2000 Minnesota Statutes

     289A.60 Civil penalties. 

    Subdivision 1.    Penalty for failure to pay tax.  (a) 
 If a tax other than a withholding or sales or use tax is not 
 paid within the time specified for payment, a penalty must be 
 added to the amount required to be shown as tax.  The penalty is 
 three percent of the tax not paid on or before the date 
 specified for payment of the tax if the failure is for not more 
 than 30 days, with an additional penalty of three percent of the 
 amount of tax remaining unpaid during each additional 30 days or 
 fraction of 30 days during which the failure continues, not 
 exceeding 24 percent in the aggregate. 

    If an individual files a state individual income tax return 
 and pays all of the state individual income tax with the filing 
 of a return within six months of the date the return is due and 
 the amount paid by the due date of the return is at least 90 
 percent of the amount of tax due, as shown on the return, the 
 individual is presumed to have reasonable cause for the late 
 payment. 

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

    Subd. 2.    Penalty for failure to make and file return. 
  If a taxpayer fails to make and file a return other than an 
 income tax return of an individual, a withholding return, or 
 sales or use tax return, within the time prescribed or an 
 extension, a penalty is added to the tax.  The penalty is three 
 percent of the amount of tax not paid on or before the date 
 prescribed for payment of the tax including any extensions if 
 the failure is for not more than 30 days, with an additional 
 five percent of the amount of tax remaining unpaid during each 
 additional 30 days or fraction of 30 days, during which the 
 failure continues, not exceeding 23 percent in the aggregate. 

    If a taxpayer fails to file an individual income tax return 
 within six months after the date prescribed for filing of the 
 return, a penalty of ten percent of the amount of tax not paid 
 by the end of that six-month period is added to the tax.  

    If a taxpayer fails to file a withholding or sales or use 
 tax return within the time prescribed, including an extension, a 
 penalty of five percent of the amount of tax not timely paid is 
 added to the tax.  

    Subd. 3.    Combined penalties.  When penalties are 
 imposed under subdivisions 1 and 2, the penalties imposed under 
 both subdivisions combined must not exceed 38 percent. 

    Subd. 4.    Substantial understatement of liability; 
 penalty.  The commissioner of revenue shall impose a penalty 
 for substantial understatement of any tax payable to the 
 commissioner, except a tax imposed under chapter 297A. 

    There must be added to the tax an amount equal to 20 
 percent of the amount of any underpayment attributable to the 
 understatement.  There is a substantial understatement of tax 
 for the period if the amount of the understatement for the 
 period exceeds the greater of:  (1) ten percent of the tax 
 required to be shown on the return for the period; or (2)(a) 
 $10,000 in the case of a mining company or a corporation, other 
 than an S corporation as defined in section 290.9725, when the 
 tax is imposed by chapter 290, or (b) $5,000 in the case of any 
 other taxpayer, and in the case of a mining company or a 
 corporation any tax not imposed by chapter 290 or section 298.01 
 or 298.015.  The term "understatement" means the excess of the 
 amount of the tax required to be shown on the return for the 
 period, over the amount of the tax imposed that is shown on the 
 return.  The amount of the understatement shall be reduced by 
 that part of the understatement that is attributable to the tax 
 treatment of any item by the taxpayer if there is or was 
 substantial authority for the treatment, or any item with 
 respect to which the relevant facts affecting the item's tax 
 treatment are adequately disclosed in the return or in a 
 statement attached to the return.  The special rules in cases 
 involving tax shelters provided in section 6662(d)(2)(C) of the 
 Internal Revenue Code shall apply and shall apply to a tax 
 shelter the principal purpose of which is the avoidance or 
 evasion of state taxes.  The commissioner may abate all or any 
 part of the addition to the tax provided by this section on a 
 showing by the taxpayer that there was reasonable cause for the 
 understatement, or part of it, and that the taxpayer acted in 
 good faith.  The additional tax and penalty shall bear interest 
 at the rate specified in section 270.75 from the time the tax 
 should have been paid until paid. 

    Subd. 5.    Penalty for intentional disregard of law or 
 rules.  If part of an additional assessment is due to 
 negligence or intentional disregard of the provisions of the 
 applicable tax laws or rules of the commissioner, but without 
 intent to defraud, there must be added to the tax an amount 
 equal to ten percent of the additional assessment.  

    Subd. 5a.    Penalty for repeated failures to file returns 
 or pay taxes.  If there is a pattern by a person of repeated 
 failures to timely file withholding or sales or use tax returns 
 or timely pay withholding or sales or use taxes, and written 
 notice is given that a penalty will be imposed if such failures 
 continue, a penalty of 25 percent of the amount of tax not 
 timely paid as a result of each such subsequent failure is added 
 to the tax.  The penalty can be abated under the abatement 
 authority in section 270.07, subdivisions 1, paragraph (e), and 
 6. 

    Subd. 6.    Penalty for false or fraudulent return, 
 evasion.  If a person files a false or fraudulent return, or 
 attempts in any manner to evade or defeat a tax or payment of 
 tax, there is imposed on the person a penalty equal to 50 
 percent of the tax, less amounts paid by the person on the basis 
 of the false or fraudulent return, due for the period to which 
 the return related.  

    Subd. 7.    Penalty for frivolous return.  If an 
 individual files what purports to be a tax return required by 
 chapter 290 but which does not contain information on which the 
 substantial correctness of the assessment may be judged or 
 contains information that on its face shows that the assessment 
 is substantially incorrect and the conduct is due to a position 
 that is frivolous or a desire that appears on the purported 
 return to delay or impede the administration of Minnesota tax 
 laws, then the individual shall pay a penalty of $500.  In a 
 proceeding involving the issue of whether or not a person is 
 liable for this penalty, the burden of proof is on the 
 commissioner.  

    Subd. 8.    Penalty for failure to file informational 
 return.  In the case of a failure to file an informational 
 return required by section 289A.12 with the commissioner on the 
 date prescribed (determined with regard to any extension of time 
 for filing), the person failing to file the return shall pay a 
 penalty of $50 for each failure or in the case of a partnership, 
 S corporation, or fiduciary return, $50 for each partner, 
 shareholder, or beneficiary; but the total amount imposed on the 
 delinquent person for all failures during any calendar year must 
 not exceed $25,000.  If a failure to file a return is due to 
 intentional disregard of the filing requirement, then the 
 penalty imposed under the preceding sentence must not be less 
 than an amount equal to:  

    (1) in the case of a return not described in clause (2) or 
 (3), ten percent of the aggregate amount of the items required 
 to be reported; 

    (2) in the case of a return required to be filed under 
 section 289A.12, subdivision 5, five percent of the gross 
 proceeds required to be reported; and 

    (3) in the case of a return required to be filed under 
 section 289A.12, subdivision 9, relating to direct sales, $100 
 for each failure; however, the total amount imposed on the 
 delinquent person for intentional failures during a calendar 
 year must not exceed $50,000.  The penalty must be collected in 
 the same manner as a delinquent income tax.  

    Subd. 9. Repealed, 1996 c 305 art 1 s 64 

    Subd. 10.    Penalty for failure to provide social 
 security number as required.  A person who is required by law 
 to:  (1) give the person's social security account number to 
 another person; or (2) include in a return, statement, or other 
 document made with respect to another person that individual's 
 social security account number, who fails to comply with the 
 requirement when prescribed, must pay a penalty of $50 for each 
 failure.  The total amount imposed on a person for failures 
 during a calendar year must not exceed $25,000.  

    Subd. 11.    Penalties relating to information reports, 
 withholding.  (a) When a person required under section 
 289A.09, subdivision 2, to give a statement to an employee or 
 payee and a duplicate statement to the commissioner, or to give 
 a reconciliation of the statements and quarterly returns to the 
 commissioner, gives a false or fraudulent statement to an 
 employee or payee or a false or fraudulent duplicate statement 
 or reconciliation of statements and quarterly returns to the 
 commissioner, or fails to give a statement or the reconciliation 
 in the manner, when due, and showing the information required by 
 section 289A.09, subdivision 2, or rules prescribed by the 
 commissioner under that section, that person is liable for a 
 penalty of $50 for an act or failure to act.  The total amount 
 imposed on the delinquent person for failures during a calendar 
 year must not exceed $25,000.  

    (b) In addition to any other penalty provided by law, an 
 employee who gives a withholding exemption certificate or a 
 residency affidavit to an employer that the employee has reason 
 to know contains a materially incorrect statement is liable to 
 the commissioner of revenue for a penalty of $500 for each 
 instance.  

    (c) In addition to any other penalty provided by law, an 
 employer who fails to submit a copy of a withholding exemption 
 certificate or a residency affidavit required by section 290.92, 
 subdivision 5a, clause (1)(a), (1)(b), or (2) is liable to the 
 commissioner of revenue for a penalty of $50 for each instance.  

    (d) An employer or payor who fails to file an application 
 for a withholding account number, as required by section 290.92, 
 subdivision 24, is liable to the commissioner for a penalty of 
 $100.  

    Subd. 12.    Penalties relating to property tax refunds. 
  (a) If the commissioner determines that a property tax refund 
 claim is or was excessive and was filed with fraudulent intent, 
 the claim must be disallowed in full.  If the claim has been 
 paid, the amount disallowed may be recovered by assessment and 
 collection. 

    (b) If it is determined that a property tax refund claim is 
 excessive and was negligently prepared, ten percent of the 
 corrected claim must be disallowed.  If the claim has been paid, 
 the amount disallowed must be recovered by assessment and 
 collection.  

    (c) An owner who without reasonable cause fails to give a 
 certificate of rent constituting property tax to a renter, as 
 required by section 290A.19, paragraph (a), is liable to the 
 commissioner for a penalty of $100 for each failure. 

    (d) If the owner or managing agent knowingly gives rent 
 certificates that report total rent constituting property taxes 
 in excess of the amount of actual rent constituting property 
 taxes paid on the rented part of a property, the owner or 
 managing agent is liable for a penalty equal to the greater of 
 (1) $100 or (2) 50 percent of the excess that is reported.  An 
 overstatement of rent constituting property taxes is presumed to 
 be knowingly made if it exceeds by ten percent or more the 
 actual rent constituting property taxes. 

    (e) No claim is allowed if the initial claim is filed more 
 than one year after the original due date for filing the claim.  

    Subd. 13.    Penalties for tax return preparers.  (a) If 
 an understatement of liability with respect to a return or claim 
 for refund is due to a willful attempt in any manner to 
 understate the liability for a tax by a person who is a tax 
 return preparer with respect to the return or claim, the person 
 shall pay to the commissioner a penalty of $500.  If a part of a 
 property tax refund claim is excessive due to a willful attempt 
 in any manner to overstate the claim for relief allowed under 
 chapter 290A by a person who is a tax refund or return preparer, 
 the person shall pay to the commissioner a penalty of $500 with 
 respect to the claim.  These penalties may not be assessed 
 against the employer of a tax return preparer unless the 
 employer was actively involved in the willful attempt to 
 understate the liability for a tax or to overstate the claim for 
 refund.  These penalties are income tax liabilities and may be 
 assessed at any time as provided in section 289A.38, subdivision 
 5. 

    (b) A civil action in the name of the state of Minnesota 
 may be commenced to enjoin any person who is a tax return 
 preparer doing business in this state from further engaging in 
 any conduct described in paragraph (c).  An action under this 
 paragraph must be brought by the attorney general in the 
 district court for the judicial district of the tax return 
 preparer's residence or principal place of business, or in which 
 the taxpayer with respect to whose tax return the action is 
 brought resides.  The court may exercise its jurisdiction over 
 the action separate and apart from any other action brought by 
 the state of Minnesota against the tax return preparer or any 
 taxpayer. 

    (c) In an action under paragraph (b), if the court finds 
 that a tax return preparer has: 

    (1) engaged in any conduct subject to a civil penalty under 
 section 289A.60 or a criminal penalty under section 289A.63; 

    (2) misrepresented the preparer's eligibility to practice 
 before the department of revenue, or otherwise misrepresented 
 the preparer's experience or education as a tax return preparer; 

    (3) guaranteed the payment of any tax refund or the 
 allowance of any tax credit; or 

    (4) engaged in any other fraudulent or deceptive conduct 
 that substantially interferes with the proper administration of 
 state tax law, and injunctive relief is appropriate to prevent 
 the recurrence of that conduct, 

 the court may enjoin the person from further engaging in that 
 conduct. 

    (d) If the court finds that a tax return preparer has 
 continually or repeatedly engaged in conduct described in 
 paragraph (c), and that an injunction prohibiting that conduct 
 would not be sufficient to prevent the person's interference 
 with the proper administration of state tax laws, the court may 
 enjoin the person from acting as a tax return preparer.  The 
 court may not enjoin the employer of a tax return preparer for 
 conduct described in paragraph (c) engaged in by one or more of 
 the employer's employees unless the employer was also actively 
 involved in that conduct. 

    (e) For purposes of this subdivision, the term 
 "understatement of liability" means an understatement of the net 
 amount payable with respect to a tax imposed by state tax law, 
 or an overstatement of the net amount creditable or refundable 
 with respect to a tax.  The determination of whether or not 
 there is an understatement of liability must 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 either 
 section 289A.25 or 289A.26 is not considered an understatement 
 of liability. 

    (f) For purposes of this subdivision, the term 
 "overstatement of claim" means an overstatement of the net 
 amount refundable with respect to a claim for property tax 
 relief provided by chapter 290A.  The determination of whether 
 or not there is an overstatement of a claim must be made without 
 regard to administrative or judicial action involving the 
 claimant. 

    (g) For purposes of this section, the term "tax refund or 
 return preparer" means an individual who prepares for 
 compensation, or who employs one or more individuals to prepare 
 for compensation, a return of tax, or a claim for refund of 
 tax.  The preparation of a substantial part of a return or claim 
 for refund is treated as if it were the preparation of the 
 entire return or claim for refund.  An individual is not 
 considered a tax return preparer merely because the individual: 

    (1) gives typing, reproducing, or other mechanical 
 assistance; 

    (2) prepares a return or claim for refund of the employer, 
 or an officer or employee of the employer, by whom the 
 individual is regularly and continuously employed; 

    (3) prepares a return or claim for refund of any person as 
 a fiduciary for that person; or 

    (4) prepares a claim for refund for a taxpayer in response 
 to a tax order issued to the taxpayer. 

    Subd. 14.    Penalty for use of sales tax exemption 
 certificates to evade tax.  A person who uses an exemption 
 certificate to buy property or purchase services that will be 
 used for purposes other than the exemption claimed, with the 
 intent to evade payment of sales tax to the seller, is subject 
 to a penalty of $100 for each transaction where that use of an 
 exemption certificate has occurred.  

    Subd. 15.    Accelerated payment of June sales tax 
 liability; penalty for underpayment.  If a vendor is required 
 by law to submit an estimation of June sales tax liabilities and 
 62 percent payment by a certain date, the vendor shall pay a 
 penalty equal to ten percent of the amount of actual June 
 liability required to be paid in June less the amount remitted 
 in June.  The penalty must not be imposed, however, if the 
 amount remitted in June equals the lesser of 62 percent of the 
 preceding May's liability or 62 percent of the average monthly 
 liability for the previous calendar year. 

    Subd. 16.    Penalty for sales after revocation.  A 
 person who engages in the business of making retail sales after 
 revocation of a permit under section 297A.07 is liable for a 
 penalty of $100 for each day the person continues to make 
 taxable sales. 

    Subd. 17.    Operator of flea markets; penalty.  A 
 person who fails to comply with the provisions of section 
 297A.041 is subject to a penalty of $100 for each day of each 
 selling event that the operator fails to obtain evidence that a 
 seller is the holder of a valid seller's permit issued under 
 section 297A.04.  

    Subd. 18.    Payment of penalties.  The penalties 
 imposed by this section are collected and paid in the same 
 manner as taxes. 

    Subd. 19.    Penalties are additional.  The civil 
 penalties imposed by this section are in addition to the 
 criminal penalties imposed by this chapter. 

    Subd. 20.    Penalty for promoting abusive tax shelters. 
  Any person who: 

    (1)(i) organizes or assists in the organization of a 
 partnership or other entity, an investment plan or arrangement, 
 or any other plan or arrangement, or (ii) participates in the 
 sale of any interest in an entity or plan or arrangement 
 referred to in clause (i); and 

    (2) makes or furnishes in connection with the organization 
 or sale a statement with respect to the allowability of a 
 deduction or credit, the excludability of income, or the 
 securing of any other tax benefit by reason of holding an 
 interest in the entity or participating in the plan or 
 arrangement that the person knows or has reason to know is false 
 or fraudulent concerning any material matter, shall pay a 
 penalty equal to the greater of $1,000 or 20 percent of the 
 gross income derived or to be derived by the person from the 
 activity. 

    The penalty imposed by this subdivision is in addition to 
 any other penalty provided by this section.  The penalty must be 
 collected in the same manner as any delinquent income tax.  In a 
 proceeding involving the issue of whether or not any person is 
 liable for this penalty, the burden of proof is upon the 
 commissioner. 

    Subd. 21.    Penalty for failure to make payment by 
 electronic funds transfer.  In addition to other applicable 
 penalties imposed by this section, after notification from the 
 commissioner to the taxpayer that payments are required to be 
 made by means of electronic funds transfer under section 
 289A.20, subdivision 2, paragraph (e), or 4, paragraph (d), or 
 289A.26, subdivision 2a, and the payments are remitted by some 
 other means, there is a penalty in the amount of five percent of 
 each payment that should have been remitted electronically.  The 
 penalty can be abated under the abatement procedures prescribed 
 in section 270.07, subdivision 6, if the failure to remit the 
 payment electronically is due to reasonable cause. 

    Subd. 22.    Composite returns.  For the purposes of the 
 penalties imposed by subdivisions 1 and 2, the payment of a 
 composite tax or filing of a composite return pursuant to 
 section 289A.08, subdivision 7, is considered the payment and 
 filing of a corporate tax. 

    Subd. 23.    Withholding for nonresident partners or 
 shareholders.  For the purposes of the penalties imposed by 
 subdivisions 1, 2, and 5a, the filing of returns required by 
 section 289A.09, subdivision 1, paragraphs (d) and (e), and the 
 payment of amounts withheld under section 290.92, subdivisions 
 4b and 4c, are considered filing and payment corporate tax 
 rather than withholding tax. 

    Subd. 24.    Penalty for failure to notify of federal 
 change.  If a person fails to report to the commissioner a 
 change or correction of the person's federal return in the 
 manner and time prescribed in section 289A.38, subdivision 7, 
 there must be added to the tax an amount equal to ten percent of 
 the amount of any underpayment of Minnesota tax attributable to 
 the federal change. 

    HIST: 1990 c 480 art 1 s 26; 1991 c 291 art 6 s 16,17,46; art 
 8 s 6; art 11 s 11; art 16 s 10; 1992 c 511 art 6 s 19; 1993 c 
 375 art 8 s 14; art 10 s 19-23; 1994 c 510 art 2 s 2,3; 1994 c 
 587 art 1 s 24; art 12 s 6; 1995 c 264 art 4 s 9; art 10 s 5; 
 art 11 s 8; art 13 s 12; 1996 c 471 art 3 s 52; 1997 c 84 art 3 
 s 2; 1997 c 231 art 2 s 70; 1999 c 243 art 16 s 20,21; 2000 c 
 490 art 4 s 4; art 8 s 2,3 

*   NOTE:  The amendment to subdivision 15, changing 
*percentages from 75 to 62, by Laws 2000, chapter 490, article 8, 
*section 3, is effective beginning with the June 2002 liability.  
*Laws 2000, chapter 490, article 8, section 3, the effective date.