Apportionment for Financial Institutions

In general, a financial institution is any national or state bank, bank holding company, savings and loan, or any other corporation that does business that a bank or other financial institution would be authorized to do.

Financial institutions complete M8A the same way as other S corporations, except for lines 4 and 14.

Line 4—Property Factor

What is considered property in Minnesota?

The property factor for financial institutions includes certain intangible property.

The following are considered Minnesota property:

  • coin and currency located in Minnesota lease financing receivables, to the extent the property is located in Minnesota
  • secured loans if real or tangible personal property is located in Minnesota
  • unsecured(or secured by intangible property) consumer loans to Minnesota residents
  • unsecured (or secured by intangible property) commercial loans if the proceeds are applied in Minnesota
  • credit card receivables if the fees and charges are regularly billed to Minnesota
  • receivables from merchant discount income if the merchant is located in Minnesota, and
  • securities, money market instruments and secondary market assets apportioned to Minnesota, in the ratio of Minnesota deposits to all deposits if a regulated financial institution, or in the ratio of Minnesota gross business income to total gross business income if unregulated.

Secondary market assets are obligations that are not originally solicited or entered into by the owner. They include secured, consumer and commercial loans and lease financing, credit card, and merchant discount receivables.

Line 14—Sales or Receipts Factor

Financial institutions use a receipts factor instead of a sales factor.

Include the gross income from activities in the ordinary course of business, including income from securities and money market instruments.

What is considered income in Minnesota?

The following are considered Minnesota income:

  • interest income from loans secured by real or tangible personal property located in Minnesota
  • interest on consumer loans not secured by real or tangible personal property if the borrower is a Minnesota resident
  • interest on commercial loans not secured by real or tangible personal property if the proceeds are applied in Minnesota
  • merchant discount income if the merchant is located in Minnesota
  • receipts from travelers checks if purchased in Minnesota
  • receipts from credit cards if regularly billed in Minnesota
  • receipts for regulated financial institutions from securities, based on the ratio of total deposits from Minnesota to total deposits in and outside Minnesota
  • receipts for non regulated financial institutions from securities, based on the ratio of gross business income from Minnesota to total gross business income
  • receipts from secondary market assets treated in the same way as securities
  • receipts from the performance of services if the services are received in Minnesota.

This is part of a series of posts on S corporation Tax Form M8.