Tax Shelter Disclosure

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 Internal Revenue Service, 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 us a copy of Form 8886 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 Department of Revenue
Mail Station 5140
600 N. Robert St.
St. Paul, MN 55146-5140

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. 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% penalty on the understatement of a reportable transaction. The penalty increases to 30% 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% of the tax liability (and is at least $10,000) or $10 million, whichever is less.

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 Minnesota Department of Revenue requests a list, you must provide it within 20 days of the request.

Mail copies of Form 8264 and investor lists to:

Minnesota Department of Revenue
Mail Station 5140
600 N. Robert St.
St. Paul, MN 55146-5140

Penalties

If you promote an abusive tax shelter, the penalty is 50% 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% of the gross revenue derived from the activity; or 75% of the gross revenue if you intentionally fail to act.

If you fail to provide investor lists to us within 20 days of receiving a request, the penalty is $10,000 per day. For listed transactions, the penalty is $100,000 or 50% 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.