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Govenor Dayton States

Governor Dayton has proposed a significant and retroactive change to Minnesota’s personal income tax residency laws effective January 1, 2013; it may have a significant impact on people living in other states during the winter months.

Residency Law Changes Under Governor Dayton's Snowbird Proposal

  • 2/14/2013

Residency Law Changes Under Governor Dayton's Snowbird Proposal

Governor Mark Dayton has proposed a significant and retroactive change to Minnesota’s personal income tax residency laws effective January 1, 2013.

Under current law, a person is considered a resident of the state when time spent in Minnesota is at least 183 days and the person rents, owns, or occupies a residence equipped with kitchen and bathing facilities capable of year-round use for at least a portion of the year.

Under the governor's proposal, persons present in Minnesota more than 60 days but less than 183 days and who maintain a residence for at least six months will be subject to Minnesota personal income tax. Also, the person will be taxed on all Minnesota-sourced income (as they are now) and a pro rata share of all other out-of-state income based on the number of days they are present in the state. A credit will be granted for income taxes paid to other states on the same income (if the other state does not allow a credit for tax paid to Minnesota).

"If you are going to claim a change in residency, the most important thing you can to do is keep good documentation," says Susan Markey, a tax consultant with CliftonLarsonAllen. "The state can request credit card and telephone records to see that you are living as intended, so keep your moving bills and other records to establish that you lived in the state as indicated."

The proposed rule may have a significant impact on people living in other states during the winter months. No other state has this type of rule and it will be enforced retroactively beginning January 1, 2013.

Supreme Court ruling is also a game changer

A recent Minnesota Supreme Court case (William D. Larson, v. Commissioner of Revenue) held that a Minnesota resident had not effected a change of residency where the taxpayer had registered to vote in a new state, homesteaded his residence in that new state, and registered cars in his destination state, because he had not adequately demonstrated intent to change his domicile.

This case now permits the Department of Revenue to consider the “acts and circumstances” of a taxpayer’s life after a move in order to evaluate the sincerity of a taxpayer’s intent to move out of state. These recent changes indicate the Department of Revenue's intent to evaluate residency more aggressively and will likely be followed by a marked increase in Minnesota residency audits.

"We've seen a lot more residency audits since this ruling came down on January 9," says Markey.

How we can help

The proposal must still be passed into law before it is enacted. However, since this provision will be retroactive it is important to begin planning for it now.

We can help you make effective changes in residency and determine whether you should be filing resident, part-year, or nonresident returns. As always, be sure to keep good documentation of your residency activities.

 


Susan Markey, Tax Consultant
susan.markey@cliftonlarsonallen.com or 612-376-4564