Effective for taxable years beginning after Dec. 31, 2009, unless otherwise noted.
Federal changes adopted by Minnesota for tax year 2010UPDATE MARCH 21, 2011: Legislation enacted March 21, 2011, adopts all of the federal tax provisions enacted between March 18 and December 31, 2010, that affect federal taxable income for tax year 2010, with the following exception:
- The 50 percent/100 percent federal bonus depreciation and the increased federal section 179 expensing have been adopted, but these provisions are subject to an addback of 80 percent in the first year and five-year recovery, as under current state law.
The new law eliminates the need for partnerships to recompute the federal return and the amounts passed through to partners for Minnesota tax purposes.
Affected 2010 tax forms revised in March 2011 —
The following Minnesota 2010 forms and schedules are affected by the law changes and have been updated:
- Schedule KPI -- Lines 9 and 12 have been removed since they are no longer needed.
- Schedule KPC -- Lines 15 and 18 have been removed since they no longer apply.
- Instructions for M3 -- The instructions have been updated accordingly.
Tax software companies and tax preparers have been notified about these changes.
If you have not yet filed your 2010 Form M3 —
- Do not recompute your federal return for Minnesota tax purposes.
- Disregard lines 9 and 12 of Schedule KPI and lines 15 and 18 of Schedule KPC. These lines no longer apply for 2010.
- Use the Partnership return instructions, revised March 2011.
If you have filed your 2010 Form M3 and reported adjustments due to federal changes —
No further action is required by the partnership, and there is no need to amend Schedules KPI and/or KPC to affected partners.
The department will review the individual income tax and corporation franchise tax returns filed by partners to determine if adjustments are required. When possible, the department will make needed adjustments, notify taxpayers and send any additional refunds due.
Taxpayers will be notified if further action is required by them.
Factor percentages have changed
The property and payroll factors on Schedule M3A have changed from 8 percent to 6.5 percent each, and the sales factor has changed from 84 percent to 87 percent. Effective for tax year 2010.
Two new refundable credits
Effective beginning with tax year 2010, two new refundable credits (increasing research activities and historic structure rehabilitation credits) are available to partners of partnerships against their individual income tax. Any credits received must be passed through to shareholders and cannot be claimed directly by the partnership.
Credit for increasing research activities. If you paid qualified research and development expenses in Minnesota, and those expenses exceed a base amount, you may be entitled to this credit.
For additional information, see Schedule RD, Credit for Increasing Research Activities, and the instructions for completing Schedule KPI, line 15, and KPC, line 20 (see M3 instructions).
Credit for historic structure rehabilitiation. If you are eligible for the Federal Historic Rehabilitation Credit for improving a certified historic structure located in Minnesota, you may be eligible for the Minnesota historic structure rehabilitation credit.
To qualify for the state credit, the project developer must apply for approval from the State Historic Preservation Office (SHPO) of the Minnesota Historical Society before any rehabilitation of the structure begins.
For eligibility requirements and details on how to apply for approval, go to the SHPO website at www.mnhs.org/shpo.
If you received a credit certificate from the SHPO, see
the instructions for completing Schedule KPI, line 16, or KPC, line 21 (see
M3 instructions).
Electronic payments
Effective immediately, when paying electronically using our e-File Minnesota system (both the Internet and phone methods), you must use an account that is not assciated with any foreign banks.
