Minnesota imposes taxes on C corporations, S corporations, partnerships, LLCs, and LLPs that have a nexus with the state. Corporations are taxed at a rate of 9.80%, with filing deadlines, estimated payment requirements, and penalties for late compliance. S corporations and partnerships follow pass-through rules, but entities themselves must file state returns and pay minimum fees if thresholds are crossed. Extensions are available, but they cover only the return filing, not tax payments.
This blog examines the tax framework for C corporations, S corporations, and partnerships/LLCs in Minnesota, explaining the filing requirements, due dates, estimated tax rules, and penalties that apply.
C Corporation Tax
C corporations with a nexus in Minnesota are required to file corporate income tax returns. Nexus is established through physical presence, employees, property, or sales in the state.
Tax Rate:
- The corporate income tax rate is 9.80%.
Due Date:
- Returns are due by the 15th day of the ninth month following the end of the corporation’s tax year.
Form Used:
- The primary filing form is Form M4 – Minnesota Corporation Franchise Tax Return.
Extension:
- Minnesota provides an automatic seven-month extension to file returns.
- This extension applies only to filing, not to tax payments. Taxes must be paid by the original due date to avoid penalties and interest.
Estimated Tax Payments:
- C corporations must make estimated payments if expected liability exceeds USD 500.
- Payments are due on the 15th day of the 3rd, 6th, 9th, and 12th months of the tax year.
Penalty and Interest:
- Late filing penalty: 5% of unpaid tax.
- Late payment penalty: 6% of unpaid tax if less than 90% of tax is paid by the due date.
- Interest: Charged on unpaid tax and penalties from the due date until fully paid.
- Formula: (tax + penalty) × days late × interest rate ÷ 365.
- Interest rate for 2023 is 5%.
S Corporation Tax
In Minnesota, income from S corporations is passed through to shareholders, who must report their share on personal tax returns, whether or not it is distributed.
Minimum Fee Requirement:
- An S corporation is subject to a minimum fee if the sum of its Minnesota source property, payroll, and sales equals or exceeds USD 1,080,000.
Due Date:
- S corporation returns are due by the 15th day of the fourth month following the end of the tax year.
Form Used:
- S corporations must file Form M8 – Minnesota S Corporation Return.
- Shareholders receive Schedule K-1 with details of their share of income, deductions, and credits.
Extension:
- Automatic six-month extension to file returns.
- Like C corporations, this applies only to filing, not to payments. Taxes are due by the original date.
Penalties and Interest:
- Late payment penalty: 6% of unpaid tax.
- Additional late penalty: 5% of unpaid tax if the return is filed late with a balance due.
- Late filing penalty: 5% if filed after the extended due date with tax owing.
- Interest: Charged on tax and penalties at 5% (2023 rate).
Estimated Tax Payments:
- Required if liability is expected to exceed USD 500.
- Due dates: 15th day of the 4th, 6th, 9th, and 1st months of the following tax year.
Partnership LLP & LLC Tax
Partnerships, LLPs, and LLCs in Minnesota follow pass-through rules similar to S corporations. Income is taxed to partners or members individually, but the entity must still file state returns.
Form Used:
- Form M3 – Minnesota Partnership Return.
- Each partner/member receives Schedule K-1.
Due Date:
- Returns are due on the 15th day of the fourth month following the end of the tax year.
Extension:
- Automatic six-month extension for partnerships.
Estimated Tax Payments:
- Required if tax liability is expected to exceed USD 500.
- Due on the 15th day of the 4th, 6th, 9th, and 12th months of the tax year.
- Annual payment must be at least 90% of the current year’s liability or 100% of the prior year’s liability.
Minimum Fee Requirement:
- Partnerships are subject to a minimum fee if Minnesota-source property, payroll, and sales equal or exceed USD 1,080,000.
- Exemption: Partnerships with over 80% of income from farming are exempt from the minimum fee.
Penalties and Interest:
- Same as S corporations: 6% late payment penalty, 5% late filing penalty, plus interest.
Conclusion
Minnesota’s tax framework sets clear rules for C corporations, S corporations, and partnerships/LLCs.
Key points include:
- C corporations: 9.80% tax rate, Form M4, returns due by the 15th day of the ninth month, with estimated payments required for liabilities over USD 500.
- S corporations: Income passed to shareholders, but Form M8 required, minimum fee applies at USD 1,080,000, with penalties for late filing and payment.
- Partnerships/LLCs: File Form M3, pass-through taxation applies, minimum fee based on property, payroll, and sales, with farming exemptions.
Across all entities, Minnesota enforces timely compliance through penalties of up to 6% for late payments, 5% for late filings, and interest charges. Extensions offer extra time to file but not to pay. By meeting filing deadlines, making estimated payments, and staying mindful of minimum fee thresholds, businesses can maintain compliance and avoid costly penalties in Minnesota.
