Some state-based companies would gain from proposed tax change

ST. PAUL (AP) -- A proposed change in the way business income taxes are figured -- expected to be the source of a House-Senate conference committee battle -- offers a glimpse into the competing pressures on legislators who must make many choices in a complicated spending plan.

Fiddling with the formula called ''apportionment weighting'' would lower state income tax payments by tens of millions of dollars for some Minnesota companies and raise them by millions for some based elsewhere.

The net cost of the proposed change to the state treasury would be $56 million over the next two years and more in later years, according to calculations by the Minnesota Department of Revenue.

A bill passed in the House would change the decades-old formula, making sales inside Minnesota the most important element for figuring state income taxes on businesses. It would diminish the effects of having employees or property in Minnesota.

The Senate chose not to include such a provision in its tax bills despite appeals from some business lobbyists. Members of the two chambers will decide in conference what to do about the proposed tax change before the overall budget comes up for a vote.

The Minnesota Business Partnership and the Minnesota Chamber of Commerce portray the proposed business tax change as a significant step to keep corporate headquarters in Minnesota and give the state a competitive edge against rivals.

''Our organization wants to improve the environment for all businesses,'' said Bill Blazar, a lobbyist and senior vice president of the state chamber of commerce. ''Most people would agree that having major worldwide companies that call Minnesota their home is an important part of that equation.''

Wayne Cox, executive director of Minnesota Citizens for Tax Justice, disagreed, saying changing the corporate tax provision could cost the state jobs and would leave some companies that do business in Minnesota with higher income tax bills.

The tax change also could prompt companies to take their branch offices out of Minnesota in order to deal with the tax increases they would face under this change, Cox said.