- 52 -
1992-94. In our opinion, Mr. Daskais’s after-tax rates are too
high because they do not take into account the Minnesota State tax
on unrelated business income. Minnesota taxes the unrelated income
of an exempt organization at the corporate rate of 9.8 percent.
Minn. Stat. Ann. secs. 290.05, subd. 3, and 290.06, subd. 1 (West
1999 & Supp. 2003). Since State taxes paid are deducted for
purposes of Federal tax, the combined tax rate would be 36 percent23
for 1991-92 and 38.6 percent24 for 1993-94. Applying the combined
tax rates to the pretax investment rates Mr. Daskais considers
reasonable results in the following after-tax investment rates
(rounded to nearest tenth of a percent):
1991 1992 1993 1994
Pretax rate 9.0% 8.0% 8.0% 7.0%
After-tax rate 5.8 5.1 4.9 4.3
23 The combined tax rate for 1991-92 is computed as follows:
Starting point 100.0%
Minn. State tax at 9.8% (100 x 9.8%) - 9.8
90.2
Federal tax at 29% (90.2 x 29%) -26.2
64.0
Combined tax rate (100% - 64%) 36
24 The combined tax rate for 1993-94 is computed as follows:
Starting point 100.0 %
Minn. State tax at 9.8% (100 x 9.8%) - 9.8
90.2
Federal tax at 31.9% (90.2 x 31.9%) -28.8
61.4
Combined tax rate (100% - 61.4%) 38.6
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