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S.F. No. 3188 - Nonresident income exemption
Author: Senator Roger C. Chamberlain
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
Date: March 3, 2020


Under current law, income received by nonresidents is apportioned to Minnesota for purposes of calculating income tax liability. Income earned by nonresident entertainers who perform in Minnesota is not subject to Minnesota income tax; instead, nonresident entertainer earnings are subject to a nonresident entertainer tax (2% of gross earnings from performances in the state).

This bill would exempt compensation earned by certain nonresidents (who are not nonresident entertainers) for employment duties performed in Minnesota, if nonresident individuals and their employers meet several criteria.

Section 1, subd. 1. Exemption allowed. Exempts compensation received by a qualifying nonresident individual from gross income.

Subd. 2. Definitions. Defines terms for the new provisions in the bill. In pertinent part, a “qualifying nonresident individual” is an individual:

  • who is a resident of another state;
  • who is paid wages for employment duties (excluding duties performed as an entertainer) performed in Minnesota on 30 or fewer days in a taxable year;   
  • performed employment duties in more than one state during the taxable year; and
  • whose state of residence offers a similar exclusion or does not impose an income tax, or whose income is exempt from tax under state or federal law.

Subd. 3. Withholding exemption; limitation. Exempts wages paid to qualifying nonresidents from employer withholding requirements. The exemption does not apply to income earned for employment duties performed in the state for more than the 30-day threshold. In that case, all income earned by a nonresident individual would be subject to income tax and withholding requirements.

Subd. 4. Employers; application of penalties. Exempts employers from penalties for failing to withhold income taxes if they meet specified requirements for maintaining an employee time and attendance system.

Subd. 5. Timing of employment duties performed. Provides that an employee is deemed to have performed employment duties in Minnesota if more employment duties were performed in the state than any other state during that day.

Subd. 6. Severabilty. Provides that any sections of the bill not found unconstitutional remain effective.

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