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Independent contractors

Published (4/18/2008)
By Courtney Blanchard
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For a while the House Taxes Committee appeared baffled by a proposal to make a technical change to the state’s tax code.

HF4168, sponsored by Chairwoman Rep. Ann Lenczewski (DFL-Bloomington), would change a provision that allows a worker to be qualified as an “independent contractor.” The committee laid over the bill on April 16 for possible inclusion in the omnibus tax bill. There is no Senate companion.

Under current law, the tax code provides a safe haven for the employers to avoid tax withholding, Lenczewski said. The proposal would classify some workers as employees instead of independent contractors, subjecting them to withhold Minnesota’s taxes.

But the reasons, possible repercussions and the current law itself (Section 530 of the Revenue Act of 1978), prompted frustration in the committee.

“I’ve never heard of Section 530, and I don’t want to hear about it again!” said Rep. Loren Solberg (DFL-Grand Rapids).

About the proposal, testifiers said:

• it could lead to more tax compliance, so it could bring in more revenue;

• it would standardize the definition of an employee, following a recommendation by the nonpartisan Office of the Legislative Auditor;

• it would move away from federal conformity, and some workers would have to file a W-2 for their state taxes and a form 1099 for their federal taxes; and that

• carpenters would no longer be misclassified on state tax returns filed by construction firms. The proposal would change state law, and wouldn’t grant access to federal benefits. However, the 26 percent of carpenters who should be classified as “employees” could lobby for access to federal benefits like workers’ compensation and employee insurance, said Kyle Makarios, political director at the North Central States Regional Council of Carpenters.

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