End appears near for corporate alternative minimum tax

Who killed Minnesota’s corporate alternative minimum tax? Granted, it’s not dead yet, but it appears that it’s about to breathe its last. HF870 could be what finally does it in, but it’s been in decline since late 2017.

Finally repealing it altogether is the intent of the bill sponsored by Rep. Greg Davids (R-Preston), which was laid over for possible inclusion in the omnibus tax bill by the House Taxes Committee Thursday. It would seem that the tax is a victim of the desire for simplicity.

Rep. Greg Davids

The chief suspect in this whodunit is the federal Tax Cuts and Jobs Act signed into law in December 2017. It eliminated the federal corporate alternative minimum tax, which was the benchmark that Minnesota and seven other states used to compute percentages for their own versions. Three of those states repealed their state tax last year, and now it appears that Minnesota is about to join them.

Davids touted the bipartisan nature of the repeal, adding, “I can’t say that Gov. Walz supports this, but he does.”

The bill’s companion, SF345, sponsored by Sen. Ann Rest (DFL-New Hope), awaits action by the Senate Taxes Committee.

The soon-to-be deceased was a rebel in its youth. Back in 1982, there was much public outcry at the news that many large corporations paid little or nothing in taxes. So the federal government created the corporate alternative minimum tax, and Minnesota added its own extra tax atop its version to make sure that no state companies could get away with that.

Rep. Diane Loeffler (DFL-Mpls) recalled that the tenor of the times back then was that successful companies “had to contribute something to the society that helped create that success.” Citing reports that one of America’s largest corporations, Amazon, pays no taxes, she said that she foresees public unrest around the issue returning.

Yet the tax’s demise seemed sealed when it became clear that the state would have to create something complex and potentially cumbersome for filers in order to continue the state tax after the federal tax was repealed. And there’s some debate about whether the tax accomplished its mission or was merely an inefficient albatross for which revenues didn’t justify the cost of enforcement.