Minnesota is considering a legislative proposal that could ease tax burdens for nonresident business travelers. The bill, introduced by Senator Ann Rest, aims to establish a 30-day threshold for temporary workers in the state to be exempt from filing and withholding requirements. This initiative could potentially reduce compliance costs for both employees and employers.
Under the proposed legislation, a "qualifying nonresident individual" is defined as someone who resides and returns to another state at least once a month and performs most of their employment duties outside Minnesota. Employers would need to maintain records of employees' work locations daily, although alternative methods are allowed if no formal system exists.
The bill specifies that wages paid to qualifying nonresidents would be exempt from Minnesota's withholding and filing requirements under sections 290.92 and 289A.09. Employers relying on time and attendance data or other records in good faith would not face penalties even if some employees exceed the 30-day limit.
Currently, nonresidents must file taxes if their gross income from an employer meets or exceeds Minnesota's minimum income threshold of $14,575. The state's unique withholding requirement considers total income earned from an employer rather than just state-sourced income.
This proposal could simplify tax obligations for nonresidents, encourage labor mobility across states, and reduce compliance costs while keeping Minnesota competitive with neighboring states' tax policies. It may particularly benefit workers in border regions and industries with mobile labor needs.
If passed, this legislation could alleviate significant recordkeeping burdens for both employers and employees. Nearly half of U.S. states treat nonresident workers similarly, despite low compliance rates. Taxpayers can claim credits on their liability from another state, minimizing overall tax impacts.
Minnesota already has tax reciprocity agreements with Michigan and North Dakota, allowing residents working across these borders to pay taxes in their home state instead of where they work temporarily. The proposed threshold would extend similar benefits to residents of other states with no income tax or comparable thresholds.
As more states adopt filing and withholding thresholds recognizing the limited value of taxing short-term visitors, Minnesota might soon join this trend with SF 46.
