An abatement is the cancellation of valid penalty, and the interest on the penalty, that was assessed for failing to comply with Minnesota tax requirements. For detailed information, see Minnesota Statutes, section 270C.34.
Examples of failure to comply include:
- Filing tax returns late
- Paying tax debt late
- Failing to make required estimated deposits
- Failing to file or pay electronically when required
If a debtor wants to request an abatement, the request must be made within 60 days from the department’s first written notice that penalty has been assessed. The department is required to mail the penalty notice to the debtor’s last known address. A letter sent to a last known address serves as a debtor's sufficiency of notice.
There is no requirement to pay tax and interest before an abatement is considered. If reasonable cause exists, the abatement request will not be denied because of unpaid tax or unfiled returns. If the debtor is asking for abatement on more than one tax debt, the department will examine each debt separately to see if it qualifies.
A reasonable cause results from circumstances beyond the debtor's control. Each case must be decided on its own merits based on documentation from the debtor. Good filing history alone is not considered reasonable cause.
Business Trust Taxes
When requesting abatement for a business, remember that sales tax and withholding are trust taxes. This means that the money collected or withheld belongs to the state and the debtor is holding the money in trust. This money cannot be used by a business as additional operating capital or for any other purpose.
Partial Abatement of Penalty
The department may abate a partial amount of the penalty. Circumstances surrounding the request are considered.
Abatement of Interest
Abatement of interest is rarely given. However, the department will abate interest on any penalty that was assessed and later abated.
Denial of Abatement
If the department denies a timely filed abatement request, the debtor has the right to appeal the decision to the Appeals and Legal Services Division. If the appeal is denied, an additional 60 days is given to appeal the denial in Minnesota Tax Court