Navigate Up
Sign In
Last Updated: 1/16/2014

Tax Shelter Disclosure

Contact Us

Minnesota Department of Revenue

651-556-3000
800-657-3666
8:00 a.m.- 4:30 p.m. Mon.- Fri.

more

Top FAQs

Related Information

About This Page

This information explains tax shelter disclosure requirements and penalties for taxpayers participating in tax shelters, tax shelter promoters and material advisors.

Taxpayers participating in tax shelters

If you claim a deduction, credit or other tax benefit related to a reportable transaction and are required to submit federal Form 8886 (Reportable Transaction Disclosure Statement) to the IRS, you must also submit a copy to the Minnesota Department of Revenue.

For your first Minnesota return due on or after Sept. 11, 2005, attach a copy of Form 8886 to the return.

For tax years ending on or after Dec. 31, 2005, mail a copy of Form 8886 to the address below the first time you disclose the reportable transaction AND attach a copy to your Minnesota return. For each succeeding year you participate in the transaction, only attach a copy to your Minnesota return; do not mail a separate copy.

Mail copies of Form 8886 to:

Minnesota Revenue
Mail Station 5130
St. Paul, MN 55146-5130

Note: If you participate in the Minnesota voluntary compliance program, attach a copy of Form 8886 to your amended return.

Penalties

If you fail to include the tax shelter registration number with your Minnesota tax return, the penalty is $10,000 for individuals and $50,000 for entities. Note: Include the registration number on Form 8886.

If you don’t include information relating to a reportable transaction, the penalty is $10,000 for individuals and $50,000 for entities. If the transaction is a listed transaction, the penalty is $100,000 for individuals and $200,000 for entities.

There is a 20 percent penalty on the understatement of a reportable transaction. The penalty increases to 30 percent if the required disclosures are not made.

Note: For corporations, there is a substantial understatement of tax if the amount of the understatement exceeds 10 percent of the tax liability (and is at least $10,000) or $10 million, whichever is less.

Tax shelter promoters and material advisors

If you are required to submit federal Form 8264, Application for Registration of a Tax Shelter, to the Internal Revenue Service (IRS), you must also submit a copy to the Minnesota Department of Revenue by the date the shelter is offered for sale to Minnesota taxpayers.

If you are required to submit a list of investors to the IRS, you must submit a copy of the list to Minnesota within 60 days after entering into the transaction; or 60 days after it becomes a listed transaction, whichever is later. If the department requests a list, you must provide it within 20 days of the request.

Mail copies of Form 8264 and investor lists to:

Minnesota Revenue
Mail Station 5130
St. Paul, MN 55146-5130

Penalties

If you promote an abusive tax shelter, the penalty is 50 percent of the gross revenue derived from the activity.

If you fail to register a tax shelter or file false or incomplete information, the penalty is $50,000. If the tax shelter is a listed transaction, the penalty is the greater of $200,000; 50 percent of the gross revenue derived from the activity; or 75 percent of the gross revenue if you intentionally fail to act.

If you fail to provide investor lists to the Department of Revenue within 20 days of receiving a request, the penalty is $10,000 per day. For listed transactions, the penalty is $100,000 or 50 percent of the gross income derived from the activity.

If you are involved in preparing tax shelter returns, affidavits, documents, etc., and you know (or have reason to know) that it will result in an understatement of Minnesota tax liability for another person, the aiding and abetting penalty is $1,000 per document for individuals and $10,000 for corporations.