Minnesota Legislature
HF 1388
as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am
Bill Text Versions
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| Introduction | Posted on 02/28/2005 |
Current Version - as introduced
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A bill for an act
relating to taxation; corporate franchise; modifying
the definition of foreign operating corporations;
amending Minnesota Statutes 2004, sections 290.01,
subdivision 6b; 290.17, by adding a subdivision.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2004, section 290.01,
subdivision 6b, is amended to read:
Subd. 6b.
Foreign operating corporation.
The term
"foreign operating corporation," when applied to a corporation,
means a domestic corporation with the following characteristics:
(1) it is part of a unitary business at least one member of
which is taxable in this state;
(2) it is not a foreign sales corporation under section 922
of the Internal Revenue Code, as amended through December 31,
1999, for the taxable year; deleted text begin and
deleted text end
(3) deleted text begin either deleted text end (i) the average of the percentages of its
property and payrollsnew text begin , including the pro rata share of its
unitary partnerships' property and payroll,new text end assigned to
locations deleted text begin inside deleted text end new text begin outside new text end the United States deleted text begin and the District of
Columbia, excluding the commonwealth of Puerto Rico and
possessions of the United Statesdeleted text end , new text begin where the United States
includes the District of Columbia and excludes the possessions
of the United States,new text end as determined under section 290.191 or
290.20, is deleted text begin 20 deleted text end new text begin 80 new text end percent or deleted text begin less deleted text end new text begin morenew text end ; or (ii) it has in effect
a valid election under section 936 of the Internal Revenue Codenew text begin ;
and
new text end
new text begin
(4) it has $1,000,000 of payroll and $2,000,000 of
property, as determined under section 290.191 or 290.20, that
are located outside of the United States. If the domestic
corporation does not have payroll as determined under section
290.191 or 290.20, but it or its partnerships have paid
$1,000,000 for work, performed directly for the domestic
corporation or the partnerships, outside of the United States,
then paragraph (3)(i) does not require payrolls to be included
in the average calculationnew text end .
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable
years beginning after December 31, 2004.
new text end
Sec. 2.
Minnesota Statutes 2002, section 290.17, is
amended by adding a subdivision to read:
new text begin Subd. 8.new text end
new text begin Foreign operating corporations; commissioner's
authority.new text end
new text begin (a) This subdivision applies to a unitary business
that includes a foreign operating corporation.
new text end
new text begin
(b) The commissioner may disqualify a corporation as a
foreign operating corporation, if the commissioner finds that:
new text end
new text begin
(1) there was no substantial independent business purpose,
other than the reduction of tax, for establishment of the
foreign operating corporation;
new text end
new text begin
(2) the income of the foreign operating corporation, on a
multiyear basis, is primarily derived from or fairly
attributable to domestic operations or sources of the unitary
business; or
new text end
new text begin
(3) a significant amount of inter-company transactions
involving the foreign operating corporation lack economic
substance or do not reflect market prices.
new text end
new text begin
(c) The commissioner may disallow all or part of the
subtraction for royalties, fees, and like income under section
290.01, subdivision 19d, clause (10), or all or part of the
deduction for deemed dividends of the foreign operating
corporation under section 290.21, if the commissioner finds that
the income or transactions on which the deductions are based:
new text end
new text begin
(1) lack economic substance or fail to reflect market
prices;
new text end
new text begin
(2) have no substantial independent business purpose other
than the reduction of tax; or
new text end
new text begin
(3) are derived from or fairly attributable to domestic
operations or sources.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective July 1, 2005.
new text end