Subdivision 1. Minimum liability. A corporation subject to taxation under chapter 290 (excluding section 290.92 and an S corporation under section 290.9725) or an entity subject to taxation under section 290.05, subdivision 3, must make payment of estimated tax for the taxable year if its tax liability so computed can reasonably be expected to exceed $500, or in accordance with rules prescribed by the commissioner for an affiliated group of corporations filing one return under section 289A.08, subdivision 3.
Subd. 2. Amount and time for payment of installments. The estimated tax payment required under subdivision 1 must be paid in four equal installments on or before the 15th day of the third, sixth, ninth, and 12th month of the taxable year.
Subd. 2a. Electronic payments. If the aggregate amount of estimated tax payments made is $10,000 or more in a fiscal year ending June 30, all estimated tax payments in all subsequent calendar years must be paid by electronic means.
Subd. 3. Short taxable year. (a) A corporation or an entity with a short taxable year of less than 12 months, but at least four months, must pay estimated tax in equal installments on or before the 15th day of the third, sixth, ninth, and final month of the short taxable year, to the extent applicable based on the number of months in the short taxable year.
(b) A corporation or an entity is not required to make estimated tax payments for a short taxable year unless its tax liability before the first day of the last month of the taxable year can reasonably be expected to exceed $500.
(c) No payment is required for a short taxable year of less than four months.
Subd. 4. Underpayment of estimated tax. If there is an underpayment of estimated tax by a corporation or an entity, there shall be added to the tax for the taxable year an amount determined at the rate in section 270C.40 on the amount of the underpayment, determined under subdivision 5, for the period of the underpayment determined under subdivision 6. This subdivision does not apply in the first taxable year that a corporation is subject to the tax imposed under section 290.02 or an entity is subject to the tax imposed under section 290.05, subdivision 3.
Subd. 5. Amount of underpayment. For purposes of subdivision 4, the amount of the underpayment is the excess of
(1) the required installment, over
(2) the amount, if any, of the installment paid on or before the last date prescribed for payment.
Subd. 6. Period of underpayment. The period of the underpayment runs from the date the installment was required to be paid to the earlier of the following dates:
(1) the 15th day of the third month following the close of the taxable year for corporations, and the 15th day of the fifth month following the close of the taxable year for entities subject to tax under section 290.05, subdivision 3; or
(2) with respect to any part of the underpayment, the date on which that part is paid. For purposes of this clause, a payment of estimated tax shall be credited against unpaid required installments in the order in which those installments are required to be paid.
Subd. 7. Required installments. (a) Except as otherwise provided in this subdivision, the amount of a required installment is 25 percent of the required annual payment.
(b) Except as otherwise provided in this subdivision, the term "required annual payment" means the lesser of:
(1) 100 percent of the tax shown on the return for the taxable year, or, if no return is filed, 100 percent of the tax for that year; or
(2) 100 percent of the tax shown on the return of the corporation or entity for the preceding taxable year provided the return was for a full 12-month period, showed a liability, and was filed by the corporation or entity.
(c) Except for determining the first required installment for any taxable year, paragraph (b), clause (2), does not apply in the case of a large corporation. The term "large corporation" means a corporation or any predecessor corporation that had taxable net income of $1,000,000 or more for any taxable year during the testing period. The term "testing period" means the three taxable years immediately preceding the taxable year involved. A reduction allowed to a large corporation for the first installment that is allowed by applying paragraph (b), clause (2), must be recaptured by increasing the next required installment by the amount of the reduction.
(d) In the case of a required installment, if the corporation or entity establishes that the annualized income installment is less than the amount determined in paragraph (a), the amount of the required installment is the annualized income installment and the recapture of previous quarters' reductions allowed by this paragraph must be recovered by increasing later required installments to the extent the reductions have not previously been recovered.
(e) The "annualized income installment" is the excess, if any, of:
(1) an amount equal to the applicable percentage of the tax for the taxable year computed by placing on an annualized basis the taxable income:
(i) for the first two months of the taxable year, in the case of the first required installment;
(ii) for the first two months or for the first five months of the taxable year, in the case of the second required installment;
(iii) for the first six months or for the first eight months of the taxable year, in the case of the third required installment; and
(iv) for the first nine months or for the first 11 months of the taxable year, in the case of the fourth required installment, over
(2) the aggregate amount of any prior required installments for the taxable year.
(3) For the purpose of this paragraph, the annualized income shall be computed by placing on an annualized basis the taxable income for the year up to the end of the month preceding the due date for the quarterly payment multiplied by 12 and dividing the resulting amount by the number of months in the taxable year (2, 5, 6, 8, 9, or 11 as the case may be) referred to in clause (1).
(4) The "applicable percentage" used in clause (1) is:
| For the following required installments: | The applicable percentage is: | ||
| 1st | 25 | ||
| 2nd | 50 | ||
| 3rd | 75 | ||
| 4th | 100 |
(f)(1) If this paragraph applies, the amount determined for any installment must be determined in the following manner:
(i) take the taxable income for the months during the taxable year preceding the filing month;
(ii) divide that amount by the base period percentage for the months during the taxable year preceding the filing month;
(iii) determine the tax on the amount determined under item (ii); and
(iv) multiply the tax computed under item (iii) by the base period percentage for the filing month and the months during the taxable year preceding the filing month.
(2) For purposes of this paragraph:
(i) the "base period percentage" for a period of months is the average percent that the taxable income for the corresponding months in each of the three preceding taxable years bears to the taxable income for the three preceding taxable years;
(ii) the term "filing month" means the month in which the installment is required to be paid;
(iii) this paragraph only applies if the base period percentage for any six consecutive months of the taxable year equals or exceeds 70 percent; and
(iv) the commissioner may provide by rule for the determination of the base period percentage in the case of reorganizations, new corporations or entities, and other similar circumstances.
(3) In the case of a required installment determined under this paragraph, if the corporation or entity determines that the installment is less than the amount determined in paragraph (a), the amount of the required installment is the amount determined under this paragraph and the recapture of previous quarters' reductions allowed by this paragraph must be recovered by increasing later required installments to the extent the reductions have not previously been recovered.
Subd. 8. Definition of tax. The term "tax" as used in this section means the tax imposed by chapter 290.
Subd. 9. Failure to file an estimate. In the case of a corporation or an entity that fails to file an estimated tax for a taxable year when one is required, the period of the underpayment runs from the four installment dates in subdivision 2 or 3, whichever applies, to the earlier of the periods in subdivision 6, clauses (1) and (2).
Subd. 10. Payment on account. Payment of the estimated tax or any installment of it shall be considered payment on account of the taxes imposed by chapter 290, for the taxable year.
Subd. 11. Overpayment of estimated tax installment. If the amount of an installment payment of estimated tax exceeds the amount determined to be the correct amount of the installment payment, the overpayment must be credited against the unpaid installments, if any.
History:1990 c 480 art 1 s 12; 1991 c 291 art 7 s 2,3; art 17 s 5; 1992 c 511 art 6 s 4-9; 1993 c 375 art 2 s 29-31; art 8 s 3; 1994 c 587 art 1 s 5; 1995 c 264 art 13 s 10; 2000 c 490 art 4 s 3; 1Sp2001 c 5 art 17 s 12; 2005 c 151 art 2 s 17; 1Sp2005 c 3 art 9 s 3; 2011 c 112 art 1 s 8; 2013 c 142 art 5 s 6; 2013 c 143 art 15 s 7-10