December 3, 1991
TO: CLOSED-END FUND MEMBERS NO. 52-91
MONEY MARKET MEMBERS - ONE PER COMPLEX NO. 31-91
TAX MEMBERS NO. 57-91
RE: MINNESOTA CLARIFIES NEW EXEMPT-INTEREST REPORTING
REQUIREMENTS
__________________________________________________________
As we previously informed you, Minnesota enacted
legislation this year which requires regulated investment
companies ("RICs") whose shares are registered in Minnesota to
report to Minnesota shareholders to whom the RIC pays more than
$10 per year in exempt-interest dividends the amount of those
dividends paid in that tax year. (See Institute Memorandum to
Money Market Members - One Per Complex No. 15-91, Closed-End Fund
Members No. 23-91 and Tax Members No. 19-91, dated June 4, 1991.)
The legislation also requires that the report include a clear
statement, in the form prescribed by the Minnesota Commissioner
of Revenue, that the non-Minnesota exempt-interest dividends must
be included in the computation of Minnesota taxable income.
The Institute requested that the Minnesota Commissioner of
Revenue clarify certain points. (See Institute Memorandum to Tax
Committee No. 27-91 and to Minnesota Members, dated August 23,
1991.) We are pleased to inform you that the Commissioner, in
the attached Revenue Notice #91-17, has responded positively to
all of the Institute's requests. First, the Commissioner has
proposed preferred language which may be used to inform Minnesota
shareholders of the amount of exempt-interest dividends subject
to Minnesota income tax. However, no specific language is
required so long as the basic information as to the amount or
portion of the exempt-interest dividends subject to tax is
imparted to the shareholders. Second, the period for which the
reporting is to be done is the calendar year rather than the
RIC's tax year as the statutory language appears to suggest.
Third, no specific form is required for the report; it may either
be on Form 1099 or a separate statement. Finally, if all exempt-
interest dividends are also exempt from Minnesota tax, no report
need be made.
We will keep you informed of further developments.
David J. Mangefrida Jr.
Assistant Counsel - Tax
Attachment