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SF2585 (Legislative Session 94 (2025-2026))

Contingent corporation franchise tax rate reductions authorization

Related bill: HF1131

AI Generated Summary

Purpose of the Bill

The bill aims to provide a mechanism for reducing the corporate franchise tax rate in Minnesota. It seeks to tie potential tax reductions to specific fiscal conditions within the state.

Main Provisions

  • Tax Rate Reduction: The current corporate franchise tax rate is 9.8%. This bill proposes contingent rate reductions of 0.312% under certain conditions, potentially lowering the rate to a minimum of 8.24%.

  • Conditions for Reduction:

    1. A budget surplus: The tax rate may be reduced if the state has a budget surplus that equals or exceeds any net adjusted revenue reduction. This surplus is defined as a positive unrestricted balance in the general fund after mandatory transfers to the budget reserve.
    2. A specific allocation in the tax incidence report: The reduction will occur if over 70% of the corporate franchise tax is borne by consumers according to the latest tax incidence report.

  • Publication and Implementation: The Minnesota Commissioner of Revenue must publish a notice by December 31 if a rate reduction will take effect, with the lowered rate applying to taxable years starting after December 31 of the notice year.

Significant Changes to Existing Law

The bill amends the current statute (Minnesota Statutes 2024 section 290.06, subdivision 1) to introduce a formulaic approach for adjusting the corporate tax rate, reducing it when certain fiscal benchmarks are met.

Relevant Terms

corporate franchise tax, tax rate reduction, budget surplus, net adjusted revenue reduction, tax incidence report, Minnesota Commissioner of Revenue.

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
March 16, 2025SenateFloorActionIntroduction and first reading
March 16, 2025SenateFloorActionReferred toTaxes

Citations

 
[
  {
    "analysis": {
      "added": [
        "Adds consideration of allocation percentage for corporate franchise tax adjustments."
      ],
      "removed": [],
      "summary": "This bill proposes amendments related to tax incidence reports referenced under section 270C.13.",
      "modified": [
        "Requires tax incidence report to influence rate reductions."
      ]
    },
    "citation": "270C.13"
  },
  {
    "analysis": {
      "added": [
        "Specifies the use of general fund balance for tax rate reductions."
      ],
      "removed": [],
      "summary": "This bill references budget reserve account transfers under section 16A.152 regarding surplus calculations.",
      "modified": [
        "Clarifies the role of budget reserves in determining tax rate adjustments."
      ]
    },
    "citation": "16A.152"
  }
]

Sponsors