This is the sixth article in a series dedicated to the rules regarding who qualifies as a “resident” of the State of Minnesota for tax purposes. Status as a resident of Minnesota is important as all Minnesota residents are subject to Minnesota individual income tax, estate tax, and sales and use tax. Non-residents are usually not subject to these taxes unless they purposely avail themselves of Minnesota taxes.
A person can be a “resident” of Minnesota for tax purposes under the “non-domiciliary resident” rules. Under these rules, a person is a “resident” for tax purposes if they maintain a place of abode in Minnesota and spend in the aggregate more than one-half of the year in Minnesota. The fifth article in this series discussed the definition of “abode.” This article provides a brief overview of how to determine whether an individual spent “in the aggregate more than one-half of the year in Minnesota.”
An individual spends more than one-half of the year in Minnesota when he/she spends 183 days or more in Minnesota in a calendar year. Minnesota Rules 8001.0300, Subpart 4 explains how to calculate the number of days an individual spent in and out of Minnesota for the purposes of the non-domiciliary resident rules. This Rule states: “In counting the number of days spent within and without Minnesota, a person shall be treated as present in Minnesota on any day if the person is physically present in Minnesota at any time during that day.” Thus, the general rule is that if an individual is in Minnesota for any time during a day, this day will count as a day spent in Minnesota.
There is a narrow exception to this rule stated in Minnesota Rules 8001.0300, Subpart 4. If an individual is in transit between two points outside of Minnesota, and the individual is physically present in Minnesota for less than 24 hours, the day(s) is/are not counted as a day/days spent in Minnesota. The origin and destination points are critical determining factors when deciding whether this rule applies.
To illustrate this exception, for example, assume an individual drives from Eau Claire, Wisconsin, at 10:00 p.m. on April 22. This individual’s destination is Fargo, North Dakota. The logical way to drive from Eau Claire to Fargo is on Interstate 94 through Minnesota. As long as the individual arrives in Fargo by 9:49 p.m. on April 23, according to the exception, neither April 22 nor April 23 should count as days spent in Minnesota.
One of the best ways to track time spent in and out of Minnesota is to maintain good records. Individuals should keep bank and credit card statements, cell phone statements, travel receipts, and other records that show where they conducted their affairs on any given day. If we are helping a client in a Minnesota Department of Revenue (MDR) audit, we commonly ask the client to use their records to prepare a color-coded calendar showing time spent inside and outside of Minnesota. This makes calculating the days the client spent in and out of Minnesota easy for the MDR. It can also often alleviate the MDR’s concern that an individual is a resident of Minnesota under the non-domiciliary rules.
This article provides a basic explanation of how to calculate days spent in and out of Minnesota for the purposes of the non-domiciliary resident rules. Please watch for future articles discussing the Minnesota other aspects of the Minnesota residency rules.