What's new for Corporation Franchise Tax?

Conformity

Minnesota Statutes (M.S.) generally conform to the Internal Revenue Code (IRC) as amended through December 31, 2018.

• Get updated forms and instructions on our website.
• Do not file amended returns specifically for adjustments related to tax year 2017 tax law changes. Impacted taxpayers will receive letters explaining our adjustments or requesting more information. If taxpayers need to change their return for a different reason, they should file an amended return.

Additional Charge for Underpayment of Estimated Tax (ATC)

For tax year 2017, we will waive the ATC for underpayment of estimated tax if both of the following apply:

• Your tax after allowable credits is less than $1,000, and 
• You underpaid due to uncertainty in tax planning as a result of federal tax law changes effective after December 31, 2016.

Calculate your additional charge amount using the updated Schedule M15C on our website.

Disqualified Captive Insurance Company

A disqualified captive insurance company is required to file and pay income tax in Minnesota. All other insurance companies remain exempt from income taxation.

A disqualified captive insurance company is a captive insurance company that either:

• Pays less than 0.5% of its total premiums in the taxable year in tax under M.S. 297A or a comparable tax of another state.
• Receives less than 50% of its gross receipts for the taxable year from premiums.

A captive insurance company either:

• Is licensed as a captive insurance company.
• Derives less than 50% of its total premiums for the taxable year from sources outside the unitary business.

IRC Section 965 Deferred Foreign Income (DFI)

Minnesota law allows a subtraction for DFI reported on your federal return.

Conformity

Minnesota Statutes (M.S.) generally conform to the Internal Revenue Code (IRC) as amended through December 31, 2018.

Do not file amended returns specifically for adjustments related to 2018 tax law changes. Impacted taxpayers will receive letters explaining our adjustments or requesting more information. If taxpayers need to change their return for a different reason, they should file an amended return.

Corporate Net Operating Loss (NOL) Deduction

The Minnesota corporate NOL deduction is limited to 80% of the corporation's taxable income. Minnesota law does not distinguish between NOL carryovers generated before or after the law change. See the updated Schedule NOL for more information.

Business Interest Expense Limitation

IRC Section 163(j) is a provision of the TCJA that limits the deduction for business interest expense to the sum of the business interest income, 30% of adjusted taxable income, and floor plan financing interest.

For unitary businesses, the limitation applies to the entities within the Minnesota combined group. The limitation calculation uses the attributes of only those entities included in the Minnesota combined group. Combined groups that are different from the federal consolidated group will need to complete a federal Form 8990 for Minnesota purposes to determine their Minnesota business interest expense deduction.

Historic Structure Rehabilitation Tax Credit

The Minnesota Historic Structure Rehabilitation Tax Credit is payable in five equal installments over five years, beginning in the year the building was placed in service.

Effective for allocation certificate applications submitted to the Minnesota State Historic Preservation Office after December 31, 2017.

Additional Charge for Underpayment of Estimated Tax (ATC)

For tax year 2018, we will waive the ATC for underpayment of estimated income tax due to uncertainty in tax planning as a result of federal tax law changes effective after December 31, 2016.

Disqualified Captive Insurance Company

A disqualified captive insurance company is required to file and pay corporate franchise income tax in Minnesota. All other insurance companies remain exempt from corporate franchise income tax.

A disqualified captive insurance company is a captive insurance company that either:

• Pays less than 0.5% of its total premiums in the taxable year in tax under M.S. 297A or a comparable tax of another state.
• Receives less than 50% of its gross receipts for the taxable year from premiums.

A captive insurance company either:

• Is licensed as a captive insurance company.
• Derives less than 50% of its total premiums for the taxable year from sources outside the unitary business.

IRC Section 965 Deferred Foreign Income (DFI)

Minnesota law allows a subtraction for DFI reported on your federal return.

Inclusion of Global Intangible Low-Taxed Income (GILTI)

Minnesota law allows a subtraction for the inclusion of GILTI reported on your federal return.

Special deductions under IRC 250 and 965 addition

The corporate addition for special federal deductions was modified to include the deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI).

Corporate Net Operating Loss (NOL) Deduction

The Minnesota corporate NOL deduction is limited to 80% of the corporation's taxable income. Minnesota law does not distinguish between NOL carryovers generated before or after the law change. See the updated Schedule NOL for more information.

Business Interest Expense Limitation

IRC Section 163(j) limits the deduction for business interest expense to the sum of the business interest income, 30% of adjusted taxable income, and floor plan financing interest.

For unitary businesses, the limitation applies to entities within the Minnesota combined group. The limitation calculation uses the attributes of only those entities included in the Minnesota combined group. 

Combined groups that are different from the federal consolidated group will need to complete a federal Form 8990 for Minnesota purposes to determine their Minnesota business interest expense deduction.

Historic Structure Rehabilitation Tax Credit

The Minnesota Historic Structure Rehabilitation Tax Credit is payable in five equal installments over five years, beginning in the year the building was placed in service.

Effective for allocation certificate applications submitted to the Minnesota State Historic Preservation Office after December 31, 2017.

Disqualified Captive Insurance Company

A disqualified captive insurance company is required to file and pay corporate franchise income tax in Minnesota. All other insurance companies remain exempt from corporate franchise income tax.

A disqualified captive insurance company is a captive insurance company that either:

• Pays less than 0.5% of its total premiums in the taxable year in tax under M.S. 297A or a comparable tax of another state.
• Receives less than 50% of its gross receipts for the taxable year from premiums.

A captive insurance company:

• Is licensed as a captive insurance company.
• Derives less than 50% of its total premiums for the taxable year from sources outside the unitary business.

IRC Section 965 Deferred Foreign Income (DFI)

Minnesota law allows a subtraction for DFI reported on your federal return.

Inclusion of Global Intangible Low-Taxed Income (GILTI)

Minnesota law allows a subtraction for the inclusion of GILTI reported on your federal return.

Special deductions under IRC 250 and 965 addition

Minnesota law requires an addition for special federal deductions for IRC 250 foreign-derived intangible income (FDII) and IRC 965 deferred foreign income.

Public Law 86-272 Check Box

A new check box was added to the top of Form M4 to claim exemption from Minnesota income tax under Public Law 86-272.

Domestic Production Activities Deduction (DPAD)

Minnesota repealed the addition of the DPAD.

Fines, Fees, and Penalties

Minnesota repealed the addition of fines, fees, and penalties that were deducted on your federal return.

Federally disallowed IRC Section 280E Expenses for Medical Cannabis Manufacturers

Minnesota law allows a subtraction for federally disallowed IRC Section 280E expenses for medical cannabis manufacturers. Additionally, when calculating corporate alternative minimum tax, Minnesota law allows a subtraction for federally disallowed IRC Section 280E expenses for medical cannabis manufacturers.

Debt-Financed Stock

Dividends attributable to debt-financed stock under IRC Section 246A are excluded from the Minnesota dividends received deduction.

Mutual Fund Manager

Minnesota requires mutual fund managers to determine their Minnesota source sales based on the state where the fund's shareholders reside.

The requirement has extended to include individuals, estates, and partnerships, in addition to corporations and trusts.

Credit for Increasing Research Activities (R&D)

Expenditures funded through Innovation Grants from the Launch Minnesota program cannot be used to claim the R&D Credit. For more information on the credit, see Schedule RD.

Minimum Fee Indexed for Inflation

Interest Rate Determined