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Abdo: It is not enough simply to purchase a home in another state and reside there for at least six months. The court cases suggest that a more complete break with Minnesota must be established in order to evidence a taxpayer’s intent to change from Minnesota to another state. Further, with the expansion of the Minnesota estate tax as applied to nonresidents to cover ownership interests in [certain partnerships and investments] … will still subject the taxpayer to Minnesota taxes.
Q: Do you think the recent court and legislative moves mean more entrepreneurs and affluent citizens will leave Minnesota?
Abdo: Too early to tell. Even though there is an angel [tax credit] incentive, Minnesota is not an easy state to start a business in if you’re in need of capital. Angel networks don’t seem to be as vigorous as they are in other states. The angel tax credit is limited to a narrow class of businesses (usually high-tech or green) and the state does not offer much by way of loans or grants or matching funds as do some states such as South Dakota. By taxing higher income individuals more — in essence daring them to relocate to states with lower taxes — Minnesota is creating a negative environment for small-business investment.
Q: Do you give credence to those who say the Twin Cities and other higher-cost areas still will attract entrepreneurs because of business, civic, cultural and other assets?
Abdo: Minnesota has great assets that appeal to entrepreneurs and creatives. It will be hampered in its efforts to continue to attract business and entrepreneurs if state government creates disincentives to investment in Minnesota small businesses. A nonresident must now weigh Minnesota estate, income and gift tax consequences of investing in a small business which owns its own equipment, such as a brewery. When gauging the pros and cons of starting a business … it appears that the Legislature in the last session added to the list of cons that a business must weigh before doing business here.
Neal St. Anthony • 612-673-7144