In performing a quick review of SEC filings of large corps with an SEC State Location Code in Minnesota, I found 17 corps with pretty large State Corporate Income Tax Loopholes Taken, at least the way I measure them, of at least $250 mil each, in the last dozen years.
I didn’t realize just how many large corps are headquartered in Minnesota….that’s pretty cool! And after thoroughly reviewing the annual earnings trend of its Big Corps, I am really impressed with the high quality and consistency of these companies. It's easy for me to understand why the State of Minnesota's unemployment rate is not nearly as high right now as that of many other US States. I think there is a direct correlation between how businesses are doing in a State and a State's unemployment rate.
Below here is the effective state corporate income tax rates paid, which are computed by dividing the current state corporate income tax paid by the consolidated pretax income, both in total for the past twelve years for each of these 17 large Minnesota Corps. These 17 large Minnesota Corps below had a weighted average state corporate effective income tax rate paid of a very modest 2.79%, or a huge 72% discount to Minnesota’s current state corporate income tax rate of 9.80%.
….……………………............Current…………………......State
….……………………..............State...Consolidated..Effective
….……………………..............Tax……….Pretax………Tax Rate
….……………………..............Paid……..Income……….Paid
….……………….…..............(Millions of Dollars)
17. Target………...............1,927….....36,809……..5.24%
16. Supervalu...................300..........6,143**......4.88%
15. US Bancorp….............2,283……..52,473……..4.35%
14. Ecolab..........................227*….....5,315……..4.27%
13. Best Buy..…………..........659…......16,209....…4.07%
12. Hormel Foods...............165…........4,259…….3.87%
11. CHS...............................183*.........4,941.......3.70%
10. Xcel Energy...................280….......9,801…….2.86%
..9. General Mills…..............456……...17,269…….2.64%
..8. UnitedHealth Group...1,014……...41,242……..2.46%
..7. St. Jude Medical….........134…........6,329***…2.12%
..6. TCF Financial..................69………..3,690……..1.87%
..5. Ameriprise Financial…....88..........5,030.…....1.75%
..4. Mosaic...........................116……….7,408……..1.57%
..3. Medtronic.....................409*…….31,607***…1.29%
..2. 3M………….....................563……...47,265……..1.19%
..1. Travelers.........................99……...26,156.…….0.38%
Total all 17………...............8,972…...321,946……..2.79%
* Current and Deferred State Tax Combined
** Exclusive of large Asset Impairment Charge
*** Exclusive of large Acquired In Process R&D Charges
For the most recent year 2009, this weighted average effective state corporate income tax rate paid was an even lower 2.04% for these 17 large Minnesota Corps.
And then, below here is a summary of what I call a fair measure of the Total State Corporate Income Tax Loopholes Taken by each of these 17 large Minnesota Corps for the past twelve years. In estimating what I think is a fair measurement of State Corporate Income Tax Loopholes Taken, for ease of computation, I started by multiplying the current Minnesota Corporate Income Tax Rate of 9.80% by the total Consolidated Pretax Income of each large Minnesota Corp for the last twelve years. Then, I subtracted the actual total State Income Tax Paid, and in some cases also Local Income Tax Paid, and in two instances, also Deferred State Income Tax Expense, by each of these Corps for the same twelve years.
……………………….....................MN……......State……..Resultant
………………….........….........Corporate…Effective.......Higher
………………….........………….....Tax……..Tax Rate…...State Tax
………………..........………….......Rate……....Paid…....Last 12 Years
…………………………………………………...................(Millions of dollars)
1.. 3M………….......…………....9.80%......1.19%............4,069
2.. UnitedHealth Group.......9.80%......2.46%...........3,028
3.. US Bancorp………............9.80%......4.35%............2,859
4.. Medtronic…………...........9.80%.......1.29%............2,688
5.. Travelers…………………....9.80%.......0.38%...........2,464
6.. Target………………………...9.80%.......5.24%............1,680
7.. General Mills......………….9.80%.......2.64%............1,236
8.. Best Buy……………….........9.80%.......4.07%..............929
9.. Xcel Energy……...............9.80%.......2.86%..............680
10. Mosaic....…………………….9.80%.......1.57%..............610
11. St. Jude Medical……........9.80%.......2.12%..............486
12. Ameriprise Financial…....9.80%......1.75%..............405
13. Supervalu.......................9.80%.......4.88%..............302
14. CHS.................................9.80%......3.70%..............301
15. Ecolab…………………….......9.80%......4.27%..............294
16. TCF Financial...................9.80%......1.87%..............293
17. Hormel Foods..................9.80%......3.87%..............252
Total all 17…………………………………………22,579 (yeah, $22.6 bil)
For the most recent six years, the related estimated total State Corporate Income Tax Loopholes Taken, as I have defined them above, by these 17 large Minnesota Corps, was $16.1 bil, as compared to $22.6 bil for the past twelve years.
At first glance, Minnesota’s statutory corporate income tax rate of 9.80% seems high. However, it hasn’t prevented many of Minnesota's Big Corps from paying much lower effective tax rates, which averaged just 2.79% in the past twelve years for the above 17 corps. My hunch is that many profitable small and medium-sized Minnesota Corps are actually paying higher than this average 2.79% tax rate paid by these 17 Minnesota Big Corps, but also are paying much lower than the 9.80% statutory tax rate.
Particularly given its climate, I think Minnesota businesses and its residents would both be helped immensely by a vibrant US energy tax credit for all businesses that perform Green Energy Commercial Building Retrofit Upgrades.
Also, for maximum positive effect to the US economy and to US job creation, I think the US government should let businesses have a choice on the capital expenditures they make.....they could either take 100% first year expensing, or they could instead choose a refundable investment tax credit.
From a fairness standpoint, the above effective Minnesota Corporate State Income Tax Rates Paid by these 17 Big Corps of 2.79% is very low in comparison with Minnesota’s current individual income tax rate of 7.05% for income above $22,770 up to $74,780, and of 7.85% for income above $74,780.
It looks to me like the State of Minnesota has an opportunity here to strengthen its financial coffers significantly by closing some of these huge Big Corp State Income Tax Loopholes.
