2004 Minnesota Statutes

     289A.36 Examinations; audits and collections. 

    Subdivision 1.    Examination of taxpayer.  To determine 
 the accuracy of a return or report, or in fixing liability under 
 state tax law, or for the purpose of collection, the 
 commissioner may make reasonable examinations or investigations 
 of a taxpayer's place of business, tangible personal property, 
 equipment, computer systems and facilities, pertinent books, 
 records, papers, vouchers, computer printouts, accounts, and 
 documents.  

    Subd. 2.    Access to records of other persons in 
 connection with examination of taxpayer.  When conducting an 
 investigation or an audit of a taxpayer, or for the purpose of 
 collection, the commissioner may examine, except where 
 privileged by law, the relevant records and files of any person, 
 business, institution, financial institution, state agency, 
 agency of the United States government, or agency of any other 
 state where permitted by statute, agreement, or reciprocity.  
 The commissioner may compel production of these records by 
 subpoena.  A subpoena may be served directly by the commissioner.

    Subd. 3.    Power to compel testimony.  In the 
 administration of state tax law, the commissioner may: 

    (1) administer oaths or affirmations and compel by subpoena 
 the attendance of witnesses, testimony, and the production of a 
 person's pertinent books, records, papers, or other data for 
 inspection and copying; 

    (2) examine under oath or affirmation any person regarding 
 the business of any taxpayer concerning any relevant matter 
 incident to the administration of state tax law.  The fees of 
 witnesses required by the commissioner to attend a hearing are 
 equal to those allowed to witnesses appearing before courts of 
 this state.  The fees must be paid in the manner provided for 
 the payment of other expenses incident to the administration of 
 state tax law; and 

    (3) in addition to other remedies that may be available, 
 bring an action in equity by the state against a taxpayer for an 
 injunction ordering the taxpayer to file a complete and proper 
 return or amended return.  The district courts of this state 
 have jurisdiction over the action and disobedience of an 
 injunction issued under this clause will be punished as a 
 contempt of district court. 

    Subd. 4.    Third party subpoena where taxpayer's identity 
 is known.  An investigation may extend to a person that the 
 commissioner determines has access to information that may be 
 relevant to the examination or investigation.  When a subpoena 
 requiring the production of records as described in subdivision 
 2 is served on a third-party recordkeeper, written notice of the 
 subpoena must be mailed to the taxpayer and to any other person 
 who is identified in the subpoena.  The notices must be given 
 within three days of the day on which the subpoena is served.  
 Notice to the taxpayer required by this section is sufficient if 
 it is mailed to the last address on record with the commissioner.

    The provisions of this subdivision relating to notice to 
 the taxpayer or other parties identified in the subpoena do not 
 apply if there is reasonable cause to believe that the giving of 
 notice may lead to attempts to conceal, destroy, or alter 
 records or assets relevant to the examination, to prevent the 
 communication of information from other persons through 
 intimidation, bribery, or collusion, or to flee to avoid 
 prosecution, testifying, or production of records. 

    Subd. 5.    Third party subpoena where taxpayer's identity 
 is not known.  A subpoena that does not identify the person or 
 persons whose tax liability is being investigated may be served 
 only if: 

    (1) the subpoena relates to the investigation of a 
 particular person or ascertainable group or class of persons; 

    (2) there is a reasonable basis for believing that the 
 person or group or class of persons may fail or may have failed 
 to comply with tax laws administered by the commissioner; 

    (3) the information sought to be obtained from the 
 examination of the records, and the identity of the person or 
 persons with respect to whose liability the subpoena is issued, 
 is not readily available from other sources; 

    (4) the subpoena is clear and specific concerning the 
 information sought to be obtained; and 

    (5) the information sought to be obtained is limited solely 
 to the scope of the investigation.  

    The party served with a subpoena that does not identify the 
 person or persons with respect to whose tax liability the 
 subpoena is issued may, within 20 days after service of the 
 subpoena, petition the district court in the judicial district 
 in which that party is located for a determination concerning 
 whether the commissioner has complied with the requirements in 
 clauses (1) to (5), and thus, whether the subpoena is 
 enforceable.  If no petition is made by the party served within 
 the time prescribed, the subpoena has the effect of a court 
 order. 

    Subd. 6.    Request by taxpayer for subpoena.  When the 
 commissioner has the power to issue a subpoena for investigative 
 or auditing purposes, the commissioner shall honor a reasonable 
 request by the taxpayer to issue a subpoena on the taxpayer's 
 behalf, if in connection with the investigation or audit. 

    Subd. 7.    Application to court for enforcement of 
 subpoena.  (a) Disobedience of subpoenas issued under this 
 section shall be punished by the district court of the district 
 in which the party served with the subpoena is located, in the 
 same manner as contempt of the district court.  

    (b) Disobedience of a subpoena issued under subdivision 9 
 shall be punished by the District Court for Ramsey County in the 
 same manner as contempt of the district court.  In addition to 
 contempt remedies, the court may issue any order the court deems 
 reasonably necessary to enforce compliance with the subpoena. 

    Subd. 8.    Cost of production of records.  The cost of 
 producing records of a third party required by a subpoena must 
 be paid by the taxpayer, if the taxpayer requests the subpoena 
 to be issued, or if the taxpayer has the records available but 
 has refused to provide them to the commissioner.  In other cases 
 where the taxpayer cannot produce records and the commissioner 
 then initiates a subpoena for third-party records, the 
 commissioner shall pay the reasonable cost of producing the 
 records.  The commissioner may later assess the reasonable costs 
 against the taxpayer if the records contribute to the 
 determination of an assessment of tax against the taxpayer. 

    Subd. 9.    Access to records in connection with 
 examination of businesses located outside the state.  (a) In 
 order to determine whether a business located outside the state 
 of Minnesota is required to file a return under this chapter, 
 the commissioner may examine the relevant records and files of 
 the business. 

    (b) To the full extent permitted by the Minnesota and 
 United States Constitutions, the commissioner may compel 
 production of those relevant records and files by subpoena.  The 
 subpoena may be served on the secretary of state along with the 
 address to which service of the subpoena is to be sent and a fee 
 of $50.  The secretary of state shall forward a copy of the 
 subpoena to the business using the procedures for service of 
 process in section 5.25, subdivision 6.  

    (c) The commissioner shall pay the reasonable cost of 
 producing records subject to subpoena under this subdivision if: 

    (1) the subpoenaed party cannot produce the records without 
 undue burden; and 

    (2) the examination made pursuant to paragraph (a) shows 
 that the subpoenaed party is not required to file a return under 
 this chapter. 

    Subd. 10.    Penalty.  In addition to sanctions imposed 
 under subdivision 7, a penalty of $250 per day is imposed on any 
 business that is in violation of a court order to comply with a 
 subpoena that is seeking information necessary for the 
 commissioner to be able to determine whether the business is 
 required to file a return or pay a tax.  The maximum penalty is 
 $25,000.  Upon the request of the commissioner, the court shall 
 determine the amount of the penalty and enter it as a judgment 
 in favor of the commissioner.  The penalty is not payable until 
 the judgment is entered. 

    HIST: 1990 c 480 art 1 s 16; 1993 c 375 art 10 s 16,17; 1997 c 
 84 art 5 s 9; 2003 c 127 art 8 s 9-11