Foreign Disregarded Entities
Foreign Disregarded Entities
The department’s policy on foreign disregarded entities depends on the taxpayer’s tax year and the taxpayer’s check-the-box election on their federal form.
Minnesota Reporting and Check-the-Box Impacts
For tax years beginning 2013, Minnesota follows the federal check-the-box election on federal Form 8832.
Minnesota does not have a separate disclosure form for disregarded entities.
This table shows what a foreign entity must do based on the tax year and the federal check-the-box election.
| Tax years beginning | Election D | Election E | Election F |
|---|---|---|---|
| After 12/31/2012 |
The foreign entity files a separate Form M4, Corporation Franchise Tax Return. |
Minnesota follows the federal election. If the foreign entity is included in the federal return, the foreign entity is included in the Minnesota return for income and apportionment purposes. |
Minnesota follows the federal election. If the foreign entity is included in the federal return, the foreign entity is included in the Minnesota return for income and apportionment purposes. |
| After 12/31/1996 and before 1/1/2013 | The foreign entity files a separate Form M4. | Income and apportionment factors of the foreign entity must be excluded from the Minnesota return. | Income and apportionment factors of the foreign entity must be included in the Minnesota return. |
Policy History
The Minnesota Supreme Court’s decision in 2017 Ashland Inc. v. Commissioner of Revenue retroactively overturned the department’s previous policy, for tax years 1997 - 2012, which was to exclude foreign disregarded entities from the unitary group. After the court decision, the department changed its policy for tax years 2013 and later. (See Revenue Notice 13-08.)