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Minnesota state taxes and foreign income: Impact of new tax law

Tax planning strategies can reduce a business’ tax obligations. One example involves keeping certain assets overseas. If the asset returned to the United States, a tax would be due. An asset that remained abroad was not subject to this tax.

A provision within the new tax law attempts to end this practice. Essentially, it requires businesses bring these assets back to the United States. In exchange for moving these assets back, the business will then have up to eight years to pay the tax bill that comes with the return of these assets to the United States. This translates to 15.5 percent tax on cash assets and 8 percent on noncash investments.

This process, referred to as repatriation, will have another likely unexpected impact on Minnesota businesses.

Repatriation and Minnesota state taxes

Minnesota state law requires payment of a state tax on repatriated profits.  This could lead to over $356 million in additional taxes for Minnesota businesses for the 2018 through 2021 tax years.

Business leaders throughout the state are pushing lawmakers to address this issue. They argue profits made in a foreign country should not be subject to Minnesota state taxes. If the state insists, business leaders are pushing for the funds to go specifically towards improvement of the “business environment” in the state.

This is just one of the many impacts of the new tax law that businesses in Minnesota should take into consideration when putting together a tax strategy. A failure to plan wisely can result in issues with state and federal tax authorities, potentially leading to an audit. An attorney can help in these matters and work to better ensure your business’ interests are protected.

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