Balancing the Business Tax Burden

Entrepreneurs may soon have an additional incentive to encourage starting a small business in Minnesota.

The Senate Tax Reform Division heard a bill this week aimed at providing start-ups with cash to help offset their initial costs. Under this bill, corporations could purchase unused Minnesota Net Operating Loss carryovers from emerging technology and biotech start-up businesses. Purchasing companies would receive tax credits equal to the amount of the tax benefits being transferred, and smaller companies would receive cash to help offset initial start-up costs.

Many of Minnesota’s medical device technology companies endure long FDA processes and have significantly more expenses than revenue in the first several years of operation. A Net Operating Loss carryover – which is available to corporations whose tax-deductible expenses are greater than its taxable income – can be used to recover past or future income tax payments in order to balance a company’s tax burden in periods of varying revenue and expenses. This bill would allow those small start-ups to have some cash flow during those early stages, while also providing tax benefits to the larger corporations also settled in Minnesota.

The bill was laid over for possible inclusion in the 2015 Tax Bill. (S.F. 1253)

Senate DFL Media