In order to gain Minnesota tax-exempt status, a corporation must qualify as a 501(c) and obtain a Nonprofit Tax-Exempt ID Number from the IRS. Labor Unions Labor unions and worker's organizations are exempt from taxation on dues and other forms of income. Tax-Exempt Religious Institutions Bona-fide religious institutions including churches, synagogues, and mosques are exempt from corporate income taxes under § 501(c)(3) of the IRC Tax-Exempt Recreational Organizations Social clubs and recreational groups may collect dues and other funds as a tax-free organization as long as the primary purpose of the group is not for profit. Tax-Exempt Charities Bona-fide charities are exempt from all corporate income taxes, including both religious and non-religious charities. Some of the most common 501(c) organizations include:Įducational & Scientific Institutions Nonprofit educational and scientific groups are tax-exempt, including nonprofit schools and colleges and certain research institutions. Specifically, certified Minnesota 501(c) nonprofit corporations are exempt from the Minnesota corporate income tax. However, the owners or members of the corporation must report their share of the corporation's income on their personal tax returns and pay Minnesota and federal income tax.Īll incorporated Minnesota businesses, regardless of whether or not they are required to pay any taxes, should file at least an informational tax return with the Minnesota Department of Revenue as well as a federal business tax return (Form 1120) with the IRS.Ĭertain nonprofit entities registered in Minnesota may be able to exempt some or all of their qualifying income from Minnesota and federal income taxes. S-Corporations and other flow-through entities aren't subject to the double taxation of revenue imposed on a C-Corp, because they aren't required to pay corporate taxes on their revenue. The most commonly used business structure that is subject to corporate taxes is a C-Corporation.īecause C-Corporations pay corporate taxes on their revenue in addition to the personal income taxes shareholders and owners pay on profits withdrawn from the company, profits received from a C-Corporation are subject to a phenomenon known as double taxation. In general, all businesses operating in Minnesota which are not registered as a flow-through entity (like a sole proprietorship, a partnership, or an S-Corporation) must report their income and pay both Minnesota and Federal corporate income taxes on their earnings. What kind of businesses have to pay the Minnesota corporate income tax? Similar to the personal income tax, businesses must file a yearly tax return and are allowed deductions such as wages paid, cost of goods sold, and other qualifying business expenses. The Minnesota corporate income tax is the business equivalent of the Minnesota personal income tax, and is based on a bracketed tax system. Minnesota's corporate income tax is a business tax levied on the gross taxable income of most businesses and corporations registered or doing business in Minnesota.
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