fifteenth day of the fourth month following the 
close of such fiscal year, except that returns of corporations 
shall be filed on the fifteenth day of the third month following 
the close of the fiscal year; 
     (3) Returns made for a fractional part of a year as an 
incident to a change from one taxable year to another shall be 
filed on the fifteenth day of the fourth month following the 
close of the period for which made, except that such returns of 
corporations shall be filed on the fifteenth day of the third 
month following the close of the period for which made; 
     (4) Other returns for a fractional part of a year shall be 
filed on the fifteenth day of the fourth month following the end 
of the month in which falls the last day of the period for which 
the return is made, except that such returns of corporations 
shall be filed on the fifteenth day of the third month following 
the end of the month in which falls the last day of the period 
for which the return is made: 
     In the case of a final return of a decedent for a 
fractional part of a year, such return shall be filed on the 
fifteenth day of the fourth month following the close of the 
twelve-month period which began with the first day of such 
fractional part of a year. 
     (4a) In the case of the return of a cooperative association 
such returns shall be filed on or before the fifteenth day of 
the ninth month following the close of the taxable year. 
     (5) If the due date for any return required under chapter 
290 falls upon: 
     A Saturday, Sunday, or a legal holiday such return filed by 
the next succeeding day which is not a Saturday, Sunday, or 
legal holiday shall be considered to be timely filed.  The term 
"legal holiday" means any day made a holiday in Minnesota by 
section 645.44, subdivision 5 or by the laws of the United 
States.  
     (6) In case of sickness, absence, or other disability, or 
when, in his judgment, good cause exists, the commissioner may 
extend the time for filing these returns for not more than six 
months, except that where the failure is due to absence outside 
the United States he may extend the period as provided in 
section 6081 of the Internal Revenue Code of 1954, as amended 
through December 31, 1983.  He may require each taxpayer in any 
of such cases to file a tentative return at the time fixed for 
filing the regularly required return from him, and to pay a tax 
on the basis of such tentative return at the times required for 
the payment of taxes on the basis of the regularly required 
return from such taxpayer.  The commissioner may exercise his 
power under this clause by rule only. 
    (7) Every person making a return under section 290.41 
(except subdivisions 3 and 4) shall furnish to each person whose 
name is set forth in the return a written statement showing 
    (A) the name and address of the person making the return, 
and 
    (B) the aggregate amount of payments to the person shown on 
the return.  
    This written statement shall be furnished to the person on 
or before January 31 of the year following the calendar year for 
which the return was made.  A duplicate of this written 
statement shall be furnished to the commissioner on or before 
February 28 of the year following the calendar year for which 
the return was made.  
    Sec. 7.  Minnesota Statutes 1984, section 290.523, 
subdivision 2, is amended to read: 
    Subd. 2.  [UNDERSTATEMENT OF LIABILITY DEFINED.] For 
purposes of this section, the term "understatement of liability" 
means any understatement of the net amount payable with respect 
to any tax imposed by this chapter, or any overstatement of the 
net amount creditable or refundable with respect to any such 
tax.  The determination of whether or not there is an 
understatement of liability shall be made without regard to any 
administrative or judicial action involving the taxpayer.  
     For purposes of this subdivision, the amount determined for 
underpayment of estimated tax under section 290.93, subdivision 
10, or 290.934, subdivision 4, is not considered an 
understatement of liability. 
    Sec. 8.  Minnesota Statutes 1984, section 290.9726, 
subdivision 2, is amended to read: 
    Subd. 2.  [CHARACTER OF ITEMS DISTRIBUTED OR CONSIDERED 
DISTRIBUTED.] The character of any item of income, gain, loss, 
or deduction included in shareholder's income, for the period of 
time that the shareholder is not a resident of Minnesota, shall 
be assignable as provided in section 290.17, subdivision 2, as 
if the item were realized directly from the source from which it 
was realized by the corporation or incurred in the same manner 
as incurred by the corporation.  
    Sec. 9.  Minnesota Statutes 1984, section 290A.03, 
subdivision 3, is amended to read: 
    Subd. 3.  [INCOME.] (1) "Income" means the sum of the 
following: 
    (a) federal adjusted gross income as defined in the 
Internal Revenue Code of 1954 as amended through December 31, 
1983; and 
    (b) the sum of the following amounts to the extent not 
included in clause (a): 
    (i) additions to federal adjusted gross income as provided 
in Minnesota Statutes, section 290.01, subdivision 20a, clauses 
(1), (2), (4), (9), (10), and (14); 
    (ii) all nontaxable income; 
    (iii) recognized net long term capital gains; 
    (iv) dividends and interest excluded from federal adjusted 
gross income under sections 116 or 128 of the Internal Revenue 
Code of 1954; 
    (v) cash public assistance and relief; 
    (vi) any pension or annuity (including railroad retirement 
benefits, all payments received under the federal social 
security act, supplemental security income, and veterans 
benefits), which was not exclusively funded by the claimant or 
spouse, or which was funded exclusively by the claimant or 
spouse and which funding payments were excluded from federal 
adjusted gross income in the years when the payments were made; 
    (vii) nontaxable interest received from the state or 
federal government or any instrumentality or political 
subdivision thereof; 
    (viii) workers' compensation; 
    (ix) unemployment benefits; 
    (x) nontaxable strike benefits; and 
    (xi) the gross amounts of payments received in the nature 
of disability income or sick pay as a result of accident, 
sickness, or other disability, whether funded through insurance 
or otherwise; and 
   (xii) the ordinary income portion of a lump sum 
distribution under section 402(e) of the Internal Revenue Code 
of 1954. 
     In the case of an individual who files an income tax return 
on a fiscal year basis, the term "federal adjusted gross income" 
shall mean federal adjusted gross income reflected in the fiscal 
year ending in the calendar year.  Federal adjusted gross income 
shall not be reduced by the amount of a net operating loss 
carryback. 
    (2) "Income" does not include 
    (a) amounts excluded pursuant to the Internal Revenue Code, 
Sections 101(a), 102, 117, and 121; 
    (b) amounts of any pension or annuity which was exclusively 
funded by the claimant or spouse and which funding payments were 
not excluded from federal adjusted gross income in the years 
when the payments were made; 
    (c) surplus food or other relief in kind supplied by a 
governmental agency; 
    (d) relief granted under this chapter; 
    (e) child support payments received under a temporary or 
final decree of dissolution or legal separation; or 
     (f) federal adjusted gross income shall be reduced by wage 
or salary expense which is not allowed as a deduction under 
provisions of section 280C of the Internal Revenue Code of 1954. 
     Sec. 10.  [REPEALER.] 
    Laws 1983, chapter 247, section 122, and Laws 1984, chapter 
514, article 2, section 13, are repealed. 
     Sec. 11.  [EFFECTIVE DATE.] 
    Sections 1, 3, 4, 7, and 8 are effective for taxable years 
beginning after December 31, 1983.  Sections 2 and 10 are 
effective for taxable years beginning after December 31, 1984. 
Section 5 is effective beginning on June 15, 1983.  Section 6 is 
effective for taxable years beginning after December 31, 1982. 
Section 9 is effective for claims based on rent paid in 1985 and 
thereafter, and for property taxes payable in 1986 and 
thereafter. 
    Approved May 23, 1985