HF 2955

as introduced - 93rd Legislature (2023 - 2024) Posted on 03/16/2023 02:36pm

A bill for an act
relating to taxation; corporate franchise; repealing the corporate alternative
minimum tax and corporate minimum fee; amending Minnesota Statutes 2022,
sections 290.0131, subdivision 5; 290.0133, subdivision 2; 290.0136; 290.0921,
subdivision 8; 290.0922, subdivisions 1, 2; 469.317; repealing Minnesota Statutes
2022, section 290.0921, subdivisions 1, 2, 3, 3a, 4, 6.

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

Section 1.

Minnesota Statutes 2022, section 290.0131, subdivision 5, is amended to read:

Subd. 5.

Income taxes deducted in computing federal adjusted gross income.

(a)
The amount of income taxes paid or accrued within the taxable year under this chapter and
taxes based on net income paid to any other state or any province or territory of Canada is
an addition to the extent allowed as a deduction in determining federal adjusted gross income.

(b) For the purpose of this subdivision, income taxes do not include the taxes imposed
by sections 290.0922, subdivision 1, paragraph deleted text begin (b) deleted text end new text begin (a) new text end ; 290.9727; 290.9728; and 290.9729.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2022.
new text end

Sec. 2.

Minnesota Statutes 2022, section 290.0133, subdivision 2, is amended to read:

Subd. 2.

Taxes paid.

The amount of any deduction taken for income, excise, or franchise
taxes based on net income or related minimum taxes, including but not limited to the tax
deleted text begin imposed under section 290.0922, deleted text end paid by the corporation to Minnesota, another state, a
political subdivision of another state, the District of Columbia, or any foreign country or
possession of the United States, is an addition.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2022.
new text end

Sec. 3.

Minnesota Statutes 2022, section 290.0136, is amended to read:

290.0136 CERTAIN PREFERRED STOCK LOSSES.

A taxpayer must compute net income by treating losses from the sale or transfer of
certain preferred stock, which the taxpayer treated as ordinary losses pursuant to Division
A, title III, section 301 of Public Law 110-343, as capital losses. The amount of net income
under section 290.01, subdivision 19; taxable net income under section 290.01, subdivision
22; taxable income under section 290.01, subdivision 29; the numerator and denominator
in section 290.06, subdivision 2c, paragraph (e); individual alternative minimum taxable
income under section 290.091, subdivision 2; deleted text begin corporate alternative minimum taxable income
under section 290.0921, subdivision 3; deleted text end and net operating losses under section 290.095 must
be computed for each taxable year as if those losses had been treated by the taxpayer as
capital losses under the Internal Revenue Code, including the limitations under section 1211
of the Internal Revenue Code.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2022.
new text end

Sec. 4.

Minnesota Statutes 2022, section 290.0921, subdivision 8, is amended to read:

Subd. 8.

Carryover credit.

(a) A corporation is allowed a credit against qualified regular
tax for qualified alternative minimum tax previously paid. The credit is allowable only deleted text begin if
the corporation has no tax liability under this section for the taxable year and deleted text end if the
corporation has an alternative minimum tax credit carryover from a previous year. The
credit allowable in a taxable year equals the lesser of new text begin :
new text end

(1) deleted text begin the excess of deleted text end the qualified regular tax for the taxable year deleted text begin over the amount computed
under subdivision 1, clause (1), for the taxable year deleted text end new text begin ; new text end or

(2) the carryover credit to the taxable year.

(b) For purposes of this subdivision, the following terms have the meanings given.

(1) "Qualified alternative minimum tax" equals the amount determined under subdivision
1 for deleted text begin the deleted text end new text begin a new text end taxable year new text begin beginning before January 1, 2021 new text end .

(2) "Qualified regular tax" means the tax imposed under section 290.06, subdivision 1.

(c) The qualified alternative minimum tax for a taxable year is an alternative minimum
tax credit carryover to each of the taxable years succeeding the taxable year. The entire
amount of the credit must be carried to the earliest taxable year to which the amount may
be carried. Any unused portion of the credit must be carried to the following taxable year.
No credit may be carried to a taxable year in which alternative minimum tax was paid.

(d) An acquiring corporation may carry over this credit from a transferor or distributor
corporation in a corporate acquisition. The provisions of section 381 of the Internal Revenue
Code apply in determining the amount of the carryover, if any.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2022.
new text end

Sec. 5.

Minnesota Statutes 2022, section 290.0922, subdivision 1, is amended to read:

Subdivision 1.

Imposition.

deleted text begin (a) In addition to the tax imposed by this chapter without
regard to this section, the franchise tax imposed on a corporation required to file under
section 289A.08, subdivision 3, other than a corporation treated as an "S" corporation under
section 290.9725 for the taxable year includes a tax equal to the following amounts:
deleted text end

deleted text begin If the sum of the corporation's Minnesota property, payrolls, and sales or receipts is: deleted text end							deleted text begin the tax equals: deleted text end
		deleted text begin less than deleted text end		deleted text begin $ deleted text end	deleted text begin 1,020,000 deleted text end		deleted text begin $ deleted text end	deleted text begin 0 deleted text end
	deleted text begin $ deleted text end	deleted text begin 1,020,000 deleted text end	deleted text begin to deleted text end	deleted text begin $ deleted text end	deleted text begin 2,039,999 deleted text end		deleted text begin $ deleted text end	deleted text begin 210 deleted text end
	deleted text begin $ deleted text end	deleted text begin 2,040,000 deleted text end	deleted text begin to deleted text end	deleted text begin $ deleted text end	deleted text begin 10,209,999 deleted text end		deleted text begin $ deleted text end	deleted text begin 610 deleted text end
	deleted text begin $ deleted text end	deleted text begin 10,210,000 deleted text end	deleted text begin to deleted text end	deleted text begin $ deleted text end	deleted text begin 20,409,999 deleted text end		deleted text begin $ deleted text end	deleted text begin 2,040 deleted text end
	deleted text begin $ deleted text end	deleted text begin 20,410,000 deleted text end	deleted text begin to deleted text end	deleted text begin $ deleted text end	deleted text begin 40,819,999 deleted text end		deleted text begin $ deleted text end	deleted text begin 4,090 deleted text end
	deleted text begin $ deleted text end	deleted text begin 40,820,000 deleted text end	deleted text begin or deleted text end	deleted text begin more deleted text end			deleted text begin $ deleted text end	deleted text begin 10,210 deleted text end

deleted text begin (b) deleted text end new text begin (a) new text end A tax is imposed for each taxable year on a corporation required to file a return
under section 289A.12, subdivision 3, that is treated as an S corporation under section
290.9725 and on a partnership required to file a return under section 289A.12, subdivision
3, other than a partnership that derives over 80 percent of its income from farming. The tax
imposed under this paragraph is due on or before the due date of the return for the taxpayer
due under section 289A.18, subdivision 1. The commissioner shall prescribe the return to
be used for payment of this tax. The tax under this paragraph is equal to the following
amounts:

If the sum of the S corporation's or partnership's Minnesota property, payrolls, and sales or receipts is:							the tax equals:
		less than		$	1,020,000		$	0
	$	1,020,000	to	$	2,039,999		$	210
	$	2,040,000	to	$	10,209,999		$	610
	$	10,210,000	to	$	20,409,999		$	2,040
	$	20,410,000	to	$	40,819,999		$	4,090
	$	40,820,000	or more				$	10,210

deleted text begin (c) deleted text end new text begin (b) new text end The commissioner shall annually adjust the dollar amounts of both the tax and
the property, payrolls, and sales or receipts thresholds in deleted text begin paragraphs deleted text end new text begin paragraph new text end (a) deleted text begin and (b) deleted text end
as provided in section 270C.22. The statutory year is taxable year 2019. The tax amounts
as adjusted must be rounded to the nearest $10 amount and the threshold amounts must be
adjusted to the nearest $10,000 amount. For tax amounts that end in $5, the amount is
rounded up to the nearest $10 amount and for the threshold amounts that end in $5,000, the
amount is rounded up to the nearest $10,000.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2022.
new text end

Sec. 6.

Minnesota Statutes 2022, section 290.0922, subdivision 2, is amended to read:

Subd. 2.

Exemptions.

The following entities are exempt from the tax imposed by this
section:

deleted text begin (1) corporations exempt from tax under section 290.05;
deleted text end

deleted text begin (2) deleted text end new text begin (1) new text end real estate investment trusts;

deleted text begin (3) deleted text end new text begin (2) new text end regulated investment companies or a fund thereof;

deleted text begin (4) deleted text end new text begin (3) new text end entities having a valid election in effect under section 860D(b) of the Internal
Revenue Code;

deleted text begin (5) deleted text end new text begin (4) new text end township mutual insurance companies;

deleted text begin (6) deleted text end new text begin (5) new text end cooperatives organized under chapter 308A or 308B that provide housing
exclusively to persons age 55 and over and are classified as homesteads under section
273.124, subdivision 3; and

deleted text begin (7) deleted text end new text begin (6) new text end a qualified business as defined under section 469.310, subdivision 11, if for the
taxable year all of its property is located in a job opportunity building zone designated under
section 469.314 and all of its payroll is a job opportunity building zone payroll under section
469.310.

Entities not specifically exempted by this subdivision are subject to tax under this section,
notwithstanding section 290.05.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2022.
new text end

Sec. 7.

Minnesota Statutes 2022, section 469.317, is amended to read:

469.317 CORPORATE FRANCHISE TAX EXEMPTION.

(a) A qualified business is exempt from taxation under section 290.02 deleted text begin , the alternative
minimum tax under section 290.0921, deleted text end and the minimum fee under section 290.0922 deleted text begin , deleted text end on the
portion of its income attributable to operations within the zone. deleted text begin This exemption is determined
as follows:
deleted text end

deleted text begin (1) deleted text end new text begin (b) new text end For purposes of the tax imposed under section 290.02, new text begin the exemption is determined
new text end by multiplying its taxable net income by its zone percentage and by its relocation payroll
percentage and subtracting the result in determining taxable income deleted text begin ; deleted text end new text begin .
new text end

deleted text begin (2) for purposes of the alternative minimum tax under section 290.0921, by multiplying
its alternative minimum taxable income by its zone percentage and by its relocation payroll
percentage and reducing alternative minimum taxable income by this amount; and
deleted text end

deleted text begin (3) deleted text end new text begin (c) new text end For purposes of the minimum fee under section 290.0922, new text begin the exemption is
determined new text end by excluding property and payroll in the zone from the computations of the fee
or by exempting the entity under section 290.0922, subdivision 2, clause (7).

deleted text begin (b) deleted text end new text begin (d) new text end No subtraction is allowed under this section in excess of 20 percent of the sum
of the corporation's job opportunity building zone payroll and the adjusted basis of the
property at the time that the property is first used in the job opportunity building zone by
the corporation.

deleted text begin (c) deleted text end new text begin (e) new text end This section applies only to taxable years beginning during the duration of the
job opportunity building zone.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2022.
new text end

Sec. 8. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2022, section 290.0921, subdivisions 1, 2, 3, 3a, 4, and 6, new text end new text begin are repealed.
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, 2022.
new text end

APPENDIX

Repealed Minnesota Statutes: 23-04650

290.0921 CORPORATE ALTERNATIVE MINIMUM TAX AFTER 1989.

Subdivision 1.

Tax imposed.

In addition to the taxes computed under this chapter without regard to this section, the franchise tax imposed on corporations includes a tax equal to the excess, if any, for the taxable year of:

(1) 5.8 percent of Minnesota alternative minimum taxable income; over

(2) the tax imposed under section 290.06, subdivision 1, without regard to this section.

Subd. 2.

Definitions.

(a) For purposes of this section, the following terms have the meanings given them.

(b) "Alternative minimum taxable net income" is alternative minimum taxable income,

(1) less the exemption amount, and

(2) apportioned or allocated to Minnesota under section 290.17, 290.191, or 290.20.

(c) The "exemption amount" is $40,000, reduced, but not below zero, by 25 percent of the excess of alternative minimum taxable income over $150,000.

(d) "Minnesota alternative minimum taxable income" is alternative minimum taxable net income, less the deductions for alternative tax net operating loss under subdivision 4; and dividends received under subdivision 6. The sum of the deductions under this paragraph may not exceed 90 percent of alternative minimum taxable net income. This limitation does not apply to:

(1) a deduction for dividends paid to or received from a corporation which is subject to tax under section 290.36 and which is a member of an affiliated group of corporations as defined by the Internal Revenue Code; or

(2) a deduction for dividends received from a property and casualty insurer as defined under section 60A.60, subdivision 8, which is a member of an affiliated group of corporations as defined by the Internal Revenue Code and either: (i) the dividend is eliminated in consolidation under Treasury Regulation 1.1502-14(a), as amended through December 31, 1989; or (ii) the dividend is deducted under an election under section 243(b) of the Internal Revenue Code.

(e) "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended through December 16, 2016.

Subd. 3.

Alternative minimum taxable income.

"Alternative minimum taxable income" is Minnesota net income as defined in section 290.01, subdivision 19, and includes the adjustments and tax preference items in sections 56, 57, 58, and 59(d), (e), (f), and (h) of the Internal Revenue Code. If a corporation files a separate company Minnesota tax return, the minimum tax must be computed on a separate company basis. If a corporation is part of a tax group filing a unitary return, the minimum tax must be computed on a unitary basis. The following adjustments must be made.

(1) The portion of the depreciation deduction allowed for federal income tax purposes under section 168(k) of the Internal Revenue Code that is required as an addition under section 290.0133, subdivision 11, is disallowed in determining alternative minimum taxable income.

(2) The subtraction for depreciation allowed under section 290.0134, subdivision 13, is allowed as a depreciation deduction in determining alternative minimum taxable income.

(3) The alternative tax net operating loss deduction under sections 56(a)(4) and 56(d) of the Internal Revenue Code does not apply.

(4) The special rule for certain dividends under section 56(g)(4)(C)(ii) of the Internal Revenue Code does not apply.

(5) The tax preference for depletion under section 57(a)(1) of the Internal Revenue Code does not apply.

(6) The tax preference for tax exempt interest under section 57(a)(5) of the Internal Revenue Code does not apply.

(7) The tax preference for charitable contributions of appreciated property under section 57(a)(6) of the Internal Revenue Code does not apply.

(8) For purposes of calculating the adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code, the term "alternative minimum taxable income" as it is used in section 56(g) of the Internal Revenue Code, means alternative minimum taxable income as defined in this subdivision, determined without regard to the adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code.

(9) For purposes of determining the amount of adjusted current earnings under section 56(g)(3) of the Internal Revenue Code, no adjustment shall be made under section 56(g)(4) of the Internal Revenue Code with respect to (i) the amount of foreign dividend gross-up subtracted as provided in section 290.0134, subdivision 2, or (ii) the amount of refunds of income, excise, or franchise taxes subtracted as provided in section 290.0134, subdivision 8.

(10) Alternative minimum taxable income excludes the income from operating in a job opportunity building zone as provided under section 469.317.

Items of tax preference must not be reduced below zero as a result of the modifications in this subdivision.

(11) The subtraction for disallowed section 280E expenses under section 290.0134, subdivision 19, is allowed as a deduction in determining alternative minimum taxable income.

Subd. 3a.

Exemptions.

The following entities are exempt from the tax imposed by this section:

(1) cooperatives taxable under subchapter T of the Internal Revenue Code or organized under chapter 308 or a similar law of another state;

(2) corporations subject to tax under section 297I.05, subdivisions 1 to 5;

(3) real estate investment trusts;

(4) regulated investment companies or a fund thereof;

(5) entities having a valid election in effect under section 860D(b) of the Internal Revenue Code; and

(6) small corporations exempt from the federal alternative minimum tax under section 55(e) of the Internal Revenue Code.

Subd. 4.

Alternative tax net operating loss.

(a) An alternative tax net operating loss deduction is allowed from alternative minimum taxable net income equal to the net operating loss deduction allowable for the taxable year under section 290.095 with the following modifications:

(1) The amount of the net operating loss deduction must not exceed 90 percent of alternative minimum taxable net income.

(2) In determining the amount of the net operating loss deduction (i) the net operating loss under section 290.095 must be adjusted as provided in paragraph (b), and (ii) for taxable years beginning after December 31, 1989, section 290.095, subdivision 3, must be applied by substituting "90 percent of alternative minimum taxable net income" for "taxable net income."

(b) For a loss year beginning after December 31, 1989, the net operating loss for each year under section 290.095 must be (1) determined with the adjustments provided in sections 56 and 58 of the Internal Revenue Code, as modified by subdivision 3 and (2) reduced by the items of tax preference for the year determined under section 57 of the Internal Revenue Code, as modified by subdivision 3.

Subd. 6.

Dividends received.

(a) A deduction is allowed from alternative minimum taxable net income equal to the deduction for dividends received under section 290.21, subdivision 4, for purposes of calculating taxable income under section 290.01, subdivision 29.

(b) The amount of the deduction must not exceed 90 percent of alternative minimum taxable net income.

This limitation does not apply to:

(1) dividends paid to or received from a corporation which is subject to tax under section 290.36 and which is a member of an affiliated group of corporations as defined by the Internal Revenue Code; or

(2) dividends received from a property and casualty insurer as defined under section 60A.60, subdivision 8, which is a member of an affiliated group of corporations as defined by the Internal Revenue Code and either: (i) the dividend is eliminated in consolidation under Treasury Regulation 1.1502-14(a), as amended through December 31, 1989; or (ii) the dividend is deducted under an election under section 243(b) of the Internal Revenue Code.