If there are nonresident individual shareholders who will not be included in the composite income tax, generally the S corporation is required to withhold income tax (called nonresident withholding) on behalf of such shareholders and remit it with Form M8 by using Schedule KS. If the S corporation is making a pass-through entity tax election, it must file Schedule PTE with its Form M8 and file on or before the extended due date for the return. Limited Liability Company Under Treasury Regulations the organizers of a Limited Liability Company can choose how the Limited Liability Company will be taxed. Generally, a Limited Liability Company (LLC) with one member may be taxed either as a corporation or as a sole proprietorship. LLCs with two or more members may be taxed either as a partnership or as a corporation. Note: For one member LLCs, this decision will also impact whether the LLC needs a tax identification number. A Minnesota Limited Liability Company will receive the tax treatment for state purposes that it receives for federal purposes. Persons considering forming a Limited Liability Company are advised to consult with a tax professional regarding the state and federal tax treatment of such an entity. See also the section of this Guide entitled “Choosing the Form of Business Organization – Tax and Non-Tax Considerations”.
TAX CREDITS AND INCENTIVES
Minnesota Tax Credits and Incentives • Research and Development Tax Credit: Provides a credit of 10 percent of qualifying expenses up to $2 million, and 4 percent for expenses above that level. Qualifying expenses are the same as for the federal R&D credit - defined in Section 41 of the Internal Revenue Code - but must be for research done in Minnesota. (Minn. Stat. § 290.068) NOTE : users of the federal credit should be aware that it is different from the research expenditure deduction that was available under Section 174 of the Internal Revenue Code and which allowed deduction of those expenses in the year they were sustained. For tax years beginning in 2022 those costs must be amortized over a five year period. Users should also note that the expenditures qualifying under Section 41 and 174 are not exactly the same. • Alternative Minimum Tax Carryover Credit : Provides a credit for prior year alternative minimum tax liability caused by timing items. The credit cannot be claimed in a year for which the taxpayer was subject to alternative minimum tax. For C corporations This allows a credit against corporate income tax for qualified alternative minimum tax previously paid. The entire amount of the credit must be carried into the earliest taxable year into which the credit may be carried, and any unused portion of the credit must be carried into the following taxable year. The credit may not be claimed in the same year the C corporation is paying Alternative Minimum Tax. (Minn. Stat. § 290.0921, subd. 8).
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