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Minnesota Taxes in Comparison. - PowerPoint PPT Presentation
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Minnesota Taxes in Comparison
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity (“KPMG International”). All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 44116CHI
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Notwithstanding anything to the contrary set forth herein, you (and your employees, representatives, or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of any transaction, and all materials of any kind (including opinions or other tax analyses) that are provided to you by KPMG LLP related to such tax treatment and tax structure, effective immediately upon commencement of discussions with KPMG LLP.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND
CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (I) AVOIDING
PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (II) PROMOTING, MARKETING, OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity (“KPMG International”). All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 44116CHI
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State –Local Tax Mix: Minnesota v. U.S.
Relatively less reliance on property tax29 percent vs. 33 percentRelatively less reliance on general sales taxes19 percent vs. 23 percentRelatively greater reliance on personal income taxes29 percent vs. 21 percent
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State-Local Tax Mix: Minnesota vs. Great Lake States
Relatively less reliance on property taxes30 percent vs. roughly 40 percent in Illinois, Michigan and Wisconsin; Minnesota
has least reliance in the regionRelatively less reliance on general sales taxes19 percent vs. 25 percent in Indiana, Iowa, and Michigan; Wisconsin and Illinois
about equal to MinnesotaRelatively greater reliance on personal income taxes29 percent vs. 17 percent in Illinois and Michigan; Minnesota is highest with
Indiana, Iowa and Wisconsin at about 25 percent
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity (“KPMG International”). All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 44116CHI
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Minnesota vs. U.S.
State taxes only – Compared to the U.S.Sales tax reliance – 26 percent vs. 31 percentPersonal income tax reliance 40 percent vs. 35 percentLocal taxes only – Compared to the U.S.Property tax reliance – 93 percent vs. 74 percentSales tax reliance – 2 percent vs. 11 percentState taxes only – Compared to the Great LakesProperty taxes – 4 percent; only Michigan also has state property taxGeneral sales tax – 25 percent is lowest in the region; 40 percent in Indiana and
MichiganPersonal income taxes – 41 percent (highest along with Wisconsin)Local taxes – Compared to the Great LakesMinnesota is the highest; Illinois, Iowa and Wisconsin share sales
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Tax Burdens: 1977 – 2009 [Taxes as Percent of Personal Income]
State – Local Taxes1977 – 2002 – Minnesota generally exceeds U.S. average and other states in the
region (except Wisconsin) by considerable margin2005 – 2009 – Minnesota runs steady at about 10.8 percent of personal income;
effectively equal to U.S. average and near the middle of Great Lakes States
State Taxes OnlyMinnesota at roughly 8.0 percent of personal income consistently above U.S.
average (6.0 percent) and at highest among states in the region
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Structural Characteristics
Corporate Income TaxTax rate is relatively higher: 9.8 percent vs. 6.0 – 8.0 percent (roughly)Personal Income TaxTax rate is generally higher 7.5+ percent (equivalent to Wisconsin), compared to
flat rates in Indiana and Illinois. Phase-out of exemptions and deductions has substantial effect
General Sales TaxRate is near the upper end of the regionBase with food and clothing exempt is relatively more narrowTax relatively large number of services – most of which are classified as servicesLikely tax manufacturing equipment and utilities a bit more as well as other
business inputs
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity (“KPMG International”). All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 44116CHI
State-Local Tax Mix: Minnesota and U.S.Percentage Distribution of State and Local Taxes -- 2009
Ppty.33%
Gen. Sales23%Sel.
Sales11%
Ind. Inc.21%
Corp. Inc.4%
Other8%
U.S.
Ppty.29%
Gen. Sales19%
Sel. Sales13%
Ind. Inc.29%
Corp. Inc.3%
Other7%
Minnesota
Source: Bureau of the Census
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity (“KPMG International”). All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 44116CHI
State – Local Tax Mix: Upper MidwestPercentage Distribution of State and Local Taxes in Selected States – 2009
U.S.
Minnesota
Illinois
Indiana
Iowa
Michigan
Wisconsin
33.4
29.5
40.1
30.3
33.2
40.1
38.3
22.9
18.7
19
26
23.6
25.1
18.2
11.2
13.1
15.6
11.7
10.6
10.5
11
21.3
28.9
16.2
23.9
23.5
17.5
24.8
3.6
3.2
3
3.5
2.2
2
2.7
7.7
6.5
6
4.7
6.8
4.9
5.1
Property Gen. Sales Sel. SalesInd. Inc. Corp. Other
Source: Bureau of the Census
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity (“KPMG International”). All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 44116CHI
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State Tax Mix: U.S. and MinnesotaPercentage Distribution of State Taxes -- 2009
Ppty.4%
Gen. Sales25%
Sel. Sales17%
Ind. Inc.40%
Corp. Inc.4%
Other8%
MinnesotaPpty.2%
Gen. Sales31%
Sel. Sale
s16%
Ind. Inc.35%
Corp. Inc.6%
Other10%
U.S.
Source: Bureau of the Census
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity (“KPMG International”). All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 44116CHI
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Local Tax Mix: U.S. and MinnesotaPercentage Distribution of Local Taxes – 2009
Ppty.74%
Gen.
Sales11%
Sel.
Sales5%
Ind.
Inc.4%
Corp. Inc.1%
Other4%
U.S. Minnesota
Source: Bureau of the Census
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity (“KPMG International”). All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 44116CHI
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State Tax Mix: Upper MidwestPercentage Distribution of State Taxes in Selected States – 2009
U.S.
Minnesota
Illinois
Indiana
Iowa
Michigan
Wisconsin
1.8%
4.2%
0.2%
0.1%
0.0%
9.5%
0.9%
32.0%
25.5%
31.9%
41.6%
31.5%
39.5%
28.3%
16.2%
17.4%
21.9%
17.8%
15.3%
15.4%
17.7%
34.4%
40.5%
31.4%
28.9%
38.7%
25.7%
41.3%
5.5%
4.5%
5.8%
5.6%
3.8%
3.1%
4.5%
10.1%
8.0%
8.8%
5.9%
10.7%
6.7%
7.2%
Property Gen. Sales Sel. SalesInd. Inc. Corp. Other
Source: Bureau of the Census
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity (“KPMG International”). All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 44116CHI
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State-Local Tax Burden Over TimeState-Local Taxes as Percent of Personal Income – Various Years
1977
1982
1987
1992
1997
2002
2004
2005
2006
2007
2008
2009
8.0%8.5%9.0%9.5%
10.0%10.5%11.0%11.5%12.0%12.5%13.0%
USMNILINIAMIWI
Source: Bureau of the Census
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity (“KPMG International”). All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 44116CHI
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State Tax Burden Over TimeStateTaxes as Percent of Personal Income – Various Years
1977
1982
1987
1992
1997
2002
2004
2005
2006
2007
2008
2009
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
USMNILINIAMIWI
Source: Bureau of the Census
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity (“KPMG International”). All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 44116CHI
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Corporate Income Tax Features
Minnesota Illinois Indiana Iowa Michigan Wisconsin
Rates9.8% 9.5%
8.5% (8.0% on 7/1/12)
6.0-12.0% 6.0% 7.9%
Combined Reporting Required
Yes Yes No (DoR Authority) No Yes Yes
NOL Carryback -0- -0- -0- -0- -0- -0-
NOL CarryForward 15
-0- (Suspended to 2014)
20 20 10 15
Sales Factor
93% (100% in 2014) 100% 100% 100% 100% 100%
Sourcing Services Market Market COP Market Market Market
Source RIA Checkpoint
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity (“KPMG International”). All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 44116CHI
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Personal Income Tax Characteristics
Minnesota Illinois Indiana Iowa Michigan Wisconsin
Rates 5.35% - 7.85% 5% 3.4%
0.36% - 8.98%
(Fed Tax Deduct)
4.35% 4.6%-7.75%
Starting point
Federal Taxable
Federal AGI
Federal AGI
Federal AGI
Federal AGI
Federal AGI
Personal Exempt
Same as Fed. with addback
$2,000
$1,000 / $1,500
(depend. child)
$40 Credit $3,700 $700
Standard Deduction
Same as Fed. with addback
N/A N/A $4,460 (MFJ) N/A Variable
Source: RIA Checkpoint
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity (“KPMG International”). All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 44116CHI
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Sales Tax Characteristics
Minnesota
Illinois Indiana Iowa Michigan Wisconsin
Rate (State) 6.875% 6.25% 7% 6% 6% 5%
Food Exempt Yes Taxed at
1% Yes Yes Yes Yes
Mfct. M&E Equipment
No (Some
refunds)Yes Yes Yes Yes Yes
Mfct. Utilities ExemptNo. of Services Taxed (FTA)
66 17 94 94 26 76
Local Sales Taxes
23 entities
(1% max)
320 entities (2.75% max)
-0- 200+ entities (1% max) -0- 71 entities
(0.5% max)
SST Member Yes No Yes Yes Yes Yes
© 2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity (“KPMG International”). All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 44116CHI
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PresenterHarley Duncan
Washington National TaxManaging Director
hduncan@kpmg.com 202-533-3254
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