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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 for contingent rate reductions in the corporate franchise tax in Minnesota under certain conditions. This initiative is designed to potentially decrease the tax burden on corporations based on the fiscal condition of the state and tax incidence.

Main Provisions

  1. Tax Rate Calculation: The bill amends the method used to compute the corporate franchise tax. Initially, a rate of 9.8 percent is applied to the taxable income of corporations. Adjustments to this rate are possible under certain conditions.

  2. Conditions for Rate Reduction:

    • The corporate tax rate will be reduced by 0.312 percent if either of the following two conditions are met:
      1. There is a budget surplus that equals or exceeds the net adjusted revenue reduction.
      2. The latest tax incidence report shows that more than 70 percent of the corporate franchise tax burden falls on consumers.

  3. Rate Floor: The corporate franchise tax rate cannot be reduced below 8.24 percent, ensuring a minimum tax rate.

  4. Notification and Timing:

    • The Commissioner of Revenue is required to publish notice of any rate reduction by December 31.
    • The new rate becomes effective for taxable years starting after December 31 of the announcement year.

Significant Changes

  • Contingent Reductions: Introduces a mechanism for potentially lowering the corporate tax rate based on fiscal criteria such as budget surpluses and tax burden distribution reports.

Relevant Terms

  • Corporate franchise tax
  • Tax rate reduction
  • Budget surplus
  • Tax incidence report
  • Commissioner of Revenue
  • Rate adjustment limit

Bill text versions

Actions

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

Citations

 
[
  {
    "analysis": {
      "added": [
        "Introduces a mechanism for contingent rate reductions based on budget surplus and tax incidence reports."
      ],
      "removed": [],
      "summary": "This bill amends section 290.06, subdivision 1, which relates to the computation of the corporation franchise tax.",
      "modified": [
        "Amends the tax rate adjustment procedure by specifying conditions under which the rate can be reduced."
      ]
    },
    "citation": "290.06",
    "subdivision": "subdivision 1"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "References the submission of the tax incidence report under section 270C.13.",
      "modified": [
        "Stipulates that a rate reduction is considered if the tax incidence report shows over 70% allocation of the corporate franchise tax to consumers."
      ]
    },
    "citation": "270C.13",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "This bill references the requirement for transfers to the budget reserve account under section 16A.152, subdivision 1b.",
      "modified": [
        "Defines 'budget surplus' in the context of determining rate reductions, taking into consideration required transfers."
      ]
    },
    "citation": "16A.152",
    "subdivision": "subdivision 1b"
  }
]

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