Minnesota Revenue Notice on Relationships with Professional Advisors


The Minnesota Department of Revenue just issued Revenue Notice 16-01, which discusses the position of the Department on certain residency factor questions.


For people desiring to move from Minnesota and establish residency in another state, Minnesota regulations provide 26 factors to weigh in determining whether that person’s "domicile" has truly changed. The concept of "domicile" involves a person’s subjective intent, and is defined in the regulations as "the bodily presence of an individual person in a place coupled with an intent to make such a place one’s home."


One of the factors listed in the regulations is "the location of business relationships and the place where business is transacted." This is often understood to refer to relationships with CPAs, attorneys, and other professional advisors. Another factor in the regulations is the "location of any bank accounts."


These factors have been criticized as a disincentive to doing business with Minnesota professionals and banks, and thereby harming the Minnesota business community. The relevance of these factors has also fallen into question, as technological advances and the internet have made it possible to have business and financial interactions from almost anywhere.


The new Revenue Notice can be seen as a response to these criticisms, though it doesn’t go as far as most critics would hope. The two new Department position statements are:

  • "Employing, hiring, or engaging an attorney or CPA, or who has a business relationship with an attorney or CPA, whose address is in Minnesota, does not, by itself, demonstrate an intent to establish or retain domicile in Minnesota."
  • "Having one or more bank accounts located in Minnesota, does not, by itself, demonstrate an intent to establish or retain domicile in Minnesota."


These statements do not remove these factors from consideration, but merely state that either of these factors, on their own or "by itself", will not be conclusive evidence as to the question of state of residency.


As the State of Minnesota regulations already specifically state:

"Any one of the [26 factors] will not, by itself, determine domicile,"

and the Minnesota Supreme Court has stated the same in several cases. The State, in its latest notice, does not appear to provide any additional clarification. Accordingly, it is hard to see what effect this Revenue Notice will have on residency disputes.


Minnesota Supreme Court Decision relating to Time In/Out of State


In a further development, the Minnesota Supreme Court recently ruled in the Marks case that the "more than half the year" test applies to the entire year that a person moves into or out of Minnesota, not just the portion of the year in which they were domiciled in another state. This ruling reversed the conclusion of the Minnesota Tax Court on that issue. As a result of this new ruling, it may be more difficult for taxpayers to file as part-year residents in the year they move to or from the State of Minnesota.


To learn more about residency guidance, please contact Patricia Kalil Margarit, CPA, at pmargarit@boulaygroup.com or 952-893-3834 or 239-325-1103.


File Download: New Guidance for People Establishing Residency Outside of Minnesota and Recent Supreme Court Decision