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Minnesota offers to end tax reciprocity stalemate with Wisconsin

ST. PAUL — Minnesota is hoping to end a stalemate with Wisconsin over tax reciprocity. Whether it will work remains unlikely, according to state officials in Wisconsin.

Late last week, Minnesota Revenue Commissioner Myron Frans made Wisconsin an offer that could save Wisconsin $1 million in payments to level the playing field for revenue lost for Wisconsin residents working in Minnesota. More than twice as many Wisconsinites work in Minnesota than Minnesotans working in Wisconsin. The net result of reciprocity would leave Minnesota holding the bag for lost revenue without the equalizing payments from Wisconsin.

Frans said the loss for Minnesota in 2015 would be about $92.5 million. Under the proposal put forth, Wisconsin would only reimburse its neighbor to the west with payments totaling $91.5 million if Wisconsin agrees to reinstate tax reciprocity for the 2015 tax year by Sept. 30.

The goal is to simplify things for taxpayers, Frans said.

Wisconsin residents working in Minnesota and Minnesota residents working in Wisconsin are required to file income tax returns in both states since former Minnesota Gov. Tim Pawlenty ended tax reciprocity in 2009. The 40-year agreement ended because Wisconsin was slow to reimburse Minnesota for its revenue losses. Payments lagged by as much as 18 months from the time Wisconsin collected the taxes to the time it paid Minnesota.

Officials with revenue departments in both states agree that issue has been resolved with a plan that would require Wisconsin to make equal quarterly payments to Minnesota to reimburse Minnesota for its lost revenue.

The issue now is how much Wisconsin would owe Minnesota, and whether Wisconsin would be subsidizing the state of Minnesota.

“There can be no net revenue loss for Minnesota,” Frans said. He said other reciprocity agreements in Minnesota ensure that.

Frans said he put forth the offer to reduce what Wisconsin would owe by $1 million at the urging of Minnesota senators hoping to end the impasse.