Purpose of the Bill

The purpose of this bill is to adjust the corporate franchise tax rate in Minnesota contingent on changes to the federal corporate tax rate. It aims to ensure that Minnesota maintains a consistent tax revenue from corporations, even if federal tax rates decrease.

Main Provisions

• Corporate Franchise Tax Rate Adjustment: For taxable years starting after December 31, 2024, the corporate franchise tax rate in Minnesota will be the greater of two options: 9.8% or a rate calculated based on changes to the federal corporate tax rate.
• Contingent Increase Mechanism: If legislation reduces the federal corporate tax rate, the Minnesota tax rate will increase proportionately. Specifically, if the federal rate under section 11b of the Internal Revenue Code changes, the state's rate will be adjusted upwards by a percentage that mirrors the federal rate reduction, rounded to the nearest twentieth of a percent.

Significant Changes

• The bill introduces a mechanism for dynamically adjusting Minnesota's corporate tax rate in response to federal tax rate changes. This ensures that reductions in federal tax rates do not result in reduced state tax revenues from corporations.

Relevant Terms

• Corporate franchise tax
• Taxable income
• Federal corporate tax rate
• Section 11b of the Internal Revenue Code
• Percentage decrease