MINNESOTA Department of Revenue

Transcription

1 MINNESOTA Department of Revenue Department Technical Bill February 1, 2000 Department of Revenue Analysis of S.F (Belanger) /H.F (Daggett) Revenue Gain or (Loss) F.Y F.Y Biennium F.Y F.Y Biennium (000 s) General Fund No Impact No Impact EXPLANATION OF THE BILL A section-by-section summary is attached. Source: Minnesota Department of Revenue Tax Research Division sf2693(hf3024)-1.doc/cc

2 2000 TECHNICAL BILL SUMMARY MINNESOTA Department of Revenue Appeals, Legal Services & Criminal Investigation Division (651) Mail Station North Robert Street St. Paul, MN Article 1 Income and Franchise Taxes Section 1. Withholding EFT. Amends Minn. Stat. 289A.20, subd. 2 to clarify that an employer is required to deposit Minnesota wage withholding by electronic funds transfers on amounts withheld in the year and not on the amounts deposited in the year. For example, if the employer withholds Minnesota taxes on December 20, 1999 and deposits the taxes on January 4, 2000, the employer would have to electronically transfer the withholding only if they were required to electronically transfer for calendar year Effective for wages paid after December 31, Section 2. Payment of Estimated Tax. Amends Minn. Stat. 289A.26, subd. 1 to delete an obsolete reference to an election to file a single corporate franchise tax return. Effective day following final enactment. Section 3. Minimum Fee. Amends Minn. Stat , subd. 19c to clarify that the corporate franchise tax minimum fee is a tax and it must be added back to federal taxable income if it was deducted for federal income tax purposes. Effective for tax years beginning after December 31, Sections 4, 5, and 6. Minimum Contacts. Amends Minn. Stat , subd. 1 to clarify that the presence of mobile property in Minnesota may subject a taxpayer to the tax imposed by Chapter 290; clarifies the language that requires a taxpayer to file a return if they have transactions with customers in Minnesota involving intangible property where the receipts are attributed to Minnesota; adds several statutory references; and deletes the clause providing that business from within this state for financial institutions includes receiving deposits from customers in this state. Amends Minn. Stat , subd. 3 and subd. 4 to change unitary group to unitary business and to make other nonsubstantive changes to improve clarity. Effective for tax years beginning after December 31, Section 7. Credit for Taxes Paid to Another State. Amends Minn. Stat , subd. 22 to delete an obsolete statutory reference. Effective the day following final enactment. Sections 8, 9 & 10. NonWage Withholding Rates. Amends Minn. Stat , subds. 3, 28, and 29 by changing the statutorily set rates of Minnesota withholding on certain types of payments. During the 1999 legislative session, the Minnesota individual income tax rates were reduced by approximately 10%. The set withholding rates, which are meant to

3 approximate the actual income tax, were not changed. Thus, Section 8 reduces the withholding tax rate on supplemental wage payments not tied to a specific wage period from the current 7% to 6.25%. Section 9 reduces the withholding tax rate on payments to jockeys and trainers from 7% to 6.25%. Section 10 reduces the rate on lottery winnings from 8% to 7.25%. Section 8 is effective for wages paid after December 31, Section 9 is effective for payments made after the date of final enactment and Section 10 is effective for winnings paid after the date of final enactment. Section 11. Effective Dates. Article 2 Sales and Special Taxes Section 1. Payment of Newly Mandated EFT Sales Tax Payments. Changes the effective date for newly mandated sales tax electronic funds transfers so that the first required EFT payment is made for the period beginning in the new calendar year rather than the first payment due in the new calendar year. This will be less confusing for taxpayers and simplify the transition to the EFT method of payment and will be easier for the Department of Revenue to administer. Effective the day following final enactment. Section 2. Penalty for Misusing Exemption Certificates for Purchases of Taxable Services. Clarifies that the penalty in Minn. Stat. 289A.60, subd. 14 for the misuse of an exemption certificate in an effort to evade sales tax, applies to purchases of taxable services as well as purchases of taxable property. Effective for exemption certificates used on or after July 1, Section 3. MTC Bus Exemption. Amends Minn. Stat. 297A.25, subd. 34 to clarify that purchases and leases of Metropolitan Transit Council buses are exempt from sales tax. A law change made in 1997 had the unintentional effect of imposing sales tax on buses purchased or leased by the MTC. (The intent was to clarify that local governments are required to pay sales tax on their off-road vehicles.) This change corrects the oversight. Retroactively effective July 1, Section 4. Motor Vehicle Transfers Between Related Companies. Expands the exemption in Minn. Stat. 297B.03(4) for transfers between related companies to be consistent with the occasional sale exemption allowed for corporate mergers, liquidations and reorganizations mentioned in Minn. Stat. 297A.25, subd. 12. The Department of Revenue has taken the position that vehicle transfers that are the result of legal mergers, liquidations and reorganizations are exempt from the sales tax on motor vehicles since the transfer is solely by operation of law. This will create consistency between the two statutes. Effective the day following final enactment. 2

4 Section 5. Definition of Consumer. Amends Minn. Stat. 297F.01, subd. 7 which provides a definition of consumer for the cigarette and tobacco products taxes to clarify consumer means an individual who has title to or possession of cigarettes or tobacco products for personal consumption rather than for sale. Effective the day following final enactment. Section 6. Definition of Invoice. Adds a new subdivision to Minn. Stat. 297F.01, to define the term invoice for the cigarette and tobacco products taxes. Effective July 1, Section 7. Definition of Retailer. Amends Minn. Stat. 297F.01, subd. 14 which provides a definition of retailer for the cigarette and tobacco products taxes to include persons licensed under Minn. Stat. Chapter 461. Effective the day following final enactment. Section 8. Definition of Unlicensed Seller. Adds a new subdivision to Minn. Stat. 297F.01, to define the term unlicensed seller for the cigarette and tobacco products taxes. Effective the day following final enactment. Section 9. Maintenance of Invoices. Amends Minn. Stat. 297F.13, subd. 4 of the cigarette and tobacco products taxes to require that retailers and sub-jobbers maintain copies of invoices for all cigarettes or tobacco products at each licensed place of business. Effective July 1, Section 10. Repealer. Repeals Minn. Stat , which is an obsolete statute dealing with railroads and other corporations and companies that pay taxes upon a gross earnings basis, and requires the Commissioner of Revenue to visit these companies once a year and examine their books of account. Effective the day following final enactment. Section 11. Effective Dates. Article 3 Property Taxes Sections 1, 2 and 8(a). Airflight Property Tax Lien. Amends Minn. Stat , subd. 2; adds a new subdivision 6, to that section and, repeals Minn. Stat , subd. 5, and , subds. 3 and 4. Under current law, it is unclear whether the lien for this tax attaches on the January 2 nd valuation date, on September 1 st when the tax amount for the following year is determined, or some other date. The changes to subdivision 2 clarify that airflight property is valued for tax purposes as of January 2 in the assessment year. The changes under the new subdivision 6 clarify that the lien for the tax attaches on the same date. Since this is a personal property tax, the lien attaches to all property within the state of the taxpayer. The repealers eliminate special provisions whereby, in order to enforce the tax, the Attorney General must bring an action in court. The tax, plus any applicable penalties and interest, will now be 3

5 enforced under the general statutory lien and levy powers of the Commissioner of Revenue. Effective for taxes payable in 2001 and thereafter. Section 3. Green Acres. Amends Minn. Stat , subd. 3 to allow Green Acres treatment to carryover to noncontiguous, nonhomestead agricultural land that is farmed with qualifying agricultural land, if the noncontiguous parcel is within four townships of the qualifying land. Current law limits carryovers in these situations to noncontiguous land that is within two townships of the qualifying land. The changes made here are similar to the 1998 changes in the agricultural homestead definition statute, Minn. Stat , subd. 14, par. (b), under which noncontiguous land up to four townships away will be included in the agricultural homestead for property tax purposes. Effective for taxes payable in 2000 and thereafter. Section 4. Preferred-Commercial Class Rates For Utility Property. Amends Minn. Stat , subd. 24 to clarify that taxable utility property consisting of fixtures (i.e., poles, wires or pipes) qualifies for the preferred-commercial class rate of 2.4% with respect to one parcel, per county, per owner. This change is made effective for taxes payable in 2000 and thereafter since it clarifies the intent of the 1999 law change that moved taxable utility property from class 5 to class 3. Effective for taxes payable in 2000 and thereafter. Section 5. Local Government Aid Appropriation. Amends Minn. Stat. 477A.03, subd. 2 to increase the local government aid appropriation by the amount necessary to accomplish the fold-in of local performance aid. Under a 1999 law, cities that received local performance aid in 1999 were to have their city aid base increased for local government aid payments in 2000 and thereafter by the amount of their 1999 local performance aid payment, but the local government aid appropriation section was not amended to provide for this. This change is effective for aid payable in 2000 and thereafter. Sections 6 and 7. Hospital District Levy. These sections amend Minn. Laws 1988, ch. 645, as amended by Minn. Laws 1999, ch. 243, article 6, section 9. The intent of the 1999 provisions was to increase the levy authority for a particular hospital district that covers portions of both St. Louis and Koochiching counties by approximately one-third. The levy-authority increase was specifically limited to ambulance acquisition and ambulance service purposes. In the course of converting the original 2-mill levy authority to a net tax capacity rate, a mathematical error occurred that resulted in the net tax capacity rates being one-tenth of what they should have been. That mathematical error is being corrected here. To be consistent with the 1999 changes, the conversion of the hospital district s previously existing levy authority is effective for taxes payable in 2000 and thereafter, and the increased levy authority is effective for taxes payable in 2001 and thereafter. Section 8. Repealers. Under paragraph (b) of this section, Minn. Stat , is repealed. This statute contains the transition class rates for apartment properties that previously qualified for preferential treatment under the low- and moderate-income rental housing provisions in class 4c or class 4d, but which cannot qualify for the low-and moderate-income 4

6 rental housing property tax benefits under the new class 4d. As a result of 1999 legislation, the 2.4% class rate for regular apartments for taxes payable in 2000 and thereafter, is lower than the 2.6% and 2.5% transitional class rates provided in this section for taxes payable in Transition class rates are provided in this section for taxes payable in 1998, 1999 and 2000 only. The repeal is effective for taxes payable in 2000 and thereafter. Under paragraph (c) of this section Minn. Stat , is repealed. This statute describes the conditions under which the substandard housing classification that used to be contained in Minn. Stat , subd. 25, para. (e) would have applied. Since the old paragraph (e) provisions no longer exist, this statute is irrelevant. These changes do not affect the provisions in the current Minn. Stat for noncompliant single family housing in Minneapolis and St. Paul. The repeal is effective the day following final enactment. Section 9. Effective Dates. Article 4 Miscellaneous Section 1. Compromise of Tax and Fee Claims. Amends Minn. Stat. 8.30, to make explicit the authority of the Attorney General to compromise not only tax debts, but also fees, surcharges, and assessments, for any case referred to the Attorney General by the Commissioner of Revenue. Effective for compromises entered into after the date of final enactment. Section 2. Revenue Recapture Fees. Amends Minn. Stat. 270A.07, subd. 1. Deletes duplicative language that allows the claimant agency to add the $10 Revenue Recapture fee to the debt. This eliminates the possibility of double collection of the fee. Effective the day following final enactment. Section 3. Notice of Revenue Recapture. Amends Minn. Stat. 270A.07, subd. 2. Clarifies that the debtor receives notice that their tax refund has been offset for Revenue Recapture purposes, regardless of whether only part of the refund has been taken or the entire refund has been taken. Effective the day following final enactment. Section 4. Interest on Penalties. Amends Minn. Stat. 289A.55, subd. 9 by changing the number of days from 10 to 60, during which a taxpayer has to pay certain non-timing related penalties without having to pay interest on the penalty. Effective for penalties assessed after the date of final enactment. Section 5. Payments of Refunds. Amends Minn. Stat , to clarify that all refunds of the MinnesotaCare tax should be paid out of the Health Care Access Fund. Under the current language, it is unclear how the research deduction should be paid. Effective for refunds made on or after January 1,

7 Sections 6 9. Petroleum Tax; Related Fees. All four of these sections contain technical amendments to Chapter 296A, the Petroleum Tax chapter. All four amendments are simply correcting oversights to outdated references regarding fees. Effective the day following final enactment. Section 10. Implicit Price Deflator. Amends Minn. Stat , subd. 1 to define implicit price deflator for purposes of the taconite production tax to be the gross domestic product implicit price deflator rather than the gross national product implicit price deflator. The domestic product is a better measure of experienced inflation in the United States and is the measure most commonly used and referenced in statutory language. Effective day following final enactment. Section Agricultural Relief. Amends Minn. Laws 1999, ch. 112, section 1, subd. 1 to clarify the intent of the 1999 Agricultural Relief legislation that farmers who take care of other farmer s livestock (feedlot operators) qualify as livestock producers for purposes of the 1999 agricultural relief payments to farmers. Effective retroactively to April 23, Section Sales Tax Rebate. Amends Minn. Laws 1999, ch. 243, article 1, section 2 to clarify that the 1999 sales tax rebate is not available to individuals who were not residents of Minnesota in 1997 merely because they had at least $1 of Minnesota individual income tax in Effective retroactively to May 25, Section 13. Effective Dates. 6