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SF1636 (Legislative Session 94 (2025-2026))

Reduced rate provision for certain corporations

AI Generated Summary

This bill (S.F. No. 1636) proposes an amendment to Minnesota's corporate franchise tax policy by establishing a reduced tax rate for corporations that meet specific pay equity criteria.

Key Provisions:

  1. Reduced Corporate Tax Rate:

    • Eligible corporations will be subject to a franchise tax rate of 5% instead of the standard rate.

  2. Eligibility Criteria (Pay Ratio Requirement):

    • A corporation qualifies for the reduced tax rate if its pay ratio—defined as the ratio of the average hourly compensation of its five highest-paid executives to the lowest-paid five percent of workers (including hourly employees, salaried employees, and contractors)—does not exceed 15 to 1.

  3. Calculating Compensation:

    • Executive hourly compensation: Includes wages, benefits, and other noncash compensation paid to executives, divided by 52 weeks and 40 hours per week.
    • Employee and contractor compensation: Similar calculations are applied based on annual compensation divided into an hourly wage format.

Purpose and Impact:

The bill aims to incentivize pay equity by rewarding corporations that maintain a low income disparity between executives and lower-paid workers. If enacted, it could encourage businesses to increase wages for lower-paid employees or limit executive compensation growth to qualify for tax savings.

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
February 19, 2025SenateFloorActionIntroduction and first reading
February 19, 2025SenateFloorActionReferred toTaxes

Citations

 
[
  {
    "analysis": {
      "added": [
        "A new subdivision defining eligible corporation and reduced tax rate provisions."
      ],
      "removed": [
        "No specific removal of text but redirects focus to eligible corporations for reduced rates."
      ],
      "summary": "Amends Minnesota Statutes section 290.06 to introduce a new subdivision for tax rates applicable to certain corporations.",
      "modified": [
        "Adjustments to the text to include definitions and conditions for eligibility concerning tax rates."
      ]
    },
    "citation": "290.06"
  },
  {
    "analysis": {
      "added": [
        "Inclusion of further clarifications or adjustments to existing tax subdivisions."
      ],
      "removed": [
        "No direct removal referenced."
      ],
      "summary": "References to existing subdivision regarding tax implications in Minnesota Statutes section 290.068.",
      "modified": [
        "Modification likely in the context of tax implications for qualifying corporations, considering changes in related subdivisions."
      ]
    },
    "citation": "290.068"
  },
  {
    "analysis": {
      "added": [
        "Potential addition of new criteria or clarifications about franchise tax as applied to certain entities."
      ],
      "removed": [
        "No specifics on removal, but possible restructuring or rephrasing of previous criteria to align with new rules."
      ],
      "summary": "Addresses aspects of the Minnesota Statutes section 290.0921 pertinent to franchise tax.",
      "modified": [
        "Key modifications in understanding tax eligibility and calculation against the new corporate criteria."
      ]
    },
    "citation": "290.0921"
  },
  {
    "analysis": {
      "added": [
        "Additional clauses and guidelines about withholding tax as applied to different compensation scenarios."
      ],
      "removed": [
        "Previous withholding guidelines may be adapted or made redundant by new definitions."
      ],
      "summary": "Relates to withholding tax guidelines implicated throughout the legislative text amending statutes.",
      "modified": [
        "Modifies the context in which compensation is calculated and withheld according to new corporate statutes."
      ]
    },
    "citation": "290.92"
  }
]

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