1.1 	A bill for an act
1.2 	relating to taxation; exempting publicly traded
1.3 	partnerships from the withholding requirements;
1.4 	amending Minnesota Statutes 2004, section 290.92,
1.5 	subdivision 4b.
1.6 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.7 	Section 1. Minnesota Statutes 2004, section 290.92,
1.8 	subdivision 4b, is amended to read:
1.9 		Subd. 4b.Withholding by partnerships.  (a) A partnership
1.10 	shall deduct and withhold a tax as provided in paragraph (b) for
1.11 	nonresident individual partners based on their distributive
1.12 	shares of partnership income for a taxable year of the
1.13 	partnership.
1.14 	(b) The amount of tax withheld is determined by multiplying
1.15 	the partner's distributive share allocable to Minnesota under
1.16 	section 290.17, paid or credited during the taxable year by the
1.17 	highest rate used to determine the income tax liability for an
1.18 	individual under section 290.06, subdivision 2c, except that the
1.19 	amount of tax withheld may be determined by the commissioner if
1.20 	the partner submits a withholding exemption certificate under
1.21 	subdivision 5.
1.22 	(c) The commissioner may reduce or abate the tax withheld
1.23 	under this subdivision if the partnership had reasonable cause
1.24 	to believe that no tax was due under this section.
1.25 	(d) Notwithstanding paragraph (a), a partnership is not
2.1 	required to deduct and withhold tax for a nonresident partner if:
2.2 	(1) the partner elects to have the tax due paid as part of
2.3 	the partnership's composite return under section 289A.08,
2.4 	subdivision 7;
2.5 	(2) the partner has Minnesota assignable federal adjusted
2.6 	gross income from the partnership of less than $1,000; or
2.7 	(3) the partnership is liquidated or terminated, the income
2.8 	was generated by a transaction related to the termination or
2.9 	liquidation, and no cash or other property was distributed in
2.10 	the current or prior taxable year; or 
2.11 	(4) the distributive shares of partnership income are
2.12 	attributable to:
2.13 	(i) income required to be recognized because of discharge
2.14 	of indebtedness;
2.15 	(ii) income recognized because of a sale, exchange, or
2.16 	other disposition of real estate, depreciable property, or
2.17 	property described in section 179 of the Internal Revenue Code;
2.18 	or
2.19 	(iii) income recognized on the sale, exchange, or other
2.20 	disposition of any property that has been the subject of a basis
2.21 	reduction pursuant to section 108, 734, 743, 754, or 1017 of the
2.22 	Internal Revenue Code
2.23 	to the extent that the income does not include cash received or
2.24 	receivable or, if there is cash received or receivable, to the
2.25 	extent that the cash is required to be used to pay indebtedness
2.26 	by the partnership or a secured debt on partnership property; or 
2.27 	(5) the partnership is a publicly traded partnership, as
2.28 	defined in section 7704(b) of the Internal Revenue Code.
2.29 	(e) For purposes of subdivision 6a, and sections 289A.09,
2.30 	subdivision 2, 289A.20, subdivision 2, paragraph (c), 289A.50,
2.31 	289A.56, 289A.60, and 289A.63, a partnership is considered an
2.32 	employer.
2.33 	(f) To the extent that income is exempt from withholding
2.34 	under paragraph (d), clause (4), the commissioner has a lien in
2.35 	an amount up to the amount that would be required to be withheld
2.36 	with respect to the income of the partner attributable to the
3.1 	partnership interest, but for the application of paragraph (d),
3.2 	clause (4).  The lien arises under section 270.69 from the date
3.3 	of assessment of the tax against the partner, and attaches to
3.4 	that partner's share of the profits and any other money due or
3.5 	to become due to that partner in respect of the partnership.
3.6 	Notice of the lien may be sent by mail to the partnership,
3.7 	without the necessity for recording the lien.  The notice has
3.8 	the force and effect of a levy under section 270.70, and is
3.9 	enforceable against the partnership in the manner provided by
3.10 	that section.  Upon payment in full of the liability subsequent
3.11 	to the notice of lien, the partnership must be notified that the
3.12 	lien has been satisfied.
3.13 	
EFFECTIVE DATE. This section is effective for taxable
3.14 	years beginning after December 31, 2004.