HF 2114

as introduced - 92nd Legislature (2021 - 2022) Posted on 03/11/2021 02:42pm

A bill for an act
relating to taxation; modifying individual income taxes and corporate franchise
taxes; creating an addition for certain previously taxed income; deeming certain
foreign corporations to be domestic corporations; amending Minnesota Statutes
2020, section 290.17, by adding subdivisions.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2020, section 290.17, is amended by adding a subdivision
to read:

new text begin Subd. 4a. new text end

new text begin Controlled foreign corporations. new text end

new text begin (a) For purposes of applying subdivision
4, a controlled foreign corporation as defined in section 957 of the Internal Revenue Code
is deemed to be a domestic corporation if:
new text end

new text begin (1) a United States shareholder of a controlled foreign corporation is required for the
taxable year to include in gross income the shareholder's global intangible low-taxed income
under section 951A of the Internal Revenue Code; and
new text end

new text begin (2) the commissioner determines that the controlled foreign corporation is a member of
a unitary group.
new text end

new text begin (b) The determination made by the commissioner under paragraph (a), clause (2), is
prima facie valid. The taxpayer subject to this determination has the burden of establishing
the determination's incorrectness in any related action or proceeding.
new text end

new text begin (c) For purposes of imposing a tax under this chapter, the federal taxable income of a
controlled foreign corporation deemed to be a domestic corporation under this subdivision
must be computed as follows:
new text end

new text begin (1) a profit and loss statement must be prepared in the currency in which the books of
account of the controlled foreign corporation are regularly maintained;
new text end

new text begin (2) except as determined by the commissioner, adjustments must be made to the profit
and loss statement to conform the statement to the accounting principles generally accepted
in the United States for the preparation of those statements;
new text end

new text begin (3) adjustments must be made to the profit and loss statement to conform it to the tax
accounting standards required by the commissioner;
new text end

new text begin (4) unless otherwise authorized by the commissioner, the profit and loss statement of
each member of the combined group, and the apportionment factors related to the combined
group, whether domestic or foreign, must be converted into the currency in which the parent
company maintains its books and records; and
new text end

new text begin (5) income apportioned to this state must be expressed in United States dollars.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2020.
new text end

Sec. 2.

Minnesota Statutes 2020, section 290.17, is amended by adding a subdivision to
read:

new text begin Subd. 4b. new text end

new text begin Worldwide election. new text end

new text begin (a) Taxpayer members of a unitary group, of which one
or more members are deemed to be domestic corporations under subdivision 4a for the
taxable year, may elect to determine each of their apportioned shares of the net business
income or loss of the combined group under a worldwide election. Under the election,
taxpayer members must take into account the entire income and apportionment factors of
each member of the unitary group, regardless of the place where a member is incorporated
or formed. Corporations or other entities incorporated or formed outside of the United States
are subject to the requirements of subdivision 4a, paragraph (c), in reporting their income.
new text end

new text begin (b) A worldwide election is effective only if made on a timely filed, original return for
the tax year by each member of the unitary group subject to tax under this chapter.
new text end

new text begin (c) A worldwide election is binding for and applies to the taxable year it is made and
for the ten following taxable years.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2020.
new text end

Sec. 3.

Minnesota Statutes 2020, section 290.17, is amended by adding a subdivision to
read:

new text begin Subd. 4c. new text end

new text begin Withdrawal; reinstitution. new text end

new text begin (a) The election under subdivision 4b, paragraph
(a), may be withdrawn:
new text end

new text begin (1) after expiration of the ten-year period in subdivision 4b, paragraph (c), provided that
the withdrawal is made in writing within one year after the expiration of the election; or
new text end

new text begin (2) prior to the expiration of the ten-year period, if the taxpayer members:
new text end

new text begin (i) file a written withdrawal request with the commissioner;
new text end

new text begin (ii) demonstrate that they would experience an extraordinary hardship due to unforeseen
changes in this state's tax statutes, laws, or policies; and
new text end

new text begin (iii) receive written permission from the commissioner approving the withdrawal, which
the commissioner may grant.
new text end

new text begin (b) A withdrawal made under paragraph (a) is binding for ten years. If no withdrawal
is properly made under paragraph (a), clause (1), the worldwide election is binding for an
additional ten taxable years. If the commissioner grants written permission to withdraw
under paragraph (a), clause (2), the commissioner must impose any requirement deemed
necessary to prevent evasion of tax or to clearly reflect income for the election period before
or after withdrawal.
new text end

new text begin (c) Notwithstanding the requirement binding withdrawal for ten years under paragraph
(b), the election may be reinstituted if the taxpayer members:
new text end

new text begin (1) file a written reinstitution request with the commissioner;
new text end

new text begin (2) demonstrate that they would experience an extraordinary hardship due to unforeseen
changes in this state's tax statutes, laws, or policies; and
new text end

new text begin (3) receive written permission from the commissioner approving the reinstitution, which
the commissioner may grant.
new text end

new text begin (d) A reinstitution under paragraph (c) is binding for a period of ten years. The withdrawal
provisions of paragraph (a) apply to a reinstitution under paragraph (c), and the provisions
of paragraph (c) apply to a reinstitution following a subsequent withdrawal.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2020.
new text end