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Legislature > House of Representatives > House Research > Taxes > Major State Aids & Taxes

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 based on the percentage of their sales that are made to purchasers 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. For tax year 2014, the minimum fee ranged from $190 to $9,500, depending upon the corporation's sales, property, and payroll in Minnesota. The fees are indexed annually for inflation.

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Tax Amount and Reporting

2014 Corporate Income Tax: $1,177.1 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, 2014. (Most returns filed in 2014 were for calendar year 2013, but the total also includes some calendar year 2012 returns.) The total statewide amount of $1,177.1 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 2010 to 2011 was allocated using the Census Bureau's 2007 Survey,1 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 2014 state total of corporate tax was allocated using the Census Bureau's 2012 Survey, with the 2013 and 2014 data adjusted for the change in gross sales from year to year.

1 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 2014 # of Returns % of Total Tax Liability % of Total Average Tax
Unitary Returns 33,107 53.2% $988,438,335 84.0% $29,856
Nonunitary Returns 29,111 46.8% $188,618,686 16.0% $6,479
Total 62,218 100.0% $1,177,057,021 100.0% $18,918
* 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 2014 # of Returns % of Total Tax Liability % of Total Average Tax
100% Minnesota Corporations
Regular Tax 6,011 9.7% $59,664,067 5.1% $9,926
Minimum Tax 3,777 6.1 2,658,071 0.2 704
No Tax 7,176 11.5 0 0.0 0
Total 16,964 27.3% $62,322,138 5.3% $3,674

Multistate Corporations
Regular Tax 14,436 23.2% $1,095,424,118 93.1% $75,881
Minimum Tax 6,187 9.9 19,310,765 1.6 3,121
No Tax 24,631 39.6 0 0.0 0
Total 45,254 72.7% $1,114,734,883 94.7% $24,633

All Corporations
Regular Tax 20,447 32.9% $1,155,088,185 98.1% $56,492
Minimum Tax 9,964 16.0 21,968,836 1.9 2,205
No Tax 31,807 51.1 0 0.0 0
Total 62,218 100.0% $1,177,057,021 100.0% $18,918

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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 and constant (inflation-adjusted) dollars.

Corporate Franchise Tax: Filed Calendar Years 2010 to 2014
Nominal dollars, in thousands
2010 2011 2012 2013 2014 5-Yr. Chg. Aid
State $661,889 $782,453 $943,323 $1,057,094 $1,177,057 78%

Northern Regions
Northwest (1)
Headwaters (2)
Arrowhead (3)
West Central (4)
Five (5)
East Central (7E)
7,941
3,707
21,301
14,682
9,527
6,028
9,928
4,404
25,909
18,426
11,222
7,110
14,762
5,803
33,135
23,213
12,819
8,691
16,914
6,978
36,747
27,543
13,891
10,864
17,710
7,956
41,307
28,863
15,906
11,984
123
115
94
97
67
99

Southern Regions
Six East (6E)
Upper MN Valley (6W)
Central MN (7W)
Southwest (8)
Nine (9)
Southeastern MN (10)
10,658
7,144
28,772
15,501
30,665
39,630
13,564
8,999
35,636
22,019
39,398
48,594
16,231
7,682
41,363
21,989
34,412
60,261
18,101
7,945
45,793
23,920
37,158
66,615
19,930
7,804
51,446
25,514
39,378
71,138
87
9
79
65
28
80
Total Nonmetro $195,555 $245,210 $281,443 $312,467 $338,935 73%

Metro Region
Hennepin County
Ramsey County
Remaining Metro
295,467
65,931
104,936
331,243
78,165
127,835
391,961
82,262
187,657
439,128
92,728
212,771
497,518
102,274
238,330
68
55
127
Total Metro $466,334 $537,243 $661,880 $744,627 $838,122 80%

Statewide Corporate Franchise Tax

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December 2017

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