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Chapter 289A

Section 289A.60

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289A.60 CIVIL PENALTIES.
    Subdivision 1. Penalty for failure to pay tax. (a) If a corporate franchise, fiduciary income,
mining company, estate, partnership, S corporation, or nonresident entertainer tax is not paid
within the time specified for payment, a penalty of six percent is added to the unpaid tax, except
that if a corporation or mining company meets the requirements of section 289A.19, subdivision
2
, the penalty is not imposed.
(b) For the taxes listed in paragraph (a), in addition to the penalty in that paragraph,
whether imposed or not, if a return or amended return is filed after the due date, without regard
to extensions, and any tax reported as remaining due is not remitted with the return or amended
return, a penalty of five percent of the tax not paid is added to the tax. If the commissioner issues
an order assessing additional tax for a tax listed in paragraph (a), and the tax is not paid within
60 days after the mailing of the order or, if appealed, within 60 days after final resolution of the
appeal, a penalty of five percent of the unpaid tax is added to the tax.
(c) If an individual income tax is not paid within the time specified for payment, a penalty of
four percent is added to the unpaid tax. There is a presumption of reasonable cause for the late
payment if the individual: (i) pays by the due date of the return at least 90 percent of the amount
of tax, after credits other than withholding and estimated payments, shown owing on the return;
(ii) files the return within six months after the due date; and (iii) pays the remaining balance
of the reported tax when the return is filed.
(d) If the commissioner issues an order assessing additional individual income tax, and the
tax is not paid within 60 days after the mailing of the order or, if appealed, within 60 days after
final resolution of the appeal, a penalty of four percent of the unpaid tax is added to the tax.
(e) If a withholding or sales or use tax is not paid within the time specified for payment, a
penalty must be added to the amount required to be shown as tax. The penalty is five percent of
the tax not paid on or before the date specified for payment of the tax if the failure is for not more
than 30 days, with an additional penalty of five percent of the amount of tax remaining unpaid
during each additional 30 days or fraction of 30 days during which the failure continues, not
exceeding 15 percent in the aggregate.
    Subd. 2. Penalty for failure to make and file return. If a taxpayer fails to make and file a
tax return within the time prescribed, including an extension, or fails to file an individual income
tax return within six months after the due date, a penalty of five percent of the amount of tax not
paid by the end of that period is added to the tax.
    Subd. 2a. Penalties for extended delinquency. (a) If an individual income tax is not
paid within 180 days after the date of filing of a return or, in the case of taxes assessed by the
commissioner, within 180 days after the assessment date or, if appealed, within 180 days after
final resolution of the appeal, an extended delinquency penalty of five percent of the tax remaining
unpaid is added to the amount due.
(b) If a tax return is not filed within 30 days after written demand for the filing of a delinquent
return, an extended delinquency penalty of five percent of the tax not paid prior to the demand or
$100 is imposed, whichever amount is greater.
    Subd. 3.[Repealed, 1Sp2001 c 5 art 11 s 8]
    Subd. 4. Substantial understatement of liability; penalty. (a) 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.
(b) 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)(i) $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 section 298.01 or
298.015, or
(ii) $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.
(c) For a corporation, other than an S corporation, there is also a substantial understatement
of tax for any taxable year if the amount of the understatement for the taxable year exceeds the
lesser of:
(1) ten percent of the tax required to be shown on the return for the taxable year (or, if
greater, $10,000); or
(2) $10,000,000.
(d) 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 excess must be determined without regard to items to which subdivision 27 applies.
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 (1) there is or was substantial
authority for the treatment, or (2)(i) 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
and (ii) there is a reasonable basis for the tax treatment of the item. The exception for substantial
authority under clause (1) does not apply to positions listed by the Secretary of the Treasury under
section 6662(d)(3) of the Internal Revenue Code. A corporation does not have a reasonable
basis for its tax treatment of an item attributable to a multiple-party financing transaction if the
treatment does not clearly reflect the income of the corporation within the meaning of section
6662(d)(2)(B) of the Internal Revenue Code. 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.
(e) 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 270C.40 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 270C.34.
    Subd. 6. Penalty for failure to file, false or fraudulent return, evasion. (a) If a person,
with intent to evade or defeat a tax or payment of tax, fails to file a return, files a false or
fraudulent return, or attempts in any other 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, if any, due for the period to which the return related.
(b) If a person files a false or fraudulent return that includes a claim for refund, there is
imposed on the person a penalty equal to 50 percent of the portion of any refund claimed that
is attributable to fraud. The penalty under this paragraph is in addition to any penalty imposed
under paragraph (a).
    Subd. 7. Penalty for frivolous return. If a taxpayer files what purports to be a tax return or a
claim for refund but which does not contain information on which the substantial correctness of
the purported return or claim for refund may be judged or contains information that on its face
shows that the purported return or claim for refund is substantially incorrect and the conduct is
due to a position that is frivolous or a desire that appears on the purported return or claim for
refund to delay or impede the administration of Minnesota tax laws, then the individual shall pay
a penalty of the greater of $1,000 or 25 percent of the amount of tax required to be shown on the
return. 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 decreases the amount withheld
under section 290.92 and as of the time the certificate or affidavit was given to the employer
there was no reasonable basis for the statements in the certificate or affidavit 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 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.
(b) 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.
(c) 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.
    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 reckless disregard of laws and rules or 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 reckless disregard or 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 reckless disregard or 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 as provided in section 270C.447.
(c) The commissioner may terminate or suspend a tax preparer's authority to transmit returns
electronically to the state, if the commissioner determines that the tax preparer has engaged in a
pattern and practice of conduct in violation of paragraph (a) of this subdivision or has been
convicted under section 289A.63.
(d) 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.
(e) 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.
(f) 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.
For payments made after December 31, 2006, if a vendor is required by law to submit an
estimation of June sales tax liabilities and 78 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 78 percent of the preceding May's liability or 78 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 270C.722 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.87 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.83.
    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. (a) 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.
(b) If an activity for which a penalty imposed under this subdivision involves a statement
that a material advisor, as defined in section 289A.121, has reason to know is false or fraudulent
as to any material matter, the amount of the penalty equals the greater of:
(1) the amount determined under paragraph (a); or
(2) 50 percent of the gross income derived or to be derived from the activity.
    Subd. 20a. Aiding and abetting understating of tax liability. (a) A penalty in the amount
specified under paragraph (b) for each document is imposed on each person who:
(1) aids or assists in, procures, or advises with respect to, the preparation or presentation
of any portion of a return, affidavit, claim, or other document;
(2) knows or has reason to believe that the portion of a return, affidavit, claim, or other
document will be used in connection with any material matter arising under the Minnesota
individual income or corporate franchise tax; and
(3) knows that the portion, if so used, would result in an understatement of the liability
for tax of another person.
(b)(1) Except as provided in clause (2), the amount of the penalty imposed by this
subdivision is $1,000.
(2) If the return, affidavit, claim, or other document relates to the tax liability of a corporation,
the amount of the penalty imposed by paragraph (a) is $10,000.
(3) If any person is subject to a penalty under paragraph (a) for any document relating to
any taxpayer for any taxable period or taxable event, the person is not subject to a penalty under
paragraph (a) for any other document relating to the taxpayer for the taxable period or event.
(c) For purposes of this subdivision, "procures" includes (1) ordering or otherwise causing
any other person to do an act, and (2) knowing of, and not attempting to prevent, participation by
any other person in an act.
(d) 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. The penalty applies whether or not the
understatement is with the knowledge or consent of the persons authorized or required to present
the return, affidavit, claim, or other document.
(e) For purposes of paragraph (a), clause (1), a person furnishing typing, reproducing, or
other mechanical assistance with respect to a document is not treated as having aided or assisted
in the preparation of the document by reason of the assistance.
(f)(1) Except as provided by clause (2), the penalty imposed by this section is in addition to
any other penalty provided by law.
(2) No penalty applies under subdivision 20 to any person for any document for which a
penalty is assessed on the person under this subdivision.
    Subd. 21. Penalty for failure to make payment by electronic means. 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 electronic means under section 289A.20,
subdivision 2
, paragraph (e), or 4, paragraph (c), 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. After the commissioner's initial notification to the
taxpayer that payments are required to be made by electronic means, the commissioner is not
required to notify the taxpayer in subsequent periods if the initial notification specified the amount
of tax liability at which a taxpayer is required to remit payments by electronic means. The penalty
can be abated under the abatement procedures prescribed in section 270C.34, subdivision 2, 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.
    Subd. 25. Penalty for failure to properly complete sales tax return. A person who fails to
report local sales tax on a sales tax return or who fails to report local sales tax on separate tax
lines on the sales tax return is subject to a penalty of five percent of the amount of tax not properly
reported on the return. A person who files a consolidated tax return but fails to report location
information is subject to a $500 penalty for each return not containing location information. In
addition, the commissioner may revoke the privilege for a taxpayer to file consolidated returns
and may require the taxpayer to separately register each location and to file a tax return for
each location.
    Subd. 26. Tax shelter penalties; registration and listing. (a) For purposes of this
subdivision, "material advisor" has the meaning given it under section 6111(b)(1) of the Internal
Revenue Code.
(b) The penalties in this subdivision apply in connection with the use of tax shelters, as
defined under section 289A.121, and the definitions under that section apply for the purposes
of this subdivision.
(c) A material advisor who fails to register a tax shelter, including providing all of the
required information under section 289A.121, on or before the date prescribed or who files false
or incomplete information with respect to the transaction is subject to a penalty of $50,000. If the
tax shelter is a listed transaction, a penalty applies equal to the greater of:
(1) $200,000;
(2) 50 percent of the gross income that the material advisor derived from that activity; or
(3) 75 percent of the gross income that the material advisor derived from that activity if
the material advisor intentionally failed to act.
(d)(1) Any person who fails to include on a return or statement any information with respect
to a reportable transaction as required under section 289A.121 is subject to a penalty equal to:
(i) $10,000 in the case of an individual and $50,000 in any other case; or
(ii) with respect to a listed transaction, $100,000 in the case of an individual and $200,000 in
any other case.
(2) For a unitary business in which more than one member fails to include information on
its return or statement for the same reportable transaction, the penalty under clause (1) for each
additional member that fails to include the required information on its return or statement for the
reportable transaction is limited to the following amount:
(i) $500 for each member, subject to a maximum additional penalty of $25,000; and
(ii) with respect to a listed transaction, $1,000 for each member, subject to a maximum
additional penalty of $100,000.
(e) A material advisor required to maintain or provide a list under section 289A.121,
subdivision 6
, is subject to a penalty equal to $10,000 for each day after the 20th day that the
material advisor failed to make the list available to the commissioner after written request for that
list was made. No penalty applies for a failure on any day if the failure is due to reasonable cause.
(f) The penalty imposed by this subdivision is in addition to any other penalty imposed
under this section.
(g) Notwithstanding section 270C.34, the commissioner may abate all or any portion of any
penalty imposed by paragraphs (c) and (d) for any violation, only if all of the following apply:
(1) the violation is for a reportable transaction, other than a listed transaction; and
(2) abating the penalty would promote compliance with the requirements of chapter 290.
(h) Notwithstanding any other law or rule, a determination under paragraph (g) may not be
reviewed in any judicial proceeding.
    Subd. 27. Reportable transaction understatement. (a) If a taxpayer has a reportable
transaction understatement for any taxable year, an amount equal to 20 percent of the amount of
the reportable transaction understatement must be added to the tax.
(b)(1) For purposes of this subdivision, "reportable transaction understatement" means
the product of:
(i) the amount of the increase, if any, in taxable income that results from a difference between
the proper tax treatment of an item to which this section applies and the taxpayer's treatment of
that item as shown on the taxpayer's tax return; and
(ii) the highest rate of tax imposed on the taxpayer under section 290.06 determined without
regard to the understatement.
(2) For purposes of clause (1)(i), any reduction of the excess of deductions allowed for the
taxable year over gross income for that year, and any reduction in the amount of capital losses
which would, without regard to section 1211 of the Internal Revenue Code, be allowed for that
year, must be treated as an increase in taxable income.
(c) This subdivision applies to any item that is attributable to:
(1) any listed transaction under section 289A.121; and
(2) any reportable transaction, other than a listed transaction, if a significant purpose of that
transaction is the avoidance or evasion of federal income tax liability.
(d) Paragraph (a) applies by substituting "30 percent" for "20 percent" with respect to
the portion of any reportable transaction understatement with respect to which the disclosure
requirements of section 289A.121, subdivision 5, and section 6664(d)(2)(A) of the Internal
Revenue Code are not met.
(e)(1) No penalty applies under this subdivision with respect to any portion of a reportable
transaction understatement if the taxpayer shows that there was reasonable cause for the portion
and that the taxpayer acted in good faith with respect to the portion. This paragraph applies only if:
(i) the relevant facts affecting the tax treatment of the item are adequately disclosed as
required under section 289A.121;
(ii) there is or was substantial authority for the treatment; and
(iii) the taxpayer reasonably believed that the treatment was more likely than not the proper
treatment.
(2) A taxpayer who did not adequately disclose under section 289A.121 meets the
requirements of clause (1)(i), if the commissioner abates the penalty under section 270C.34.
(3) For purposes of clause (1)(iii), a taxpayer is treated as having a reasonable belief with
respect to the tax treatment of an item only if the belief:
(i) is based on the facts and law that exist when the return of tax which includes the tax
treatment is filed; and
(ii) relates solely to the taxpayer's chances of success on the merits of the treatment and does
not take into account the possibility that a return will not be audited, the treatment will not be
raised on audit, or the treatment will be resolved through settlement if it is raised.
(4) An opinion of a tax advisor may not be relied upon to establish the reasonable belief
of a taxpayer if:
(i) the tax advisor:
(A) is a material advisor, as defined in section 289A.121, and participates in the organization,
management, promotion, or sale of the transaction or is related (within the meaning of section
267(b) or 707(b)(1) of the Internal Revenue Code) to any person who so participates;
(B) is compensated directly or indirectly by a material advisor with respect to the transaction;
(C) has a fee arrangement with respect to the transaction which is contingent on all or part of
the intended tax benefits from the transaction being sustained; or
(D) has a disqualifying financial interest with respect to the transaction, as determined
under United States Treasury regulations prescribed to implement the provisions of section
6664(d)(3)(B)(ii)(IV) of the Internal Revenue Code; or
(ii) the opinion:
(A) is based on unreasonable factual or legal assumptions, including assumptions as to
future events;
(B) unreasonably relies on representations, statements, findings, or agreements of the
taxpayer or any other person;
(C) does not identify and consider all relevant facts; or
(D) fails to meet any other requirement as the Secretary of the Treasury may prescribe
under federal law.
(f) The penalty imposed by this subdivision applies in lieu of the penalty imposed under
subdivision 4.
History: 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 418 art 1 s 44;
2000 c 490 art 4 s 4; art 8 s 2,3; 2001 c 7 s 59,60; 1Sp2001 c 5 art 11 s 2-5; art 17 s 13; 2002 c
377 art 10 s 10; 1Sp2001 c 5 art 12 s 95; 2002 c 377 art 3 s 24; 2003 c 127 art 3 s 5; art 6 s 2,3;
1Sp2003 c 21 art 8 s 4,15; 2005 c 151 art 2 s 10,17; art 6 s 8-10; art 9 s 17-19; 1Sp2005 c 3
art 8 s 4-8; art 11 s 5; 2006 c 259 art 13 s 3

Official Publication of the State of Minnesota
Revisor of Statutes