Trade or business income apportionment; foreign sales factors required in apportionment percentage of certain taxpayers.

A bill for an act

relating to taxation; apportionment of trade or business income; requiring foreign

sales factors in the apportionment percentage of certain taxpayers; amending

Minnesota Statutes 2024, sections 290.191, subdivision 2, by adding a subdivision;

290.21, subdivision 10.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2024, section 290.191, subdivision 2, is amended to read:

Subd. 2.

Apportionment formula of general application.

(a) Except for those trades

or businesses
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required to use a different formula under subdivision 3 or section
290.36
, and

for those trades or businesses that receive permission to use some other method under section

290.20
or under subdivision 4
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listed in paragraph (c)
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, a trade or business required to apportion

its net income must apportion its income to this state on the basis of the percentage obtained

by taking the sum of:

(1) the percent for the sales factor under paragraph (b) of the percentage which the sales

made within this state in connection with the trade or business during the tax period are of

the total sales wherever made in connection with the trade or business during the tax period;

(2) the percent for the property factor under paragraph (b) of the percentage which the

total tangible property used by the taxpayer in this state in connection with the trade or

business during the tax period is of the total tangible property, wherever located, used by

the taxpayer in connection with the trade or business during the tax period; and

(3) the percent for the payroll factor under paragraph (b) of the percentage which the

taxpayer's total payrolls paid or incurred in this state or paid in respect to labor performed

in this state in connection with the trade or business during the tax period are of the taxpayer's

total payrolls paid or incurred in connection with the trade or business during the tax period.

(b) For purposes of paragraph (a) and subdivision 3, the following percentages apply

for the taxable years specified:

Taxable years beginning

during calendar year

Sales factor
percent

Property factor
percent

Payroll factor
percent

2007

78

11

11

2008

81

9.5

9.5

2009

84

8

8

2010

87

6.5

6.5

2011

90

5

5

2012

93

3.5

3.5

2013

96

2

2

2014 and later calendar years

100

0

0

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(c) Paragraphs (a) and (b) do not apply to a trade or business that:

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(1) is required to use a different formula under subdivision 3 or section 290.36;

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(2) received permission to use a different method under section 290.20; or

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(3) includes foreign pro rata sales under subdivision 13, but only to the extent that the

inclusion is inconsistent with paragraphs (a) and (b).

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EFFECTIVE DATE.

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This section is effective for taxable years beginning after December

31, 2025.

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Sec. 2.

Minnesota Statutes 2024, section 290.191, is amended by adding a subdivision to

read:

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Subd. 13.

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Factor relief for global intangible low-taxed income.

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(a) For purposes of

this subdivision, the following terms have the meanings given:

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(1) notwithstanding any provision to the contrary in this section and section 290.17,

subdivision 4, "foreign pro rata sales" means a qualified controlled foreign corporation's

total sales factor, regardless of where the sales are made, multiplied by its foreign sales

ratio;

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(2) "foreign sales ratio" means the amount of global intangible low-taxed income included

in a qualified shareholder's net income divided by the net income of the qualified controlled

foreign corporation;

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(3) "global intangible low-taxed income" has the meaning given in section 951A of the

Internal Revenue Code of 1986, as amended through May 1, 2023;

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(4) "qualified controlled foreign corporation" means a controlled foreign corporation,

as provided in section 975(a) of the Internal Revenue Code, owned in whole or in part by

a qualified shareholder;

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(5) "qualified manufacturer" means a qualified shareholder that is:

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(i) primarily engaged in the business of manufacturing, which for purposes of this

paragraph means the taxpayer's activities are classified under sector 31, 32, or 33 of the

North American Industry Classification System; and

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(ii) including global intangible low-taxed income in the taxpayer's net income; and

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(6) "qualified shareholder" means the shareholder of a controlled foreign corporation

that must include any amount of global intangible low-taxed income in the shareholder's

gross income under section 951A of the Internal Revenue Code.

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(b) A qualified manufacturer's foreign pro rata sales must be included in the

manufacturer's sales factor for purposes of determining the denominator of the qualified

manufacturer's apportionment percentage under this section.

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EFFECTIVE DATE.

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This section is effective for taxable years beginning after December

31, 2025.

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Sec. 3.

Minnesota Statutes 2024, section 290.21, subdivision 10, is amended to read:

Subd. 10.

Global intangible low-taxed income.

Any amounts included in taxable income

pursuant to section 951A of the Internal Revenue Code, are dividend income.
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This

subdivision does not apply to a qualified manufacturer as defined in section 290.191,

subdivision 13.
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EFFECTIVE DATE.

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This section is effective for taxable years beginning after December

31, 2025.

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