SF1636

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:

Reduced Corporate Tax Rate:
- Eligible corporations will be subject to a franchise tax rate of 5% instead of the standard rate.
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.
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

Introduction PDF file

Actions

Date	Chamber	Where	Type	Name	Committee Name
February 20, 2025	Senate		Action	Introduction and first reading
February 20, 2025	Senate		Action	Referred to	Taxes

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"
  }
]

Progress through the legislative process

17%

In Committee