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S.F. No. 531 - Credit for Employer Payroll Taxes for Certain Tipped Employees
Author: Senator Kathy Sheran
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
Date: March 13, 2015


This bill provides a nonrefundable tax credit in the amount of employer-paid Social Security and Medicare payroll taxes (7.65 percent total) for tipped employees, to the extent that tipped wages exceed the minimum wage.  Under federal law, the credit is allowed only for employers in the food and beverage industry.  This bill would provide an equivalent Minnesota credit for all qualifying employers not in the food and beverage industry.  Effective beginning in tax year 2015.   

Section 1


Subd. 1

Allows a credit for Minnesota employers in the amount of the excess Social Security and Medicare taxes paid.  The excess amount is defined as the taxes paid on the difference between the Minnesota minimum wage and the total wage including tips.

Subd. 2

Limits the credit to those not eligible for the federal credit.  Excludes amounts used to claim the credit from any amount deducted for purposes of calculating federal taxable income.  Requires that the credit is nonrefundable and requires that, for unitary groups and corporations that are partners in a partnership, if the credit exceeds the tax liability for one member of the group, the credit must be allocated to another member of the group.  Provides that credits allowed for partnerships, LLCs taxed as partnerships, or S corporations are allocated to partners, members, or shareholders on a pro rata basis.  

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