Bill Text: MN SF2479 | 2011-2012 | 87th Legislature | Introduced
Bill Title: Foreign operating corporations tax provisions modifications
Spectrum: Moderate Partisan Bill (Democrat 4-1)
Status: (Introduced - Dead) 2012-03-15 - Referred to Taxes [SF2479 Detail]
Download: Minnesota-2011-SF2479-Introduced.html
1.2relating to taxation; corporate franchise; modifying provisions related to foreign
1.3operating corporations;amending Minnesota Statutes 2010, sections 290.01,
1.4subdivision 19d; 290.17, subdivision 4; 290.21, subdivision 4.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2010, section 290.01, subdivision 19d, is amended to
1.7read:
1.8 Subd. 19d. Corporations; modifications decreasing federal taxable income. For
1.9corporations, there shall be subtracted from federal taxable income after the increases
1.10provided in subdivision 19c:
1.11 (1) the amount of foreign dividend gross-up added to gross income for federal
1.12income tax purposes under section 78 of the Internal Revenue Code;
1.13 (2) the amount of salary expense not allowed for federal income tax purposes due to
1.14claiming the work opportunity credit under section 51 of the Internal Revenue Code;
1.15 (3) any dividend (not including any distribution in liquidation) paid within the
1.16taxable year by a national or state bank to the United States, or to any instrumentality of
1.17the United States exempt from federal income taxes, on the preferred stock of the bank
1.18owned by the United States or the instrumentality;
1.19 (4) amounts disallowed for intangible drilling costs due to differences between
1.20this chapter and the Internal Revenue Code in taxable years beginning before January
1.211, 1987, as follows:
1.22 (i) to the extent the disallowed costs are represented by physical property, an amount
1.23equal to the allowance for depreciation under Minnesota Statutes 1986, section290.09,
1.24subdivision 7 , subject to the modifications contained in subdivision 19e; and
2.1 (ii) to the extent the disallowed costs are not represented by physical property, an
2.2amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
2.3290.09, subdivision 8
;
2.4 (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
2.5Internal Revenue Code, except that:
2.6 (i) for capital losses incurred in taxable years beginning after December 31, 1986,
2.7capital loss carrybacks shall not be allowed;
2.8 (ii) for capital losses incurred in taxable years beginning after December 31, 1986,
2.9a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
2.10allowed;
2.11 (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
2.12capital loss carryback to each of the three taxable years preceding the loss year, subject to
2.13the provisions of Minnesota Statutes 1986, section290.16 , shall be allowed; and
2.14 (iv) for capital losses incurred in taxable years beginning before January 1, 1987,
2.15a capital loss carryover to each of the five taxable years succeeding the loss year to the
2.16extent such loss was not used in a prior taxable year and subject to the provisions of
2.17Minnesota Statutes 1986, section290.16 , shall be allowed;
2.18 (6) an amount for interest and expenses relating to income not taxable for federal
2.19income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
2.20expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
2.21291 of the Internal Revenue Code in computing federal taxable income;
2.22 (7) in the case of mines, oil and gas wells, other natural deposits, and timber for
2.23which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a
2.24reasonable allowance for depletion based on actual cost. In the case of leases the deduction
2.25must be apportioned between the lessor and lessee in accordance with rules prescribed
2.26by the commissioner. In the case of property held in trust, the allowable deduction must
2.27be apportioned between the income beneficiaries and the trustee in accordance with the
2.28pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
2.29of the trust's income allocable to each;
2.30 (8) for certified pollution control facilities placed in service in a taxable year
2.31beginning before December 31, 1986, and for which amortization deductions were elected
2.32under section 169 of the Internal Revenue Code of 1954, as amended through December
2.3331, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
2.341986, section290.09, subdivision 7 ;
2.35 (9) amounts included in federal taxable income that are due to refunds of income,
2.36excise, or franchise taxes based on net income or related minimum taxes paid by the
3.1corporation to Minnesota, another state, a political subdivision of another state, the
3.2District of Columbia, or a foreign country or possession of the United States to the extent
3.3that the taxes were added to federal taxable income under section 290.01, subdivision 19c,
3.4clause (1), in a prior taxable year;
3.5 (10)80 62 percent for taxable years beginning after December 31, 2011, and before
3.6January 1, 2013, and 39 percent for taxable years beginning after December 31, 2012,
3.7of royalties, fees, or other like income accrued or received from a foreign operating
3.8corporation or a foreign corporation which is part of the same unitary business as the
3.9receiving corporation, unless the income resulting from such payments or accruals
3.10is income from sources within the United States as defined in subtitle A, chapter 1,
3.11subchapter N, part 1, of the Internal Revenue Code;
3.12 (11) income or gains from the business of mining as defined in section290.05,
3.13subdivision 1 , clause (a), that are not subject to Minnesota franchise tax;
3.14 (12) the amount of disability access expenditures in the taxable year which are not
3.15allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
3.16 (13) the amount of qualified research expenses not allowed for federal income tax
3.17purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
3.18the amount exceeds the amount of the credit allowed under section290.068 ;
3.19 (14) the amount of salary expenses not allowed for federal income tax purposes due
3.20to claiming the Indian employment credit under section 45A(a) of the Internal Revenue
3.21Code;
3.22 (15) for a corporation whose foreign sales corporation, as defined in section 922
3.23of the Internal Revenue Code, constituted a foreign operating corporation during any
3.24taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
3.25claiming the deduction under section290.21, subdivision 4 , paragraph (c), for income
3.26received from the foreign operating corporation, an amount equal to1.23 multiplied by the
3.27amount of income excluded under section 114 of the Internal Revenue Code, provided
3.28the income is not income of a foreign operating company;
3.29 (16) any decrease in subpart F income, as defined in section 952(a) of the Internal
3.30Revenue Code, for the taxable year when subpart F income is calculated without regard to
3.31the provisions of Division C, title III, section 303(b) of Public Law 110-343;
3.32 (17) in each of the five tax years immediately following the tax year in which an
3.33addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of
3.34the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
3.35amount of the addition made by the taxpayer under subdivision 19c, clause (15). The
3.36resulting delayed depreciation cannot be less than zero;
4.1 (18) in each of the five tax years immediately following the tax year in which an
4.2addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of
4.3the amount of the addition; and
4.4(19) to the extent included in federal taxable income, discharge of indebtedness
4.5income resulting from reacquisition of business indebtedness included in federal taxable
4.6income under section 108(i) of the Internal Revenue Code. This subtraction applies only
4.7to the extent that the income was included in net income in a prior year as a result of the
4.8addition under section 290.01, subdivision 19c, clause (25).
4.9EFFECTIVE DATE.This section is effective for taxable years beginning after
4.10December 31, 2011.
4.11 Sec. 2. Minnesota Statutes 2010, section 290.17, subdivision 4, is amended to read:
4.12 Subd. 4. Unitary business principle. (a) If a trade or business conducted wholly
4.13within this state or partly within and partly without this state is part of a unitary business,
4.14the entire income of the unitary business is subject to apportionment pursuant to section
4.15290.191
. Notwithstanding subdivision 2, paragraph (c), none of the income of a unitary
4.16business is considered to be derived from any particular source and none may be allocated
4.17to a particular place except as provided by the applicable apportionment formula. The
4.18provisions of this subdivision do not apply to business income subject to subdivision 5,
4.19income of an insurance company, or income of an investment company determined under
4.20section290.36 .
4.21(b) The term "unitary business" means business activities or operations which
4.22result in a flow of value between them. The term may be applied within a single legal
4.23entity or between multiple entities and without regard to whether each entity is a sole
4.24proprietorship, a corporation, a partnership or a trust.
4.25(c) Unity is presumed whenever there is unity of ownership, operation, and use,
4.26evidenced by centralized management or executive force, centralized purchasing,
4.27advertising, accounting, or other controlled interaction, but the absence of these
4.28centralized activities will not necessarily evidence a nonunitary business. Unity is also
4.29presumed when business activities or operations are of mutual benefit, dependent upon or
4.30contributory to one another, either individually or as a group.
4.31(d) Where a business operation conducted in Minnesota is owned by a business
4.32entity that carries on business activity outside the state different in kind from that
4.33conducted within this state, and the other business is conducted entirely outside the state, it
4.34is presumed that the two business operations are unitary in nature, interrelated, connected,
4.35and interdependent unless it can be shown to the contrary.
5.1(e) Unity of ownership is not deemed to exist when a corporation is involved unless
5.2that corporation is a member of a group of two or more business entities and more than 50
5.3percent of the voting stock of each member of the group is directly or indirectly owned
5.4by a common owner or by common owners, either corporate or noncorporate, or by one
5.5or more of the member corporations of the group. For this purpose, the term "voting
5.6stock" shall include membership interests of mutual insurance holding companies formed
5.7under section66A.40 .
5.8(f) The net income and apportionment factors under section290.191 or
290.20 of
5.9foreign corporations and other foreign entities which are part of a unitary business shall
5.10not be included in the net income or the apportionment factors of the unitary business.
5.11A foreign corporation or other foreign entity which is required to file a return under this
5.12chapter shall file on a separate return basis. The net income and apportionment factors
5.13under section290.191 or
290.20 of foreign operating corporations shall not be included in
5.14the net income or the apportionment factors of the unitary business except as provided in
5.15paragraph (g).
5.16(g) The adjusted net income of a foreign operating corporation shall be deemed to
5.17be paid as a dividend on the last day of its taxable year to each shareholder thereof, in
5.18proportion to each shareholder's ownership, with which such corporation is engaged in
5.19a unitary business. Such deemed dividend shall be treated as a dividend under section
5.20290.21, subdivision 4, paragraph (c)
.
5.21Dividends actually paid by a foreign operating corporation to a corporate shareholder
5.22which is a member of the same unitary business as the foreign operating corporation shall
5.23be eliminated from the net income of the unitary business in preparing a combined report
5.24for the unitary business. The adjusted net income of a foreign operating corporation
5.25shall be its net income adjusted as follows:
5.26(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto
5.27Rico, or a United States possession or political subdivision of any of the foregoing shall
5.28be a deduction; and
5.29(2) the subtraction from federal taxable income for payments received from foreign
5.30corporations or foreign operating corporations under section290.01, subdivision 19d ,
5.31clause (10), shall not be allowed.
5.32If a foreign operating corporation incurs a net loss, neither income nor deduction
5.33from that corporation shall be included in determining the net income of the unitary
5.34business.
5.35(h) For purposes of determining the net income of a unitary business and the factors
5.36to be used in the apportionment of net income pursuant to section290.191 or
290.20 , there
6.1must be included only the income and apportionment factors of domestic corporations or
6.2other domestic entities other than foreign operating corporations that are determined to
6.3be part of the unitary business pursuant to this subdivision, notwithstanding that foreign
6.4corporations or other foreign entities might be included in the unitary business.
6.5(i) Deductions for expenses, interest, or taxes otherwise allowable under this chapter
6.6that are connected with or allocable against dividends, deemed dividends described
6.7in paragraph (g), or royalties, fees, or other like income described in section290.01,
6.8subdivision 19d , clause (10), shall not be disallowed.
6.9(j) Each corporation or other entity, except a sole proprietorship, that is part of a
6.10unitary business must file combined reports as the commissioner determines. On the
6.11reports, all intercompany transactions between entities included pursuant to paragraph
6.12(h) must be eliminated and the entire net income of the unitary business determined in
6.13accordance with this subdivision is apportioned among the entities by using each entity's
6.14Minnesota factors for apportionment purposes in the numerators of the apportionment
6.15formula and the total factors for apportionment purposes of all entities included pursuant
6.16to paragraph (h) in the denominators of the apportionment formula.
6.17(k) If a corporation has been divested from a unitary business and is included in a
6.18combined report for a fractional part of the common accounting period of the combined
6.19report:
6.20(1) its income includable in the combined report is its income incurred for that part
6.21of the year determined by proration or separate accounting; and
6.22(2) its sales, property, and payroll included in the apportionment formula must
6.23be prorated or accounted for separately.
6.24EFFECTIVE DATE.This section is effective for taxable years beginning after
6.25December 31, 2011.
6.26 Sec. 3. Minnesota Statutes 2010, section 290.21, subdivision 4, is amended to read:
6.27 Subd. 4. Dividends received from another corporation. (a)(1) Eighty percent
6.28of dividends received by a corporation during the taxable year from another corporation,
6.29in which the recipient owns 20 percent or more of the stock, by vote and value, not
6.30including stock described in section 1504(a)(4) of the Internal Revenue Code when the
6.31corporate stock with respect to which dividends are paid does not constitute the stock in
6.32trade of the taxpayer or would not be included in the inventory of the taxpayer, or does not
6.33constitute property held by the taxpayer primarily for sale to customers in the ordinary
6.34course of the taxpayer's trade or business, or when the trade or business of the taxpayer
7.1does not consist principally of the holding of the stocks and the collection of the income
7.2and gains therefrom; and
7.3 (2)(i) the remaining 20 percent of dividends if the dividends received are the stock in
7.4an affiliated company transferred in an overall plan of reorganization and the dividend
7.5is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as
7.6amended through December 31, 1989;
7.7 (ii) the remaining 20 percent of dividends if the dividends are received from a
7.8corporation which is subject to tax under section290.36 and which is a member of an
7.9affiliated group of corporations as defined by the Internal Revenue Code and the dividend
7.10is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as
7.11amended through December 31, 1989, or is deducted under an election under section
7.12243(b) of the Internal Revenue Code; or
7.13 (iii) the remaining 20 percent of the dividends if the dividends are received from a
7.14property and casualty insurer as defined under section60A.60, subdivision 8 , which is a
7.15member of an affiliated group of corporations as defined by the Internal Revenue Code
7.16and either: (A) the dividend is eliminated in consolidation under Treasury Regulation
7.171.1502-14(a), as amended through December 31, 1989; or (B) the dividend is deducted
7.18under an election under section 243(b) of the Internal Revenue Code.
7.19 (b) Seventy percent of dividends received by a corporation during the taxable year
7.20from another corporation in which the recipient owns less than 20 percent of the stock,
7.21by vote or value, not including stock described in section 1504(a)(4) of the Internal
7.22Revenue Code when the corporate stock with respect to which dividends are paid does not
7.23constitute the stock in trade of the taxpayer, or does not constitute property held by the
7.24taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or
7.25business, or when the trade or business of the taxpayer does not consist principally of the
7.26holding of the stocks and the collection of income and gain therefrom.
7.27(c) 62 percent for taxable years beginning after December 31, 2011, and before
7.28January 1, 2013, and 39 percent for taxable years beginning after December 31, 2012, of
7.29dividends deemed to be paid from a foreign operating corporation under section 290.17,
7.30subdivision 4, paragraph (g).
7.31(c) (d) The dividend deduction provided in this subdivision shall be allowed only
7.32with respect to dividends that are included in a corporation's Minnesota taxable net
7.33income for the taxable year.
7.34 The dividend deduction provided in this subdivision does not apply to a dividend
7.35from a corporation which, for the taxable year of the corporation in which the distribution
8.1is made or for the next preceding taxable year of the corporation, is a corporation exempt
8.2from tax under section 501 of the Internal Revenue Code.
8.3 The dividend deduction provided in this subdivision applies to the amount of
8.4regulated investment company dividends only to the extent determined under section
8.5854(b) of the Internal Revenue Code.
8.6 The dividend deduction provided in this subdivision shall not be allowed with
8.7respect to any dividend for which a deduction is not allowed under the provisions of
8.8section 246(c) of the Internal Revenue Code.
8.9(d) (e) If dividends received by a corporation that does not have nexus with
8.10Minnesota under the provisions of Public Law 86-272 are included as income on the return
8.11of an affiliated corporation permitted or required to file a combined report under section
8.12290.17, subdivision 4
, or
290.34, subdivision 2 , then for purposes of this subdivision the
8.13determination as to whether the trade or business of the corporation consists principally
8.14of the holding of stocks and the collection of income and gains therefrom shall be made
8.15with reference to the trade or business of the affiliated corporation having a nexus with
8.16Minnesota.
8.17(e) (f) The deduction provided by this subdivision does not apply if the dividends are
8.18paid by a FSC as defined in section 922 of the Internal Revenue Code.
8.19(f) (g) If one or more of the members of the unitary group whose income is included
8.20on the combined report received a dividend, the deduction under this subdivision for
8.21each member of the unitary business required to file a return under this chapter is the
8.22product of: (1) 100 percent of the dividends received by members of the group; (2) the
8.23percentage allowed pursuant to paragraph (a)or, (b), or (c); and (3) the percentage of the
8.24taxpayer's business income apportionable to this state for the taxable year under section
8.25290.191
or
290.20 .
8.26EFFECTIVE DATE.This section is effective for taxable years beginning after
8.27December 31, 2011.
1.3operating corporations;amending Minnesota Statutes 2010, sections 290.01,
1.4subdivision 19d; 290.17, subdivision 4; 290.21, subdivision 4.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2010, section 290.01, subdivision 19d, is amended to
1.7read:
1.8 Subd. 19d. Corporations; modifications decreasing federal taxable income. For
1.9corporations, there shall be subtracted from federal taxable income after the increases
1.10provided in subdivision 19c:
1.11 (1) the amount of foreign dividend gross-up added to gross income for federal
1.12income tax purposes under section 78 of the Internal Revenue Code;
1.13 (2) the amount of salary expense not allowed for federal income tax purposes due to
1.14claiming the work opportunity credit under section 51 of the Internal Revenue Code;
1.15 (3) any dividend (not including any distribution in liquidation) paid within the
1.16taxable year by a national or state bank to the United States, or to any instrumentality of
1.17the United States exempt from federal income taxes, on the preferred stock of the bank
1.18owned by the United States or the instrumentality;
1.19 (4) amounts disallowed for intangible drilling costs due to differences between
1.20this chapter and the Internal Revenue Code in taxable years beginning before January
1.211, 1987, as follows:
1.22 (i) to the extent the disallowed costs are represented by physical property, an amount
1.23equal to the allowance for depreciation under Minnesota Statutes 1986, section
1.24subdivision 7
2.1 (ii) to the extent the disallowed costs are not represented by physical property, an
2.2amount equal to the allowance for cost depletion under Minnesota Statutes 1986, section
2.4 (5) the deduction for capital losses pursuant to sections 1211 and 1212 of the
2.5Internal Revenue Code, except that:
2.6 (i) for capital losses incurred in taxable years beginning after December 31, 1986,
2.7capital loss carrybacks shall not be allowed;
2.8 (ii) for capital losses incurred in taxable years beginning after December 31, 1986,
2.9a capital loss carryover to each of the 15 taxable years succeeding the loss year shall be
2.10allowed;
2.11 (iii) for capital losses incurred in taxable years beginning before January 1, 1987, a
2.12capital loss carryback to each of the three taxable years preceding the loss year, subject to
2.13the provisions of Minnesota Statutes 1986, section
2.14 (iv) for capital losses incurred in taxable years beginning before January 1, 1987,
2.15a capital loss carryover to each of the five taxable years succeeding the loss year to the
2.16extent such loss was not used in a prior taxable year and subject to the provisions of
2.17Minnesota Statutes 1986, section
2.18 (6) an amount for interest and expenses relating to income not taxable for federal
2.19income tax purposes, if (i) the income is taxable under this chapter and (ii) the interest and
2.20expenses were disallowed as deductions under the provisions of section 171(a)(2), 265 or
2.21291 of the Internal Revenue Code in computing federal taxable income;
2.22 (7) in the case of mines, oil and gas wells, other natural deposits, and timber for
2.23which percentage depletion was disallowed pursuant to subdivision 19c, clause (9), a
2.24reasonable allowance for depletion based on actual cost. In the case of leases the deduction
2.25must be apportioned between the lessor and lessee in accordance with rules prescribed
2.26by the commissioner. In the case of property held in trust, the allowable deduction must
2.27be apportioned between the income beneficiaries and the trustee in accordance with the
2.28pertinent provisions of the trust, or if there is no provision in the instrument, on the basis
2.29of the trust's income allocable to each;
2.30 (8) for certified pollution control facilities placed in service in a taxable year
2.31beginning before December 31, 1986, and for which amortization deductions were elected
2.32under section 169 of the Internal Revenue Code of 1954, as amended through December
2.3331, 1985, an amount equal to the allowance for depreciation under Minnesota Statutes
2.341986, section
2.35 (9) amounts included in federal taxable income that are due to refunds of income,
2.36excise, or franchise taxes based on net income or related minimum taxes paid by the
3.1corporation to Minnesota, another state, a political subdivision of another state, the
3.2District of Columbia, or a foreign country or possession of the United States to the extent
3.3that the taxes were added to federal taxable income under section 290.01, subdivision 19c,
3.4clause (1), in a prior taxable year;
3.5 (10)
3.6January 1, 2013, and 39 percent for taxable years beginning after December 31, 2012,
3.7of royalties, fees, or other like income accrued or received from a foreign operating
3.8corporation or a foreign corporation which is part of the same unitary business as the
3.9receiving corporation, unless the income resulting from such payments or accruals
3.10is income from sources within the United States as defined in subtitle A, chapter 1,
3.11subchapter N, part 1, of the Internal Revenue Code;
3.12 (11) income or gains from the business of mining as defined in section
3.13subdivision 1
3.14 (12) the amount of disability access expenditures in the taxable year which are not
3.15allowed to be deducted or capitalized under section 44(d)(7) of the Internal Revenue Code;
3.16 (13) the amount of qualified research expenses not allowed for federal income tax
3.17purposes under section 280C(c) of the Internal Revenue Code, but only to the extent that
3.18the amount exceeds the amount of the credit allowed under section
3.19 (14) the amount of salary expenses not allowed for federal income tax purposes due
3.20to claiming the Indian employment credit under section 45A(a) of the Internal Revenue
3.21Code;
3.22 (15) for a corporation whose foreign sales corporation, as defined in section 922
3.23of the Internal Revenue Code, constituted a foreign operating corporation during any
3.24taxable year ending before January 1, 1995, and a return was filed by August 15, 1996,
3.25claiming the deduction under section
3.26received from the foreign operating corporation, an amount equal to
3.27amount of income excluded under section 114 of the Internal Revenue Code, provided
3.28the income is not income of a foreign operating company;
3.29 (16) any decrease in subpart F income, as defined in section 952(a) of the Internal
3.30Revenue Code, for the taxable year when subpart F income is calculated without regard to
3.31the provisions of Division C, title III, section 303(b) of Public Law 110-343;
3.32 (17) in each of the five tax years immediately following the tax year in which an
3.33addition is required under subdivision 19c, clause (15), an amount equal to one-fifth of
3.34the delayed depreciation. For purposes of this clause, "delayed depreciation" means the
3.35amount of the addition made by the taxpayer under subdivision 19c, clause (15). The
3.36resulting delayed depreciation cannot be less than zero;
4.1 (18) in each of the five tax years immediately following the tax year in which an
4.2addition is required under subdivision 19c, clause (16), an amount equal to one-fifth of
4.3the amount of the addition; and
4.4(19) to the extent included in federal taxable income, discharge of indebtedness
4.5income resulting from reacquisition of business indebtedness included in federal taxable
4.6income under section 108(i) of the Internal Revenue Code. This subtraction applies only
4.7to the extent that the income was included in net income in a prior year as a result of the
4.8addition under section 290.01, subdivision 19c, clause (25).
4.9EFFECTIVE DATE.This section is effective for taxable years beginning after
4.10December 31, 2011.
4.11 Sec. 2. Minnesota Statutes 2010, section 290.17, subdivision 4, is amended to read:
4.12 Subd. 4. Unitary business principle. (a) If a trade or business conducted wholly
4.13within this state or partly within and partly without this state is part of a unitary business,
4.14the entire income of the unitary business is subject to apportionment pursuant to section
4.16business is considered to be derived from any particular source and none may be allocated
4.17to a particular place except as provided by the applicable apportionment formula. The
4.18provisions of this subdivision do not apply to business income subject to subdivision 5,
4.19income of an insurance company, or income of an investment company determined under
4.20section
4.21(b) The term "unitary business" means business activities or operations which
4.22result in a flow of value between them. The term may be applied within a single legal
4.23entity or between multiple entities and without regard to whether each entity is a sole
4.24proprietorship, a corporation, a partnership or a trust.
4.25(c) Unity is presumed whenever there is unity of ownership, operation, and use,
4.26evidenced by centralized management or executive force, centralized purchasing,
4.27advertising, accounting, or other controlled interaction, but the absence of these
4.28centralized activities will not necessarily evidence a nonunitary business. Unity is also
4.29presumed when business activities or operations are of mutual benefit, dependent upon or
4.30contributory to one another, either individually or as a group.
4.31(d) Where a business operation conducted in Minnesota is owned by a business
4.32entity that carries on business activity outside the state different in kind from that
4.33conducted within this state, and the other business is conducted entirely outside the state, it
4.34is presumed that the two business operations are unitary in nature, interrelated, connected,
4.35and interdependent unless it can be shown to the contrary.
5.1(e) Unity of ownership is not deemed to exist when a corporation is involved unless
5.2that corporation is a member of a group of two or more business entities and more than 50
5.3percent of the voting stock of each member of the group is directly or indirectly owned
5.4by a common owner or by common owners, either corporate or noncorporate, or by one
5.5or more of the member corporations of the group. For this purpose, the term "voting
5.6stock" shall include membership interests of mutual insurance holding companies formed
5.7under section
5.8(f) The net income and apportionment factors under section
5.9foreign corporations and other foreign entities which are part of a unitary business shall
5.10not be included in the net income or the apportionment factors of the unitary business.
5.11A foreign corporation or other foreign entity which is required to file a return under this
5.12chapter shall file on a separate return basis. The net income and apportionment factors
5.13under section
5.14the net income or the apportionment factors of the unitary business except as provided in
5.15paragraph (g).
5.16(g) The adjusted net income of a foreign operating corporation shall be deemed to
5.17be paid as a dividend on the last day of its taxable year to each shareholder thereof, in
5.18proportion to each shareholder's ownership, with which such corporation is engaged in
5.19a unitary business. Such deemed dividend shall be treated as a dividend under section
5.21Dividends actually paid by a foreign operating corporation to a corporate shareholder
5.22which is a member of the same unitary business as the foreign operating corporation shall
5.23be eliminated from the net income of the unitary business in preparing a combined report
5.24for the unitary business. The adjusted net income of a foreign operating corporation
5.25shall be its net income adjusted as follows:
5.26(1) any taxes paid or accrued to a foreign country, the commonwealth of Puerto
5.27Rico, or a United States possession or political subdivision of any of the foregoing shall
5.28be a deduction; and
5.29(2) the subtraction from federal taxable income for payments received from foreign
5.30corporations or foreign operating corporations under section
5.31clause (10), shall not be allowed.
5.32If a foreign operating corporation incurs a net loss, neither income nor deduction
5.33from that corporation shall be included in determining the net income of the unitary
5.34business.
5.35(h) For purposes of determining the net income of a unitary business and the factors
5.36to be used in the apportionment of net income pursuant to section
6.1must be included only the income and apportionment factors of domestic corporations or
6.2other domestic entities other than foreign operating corporations that are determined to
6.3be part of the unitary business pursuant to this subdivision, notwithstanding that foreign
6.4corporations or other foreign entities might be included in the unitary business.
6.5(i) Deductions for expenses, interest, or taxes otherwise allowable under this chapter
6.6that are connected with or allocable against dividends, deemed dividends described
6.7in paragraph (g), or royalties, fees, or other like income described in section
6.8subdivision 19d
6.9(j) Each corporation or other entity, except a sole proprietorship, that is part of a
6.10unitary business must file combined reports as the commissioner determines. On the
6.11reports, all intercompany transactions between entities included pursuant to paragraph
6.12(h) must be eliminated and the entire net income of the unitary business determined in
6.13accordance with this subdivision is apportioned among the entities by using each entity's
6.14Minnesota factors for apportionment purposes in the numerators of the apportionment
6.15formula and the total factors for apportionment purposes of all entities included pursuant
6.16to paragraph (h) in the denominators of the apportionment formula.
6.17(k) If a corporation has been divested from a unitary business and is included in a
6.18combined report for a fractional part of the common accounting period of the combined
6.19report:
6.20(1) its income includable in the combined report is its income incurred for that part
6.21of the year determined by proration or separate accounting; and
6.22(2) its sales, property, and payroll included in the apportionment formula must
6.23be prorated or accounted for separately.
6.24EFFECTIVE DATE.This section is effective for taxable years beginning after
6.25December 31, 2011.
6.26 Sec. 3. Minnesota Statutes 2010, section 290.21, subdivision 4, is amended to read:
6.27 Subd. 4. Dividends received from another corporation. (a)(1) Eighty percent
6.28of dividends received by a corporation during the taxable year from another corporation,
6.29in which the recipient owns 20 percent or more of the stock, by vote and value, not
6.30including stock described in section 1504(a)(4) of the Internal Revenue Code when the
6.31corporate stock with respect to which dividends are paid does not constitute the stock in
6.32trade of the taxpayer or would not be included in the inventory of the taxpayer, or does not
6.33constitute property held by the taxpayer primarily for sale to customers in the ordinary
6.34course of the taxpayer's trade or business, or when the trade or business of the taxpayer
7.1does not consist principally of the holding of the stocks and the collection of the income
7.2and gains therefrom; and
7.3 (2)(i) the remaining 20 percent of dividends if the dividends received are the stock in
7.4an affiliated company transferred in an overall plan of reorganization and the dividend
7.5is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as
7.6amended through December 31, 1989;
7.7 (ii) the remaining 20 percent of dividends if the dividends are received from a
7.8corporation which is subject to tax under section
7.9affiliated group of corporations as defined by the Internal Revenue Code and the dividend
7.10is eliminated in consolidation under Treasury Department Regulation 1.1502-14(a), as
7.11amended through December 31, 1989, or is deducted under an election under section
7.12243(b) of the Internal Revenue Code; or
7.13 (iii) the remaining 20 percent of the dividends if the dividends are received from a
7.14property and casualty insurer as defined under section
7.15member of an affiliated group of corporations as defined by the Internal Revenue Code
7.16and either: (A) the dividend is eliminated in consolidation under Treasury Regulation
7.171.1502-14(a), as amended through December 31, 1989; or (B) the dividend is deducted
7.18under an election under section 243(b) of the Internal Revenue Code.
7.19 (b) Seventy percent of dividends received by a corporation during the taxable year
7.20from another corporation in which the recipient owns less than 20 percent of the stock,
7.21by vote or value, not including stock described in section 1504(a)(4) of the Internal
7.22Revenue Code when the corporate stock with respect to which dividends are paid does not
7.23constitute the stock in trade of the taxpayer, or does not constitute property held by the
7.24taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or
7.25business, or when the trade or business of the taxpayer does not consist principally of the
7.26holding of the stocks and the collection of income and gain therefrom.
7.27(c) 62 percent for taxable years beginning after December 31, 2011, and before
7.28January 1, 2013, and 39 percent for taxable years beginning after December 31, 2012, of
7.29dividends deemed to be paid from a foreign operating corporation under section 290.17,
7.30subdivision 4, paragraph (g).
7.31
7.32with respect to dividends that are included in a corporation's Minnesota taxable net
7.33income for the taxable year.
7.34 The dividend deduction provided in this subdivision does not apply to a dividend
7.35from a corporation which, for the taxable year of the corporation in which the distribution
8.1is made or for the next preceding taxable year of the corporation, is a corporation exempt
8.2from tax under section 501 of the Internal Revenue Code.
8.3 The dividend deduction provided in this subdivision applies to the amount of
8.4regulated investment company dividends only to the extent determined under section
8.5854(b) of the Internal Revenue Code.
8.6 The dividend deduction provided in this subdivision shall not be allowed with
8.7respect to any dividend for which a deduction is not allowed under the provisions of
8.8section 246(c) of the Internal Revenue Code.
8.9
8.10Minnesota under the provisions of Public Law 86-272 are included as income on the return
8.11of an affiliated corporation permitted or required to file a combined report under section
8.13determination as to whether the trade or business of the corporation consists principally
8.14of the holding of stocks and the collection of income and gains therefrom shall be made
8.15with reference to the trade or business of the affiliated corporation having a nexus with
8.16Minnesota.
8.17
8.18paid by a FSC as defined in section 922 of the Internal Revenue Code.
8.19
8.20on the combined report received a dividend, the deduction under this subdivision for
8.21each member of the unitary business required to file a return under this chapter is the
8.22product of: (1) 100 percent of the dividends received by members of the group; (2) the
8.23percentage allowed pursuant to paragraph (a)
8.24taxpayer's business income apportionable to this state for the taxable year under section
8.26EFFECTIVE DATE.This section is effective for taxable years beginning after
8.27December 31, 2011.
