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Major State Aids & Taxes: Corporate Franchise (Income) Tax

Program Description

Corporate franchise (income) tax is imposed on the net income of corporations. The rate of the tax is 9.8 percent. The tax base is federal taxable income with a variety of Minnesota adjustments. Corporations that do business both inside and outside of Minnesota apportion their income using a three-factor formula based on the share of the corporation's total property, payroll, and sales that are in Minnesota. Prior to 2007, the formula weighted sales 75 percent and property and payroll 12.5 percent each. Beginning in 2007, the formula gradually phases in 100 percent sales apportionment, reaching that percentage in 2014.

An alternative minimum tax (AMT) applies to federal alternative minimum taxable income, if it would result in a higher tax than the regular corporate franchise tax. This tax rate is 5.8 percent. A minimum fee is imposed on corporations (including S corporations) and partnerships in addition to the regular tax or the AMT. The minimum fee ranges from $100 to $5,000, depending upon the corporation's sales, property, and payroll in Minnesota. 1

1 Beginning in tax year 2013, the minimum fee amounts increase to $190 to $9,340 and are indexed for inflation in following years.

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Tax Amount and Reporting

2013 Corporate Income Tax: $1,057.1 million

The amounts presented in these web pages was tabulated from all Minnesota corporate income tax returns filed during the calendar year ending December 31, 2013. (Most returns filed in calendar year 2013 were for calendar year 2012, but the total also includes some calendar year 2011 returns.) The total statewide amount of $1,057.1 million includes taxes collected from corporations whose main offices are in other states and foreign countries. It does not include any taxes or minimum fees paid by S corporations or partnerships.

The corporate income tax data was obtained from the Department of Revenue. The location of each corporation's home office is not available. Instead each county's total sales, reported in the U.S. Census Bureau's Survey of Business Owners, are used as an indicator of the source or location of the corporate tax.

Corporate tax for 2009 to 2011 was allocated using the Census Bureau's 2007 Survey,2 adjusted for the change in gross sales from year to year in Department of Revenue data on gross sales of businesses reporting sales tax. The 2012 and 2013 state total of corporate tax was allocated using the Census Bureau's 2012 Survey, with the 2013 data adjusted for the change in gross sales from 2012 to 2013.

2 2007 sales for Lake of the Woods County were unavailable. 2007 sales in Lake of the Woods County were estimated by increasing the 2002 sales in Lake of the Woods County by the same percentage that sales increased statewide.

The tables below summarize statewide data by unitary/nonunitary and by type of corporation/return.

By Unitary/Nonunitary Returns*
Returns Filed in 2013 # of Returns % of Total Tax Liability % of Total Average Tax
Unitary Returns 32,831 52.7% $917,909,406 86.8% $27,959
Nonunitary Returns 29,463 47.3% $139,184,912 13.2% $4,724
Total 62,294 100.0% $1,057,094,318 100.0% $16,969
* Related corporations, such as subsidiary, brother-sister, and parent corporations, must file on a unitary basis. For these corporations, the denominator of the three-factor apportionment formula (property, payroll, and sales) includes the factors of all the corporations in the unitary group. The numerator is the factors of the individual corporation, and the taxable income apportioned is the total income of the unitary group.
By Type of Return
Returns Filed in 2013 # of Returns % of Total Tax Liability % of Total Average Tax
100% Minnesota Corporations
Regular Tax 6,106 9.8% $53,543,912 5.05% $8,769
Minimum Tax 4,845 7.8 2,736,523 0.25 565
No Tax 6,773 10.9 0 0.0 0
Total 17,724 28.5% $56,280,435 5.3% $3,175

Multistate Corporations
Regular Tax 13,263 21.3% $982,460,688 93.0% $74,075
Minimum Tax 6,808 10.9 18,353,195 1.7 2,696
No Tax 24,499 39.3 0 0.0 0
Total 44,570 71.5% $1,000,813,883 94.7% $22,455

All Corporations
Regular Tax 19,369 31.1% $1,036,004,600 98.0% $53,488
Minimum Tax 11,653 18.7 21,089,718 2.0 1,810
No Tax 31,272 50.2 0 0.0 0
Total 62,294 100.0% $1,057,094,318 100.0% $16,969

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Per Capita Maps

Map of corporate franchise tax per capita by countyMap of corporate franchise tax per capita by economic development region

The Past Five Years of Corporate Franchise Tax

The table below shows the distribution of the corporate franchise tax in thousands of dollars for the past five years for the state and economic development regions. The graph shows total dollars of the corporate franchise tax for that same time period in nominal (actual) and constant (inflation-adjusted) dollars.

Corporate Franchise Tax: Filed Calendar Years 2009 to 2013
Nominal dollars, in thousands
2009 2010 2011 2012 2013 5-Yr. Chg. Aid
State $700,000 $661,889 $782,453 $943,323 $1,057,094 51%

Northern Regions
Northwest (1)
Headwaters (2)
Arrowhead (3)
West Central (4)
Five (5)
East Central (7E)
8,326
3,767
22,076
14,617
9,343
6,195
7,941
3,707
21,301
14,682
9,527
6,028
9,928
4,404
25,909
18,426
11,222
7,110
12,468
5,382
30,529
23,213
13,794
8,691
16,914
6,978
36,747
27,543
13,891
10,864
103
85
66
88
49
75

Southern Regions
Six East (6E)
Upper MN Valley (6W)
Central MN (7W)
Southwest (8)
Nine (9)
Southeastern MN (10)
11,647
7,208
30,358
14,946
31,352
41,498
10,658
7,144
28,772
15,501
30,665
39,630
13,564
8,999
35,636
22,019
39,398
48,594
16,638
10,771
42,672
26,349
47,814
60,389
18,101
7,945
45,793
23,920
37,158
66,615
55
10
51
60
19
61
Total Nonmetro $201,332 $195,555 $245,210 $298,710 $312,467 55%

Metro Region
Hennepin County
Ramsey County
Remaining Metro
332,506
68,293
107,869
295,467
65,431
104,936
331,243
78,165
127,835
393,691
95,394
155,528
439,128
92,728
212,771
36
36
97
Total Metro $498,668 $466,334 $537,243 $644,613 $744,627 49%

Statewide Corporate Franchise Tax

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March 2017

House Research Department  ♦  600 State Office Building, Saint Paul, MN  55155  ♦  House.Research@house.mn  ♦  651-296-6753