If you can survive a cold winter, the Land of 10,000 Lakes might just be the place for you. Although its taxes are relatively high, it helps boost the state’s economy and produce employment. Minnesota’s unemployment rate as of May 2015 sits at 3.8%. While the state dishes out high taxes for those who can afford it, it also provides a high quality of life for all its citizens.

 

Business Climate                                                                                                       

Minnesota has been actively trying to make its economy flourish by creating more jobs. Its 3.8% unemployment rate is significantly below the national rate of 5.4%. A key contributor to that is the presence of large public companies such as Target, 3M, Best Buy, US Bancorp and General Mills headquartered in the state. These corporate giants help build the foundation for businesses in the state. The state’s economy and commerce is very diverse and the quality of life is something that Minnesota boasts about. It is said to have a great source of well-educated graduates that are deployed in the workforce.

Taxes

According to the Tax Foundation’s 2015 State Business Tax Climate Index, Minnesota has one of the worst tax climates. The state falls ranks 47th out of 50.  Minnesota imposes a flat rate of 9.8% for its corporate income tax rate. Only two other states have a corporate tax rate higher than Minnesota. 

Minnesota’s personal income tax consists of four brackets ranging from 5.35% to 9.85%. That top rate ranks 4th highest among states levying an individual income tax. Minnesota’s state and local income tax collections per person were $1489 in 2012 which ranked 6th highest nationally. Minnesota levies a 6.88% general sales or use tax on consumers, which is above the national median of 5.95%.

Tax Credits & Incentives

Through its Department of Economic Development and Employment (DEED), the state of Minnesota provides various tax credits to business or investors in order to encourage employment and innovation in the state.

Greater MN Job Expansion Program: The program provides tax benefits to businesses located in Greater Minnesota that increase employment. Qualifying businesses that meet job-growth goals may receive sales tax refunds for purchases made during a seven-year period.

  1. The maximum sales tax refund amount for each qualifying business is based on the application material submitted to DEED, subject to a maximum of $2 million annually and $10 million over the seven-year certification period.
  2. It is required that there is an increase of employment at the business’s facility by a minimum of two full time equivalent (FTE) employees or 10 percent of the current number of employees, whichever is greater, within three years.

Angel Tax Credit Program: The state provides a 25-percent credit to investors or investment funds that put money into startup companies focused on high technology, new proprietary technology, or a new proprietary product, process or service in specified fields. The maximum credit is $125,000 per person, per year ($250,000 if filing jointly). The credit is refundable. Residents of other states and foreign countries are eligible.

  1. Proprietary Technology refers to technical innovations that are unique and legally owned or licensed by a business, including innovations that are patented, patent pending, a subject of trade secrets, or copyrighted.
  2. Qualified high-technology fields include, aerospace, agricultural processing, renewable energy, energy efficiency and conservation, environmental engineering, food technology, cellulosic ethanol, information technology, materials science technology, nanotechnology, telecommunications, biotechnology, medical devices, pharmaceuticals, diagnostics, biologicals, chemistry, veterinary science, or similar.

Research and Development Tax Credit Program: The R&D credit is equal to 10 percent of qualifying expenses up to $2 million, and 2.5 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.

Random Facts

  • Although nicknamed the “Land of 10,000 Lakes”, the state has 11,842 lakes that are 10 acres or larger
  • The Mall of America in Bloomington is the size of 78 football fields — 9.5 million square feet.
  • Minnesota has 90,000 miles of shoreline, more than California, Florida, and Hawaii combined.
  • Minnesota has one recreational boat per every six people, more than any other state.
  • The first open heart surgery and bone marrow transplant in the United States was conducted at The University of Minnesota.
  • Minneapolis houses the country’s oldest continuously running theater (Old Log Theater) and largest dinner theater (Chanhassan Dinner Theater).
Minnesota tax Tax Credits technology