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Multistate Tax Alert: Minnesota Enacts Omnibus Tax Bill

Changes to corporate income tax provisions, personal income tax rate and sales and use tax


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Overview

On May 23, 2013, Minnesota Governor Mark Dayton signed House Bill 677 (“H.F. 677”). 1  The bill amends Minnesota tax law in the following manner:

  • Eliminates certain corporate income tax subtraction modifications, adopts a Finnigan sales factor sourcing rule and modifies the utilization of the Research and Development Credit.
  • Creates a new 4th tier individual income tax bracket for high income earners and increases the alternative minimum tax rate.
  • Repeals the provisions of Minnesota tax law incorporating the Multistate Tax Compact.
  • Expands the sales tax base to include certain services, expands the definition of nexus and provides an up-front exemption for purchases of capital equipment.

Many of these tax changes were proposed in Governor Dayton’s budget released on February 22, 20132 and revised on March 14, 2013.3 In this Tax Alert you can download, we highlight the more significant tax law changes4 to the corporate income tax, individual income tax and sales and use tax.

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1 Chapter 143, H.F. No. 677, 2013 Regular Session, available at https://www.revisor.leg.state.mn.us/bills/text.php?number=HF677&session_year=2013&session_number=0&version=latest
2 Budget for a Better Minnesota: Governor Mark Dayton’s FY 2014-15 Budget Recommendations, available at: http://www.mmb.state.mn.us/doc/budget/bud-op/op14/gov-presentation.pdf
3 Budget for a Better Minnesota: Governor Mark Dayton’s FY2014-15 Supplemental Budget, available at: http://www.mmb.state.mn.us/march14-13
4 While not addressed in detail in this Alert, the new law also imposes a gift tax. Effective for taxable gifts made after June 30, 2013, a 10% tax is imposed on the transfer of property by gift by any individual resident or nonresident. A credit is allowed against the tax imposed equal to $100,000 which applies to the cumulative amount of taxable gifts made by the donor during the donor’s life time. Minnesota Statutes 2013, section 292.17 as added by H.F. 677, 140.7.

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