Minnesota Hospital Denied Exemption

The Lake View Memorial Hospital and Clinic in Minnesota was denied a property tax exemption in February 2018. The Minnesota Tax Court stated that the Memorial Hospital failed the auxiliary-property test. Minnesota’s statute says that in order to qualify for the exemption a taxpayer must provide evidence of its not-for-profit status. The hospital did not provide the physician compensation, article of incorporation, and documentation related to the interdependence of the hospital and clinic.

For more information on this and other property tax issues, contact your state and local tax professional.

MN Income Tax Return – Federal Conformity

The Minnesota Department of Revenue (MN DOR) has started reviewing 2015 income tax returns for conformity with federal tax law. MN tax laws did not match the federal tax laws for the 2015 and 2016 calendar years. MN legislation in January, 2017 retroactively conformed MN tax law to federal tax law for 2015 and 2016. The MN DOR was able to correct the filing forms for the 2016 tax year based on the January, 2017 update of MN tax law prior to the filing of 2016 tax returns. As 2015 income tax returns are reviewed by MN DOR, the MN DOR will be contacting taxpayers directly with modifications, refunds or questions. Therefore, the MN DOR does not recommend filing amended returns for years 2015 or 2016, unless there is a reason other than the change in MN tax law. No additional tax will be owed to the MN DOR because of the conformity changes.

Review the MN Department of Revenue website related to federal conformity. Contact your Eide Bailly professional with questions or for additional information.


Up-Front Capital Equipment Exemption – Law Change

Starting July 1, 2015, the capital equipment refund will become an up-front sales tax exemption.

To claim the exemption on eligible purchases, businesses must give the supplier a completed Form ST3, Certificate of Exemption. Use exemption reason code for “Capital equipment”.

Before July 1, businesses were required to pay sales tax when purchasing eligible capital equipment and then file a refund request with the Department of Revenue.

Note: If you pay sales tax on purchases after June 30, 2015, you may still file a refund request for tax paid in error.

For more information click here: FS103

News release: Minneapolis business owner charged with tax crimes

Contact: Lisa Erickson
Phone: 651-556-6397

Minneapolis business owner charged with tax crimes

ST. PAUL, Minn. – The Minnesota Department of Revenue announced that the Hennepin County Attorney’s Office recently charged Michael Whitelaw, 46, of Rosemount, with 68 tax-related felonies.

Whitelaw is charged with 34 counts of filing false sales tax returns and 34 counts of failing to pay the correct amount of sales tax.

According to the criminal complaint, Whitelaw has operated Food Group Holdings, LLC (also known as Social House, Zeno Café, and Fusion) since 2006. He allegedly filed fraudulent sales tax returns for the business each month of 2009 and 2010 and for 10 months in 2011. The complaint also claims he failed to pay the correct amount of sales tax he collected during these years.

According to the complaint, Whitelaw underreported sales in excess of $1 million, owing the state $170,000 in sales tax, penalty and interest.

Each felony charge carries a maximum penalty of up to five years in prison and up to a $10,000 fine.

Although most taxpayers comply with tax laws voluntarily, the Minnesota Department of Revenue takes enforcement action against noncompliant taxpayers to ensure tax laws are fairly administered.

The Minnesota Department of Revenue has a 24-hour tip line for anyone who suspects a person or business is violating tax laws. That number is 651-297-5195, or 1-800-657-3500. Tipsters may remain anonymous and can also email the department at tax.fraud@state.mn.us. In 2013, 85 percent of the department’s criminal case referrals came from citizen tips.

Defendants are presumed innocent unless and until proven guilty.

Follow the latest news and updates from the Minnesota Department of Revenue on Twitter,

and Facebook, and sign up for our email subscription list.

Minnesotta Tax Cuts

On March 21, 2014 Minnesota Governor Mark Dayton signed and approved $508 million in tax cuts.

The bill included cuts for:
Married Couples
Business Sales Taxes

It also included changes such as:
Tax Credits for Innovation and Jobs
Angel Investor Tax Credit
Simplifying the Estate Tax
Eliminating the Gift Tax

For more detail visit:
Tax Breaks Now Law, What Minn. Taxpayers Need to Know

Increased Payroll Scrutiny

The frequency of payroll audits has surged over the last five years and businesses are facing increased payroll scrutiny.

Most payroll audits have traditionally focused on whether or not a business is misclassifying an employee as an independent contractor, thus avoiding Social Security, Medicare and other payroll taxes. According to an article published last March by the Wall Street Journal entitled Payroll Audits Put Employers on Edge, “local businesses misclassify anywhere from 10% to more than 60% of their workers as independent contractors.”

Since the 2008 economic meltdown states have been springing into action to audit payroll taxes as a way to increase revenue. States are assessing hefty fines for misclassification. For example, Colorado passed House Bill 1301, which allows the Colorado Department of Labor and Employment to fine a business up to $5,000 for the first misclassification offense and up to $25,000 for subsequent offenses (Payroll audits increase as government seeks added revenue, Heather Draper, Denver Business Journal).

The increase in payroll audits has also been intensified by the Federal government. The U.S. Department of Labor has issued partnership agreements with California, Connecticut, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington to collaboratively investigate more than 6,000 employers for misclassifying employees. The U.S. Treasury estimates that if all employers were forced to properly classify employees it would result in $8.71 billion in added federal tax revenue over the next decade.

If an employer is misclassifying employees then they can take advantage of a voluntary disclosure program. The IRS is offering a Voluntary Clarification Settlement Program (VCSP) that allows employers to reclassify employees while minimizing look back, and waiving penalties and interest. Similar agreements may be negotiated at the state level.

Minnesota Sales and Use Tax Changes

The following changes are from the Minnesota Department of Revenue and went into effect January 1, 2014:

Local Government Exemption
Starting Jan. 1, 2014, cities and counties are exempt from sales and use tax on purchases used to provide certain government services. Please refer to Fact Sheet 176 for more information.
We have updated Form ST-3, Certificate of Exemption, to include “local government” as a reason for exemption under “B-specific government exemption.”

New Local Taxes
Starting Jan. 1, 2014, Olmsted County and Rice County will each have a transit sales and use tax. Please refer to the Olmsted County General Notice and Rice County General Notice for more information.

Rochester Lodging Tax Rate
Starting Jan. 1, 2014, Rochester Lodging Sales tax increases to 7%. (The previous rate was 4%.) Please refer to the Rochester Lodging General Notice for more information.

e911/TAM Fee
Starting Jan. 1, 2014, the Minnesota Department of Revenue will administer the e911/TAM fee collected by retailers who sell prepaid wireless phones, air time, or calling cards. Please refer to Fact Sheet 179 for more information.