1.1 A bill for an act
1.2 relating to taxation; individual income; exempting tip income from the individual
1.3 income tax and tax withholding requirements; amending Minnesota Statutes 2024,
1.4 sections 290.0132, by adding a subdivision; 290.92, subdivision 2a, by adding a
1.5 subdivision.
1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.7 Section 1. Minnesota Statutes 2024, section 290.0132, is amended by adding a subdivision
1.8to read:
1.9 Subd. 36.Tip income.(a) The amount of tips is a subtraction.
1.10 (b) For the purposes of this subdivision, "tips" means amounts that an individual reports:
1.11 (1) to the individual's employer as required under section 6053(a) of the Internal Revenue
1.12Code; or
1.13 (2) to the Internal Revenue Service as wages which are subject to notice and demand
1.14for payment of employer taxes under section 3121(q) of the Internal Revenue Code.
1.15 EFFECTIVE DATE.This section is effective for taxable years beginning after December
1.1631, 2024.
1.17 Sec. 2. Minnesota Statutes 2024, section 290.92, subdivision 2a, is amended to read:
1.18 Subd. 2a.Collection at source.(1) Deductions. Every employer making payment of
1.19wages shall deduct and withhold upon such wages a tax as provided in this section.
1.20 (2) Withholding on payroll period. The employer shall withhold the tax on the basis
1.21of each payroll period or as otherwise provided in this section.
1Sec. 2.
REVISOR EAP/LJ 25-0318702/10/25
State of Minnesota
This Document can be made available
in alternative formats upon request
HOUSE OF REPRESENTATIVES
H. F. No. 1221
NINETY-FOURTH SESSION
Authored by Myers02/20/2025
The bill was read for the first time and referred to the Committee on Taxes 2.1 (3) Withholding tables. Unless the amount of tax to be withheld is determined as
2.2provided in subdivision 3, the amount of tax to be withheld for each individual shall be
2.3based upon tables to be prepared and distributed by the commissioner. The tables shall be
2.4computed for the several permissible withholding periods and shall take account of
2.5allowances allowed under this section; and the amounts computed for withholding shall be
2.6such that the amount withheld for any individual during the individual's taxable year shall
2.7approximate in the aggregate as closely as possible the tax which is levied and imposed
2.8under this chapter for that taxable year, upon the individual's salary, wages, or compensation
2.9for personal services of any kind for the employer.
2.10 (4) Miscellaneous payroll period. If wages are paid with respect to a period which is
2.11not a payroll period, the amount to be deducted and withheld shall be that applicable in the
2.12case of a miscellaneous payroll period containing a number of days, including Sundays and
2.13holidays, equal to the number of days in the period with respect to which such wages are
2.14paid.
2.15 (5) Miscellaneous payroll period. (a) In any case in which wages are paid by an
2.16employer without regard to any payroll period or other period, the amount to be deducted
2.17and withheld shall be that applicable in the case of a miscellaneous payroll period containing
2.18a number of days equal to the number of days, including Sundays and holidays, which have
2.19elapsed since the date of the last payment of such wages by such employer during the
2.20calendar year, or the date of commencement of employment with such employer during
2.21such year, or January 1 of such year, whichever is the later.
2.22 (b) In any case in which the period, or the time described in clause (a), in respect of any
2.23wages is less than one week, the commissioner, under rules prescribed by the commissioner,
2.24may authorize an employer to determine the amount to be deducted and withheld under the
2.25tables applicable in the case of a weekly payroll period, in which case the aggregate of the
2.26wages paid to the employee during the calendar week shall be considered the weekly wages.
2.27 (6) Wages computed to nearest dollar. If the wages exceed the highest bracket, in
2.28determining the amount to be deducted and withheld under this subdivision, the wages may,
2.29at the election of the employer, be computed to the nearest dollar.
2.30 (7) Rules on withholding. The commissioner may, by rule, authorize employers:
2.31 (a) to estimate the wages which will be paid to any employee in any quarter of the
2.32calendar year;
2Sec. 2.
REVISOR EAP/LJ 25-0318702/10/25 3.1 (b) to determine the amount to be deducted and withheld upon each payment of wages
3.2to such employee during such quarter as if the appropriate average of the wages so estimated
3.3constituted the actual wages paid; and
3.4 (c) to deduct and withhold upon any payment of wages to such employee during such
3.5quarter such amount as may be necessary to adjust the amount actually deducted and withheld
3.6upon wages of such employee during such quarter to the amount required to be deducted
3.7and withheld during such quarter without regard to this paragraph (7).
3.8 (8) Additional withholding. The commissioner is authorized to provide by rule for
3.9increases or decreases in the amount of withholding otherwise required under this section
3.10in cases where the employee requests the changes. Such additional withholding shall for
3.11all purposes be considered tax required to be deducted and withheld under this section.
3.12 (9) Tips. In the case of tips which constitute wages, this subdivision shall be applicable
3.13only to such tips as are included in a written statement furnished to the employer pursuant
3.14to section 6053 of the Internal Revenue Code and only to the extent that the tax can be
3.15deducted and withheld by the employer, at or after the time such statement is so furnished
3.16and before the close of the calendar year in which such statement is furnished, from such
3.17wages of the employee (excluding tips, but including funds turned over by the employee to
3.18the employer for the purpose of such deduction and withholding) as are under the control
3.19of the employer; and an employer who is furnished by an employee a written statement of
3.20tips (received in a calendar month) pursuant to section 6053 of the Internal Revenue Code
3.21to which subdivision 1 is applicable may deduct and withhold the tax with respect to such
3.22tips from any wages of the employee (excluding tips) under the employer's control, even
3.23though at the time such statement is furnished the total amount of the tips included in
3.24statements furnished to the employer as having been received by the employee in such
3.25calendar month in the course of employment by such employer is less than $20. Such tax
3.26shall not at any time be deducted and withheld in an amount which exceeds the aggregate
3.27of such wages and funds as are under the control of the employer minus any tax required
3.28by other provisions of state or federal law to be collected from such wages and funds.
3.29 (10) (9) Vehicle fringe benefits. An employer shall not deduct and withhold any tax
3.30under this section with respect to any vehicle fringe benefit provided to an employee if the
3.31employer has so elected for federal purposes and the requirement of and the definition
3.32contained in section 3402(s) of the Internal Revenue Code are complied with.
3.33 EFFECTIVE DATE.This section is effective for taxable years beginning after December
3.3431, 2024.
3Sec. 2.
REVISOR EAP/LJ 25-0318702/10/25 4.1 Sec. 3. Minnesota Statutes 2024, section 290.92, is amended by adding a subdivision to
4.2read:
4.3 Subd. 32.Tip income exempt from withholding requirements.Income which is tips,
4.4as defined in section 290.0132, subdivision 36, is exempt from the withholding requirements
4.5of this section.
4.6 EFFECTIVE DATE.This section is effective for taxable years beginning after December
4.731, 2024.
4Sec. 3.
REVISOR EAP/LJ 25-0318702/10/25