HF 4535

as introduced - 93rd Legislature (2023 - 2024) Posted on 05/01/2024 12:05am

A bill for an act
relating to taxation; corporate franchise; requiring a report from the Department
of Revenue on corporate tax base erosion.

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

Section 1. new text begin CORPORATE TAX BASE EROSION STUDY.
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new text begin By January 1, 2025, the commissioner of revenue must provide a report to the chairs
and ranking minority members of the legislative committees with jurisdiction over taxes
on the extent of corporate tax base erosion in Minnesota; the legislative options for addressing
that erosion, including worldwide combined reporting; and the litigation risks that may arise
by adopting various approaches to address corporate tax base erosion. The report must
comply with Minnesota Statutes, sections 3.195 and 3.197, and specifically include a
discussion of:
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new text begin (1) the types of international corporate structures and resulting transactions among
commonly controlled businesses that reduce the amount of income that would otherwise
be apportionable to Minnesota under the corporate franchise tax, the effect of which is
commonly referred to as "corporate tax base erosion";
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new text begin (2) the most reliable published analyses of corporate tax base erosion that could be used
to estimate the revenue impact of that erosion on corporate franchise tax collections in
Minnesota, including how Minnesota's share of aggregate domestic shifted profits may be
calculated;
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new text begin (3) the extent to which the state's current treatment of income under section 951A of the
Internal Revenue Code addresses corporate tax base erosion and the limitations of this
approach;
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new text begin (4) other options that exist for modifying the state's corporate franchise tax to address
corporate tax base erosion, including the imposition of worldwide combined reporting;
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new text begin (5) for worldwide combined reporting:
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new text begin (i) how the increased amount of income estimated to be apportioned to Minnesota under
a combined reporting system would be equal to the amount of Minnesota's share of shifted
profits described in clause (2);
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new text begin (ii) the administrative impact of worldwide combined reporting on taxpayers and the
Department of Revenue relative to current law; and
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new text begin (iii) recommendations for administrative changes to the corporate franchise tax to address
the impacts described in item (ii);
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new text begin (6) recommendations for any other modifications to current law needed to administer
the options described in clause (4);
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new text begin (7) the risk of litigation, including federal constitutional claims, under the options
described in clause (4) and recommendations to mitigate those risks; and
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new text begin (8) any other topic the commissioner deems necessary to properly inform legislators on
this subject.
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new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
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