Corporate Franchise Tax
Tax Base:
MN taxable net income of the corporation. Domestic unitary reporting method is used.
Rate:
9.8%
Major Exemptions:
- charitable, religious, educational, and other organizations exempt under Subchapter F of the Internal Revenue Code (unrelated business income is taxed)
- cooperative associations
- credit unions
- mining subject to the occupation tax
- insurance companies domiciled in states with retaliatory tax provisions
- mutual property and casualty companies with assets less than $1.6 billion as of 12/31/89
Computation:
Federal taxable income,
plus:
Minnesota Additions (state, local, or foreign income taxes deducted federally; federally-exempt interest; exempt-interest dividends paid by regulated investment companies; windfall profits tax deducted federally; net operating loss deducted federally; federal dividend received deduction; losses from mining subject to occupation tax; federal capital loss deduction; federal charitable contribution deduction; exempt foreign trade income of a foreign sales corporation; federal percentage depletion deduction; amortization deduction for specified pollution control facilities; deemed dividends from foreign operating corporations)
minus:
Minnesota Subtractions (foreign dividend gross up; salary expenses not deducted federally due to federal jobs or Indian employment credits; for banks, any dividend paid on their preferred stock to the federal government; previously disallowed deductions for intangible drilling costs; capital loss deduction with no
carrybacks; interest and expenses on income that is exempt federally but taxed by the state; cost depletion for mines, oil and gas wells, other natural deposits, and timber; depreciation deduction for specified pollution control facilities; state income tax refunds; enterprise zone credits included in income; 80% of foreign source royalties, fees, etc., received within unitary group; income or gains from mining subject to the occupation tax; handicap access expenditures disallowed federally due to claiming the federal credit; research expenses disallowed federally due to claiming the federal credit)
plus or minus:
modifications to the federal accelerated cost recovery system
equals:
total net income
times:
apportionment factor (weighted factor of 12.5% of property ratio, 12.5% of payroll ratio, and
75% of sales ratio; under certain conditions, separate accounting or single sales factor can be used).
Note: for tax years beginning after December 31, 2000, the apportionment factor weights
were changed from 15% of property ratio, 15% of payroll ratio, and 70% of sales ratio.
equals:
Minnesota net income
minus:
Minnesota deductions (net operating loss; dividends received deduction; MN charitable contributions)
equals:
Minnesota taxable income
times:
tax rate of 9.8%
equals:
gross tax
minus:
nonrefundable credits (research and development credit; alternative minimum tax carryover credit; premiums tax credit for insurance companies; guaranty association assessments for insurance companies)
plus:
alternative minimum tax (5.8% of alternative minimum taxable income) in excess of the regular tax; minimum fee*
equals:
tax liability
minus:
refundable enterprise zone credits
equals:
net corporate tax payable
* The minimum fee is in addition to the regular or alternative minimum tax and is determined by the sum of the corporation's MN property, payroll, and sales as follows:
Total Minnesota Property, Payroll, and Sales Minimum Fee
==============================================================
Less than $500,000 $ 0
$500,000 - 999,999 100
$1,000,000 - 4,999,999 300
$5,000,000 - 9,999,999 1,000
$10,000,000 - 19,999,999 2,000
$20,000,000 or more 5,000
Special Provision:
A corporation may contribute $1 or more to the MN Nongame Management Account by reducing its refund or increasing its liability.
Revenue Collections:
FY1993 $509,534,000 FY1994 $551,816,000 FY1995 $665,710,000 FY1996 $701,735,000 FY1997 $680,898,000 FY1998 $752,061,000 FY1999 $777,492,000 FY2000 $800,129,000
History:
Enacted in 1933 at graduated rates from 1% to 5%, and a specific credit against income of $1,000.
This information was taken from the Minnesota Department of Revenue Tax Research Division's "Tax Handbook," 1994 edition, April 1995, and an update for 1995.