Foreign Corporate Filers

Generally, you will enter the amount from line 29, Section II from your federal Form 1120-F on line 1a of you Minnesota Form M4I, Income Calculation.

There are circumstances when line 1a of your Form M4I does not equal line 29, Section II of your federal Form 1120-F. If the amounts do not match, you must complete Schedule REC, Reconciliation, and attach it to your Minnesota Form M4, Corporation Franchise Tax Return.

Schedule REC requires you to list the companies that you are either including or excluding in the Minnesota combined group if it is different from the federal consolidated group.

You must file a pro forma federal Form 1120 to calculate Minnesota taxable income.

The 1980 United States-Canada Income Tax Convention (Treaty) provides that the taxpayer's profits are exempt from federal income taxes imposed by the Internal Revenue Code (IRC).

The Treaty makes clear that subnational taxation is not included in the exemptions provided in the Treaty. (See Treaty Article II.2(b).) In addition, the Treaty recognizes that a portion of the income is still sourced within the United States. 

As a result, the Treaty does not define, alter, or exempt income from the IRC definition of federal taxable income, which is the basis for determining Minnesota net income.