Office of the Revisor of Statutes
Minnesota Session Laws - 1989, Regular Session
Key: (1) language to be deleted (2) new language
Laws of Minnesota 1989
CHAPTER 28-H.F.No. 214
An act relating to taxation; making technical
corrections and clarifications to individual income
and corporate franchise taxes; updating references to
the Internal Revenue Code; imposing a tax and
providing for withholding of certain payments to
nonresidents; requiring surety payment by out-of-state
contractors; amending Minnesota Statutes 1988,
sections 290.01, subdivisions 4, 7, 19, 19a, 19b, 19c,
19d, 19e, and 19f; 290.06, subdivisions 2c and 22;
290.067, subdivision 1; 290.0802, subdivisions 1 and
2; 290.095, subdivision 9; 290.17, subdivisions 1 and
2; 290.311, subdivision 1; 290.92, by adding
subdivisions; and 291.005, subdivision 1; proposing
coding for new law in Minnesota Statutes, chapter 290;
repealing Minnesota Statutes 1988, section 290.01,
subdivision 6a.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 1988, section 290.01,
subdivision 4, is amended to read:
Subd. 4. [CORPORATION.] The term "corporation" shall
include every entity which is a corporation under section
7701(a)(3) or is treated as a corporation under section
851(q) 851(h) or 7704 of the Internal Revenue Code of 1986, as
amended through December 31, 1987 1988, and financial
institutions. A corporation's franchise is its authorization to
exist and conduct business, whether created by legislation, by
executive order, by a governmental agency, by contract or other
private action, or by some combination thereof. Every
corporation is deemed to have a corporate franchise. An entity
described in section 646(b) of the Tax Reform Act of 1986,
Public Law Number 99-514, as amended by section 1006(k) of the
Technical and Miscellaneous Revenue Act of 1988, Public Law
Number 100-647, shall be classified in the same manner for
purposes of this chapter as it is for federal income tax
purposes.
Sec. 2. Minnesota Statutes 1988, section 290.01,
subdivision 7, is amended to read:
Subd. 7. [RESIDENT.] The term "resident" means (1) any
individual domiciled in Minnesota, except that an individual is
not a "resident" for the period of time that the individual is a
"qualified individual" as defined in section 911(d)(1) of the
Internal Revenue Code of 1986, as amended through December 31,
1987, unless, during that period, a Minnesota homestead
application is filed for property in which the individual has an
interest; and (2) any individual domiciled outside the state who
maintains a place of abode in the state and spends in the
aggregate more than one-half of the tax year in Minnesota,
unless the individual or the spouse of the individual is in the
armed forces of the United States, or the individual is covered
under the reciprocity provisions in section 290.081.
For purposes of this subdivision, presence within the state
for any part of a calendar day constitutes a day spent in the
state. Individuals shall keep adequate records to substantiate
the days spent outside the state.
The term "abode" means a dwelling maintained by an
individual, whether or not owned by the individual and whether
or not occupied by the individual, and includes a dwelling place
owned or leased by the individual's spouse.
Sec. 3. Minnesota Statutes 1988, section 290.01,
subdivision 19, is amended to read:
Subd. 19. [NET INCOME.] The term "net income" means the
federal taxable income, as defined in section 63 of the Internal
Revenue Code of 1986, as amended through the date named in this
subdivision, incorporating any elections made by the taxpayer in
accordance with the Internal Revenue Code in determining federal
taxable income for federal income tax purposes, and with the
modifications provided in subdivisions 19a to 19f.
In the case of a regulated investment company or a fund
thereof, as defined in section 851(a) or 851(q) 851(h) of the
Internal Revenue Code, federal taxable income means investment
company taxable income as defined in section 852(b)(2) of the
Internal Revenue Code, except that:
(1) the exclusion of net capital gain provided in section
852(b)(2)(A) of the Internal Revenue Code does not apply; and
(2) the deduction for dividends paid under section
852(b)(2)(D) of the Internal Revenue Code must be applied by
allowing a deduction for capital gain dividends and
exempt-interest dividends as defined in sections 852(b)(3)(C)
and 852(b)(5) of the Internal Revenue Code.
The Internal Revenue Code of 1986, as amended through
December 31, 1986, shall be in effect for taxable years
beginning after December 31, 1986. The provisions of sections
10104, 10202, 10203, 10204, 10206, 10212, 10221, 10222, 10223,
10226, 10227, 10228, 10611, 10631, 10632, and 10711 of the
Omnibus Budget Reconciliation Act of 1987, Public Law Number
100-203, and the provisions of sections 1001, 1002, 1003, 1004,
1005, 1006, 1008, 1009, 1010, 1011, 1011A, 1011B, 1012, 1013,
1014, 1015, 1018, 2004, 3041, 4009, 6007, 6026, 6032, 6137,
6277, and 6282 of the Technical and Miscellaneous Revenue Act of
1988, Public Law Number 100-647, shall be effective at the time
they become effective for federal income tax purposes.
The Internal Revenue Code of 1986, as amended through
December 31, 1987, shall be in effect for taxable years
beginning after December 31, 1987. The provisions of sections
4001, 4002, 4011, 5021, 5041, 5053, 5075, 6003, 6008, 6011,
6030, 6031, 6033, 6057, 6064, 6066, 6079, 6130, 6176, 6180,
6182, 6280, and 6281 of the Technical and Miscellaneous Revenue
Act of 1988, Public Law Number 100-647, shall become effective
at the time they become effective for federal tax purposes.
The Internal Revenue Code of 1986, as amended through
December 31, 1988, shall be in effect for taxable years
beginning after December 31, 1988.
Except as otherwise provided, references to the Internal
Revenue Code in subdivisions 19a to 19f 19g mean the code in
effect for purposes of determining net income for the applicable
year.
Sec. 4. Minnesota Statutes 1988, section 290.01,
subdivision 19a, is amended to read:
Subd. 19a. [ADDITIONS TO FEDERAL TAXABLE INCOME.] For
individuals, estates, and trusts, there shall be added to
federal taxable income:
(1)(i) interest income on obligations of any state other
than Minnesota or a political or governmental subdivision,
municipality, or governmental agency or instrumentality of any
state other than Minnesota exempt from federal income taxes
under the Internal Revenue Code or any other federal statute,
and
(ii) exempt-interest dividends as defined in section
852(b)(5) of the Internal Revenue Code of 1986, except the
portion of the exempt-interest dividends derived from interest
income on obligations of the state of Minnesota or its political
or governmental subdivisions, municipalities, governmental
agencies or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to
all shareholders represents 95 percent or more of the
exempt-interest dividends that are paid by the regulated
investment company as defined in section 851(a) of the Internal
Revenue Code of 1986, or the fund of the regulated investment
company as defined in section 851(q) 851(h) of the Internal
Revenue Code of 1986, making the payment; and
(2) the amount of income taxes paid or accrued within the
taxable year under this chapter and income taxes paid to any
other state or to any province or territory of Canada, to the
extent allowed as a deduction under section 63(d) of the
Internal Revenue Code, but the addition may not be more than the
amount by which the itemized deductions as allowed under section
63(d) of the Internal Revenue Code exceeds the amount of the
standard deduction as defined in section 63(c) of the Internal
Revenue Code; and
(3) the capital gain amount of a lump sum distribution to
which the special tax under section 1122(h)(3)(B)(ii) of the Tax
Reform Act of 1986, Public Law Number 99-514, applies.
Sec. 5. Minnesota Statutes 1988, section 290.01,
subdivision 19b, is amended to read:
Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For
individuals, estates, and trusts, there shall be subtracted from
federal taxable income:
(1) interest income on obligations of any authority,
commission, or instrumentality of the United States to the
extent includable in taxable income for federal income tax
purposes but exempt from state income tax under the laws of the
United States;
(2) if included in federal taxable income, the amount of
any overpayment of income tax to Minnesota or to any other
state, for any previous taxable year, whether the amount is
received as a refund or as a credit to another taxable year's
income tax liability;
(3) the amount paid to others not to exceed $650 for each
dependent in grades kindergarten to 6 and $1,000 for each
dependent in grades 7 to 12, for tuition, textbooks, and
transportation of each dependent in attending an elementary or
secondary school situated in Minnesota, North Dakota, South
Dakota, Iowa, or Wisconsin, wherein a resident of this state may
legally fulfill the state's compulsory attendance laws, which is
not operated for profit, and which adheres to the provisions of
the Civil Rights Act of 1964 and chapter 363. As used in this
clause, "textbooks" includes books and other instructional
materials and equipment used in elementary and secondary schools
in teaching only those subjects legally and commonly taught in
public elementary and secondary schools in this state.
"Textbooks" does not include instructional books and materials
used in the teaching of religious tenets, doctrines, or worship,
the purpose of which is to instill such tenets, doctrines, or
worship, nor does it include books or materials for, or
transportation to, extracurricular activities including sporting
events, musical or dramatic events, speech activities, driver's
education, or similar programs. In order to qualify for the
subtraction under this clause the taxpayer must elect to itemize
deductions under section 63(e) of the Internal Revenue Code of
1986, as amended through December 31, 1987;
(4) to the extent included in federal taxable income,
distributions from a qualified governmental pension plan, an
individual retirement account, simplified employee pension, or
qualified plan covering a self-employed person that represent a
return of contributions that were included in Minnesota gross
income in the taxable year for which the contributions were made
but were deducted or were not included in the computation of
federal adjusted gross income. The distribution shall be
allocated first to return of contributions until the
contributions included in Minnesota gross income have been
exhausted. This subtraction applies only to contributions made
in a taxable year prior to 1985;
(5) income as provided under section 290.0802; and
(6) the amount of unrecovered accelerated cost recovery
system deductions allowed under subdivision 19g.; and
(7) to the extent included in federal adjusted gross
income, income realized on disposition of property exempt from
tax under section 290.491.
Sec. 6. Minnesota Statutes 1988, section 290.01,
subdivision 19c, is amended to read:
Subd. 19c. [CORPORATIONS; ADDITIONS TO FEDERAL TAXABLE
INCOME.] For corporations, there shall be added to federal
taxable income:
(1) the amount of any deduction taken for federal income
tax purposes for income, excise, or franchise taxes based on net
income or related minimum taxes paid by the corporation to
Minnesota, another state, a political subdivision of another
state, the District of Columbia, or any foreign country or
possession of the United States;
(2) interest not subject to federal tax upon obligations
of: the United States, its possessions, its agencies, or its
instrumentalities; the state of Minnesota or any other state,
any of its political or governmental subdivisions, any of its
municipalities, or any of its governmental agencies or
instrumentalities; or the District of Columbia;
(3) exempt-interest dividends received as defined in
section 852(b)(5) of the Internal Revenue Code of 1986, as
amended through December 31, 1987;
(4) the amount of any windfall profits tax deducted under
section 164 or 471 of the Internal Revenue Code of 1986, as
amended through December 31, 1987;
(5) the amount of any net operating loss deduction taken
for federal income tax purposes under section 172 of the
Internal Revenue Code of 1986, as amended through December 31,
1987;
(6) the amount of any special deductions taken for federal
income tax purposes under sections 241 to 247 of the Internal
Revenue Code of 1986, as amended through December 31, 1987;
(7) losses from the business of mining, as defined in
section 290.05, subdivision 1, clause (a), that are not subject
to Minnesota income tax;
(8) the amount of any capital losses deducted for federal
income tax purposes under sections 1211 and 1212 of the Internal
Revenue Code of 1986, as amended through December 31, 1987;
(9) the amount of any charitable contributions deducted for
federal income tax purposes under section 170 of the Internal
Revenue Code of 1986, as amended through December 31, 1987;
(10) the exempt foreign trade income of a foreign sales
corporation under sections 921(a) and 291 of the Internal
Revenue Code of 1986, as amended through December 31, 1987;
(11) the amount of percentage depletion deducted under
sections 611 through 614 and 291 of the Internal Revenue Code of
1986, as amended through December 31, 1987;
(12) for certified pollution control facilities placed in
service in a taxable year beginning before December 31, 1986,
and for which amortization deductions were elected under section
169 of the Internal Revenue Code of 1954, as amended through
December 31, 1985, the amount of the amortization deduction
allowed in computing federal taxable income for those
facilities; and
(13) the amount of any deemed dividend from a foreign
operating corporation determined pursuant to section 290.17,
subdivision 4, paragraph (g).
Sec. 7. Minnesota Statutes 1988, section 290.01,
subdivision 19d, is amended to read:
Subd. 19d. [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL
TAXABLE INCOME.] For corporations, there shall be subtracted
from federal taxable income after the increases provided in
subdivision 19c:
(1) the amount of foreign dividend gross-up added to gross
income for federal income tax purposes under section 78 of the
Internal Revenue Code;
(2) the decrease in salary expense for federal income tax
purposes due to claiming the federal jobs credit under section
51 of the Internal Revenue Code;
(3) any dividend (not including any distribution in
liquidation) paid within the taxable year by a national or state
bank to the United States, or to any instrumentality of the
United States exempt from federal income taxes, on the preferred
stock of the bank owned by the United States or the
instrumentality;
(4) amounts disallowed for intangible drilling costs due to
differences between this chapter and the Internal Revenue Code
in taxable years beginning before January 1, 1987, as follows:
(i) to the extent the disallowed costs are represented by
physical property, an amount equal to the allowance for
depreciation under Minnesota Statutes 1986, section 290.09,
subdivision 7, subject to the modifications contained in
subdivision 19e; and
(ii) to the extent the disallowed costs are not represented
by physical property, an amount equal to the allowance for cost
depletion under Minnesota Statutes 1986, section 290.09,
subdivision 8;
(5) the deduction for capital losses pursuant to sections
1211 and 1212 of the Internal Revenue Code of 1986, as amended
through December 31, 1987, except that:
(i) for capital losses incurred in taxable years beginning
after December 31, 1986, capital loss carrybacks shall not be
allowed;
(ii) for capital losses incurred in taxable years beginning
after December 31, 1986, a capital loss carryover to each of the
15 taxable years succeeding the loss year shall be allowed;
(iii) for capital losses incurred in taxable years
beginning before January 1, 1987, a capital loss carryback to
each of the three taxable years preceding the loss year, subject
to the provisions of Minnesota Statutes 1986, section 290.16,
shall be allowed; and
(iv) for capital losses incurred in taxable years beginning
before January 1, 1987, a capital loss carryover to each of the
five taxable years succeeding the loss year to the extent such
loss was not used in a prior taxable year and subject to the
provisions of Minnesota Statutes 1986, section 290.16, shall be
allowed;
(6) an amount for interest and expenses relating to income
not taxable for federal income tax purposes, if (i) the income
is taxable under this chapter and (ii) the interest and expenses
were disallowed as deductions under the provisions of section
171(a)(2), 265 or 291 of the Internal Revenue Code of 1986, as
amended through December 31, 1987, in computing federal taxable
income;
(7) in the case of mines, oil and gas wells, other natural
deposits, and timber for which percentage depletion was
disallowed pursuant to subdivision 19c, clause (11), a
reasonable allowance for depletion based on actual cost. In the
case of leases the deduction must be apportioned between the
lessor and lessee in accordance with rules prescribed by the
commissioner. In the case of property held in trust, the
allowable deduction must be apportioned between the income
beneficiaries and the trustee in accordance with the pertinent
provisions of the trust, or if there is no provision in the
instrument, on the basis of the trust's income allocable to
each;
(8) for certified pollution control facilities placed in
service in a taxable year beginning before December 31, 1986,
and for which amortization deductions were elected under section
169 of the Internal Revenue Code of 1954, as amended through
December 31, 1985, an amount equal to the allowance for
depreciation under Minnesota Statutes 1986, section 290.09,
subdivision 7;
(9) the amount included in federal taxable income
attributable to the credits provided in Minnesota Statutes 1986,
section 273.1314, subdivision 9, or Minnesota Statutes, section
469.171, subdivision 6;
(10) amounts included in federal taxable income that are
due to refunds of income, excise, or franchise taxes based on
net income or related minimum taxes paid by the corporation to
Minnesota, another state, a political subdivision of another
state, the District of Columbia, or a foreign country or
possession of the United States to the extent that the taxes
were added to federal taxable income under section 290.01,
subdivision 19c, clause (1), in a prior taxable year; and
(11) the following percentage of royalties, fees, or other
like income accrued or received from a foreign operating
corporation or a foreign corporation which is part of the same
unitary business as the receiving corporation:
Taxable Year
Beginning After .......... Percentage
December 31, 1988 ........ 50 percent
December 31, 1990 ........ 80 percent.
Sec. 8. Minnesota Statutes 1988, section 290.01,
subdivision 19e, is amended to read:
Subd. 19e. [DEPRECIATION MODIFICATIONS FOR CORPORATIONS.]
In the case of corporations, a modification shall be made for
the accelerated cost recovery system. The allowable deduction
for the accelerated cost recovery system is the same amount as
provided in section 168 of the Internal Revenue Code with the
following modifications. The modifications apply to taxable
years beginning after December 31, 1986, and to property for
which deductions under the Tax Reform Act of 1986, Public Law
Number 99-514, are elected or apply.
(a) For property placed in service after December 31, 1980,
and before January 1, 1987, 40 percent of the allowance pursuant
to section 168 of the Internal Revenue Code of 1954, as amended
through December 31, 1985, for 15-, 18-, or 19-year real
property shall not be allowed and for all other property 20
percent shall not be allowed.
(b) For property placed in service after December 31, 1987,
no modification shall be made.
(c) For property placed in service after July 31, 1986, and
before January 1, 1987, for which the taxpayer elects the
deduction pursuant to section 203 of the Tax Reform Act of 1986,
Public Law Number 99-514, and for property placed in service
after December 31, 1986, and before January 1, 1988, 15 percent
of the allowance pursuant to section 168 of the Internal Revenue
Code of 1986 shall not be allowed.
(d) For property placed in service after December 31, 1980,
and before January 1, 1987, for which the taxpayer elects to use
the straight line method provided in section 168(b)(3), (f)(12),
or (j)(1) or a method provided in section 168(e)(2) of the
Internal Revenue Code of 1986, as amended through December 31,
1986, but excluding property for which the taxpayer elects the
deduction pursuant to section 203 of the Tax Reform Act of 1986,
Public Law Number 99-514, the modifications provided in
paragraph (a) do not apply.
(e) For property subject to the modifications contained in
paragraphs (a) and (c) and Minnesota Statutes 1986, section
290.09, subdivision 7, clause (c), the following modification
shall be made after the entire amount of the allowable deduction
has been allowed for federal tax purposes for that property
under the provisions of section 168 of the Internal Revenue Code
of 1986, as amended through December 31, 1987. The remaining
depreciable basis in those assets for Minnesota purposes,
including the amount of any basis reduction to reflect the
investment tax credit for federal purposes under sections 48(q)
and 49(d) of the Internal Revenue Code of 1986, as amended
through December 31, 1987, shall be a depreciation allowance
computed using the straight line method over the following
number of years:
(1) three-year property, one year;
(2) five-year and seven-year property, two years;
(3) ten-year property, five years; and
(4) all other property, seven years.
(f) For property placed in service after December 31, 1987,
the remaining depreciable basis for Minnesota purposes that is
attributable to the basis reduction for federal purposes to
reflect the investment tax credit under sections 48(q) and 49(d)
of the Internal Revenue Code of 1986, as amended through
December 31, 1987, shall be allowed as a deduction in the first
taxable year after the entire amount of the allowable deduction
for that property under the provisions of section 168 of the
Internal Revenue Code of 1986, has been allowed, except that
where the straight line method provided in section 168(b)(3) is
used, the deduction provided in this clause shall be allowed in
the last taxable year in which an allowance for depreciation is
allowed for that property.
(g) For qualified timber property for which the taxpayer
made an election under section 194 of the Internal Revenue Code
of 1986, the remaining depreciable basis for Minnesota purposes
is allowed as a deduction in the first taxable year after the
entire allowable deduction has been allowed for federal tax
purposes.
(h) The basis of property to which section 168 of the
Internal Revenue Code applies is its basis as provided in this
chapter including the modifications provided in this subdivision
and in Minnesota Statutes 1986, section 290.09, subdivision 7,
paragraph (c). The recapture tax provisions provided in
sections 1245 and 1250 of the Internal Revenue Code of 1986, as
amended through December 31, 1987, apply but must be calculated
using the basis provided in the preceding sentence.
(i) The basis of an asset acquired in an exchange of
assets, including an involuntary conversion, is the same as its
federal basis under the provisions of the Internal Revenue Code
of 1986, except that the difference in basis due to the
modifications in this subdivision and in Minnesota Statutes
1986, section 290.09, subdivision 7, paragraph (c), is a
deduction as provided in paragraph (e).
Sec. 9. Minnesota Statutes 1988, section 290.01,
subdivision 19f, is amended to read:
Subd. 19f. [BASIS MODIFICATIONS AFFECTING GAIN OR LOSS ON
DISPOSITION OF PROPERTY.] (a) For individuals, estates, and
trusts, the basis of property is its adjusted basis for federal
income tax purposes except as set forth in paragraphs (f) and
(g). For corporations, the basis of property is its adjusted
basis for federal income tax purposes, without regard to the
time when the property became subject to tax under this chapter
or to whether out-of-state losses or items of tax preference
with respect to the property were not deductible under this
chapter, except that the modifications to the basis for federal
income tax purposes set forth in paragraphs (b) to (j) are
allowed to corporations, and the resulting modifications to
federal taxable income must be made in the year in which gain or
loss on the sale or other disposition of property is recognized.
(b) The basis of property shall not be reduced to reflect
federal investment tax credit.
(c) The basis of property subject to the accelerated cost
recovery system under section 168 of the Internal Revenue Code
shall be modified to reflect the modifications in depreciation
with respect to the property provided for in subdivision 19e.
For certified pollution control facilities for which
amortization deductions were elected under section 169 of the
Internal Revenue Code of 1954, the basis of the property must be
increased by the amount of the amortization deduction not
previously allowed under this chapter.
(d) For property acquired before January 1, 1933, the basis
for computing a gain is the fair market value of the property as
of that date. The basis for determining a loss is the cost of
the property to the taxpayer less any depreciation,
amortization, or depletion, actually sustained before that
date. If the adjusted cost exceeds the fair market value of the
property, then the basis is the adjusted cost regardless of
whether there is a gain or loss.
(e) The basis is reduced by the allowance for amortization
of bond premium if an election to amortize was made pursuant to
Minnesota Statutes 1986, section 290.09, subdivision 13, and the
allowance could have been deducted by the taxpayer under this
chapter during the period of the taxpayer's ownership of the
property.
(f) For assets placed in service before January 1, 1987,
corporations, partnerships, or individuals engaged in the
business of mining ores other than iron ore or taconite
concentrates subject to the occupation tax under chapter 298
must use the occupation tax basis of property used in that
business.
(g) For assets placed in service before January 1, 1990,
corporations, partnerships, or individuals engaged in the
business of mining iron ore or taconite concentrates subject to
the occupation tax under chapter 298 must use the occupation tax
basis of property used in that business.
(h) In applying the provisions of sections 301(c)(3)(B),
312(f) and (g), and 316(a)(1) of the Internal Revenue Code of
1986, as amended through December 31, 1987, the dates December
31, 1932, and January 1, 1933, shall be substituted for February
28, 1913, and March 1, 1913, respectively.
(i) In applying the provisions of section 362(a) and (c) of
the Internal Revenue Code of 1986, as amended through December
31, 1987, the date December 31, 1956, shall be substituted for
June 22, 1954.
(j) The basis of property shall be increased by the amount
of intangible drilling costs not previously allowed due to
differences between this chapter and the Internal Revenue Code.
(k) The adjusted basis of any corporate partner's interest
in a partnership is the same as the adjusted basis for federal
income tax purposes modified as required to reflect the basis
modifications set forth in paragraphs (b) to (j). The adjusted
basis of a partnership in which the partner is an individual,
estate, or trust is the same as the adjusted basis for federal
income tax purposes modified as required to reflect the basis
modifications set forth in paragraphs (f) and (g).
(l) The modifications contained in paragraphs (b) to (j)
also apply to the basis of property that is determined by
reference to the basis of the same property in the hands of a
different taxpayer or by reference to the basis of different
property.
Sec. 10. Minnesota Statutes 1988, section 290.06,
subdivision 2c, is amended to read:
Subd. 2c. [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES,
AND TRUSTS.] (a) The income taxes imposed by this chapter upon
married individuals filing joint returns and surviving spouses
as defined in section 2(a) of the Internal Revenue Code of 1986
as amended through December 31, 1987, must be computed by
applying to their taxable net income the following schedule of
rates:
if taxable income is: the tax is:
not over $19,000 6 percent
over $19,000 $1,140 plus 8 percent of
the excess over $19,000
plus an amount computed using the following schedule of rates:
if taxable income is: the tax is:
over $75,500, but not 0.5 percent of the
over $165,000 excess over $75,500
over $165,000 $447.50.
Married individuals filing separate returns, estates, and
trusts must compute their income tax by applying the above rates
to their taxable income, except that the income brackets will be
one-half of the above amounts. In the case of married
individuals filing separately, the additional 0.5 percent tax
provided in this subdivision shall be applied to taxable income
over $37,750, but not over $127,500.
(b) The income taxes imposed by this chapter upon unmarried
individuals must be computed by applying to taxable net income
the following schedule of rates:
if taxable income is: the tax is:
not over $13,000 6 percent
over $13,000 $780 plus 8 percent
of the excess over $13,000
plus an amount computed using the following schedule of rates:
if taxable income is: the tax is:
over $42,700, but not 0.5 percent of the
over $93,000 excess over $42,700
over $93,000 $251.50.
(c) The income taxes imposed by this chapter upon unmarried
individuals qualifying as a head of household as defined in
section 2(b) of the Internal Revenue Code of 1986, as amended
through December 31, 1987, must be computed by applying to
taxable net income the following schedule of rates:
if taxable income is: the tax is:
not over $16,000 6 percent
over $16,000 $960 plus 8 percent
of the excess over $16,000
plus an amount computed using the following schedule of rates:
if taxable income is: the tax is:
over $64,300, but not 0.5 percent of the
over $135,000 excess over $64,300
over $135,000 $353.50.
(d) In lieu of a tax computed according to the rates set
forth in this subdivision, the tax of any individual taxpayer
whose taxable net income for the taxable year is less than an
amount determined by the commissioner must be computed in
accordance with tables prepared and issued by the commissioner
of revenue based on income brackets of not more than $100. The
amount of tax for each bracket shall be computed at the rates
set forth in this subdivision, provided that the commissioner
may disregard a fractional part of a dollar unless it amounts to
50 cents or more, in which case it may be increased to $1.
(e) An individual who is not a Minnesota resident for the
entire year must compute the individual's Minnesota income tax
as provided in this subdivision. After the application of the
nonrefundable credits provided in this chapter, the tax
liability must then be multiplied by a fraction in which:
(1) The numerator is the individual's Minnesota source
federal adjusted gross income as defined in section 62 of the
Internal Revenue Code of 1986, as amended through December 31,
1987, after applying the allocation and assignability provisions
of section 290.081, clause (a), or 290.17; and
(2) the denominator is the individual's federal adjusted
gross income as defined in section 62 of the Internal Revenue
Code of 1986, as amended through December 31, 1987, increased by
the addition required for interest income from non-Minnesota
state and municipal bonds under section 290.01, subdivision 19a,
clause (1).
(f) Any individual who has income which is included in the
computation of federal adjusted gross income but is not subject
to tax by Minnesota other than income specifically allowed as a
subtraction under section 290.01, subdivision 19b, shall compute
the tax in the same manner described in paragraph (e). The
numerator of the fraction under paragraph (e) is the
individual's Minnesota source federal adjusted gross income
reduced by the income not subject to Minnesota tax and the
denominator is the federal adjusted gross income.
Sec. 11. Minnesota Statutes 1988, section 290.06,
subdivision 22, is amended to read:
Subd. 22. [CREDIT FOR TAXES PAID TO ANOTHER STATE.] (a) A
taxpayer who is liable for taxes on or measured by net income to
another state or province or territory of Canada, as provided in
paragraphs (b) through (f), upon income allocated or apportioned
to Minnesota, is entitled to a credit for the tax paid to
another state or province or territory of Canada if the tax is
actually paid in the taxable year or a subsequent taxable year.
A taxpayer who is a resident of this state pursuant to section
290.01, subdivision 7a 7, clause (b) (2), and who is subject to
income tax as a resident in the state of the individual's
domicile is not allowed this credit unless the state of domicile
does not allow a similar credit.
(b) For an individual, estate, or trust, the credit is
determined by multiplying the tax payable under this chapter by
the ratio derived by dividing the income subject to tax in the
other state or province or territory of Canada that is also
subject to tax in Minnesota while a resident of Minnesota by the
taxpayer's federal adjusted gross income, as defined in section
62 of the Internal Revenue Code of 1986, as amended through
December 31, 1987 1988, modified by the addition required by
section 290.01, subdivision 19a, clause (1) and the subtraction
allowed by section 290.01, subdivision 19b, clause (1), to the
extent the income is allocated or assigned to Minnesota under
sections 290.081 and 290.17.
(c) If the taxpayer is an athletic team that apportions all
of its income under section 290.17, subdivision 5, paragraph
(a) (c), the credit is determined by multiplying the tax payable
under this chapter by the ratio derived from dividing the total
net income subject to tax in the other state or province or
territory of Canada by the taxpayer's Minnesota taxable income.
(d) The credit determined under paragraph (b) or (c) shall
not exceed the amount of tax so paid to the other state or
province or territory of Canada on the gross income earned
within the other state or province or territory of Canada
subject to tax under this chapter, nor shall the allowance of
the credit reduce the taxes paid under this chapter to an amount
less than what would be assessed if such income amount was
excluded from taxable net income.
(e) In the case of the tax assessed on a lump sum
distribution under section 290.032, the credit allowed under
paragraph (a) is the tax assessed by the other state or province
or territory of Canada on the lump sum distribution that is also
subject to tax under section 290.032, and shall not exceed the
tax assessed under section 290.032. To the extent the total
lump sum distribution defined in section 290.032, subdivision 1,
includes lump sum distributions received in prior years or is
all or in part an annuity contract, the reduction to the tax on
the lump sum distribution allowed under section 290.032,
subdivision 2, includes tax paid to another state that is
properly apportioned to that distribution.
(f) If a Minnesota resident reported an item of income to
Minnesota and is assessed tax in such other state or province or
territory of Canada on that same income after the Minnesota
statute of limitations has expired, the taxpayer shall receive a
credit for that year under paragraph (a), notwithstanding any
statute of limitations to the contrary. The claim for the
credit must be submitted within one year from the date the taxes
were paid to the other state or province or territory of
Canada. The taxpayer must submit sufficient proof to show
entitlement to a credit.
Sec. 12. Minnesota Statutes 1988, section 290.067,
subdivision 1, is amended to read:
Subdivision 1. [AMOUNT OF CREDIT.] A taxpayer may take as
a credit against the tax due from the taxpayer and a spouse, if
any, under this chapter an amount equal to the dependent care
credit for which the taxpayer is eligible pursuant to the
provisions of section 21 of the Internal Revenue Code subject to
the limitations provided in subdivision 2. except that in
determining whether the child qualified as a dependent, income
received as an aid to families with dependent children grant or
allowance to or on behalf of the child must not be taken into
account in determining whether the child received more than half
of the child's support from the taxpayer.
If the taxpayer is not required and does not file a federal
individual income tax return for the tax year, no credit is
allowed for any amount paid to any person unless:
(1) the name, address, and taxpayer identification number
of the person are included on the return claiming the credit; or
(2) if the person is an organization described in section
501(c)(3) of the Internal Revenue Code and exempt from tax under
section 501(a) of the Internal Revenue Code, the name and
address of the person are included on the return claiming the
credit.
In the case of a failure to provide the information required
under the preceding sentence, the preceding sentence does not
apply if it is shown that the taxpayer exercised due diligence
in attempting to provide the information required.
In the case of a nonresident or, part-year resident, or
person whose tax is computed under section 290.06, subdivision
2c, paragraph (f), the credit determined under section 21 of the
Internal Revenue Code must be allocated based on the ratio by
which the earned income of the claimant and the claimant's
spouse from Minnesota sources bears to the total earned income
of the claimant and the claimant's spouse.
Sec. 13. Minnesota Statutes 1988, section 290.0802,
subdivision 1, is amended to read:
Subdivision 1. [DEFINITIONS.] For purposes of this
section, the following terms have the meanings given.
(a) "Adjusted gross income" means federal adjusted gross
income as used in section 22(d) of the Internal Revenue Code for
the taxable year plus the ordinary income portion of a lump sum
distribution as defined in section 407(e) 402(e) of the Internal
Revenue Code.
(b) "Disability income" means disability income as defined
in section 22(c)(2)(B)(iii) of the Internal Revenue Code.
(c) "Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended through December 31, 1987.
(d) "Nontaxable retirement and disability benefits" means
the amount of pension, annuity, or disability benefits that
would be included in the reduction under section 22(c)(3) of the
Internal Revenue Code, but excluding tier one railroad
retirement benefits.
(e) "Qualified individual" means a qualified individual as
defined in section 22(b) of the Internal Revenue Code.
Sec. 14. Minnesota Statutes 1988, section 290.0802,
subdivision 2, is amended to read:
Subd. 2. [SUBTRACTION.] (a) A qualified individual is
allowed a subtraction from federal taxable income equal to the
lesser of federal taxable income or for the individual's
subtraction base amount. The excess of the subtraction base
amount over federal the taxable net income computed without
regard to the subtraction for the elderly or disabled under
section 290.01, subdivision 19b, clause (5), may be used to
reduce the amount of a lump sum distribution subject to tax
under section 290.032.
(b)(1) The initial subtraction base amount equals
(i) $10,000 for a married taxpayer filing a joint return if
a spouse is a qualified individual,
(ii) $8,000 for a single taxpayer, and
(iii) $5,000 for a married taxpayer filing a separate
federal return.
(2) The qualified individual's initial subtraction base
amount, then, must be reduced by the sum of nontaxable
retirement and disability benefits and one-half of the amount of
adjusted gross income in excess of the following thresholds:
(i) $15,000 for a married taxpayer filing a joint return if
both spouses are qualified individuals,
(ii) $12,000 for a single taxpayer or for a married couple
filing a joint return if only one spouse is a qualified
individual, and
(iii) $7,500 for a married taxpayer filing a separate
federal return.
(3) In the case of a qualified individual who is under the
age of 65, the maximum amount of the subtraction base may not
exceed the taxpayer's disability income.
(4) The resulting amount is the subtraction base amount.
Sec. 15. Minnesota Statutes 1988, section 290.095,
subdivision 9, is amended to read:
Subd. 9. [SPECIAL PERIOD OF LIMITATION WITH RESPECT TO NET
OPERATING LOSS CARRYBACKS.] For the purposes of sections 290.46
and 290.50 if the claim for refund relates to an overpayment
attributable to a net operating loss carryback under this
section, in lieu of the period of limitation prescribed in
sections 290.46 and 290.50, the period shall be that period
which ends with the expiration of the 15th day of the 46th month
following the end of the taxable year of the net operating loss
which results in such carryback, plus any extension of time
granted for filing the return, but only if the return was filed
within the extended time. During this extended period, for
taxable years beginning before January 1, 1985, married
individuals who elected to file separate returns or a combined
return may change their election and file a joint return.
Sec. 16. Minnesota Statutes 1988, section 290.17,
subdivision 1, is amended to read:
Subdivision 1. [SCOPE OF ALLOCATION RULES.] (a) The income
of resident individuals is not subject to allocation outside
this state. The allocation rules apply to nonresident
individuals, estates, trusts, nonresident partners of
partnerships, nonresident shareholders of corporations having a
valid election in effect under section 1362 of the Internal
Revenue Code of 1986, as amended through December 31, 1987, and
all corporations not having such an election in effect. If a
partnership or corporation would not otherwise be subject to the
allocation rules, but conducts a trade or business that is part
of a unitary business involving another legal entity that is
subject to the allocation rules, the partnership or corporation
is subject to the allocation rules.
(b) Expenses, losses, and other deductions (referred to
collectively in this paragraph as "deductions") must be
allocated along with the item or class of gross income to which
they are definitely related for purposes of assignment under
this section or apportionment under section 290.191, 290.20,
290.35, or 290.36. Deductions not definitely related to any
item or class of gross income are assigned to the taxpayer's
domicile.
(c) The application of the allocation rules as they apply
to income, gains, losses, deductions, or credits of (1) a
partner's distributable share from a partnership under section
290.31, subdivision 4; (2) a shareholder's distributable share
from an S corporation provided in section 1366 of the Internal
Revenue Code of 1986, as amended through December 31, 1988; (3)
a beneficiary's distributable share from an estate or trust as
provided in section 290.23, subdivision 9; or (4) the
shareholders of regulated investment companies, real estate
investment trusts, and real estate mortgage investment conduits
as provided in subchapter M of the Internal Revenue Code of
1988, as amended through December 31, 1988, shall be determined
by the resident status of the partner, beneficiary, or
shareholder at the end of the taxable year of the partnership,
estate or trust, or corporation.
Sec. 17. Minnesota Statutes 1988, 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
labor or personal or professional services is assigned to this
state if, and to the extent that, the labor or services are
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; 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 from the United States, its agencies or
instrumentalities, the Federal Reserve Bank, the state of
Minnesota or any of its political or governmental subdivisions,
or a Minnesota volunteer firefighters' relief association, by
way of payment as a pension, public employee retirement benefit,
or any combination of these, or as a retirement or survivor's
benefit made from a plan qualifying under section 401, 403, 408,
or 409, or as defined in section 403(b) or 457 of the Internal
Revenue Code of 1986, as amended through December 31, 1987, are
not considered income derived from carrying on a trade or
business or from performing personal or professional services 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) Except upon the sale of a partnership interest or the
sale of stock of an S corporation, 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 stock held in an S corporation is
allocable to this state in the ratio of the original cost of
tangible property of the S corporation within this state to the
original cost of tangible property of the S corporation
everywhere.
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 assignable to Minnesota under subdivision 3.
(d) Income from the operation of a farm shall be assigned
to this state if the farm is located within this state and to
other states only if the farm is not located in this state.
(e) Income from winnings on Minnesota pari-mutuel betting
tickets and lawful gambling as defined in section 349.12,
subdivision 2, conducted within the boundaries of the state of
Minnesota shall be assigned to this state.
(f) All items of gross income not covered in paragraphs (a)
to (e) and not part of the taxpayer's income from a trade or
business shall be assigned to the taxpayer's domicile.
Sec. 18. Minnesota Statutes 1988, section 290.311,
subdivision 1, is amended to read:
Subdivision 1. [PARTNERS.] (a) Partner's modifications.
In determining gross income and Minnesota taxable income of a
partner, any modification described in section 290.01,
subdivisions 20 19 to 20f 19f, which relates to an item of
partnership income, gain, loss or deduction shall be made in
accordance with the partner's distributive share, for federal
income tax purposes, of the item to which the modification
relates.
(b) Character of items. Each item of partnership income,
gain, loss, or deduction shall have the same character for a
partner under this section which it has for federal income tax
purposes. Where an item is not characterized for federal income
tax purposes, it shall have the same character for a partner as
if realized directly from the source from which realized by the
partnership, or incurred in the same manner as incurred by the
partnership.
(c) Minnesota tax avoidance or evasion. Where a partner's
distributive share of an item of partnership income, gain, loss
or deduction is determined for federal income tax purposes by
special provision in the partnership agreement with respect to
such item, and where the effect of such provision is the
avoidance or evasion of tax under this section, the partner's
distributive share of such item, and any modifications required
with respect thereto shall be determined as if the partnership
agreement made no special provision with respect to such item.
Sec. 19. Minnesota Statutes 1988, section 290.92, is
amended by adding a subdivision to read:
Subd. 4b. [WITHHOLDING BY PARTNERSHIPS.] (a) A partnership
shall deduct and withhold a tax as provided in paragraph (b)
when the partnership pays or credits amounts to any of its
nonresident individual partners on account of their distributive
shares of partnership income for a taxable year of the
partnership.
(b) The amount of tax withheld is determined by multiplying
the partner's distributive share allocable to Minnesota under
section 290.17, paid or credited during the taxable year by the
highest rate used to determine the income tax liability for an
individual under section 290.06, subdivision 2c, except that the
amount of tax withheld may be determined based on tables
provided by the commissioner if the partner submits a
withholding exemption certificate under subdivision 5.
(c) A partnership required to deduct and withhold tax under
this subdivision shall file a return with the commissioner. The
tax required to be deducted and withheld during that year must
be paid with the return. The return and payment is due on or
before the due date specified for filing the partnership return
under section 290.42.
(d) A partnership required to withhold and remit tax under
this subdivision is liable for payment of the tax to the
commissioner, and a person having control of or responsibility
for the withholding of the tax or the filing of returns due
under this subdivision is personally liable for the tax due.
The commissioner may reduce or abate the tax withheld under this
subdivision if the partnership had reasonable cause to believe
that no tax was due under this section.
(e) Notwithstanding paragraph (a), a partnership is not
required to deduct and withhold tax for a nonresident partner if:
(1) the partner elects to have the tax due paid as part of
the partnership's composite return under section 290.39,
subdivision 5;
(2) the partner has Minnesota assignable federal adjusted
gross income from the partnership of less than $1,000; or
(3) the partnership is liquidated or terminated, the income
was generated by a transaction related to the termination or
liquidation, and no cash or other property was distributed in
the current or prior taxable year.
(f) For purposes of subdivisions 6, paragraph (1)(c), 6a,
7, 11, and 15, a partnership is considered an employer.
Sec. 20. Minnesota Statutes 1988, section 290.92, is
amended by adding a subdivision to read:
Subd. 4c. [WITHHOLDING BY SMALL BUSINESS CORPORATIONS.]
(a) A corporation having a valid election in effect under
section 290.9725 shall deduct and withhold a tax as provided in
paragraph (b) when it pays or credits amounts to any of its
nonresident individual shareholders as dividends or as their
share of the corporations's undistributed taxable income for the
taxable year.
(b) The amount of tax withheld is determined by multiplying
the amount of dividends or undistributed income allocable to
Minnesota under section 290.17, paid or credited to a
nonresident shareholder during the taxable year by the highest
rate used to determine the income tax liability of an individual
under section 290.06, subdivision 2c, except that the amount of
tax withheld may be determined based on tables provided by the
commissioner if the shareholder submits a withholding exemption
certificate under subdivision 5.
(c) A corporation required to deduct and withhold tax under
this subdivision shall file a return with the commissioner. The
tax required to be deducted and withheld during that year must
be paid with the return. The return and payment is due on or
before the due date specified for filing the corporate income
tax return under section 290.42.
(d) A corporation required to withhold and remit tax under
this section is liable for payment of the tax to the
commissioner, and a person having control of or responsibility
for the withholding of the tax or the filing of returns due
under this subdivision is personally liable for the tax due.
(e) Notwithstanding paragraph (a), a corporation is not
required to deduct and withhold tax for a nonresident
shareholder, if:
(1) the shareholder elects to have the tax due paid as part
of the corporation's composite return under section 290.39,
subdivision 5;
(2) the shareholder has Minnesota assignable federal
adjusted gross income from the corporation of less than $1,000;
or
(3) the corporation is liquidated or terminated, the income
was generated by a transaction related to the termination or
liquidation, and no cash or other property was distributed in
the current or prior taxable year.
(f) For purposes of subdivisions 6, paragraph (1)(c), 6a,
7, 11, and 15, a corporation is considered an employer.
Sec. 21. [290.9201] [TAX ON NONRESIDENT ENTERTAINERS.]
Subdivision 1. [DEFINITIONS.] (a) "Entertainer" means an
individual who is not a resident of Minnesota or a state with
which Minnesota has a reciprocal agreement under section 290.081
who performs acts in Minnesota that amuse, entertain, or
inform. For purposes of this section, "entertainer" includes,
but is not limited to, a musician, singer, dancer, comedian,
thespian, athlete, and public speaker.
(b) Entertainment entity means either: (1) an entertainer
who is paid compensation for providing entertainment as an
independent contractor, (2) a partnership that is paid
compensation for entertainment provided by entertainers who are
partners, or (3) a corporation that is paid compensation for
entertainment provided by entertainers who are shareholders of
the corporation.
Subd. 2. [TAX ON ENTERTAINMENT.] Entertainment entities
are subject to a tax in the amount of two percent of the total
compensation received by them during the calendar year for
entertainment performed in Minnesota.
Subd. 3. [CREDIT AGAINST TAX.] Each calendar year an
entertainment entity may take a nonrefundable credit of $100
against the tax imposed by this section.
Subd. 4. [FILING DATE OF ANNUAL RETURN.] (a) An
entertainment entity subject to the tax imposed by this section
shall file with the commissioner an annual return for the
calendar year on or before April 15 following the close of the
calendar year.
(b) The return must be in the form prescribed by the
commissioner.
Subd. 5. [PAYMENT OF TAX AND LIABILITY.] The tax imposed
by this section is payable to the commissioner on the filing
date and is the joint and several liability of the entertainer
and the entertainment entity.
Subd. 6. [EXEMPTION FROM INCOME TAX.] Compensation subject
to the tax imposed under this section is not assignable to
Minnesota under section 290.17.
Subd. 7. [WITHHOLDING ON COMPENSATION OF ENTERTAINERS.]
The tax on compensation of an entertainer must be withheld at a
rate of two percent of all compensation paid to the
entertainment entity by the person or corporation having legal
control of the payment of the compensation. The payor is liable
to the state for the payment of the tax required to be deducted
and withheld, and is not liable to a person for the amount of
the payment. The compensation subject to withholding under this
section is not subject to the withholding provisions of section
290.92, subdivision 2a, 3, or 28, except the provisions of
section 290.92, subdivisions 6a, 7, 14, 15, and 18 shall apply
to withholding under this section as if the withholding were
upon wages.
Subd. 8. [DEPOSIT OF ENTERTAINER WITHHOLDING.] (a) The
person or corporation having legal control of the payment of
compensation taxable under this section shall deposit the
earnings tax with the commissioner, and shall file an
entertainer withholding tax return with the commissioner, within
30 days of each performance.
(b) The withholding tax return must be in the form
prescribed by the commissioner.
Subd. 9. [REFUNDS.] If there is an overpayment of the tax
imposed by this section, refund of the overpayment or credit
shall be made to the payor under rules prescribed by the
commissioner, but only to the extent that the amount of the
overpayment was not deducted and withheld under subdivision 7 by
the payor. An overpayment that is refunded bears interest at
the rate specified in section 270.76, computed from the date of
payment until the date the refund is paid to the payor.
Subd. 10. [REFUNDS.] If the tax withheld at the source
under subdivision 7 exceeds by $1 or more the taxes, penalties,
and interest reported in the return of the entertainment entity
or imposed by this section, the excess must be refunded to the
entertainment entity. If the excess is less than $1, the
commissioner need not refund that amount. If the excess to be
refunded exceeds $10, the amount on the original return bears
interest at the rate specified in section 270.76, computed from
90 days after (1) the due date of the return of the employee
taxpayer or (2) the date on which the return is filed, whichever
is later, to the date the refund is paid to the taxpayer.
Sec. 22. [290.9705] [SURETY DEPOSITS REQUIRED FOR
CONSTRUCTION CONTRACTS.]
Subdivision 1. [WITHHOLDING OF PAYMENTS TO OUT-OF-STATE
CONTRACTORS.] (a) In this section, "person" means a person,
corporation, or cooperative, the state of Minnesota and its
political subdivisions, and a city, county, and school district
in Minnesota.
(b) A person who in the regular course of business is
hiring, contracting, or having a contract with a nonresident
person or foreign corporation, as defined in Minnesota Statutes
1986, section 290.01, subdivision 5, to perform construction
work in Minnesota, shall deduct and withhold eight percent of
every payment to the contractor if the contract exceeds or can
reasonably be expected to exceed $100,000.
Subd. 2. [REQUIREMENT TO DEPOSIT WITHHOLDINGS WITH
COMMISSIONER.] A person required to withhold an amount under
subdivision 1 shall deposit the amount withheld and file a
return prescribed by the commissioner within 30 days of the
payment to the contractor. The payor is liable to the state for
the amount required to be deducted and is not liable to a person
for the amount of the payment.
Subd. 3. [WAIVER OF WITHHOLDING.] The conditions in
subdivisions 1 and 2 may be waived by the commissioner if (1)
the contractor gives the commissioner a cash surety or a bond,
secured by an insurance company licensed by Minnesota,
conditioned that the contractor will comply with all applicable
provisions of chapters 290 and 297A, or (2) the contractor has
done construction work in Minnesota at any time during the three
calendar years prior to entering the contract and has fully
complied with all the provisions of chapters 290 and 297A for
the three prior years.
Subd. 4. [DEPOSITS USED AS SURETY FOR COMPLIANCE WITH
INCOME AND SALES TAX PROVISIONS.] The amounts deposited with the
commissioner under subdivisions 2 and 3 are considered a surety
to guarantee payment of income, franchise, withholding, and
sales and use taxes of the contractor. The commissioner shall
retain the money deposited until the commissioner determines the
contractor's liability for state income, franchise, sales and
use taxes, and taxes withheld under section 290.92. If the
deposit exceeds the liability, the commissioner shall refund the
difference to the contractor with interest at the rate specified
in section 270.76 computed from the dates the amounts were
deposited with the commissioner.
Sec. 23. Minnesota Statutes 1988, section 291.005,
subdivision 1, is amended to read:
Subdivision 1. Unless the context otherwise clearly
requires, the following terms used in this chapter shall have
the following meanings:
(1) "Federal gross estate" means the gross estate of a
decedent as valued and otherwise determined for federal estate
tax purposes by federal taxing authorities pursuant to the
provisions of the Internal Revenue Code.
(2) "Minnesota gross estate" means the federal gross estate
of a decedent after (a) excluding therefrom any property
included therein which has its situs outside Minnesota and (b)
including therein any property omitted from the federal gross
estate which is includable therein, has its situs in Minnesota,
and was not disclosed to federal taxing authorities.
(3) "Personal representative" means the executor,
administrator or other person appointed by the court to
administer and dispose of the property of the decedent. If
there is no executor, administrator or other person appointed,
qualified, and acting within this state, then any person in
actual or constructive possession of any property having a situs
in this state which is included in the federal gross estate of
the decedent shall be deemed to be a personal representative to
the extent of the property and the Minnesota estate tax due with
respect to the property.
(4) "Resident decedent" means an individual whose domicile
at the time of death was in Minnesota.
(5) "Nonresident decedent" means an individual whose
domicile at the time of death was not in Minnesota.
(6) "Situs of property" means, with respect to real
property, the state or country in which it is located; with
respect to tangible personal property, the state or country in
which it was normally kept or located at the time of the
decedent's death; and with respect to intangible personal
property, the state or country in which the decedent was
domiciled at death.
(7) "Commissioner" means the commissioner of revenue or any
person to whom the commissioner has delegated functions under
this chapter.
(8) "Internal Revenue Code" means the United States
Internal Revenue Code of 1954 1986 as amended through December
31, 1984 1988.
Sec. 24. [FEDERAL CHANGES.]
The changes made by sections 1002, 1004, 1006, 1008, 1009,
1011, 1014, 1018, 3041, 6002, 6026, and 6286 of the Technical
and Miscellaneous Revenue Act of 1988, Public Law Number
100-647, which affect the computation of Minnesota gross income
as defined in Minnesota Statutes, section 290.01, subdivision
20; lump sum distributions as allowed by Minnesota Statutes,
section 290.032; accounting provision applied under Minnesota
Statutes, section 290.07; contribution deduction allowed by
Minnesota Statutes, sections 290.089 and 290.21; depreciation,
amortization, and expensing provisions allowed under Minnesota
Statutes, section 290.09; the recognition rules for
distributions and reorganization rules provided by Minnesota
Statutes, sections 290.13 to 290.139; and the grantor trust and
reversionary interest rule exceptions and limitations under
Minnesota Statutes, sections 290.23 and 290.25, for years
beginning before January 1, 1987, shall be in effect at the same
time they become effective for federal income tax purposes.
The additional statute of limitations to file amended
returns allowing contributions to institutions of higher
education and allowing an election to claim losses on deposits
in certain insolvent financial institutions under provisions of
sections 6001 and 1009 of the Technical and Miscellaneous
Revenue Act of 1988, shall apply to Minnesota for the same
period as the federal period applies plus an additional six
months.
The waiver of the estimated tax penalties provided by
section 1019 of the Technical and Miscellaneous Revenue Act of
1988, shall also apply to Minnesota to the extent the
underpayment was created or increased by any provisions of the
changes due to applying the federal law changes.
Sec. 25. [INSTRUCTION TO REVISOR.]
In the next edition of Minnesota Statutes, the revisor of
statutes shall substitute the phrase "Internal Revenue Code of
1986, as amended through December 31, 1988" for the words
"Internal Revenue Code of 1986, as amended through December 31,
1987" wherever it occurs in chapters 290, except in section
290.01, subdivision 19, and 290A.
Sec. 26. [REPEALER.]
Minnesota Statutes 1988, section 290.01, subdivision 6a, is
repealed.
Sec. 27. [EFFECTIVE DATE.]
Section 5 is effective for taxable years beginning after
December 31, 1987. Sections 2, 3, 4, and 10 to 18 are effective
for taxable years beginning after December 31, 1988. Sections
19 to 21 are effective after December 31, 1989. Section 22 is
effective for contracts entered into after December 31, 1989.
Section 23 is effective for dates of death after December 31,
1988. Section 1 and sections 6 to 9 are effective for taxable
years beginning after December 31, 1986. The part of section 17
pertaining to goodwill and covenants not to compete are only in
effect on contracts entered into after the day of final
enactment.
Presented to the governor April 7, 1989
Signed by the governor April 7, 1989, 4:55 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes