S Corporation Taxes and Minimum Fee


Most S corporation income is taxed after it passes through to shareholders.

S corporations must pay Minnesota’s corporate tax rate of 9.8% on the following:

  • The Minnesota portion of any passive income that is subject to federal tax
  • The Minnesota portion of any recognized built-in gains and net capital gains that are subject to federal tax
  • The current year’s installment of any LIFO recapture tax, imposed when a C corporation converts to an S corporation and paid over a four-year period

An S corporation is also subject to the minimum fee if its Minnesota property, payroll, and sales total at least $1,050,000 for the year.

The $1,050,000 figure is for the 2021 tax year and is adjusted annually for inflation.

In some cases, the property, payroll, and sales used for computing the minimum fee are different from those used to apportion Minnesota income.

S corporation taxes and the minimum fee are determined when you complete Form M8, S Corporation Return. For more information, see Form M8 Instructions.

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