HF 2228

as introduced - 92nd Legislature (2021 - 2022) Posted on 03/15/2021 03:10pm

A bill for an act
relating to taxation; corporate franchise; requiring worldwide combined reporting;
amending Minnesota Statutes 2020, section 290.17, subdivision 4, by adding a
subdivision.

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

Section 1.

Minnesota Statutes 2020, section 290.17, subdivision 4, is amended to read:

Subd. 4.

Unitary business principle.

(a) If a trade or business conducted wholly within
this state or partly within and partly without this state is part of a unitary business, the entire
new text begin worldwide new text end income of the unitary business is subject to apportionment pursuant to section
290.191. Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary
business is considered to be derived from any particular source and none may be allocated
to a particular place except as provided by the applicable apportionment formula. The
provisions of this subdivision do not apply to business income subject to subdivision 5,
income of an insurance company, or income of an investment company determined under
section 290.36.

(b) The term "unitary business" means business activities or operations which result in
a flow of value between them. The term may be applied within a single legal entity or
between multiple entities and without regard to whether each entity is a sole proprietorship,
a corporation, a partnership or a trust.

(c) Unity is presumed whenever there is unity of ownership, operation, and use, evidenced
by centralized management or executive force, centralized purchasing, advertising,
accounting, or other controlled interaction, but the absence of these centralized activities
will not necessarily evidence a nonunitary business. Unity is also presumed when business
activities or operations are of mutual benefit, dependent upon or contributory to one another,
either individually or as a group.

(d) Where a business operation conducted in Minnesota is owned by a business entity
that carries on business activity outside the state different in kind from that conducted within
this state, and the other business is conducted entirely outside the state, it is presumed that
the two business operations are unitary in nature, interrelated, connected, and interdependent
unless it can be shown to the contrary.

(e) Unity of ownership does not exist when two or more corporations are involved unless
more than 50 percent of the voting stock of each corporation is directly or indirectly owned
by a common owner or by common owners, either corporate or noncorporate, or by one or
more of the member corporations of the group. For this purpose, the term "voting stock"
shall include membership interests of mutual insurance holding companies formed under
section 66A.40.

deleted text begin (f) The net income and apportionment factors under section 290.191 or 290.20 of foreign
corporations and other foreign entities, but excluding a disqualified captive insurance
company, which are part of a unitary business shall not be included in the net income or
the apportionment factors of the unitary business; except that the income and apportionment
factors of a foreign entity, other than an entity treated as a C corporation for federal income
tax purposes, that are included in the federal taxable income, as defined in section 63 of the
Internal Revenue Code as amended through the date named in section 290.01, subdivision
19, of a domestic corporation, domestic entity, or individual must be included in determining
net income and the factors to be used in the apportionment of net income pursuant to section
290.191 or 290.20. A foreign corporation or other foreign entity which is not included on
a combined report and which is required to file a return under this chapter shall file on a
separate return basis.
deleted text end

deleted text begin (g) For purposes of determining the net income of a unitary business and the factors to
be used in the apportionment of net income pursuant to section 290.191 or 290.20, there
must be included only the income and apportionment factors of domestic corporations or
other domestic entities that are determined to be part of the unitary business pursuant to this
subdivision, notwithstanding that foreign corporations or other foreign entities might be
included in the unitary business; except that the income and apportionment factors of a
foreign entity, other than an entity treated as a C corporation for federal income tax purposes,
that is included in the federal taxable income, as defined in section 63 of the Internal Revenue
Code as amended through the date named in section 290.01, subdivision 19, of a domestic
corporation, domestic entity, or individual must be included in determining net income and
the factors to be used in the apportionment of net income pursuant to section 290.191 or
290.20.
deleted text end

deleted text begin (h) deleted text end new text begin (f) new text end Each corporation or other entity, except a sole proprietorship, that is part of a
unitary business must file combined reports as the commissioner determines. On the reports,
all intercompany transactions between entities deleted text begin included pursuant to paragraph (g) deleted text end must be
eliminated and the entire net income of the unitary business determined in accordance with
this subdivision is apportioned among the entities by using each entity's Minnesota factors
for apportionment purposes in the numerators of the apportionment formula and the total
factors for apportionment purposes of all entities deleted text begin included pursuant to paragraph (g) deleted text end in the
denominators of the apportionment formula. Except as otherwise provided by paragraph
(f), all sales of the unitary business made within this state pursuant to section 290.191 or
290.20 must be included on the combined report of a corporation or other entity that is a
member of the unitary business and is subject to the jurisdiction of this state to impose tax
under this chapter.

deleted text begin (i) deleted text end new text begin (g) new text end If a corporation has been divested from a unitary business and is included in a
combined report for a fractional part of the common accounting period of the combined
report:

(1) its income includable in the combined report is its income incurred for that part of
the year determined by proration or separate accounting; and

(2) its sales, property, and payroll included in the apportionment formula must be prorated
or accounted for separately.

deleted text begin (j) deleted text end new text begin (h) new text end For purposes of this subdivision, "insurance company" means an insurance
company, as defined in section 290.01, subdivision 5b, that is not a disqualified captive
insurance company.

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. 4a. new text end

new text begin Foreign corporations and other foreign entities. new text end

new text begin For purposes of imposing
a tax under this chapter, the federal taxable income of a foreign corporation or other foreign
entity 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 foreign corporation or other foreign entity 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