Minnesota Form M3 Partnership Return: Minimum Fee, Filing, and Penalties

Minnesota Form M3 is the partnership return filed with the Minnesota Department of Revenue by any partnership with Minnesota-source income that also files a federal Form 1065. Calendar-year filers owe it by March 15 of the following year, and every partnership gets an automatic six-month extension to file. Payment, however, is still due in March. What follows walks through who files, what to pull together first, how the main calculations on the return work, where to send it, and what happens if you miss the deadline or need to amend.

Who Has to File and By When

Any partnership with taxable Minnesota gross income that is required to file federal Form 1065 must file Form M3.¹ That covers general partnerships, limited partnerships, and limited liability partnerships. A partnership made up entirely of nonresident partners still has to file if it earns income from Minnesota sources or holds property in the state.

Calendar-year partnerships file by March 15 of the year after the tax year closes. Fiscal-year filers owe the return on the 15th day of the third month after their year ends. When that date lands on a weekend or holiday, it rolls to the next business day.² For the 2025 tax year, March 15, 2026 is a Sunday, so the deadline is Monday, March 16, 2026.

Minnesota grants every partnership an automatic six-month extension to file. No separate state extension form is required. If the IRS grants a federal extension longer than six months, Minnesota matches it.³ The extension covers the paperwork only. Any minimum fee, composite income tax, or nonresident withholding you owe is still due by the original March date, and interest accrues daily on anything paid later.

What to Have in Hand Before You Start

Finish the federal return first. The M3 instructions reference federal line items throughout, and the state schedules draw directly from each partner’s federal Schedule K-1.⁴⁵

Then pull together:

Your federal Employer Identification Number.
Your seven-digit Minnesota Tax ID, assigned when you registered with the Department of Revenue. It is often the same number used for sales tax or employer withholding, and including it on the return gets your payments credited to the right account.⁴
Each partner’s name, address, Social Security number or EIN, and ownership percentage.
Records of Minnesota property values, Minnesota payroll, and sales sourced to Minnesota. These figures drive the minimum fee and the apportionment calculation.

Under Minnesota Statutes 289A.12, the partnership must also furnish each person who was a partner at any point during the year a copy of their distributive share information on or before the day the return is filed.⁶ That is handled through Schedule KPI.

Calculating the Minimum Fee

Most partnerships that file Form M3 owe a minimum fee, calculated on Schedule M3A (page 3 of the return) using the sum of Minnesota property, payroll, and sales. For the 2026 tax year, no fee is owed below $1,280,000. Above that, the fee runs $260, then $770 at $2,560,000, and climbs in brackets to $12,830 once the total hits $51,280,000.⁷ The thresholds are indexed and shift periodically, so check the current-year instructions before entering a figure. The final number lands on line 1 of Form M3.

Two exemptions wipe the fee out entirely. A partnership with more than 80 percent of its income from farming owes nothing, and neither does a qualified business operating fully within a Minnesota Job Opportunity Building Zone.⁷

Apportioning Income to Minnesota

Minnesota uses 100 percent sales apportionment to figure the partnership’s taxable income attributable to the state. The sales factor on Schedule M3A is Minnesota sales divided by total sales everywhere, carried to five decimal places. The property and payroll factors still appear on M3A because they feed the minimum fee calculation, not because they share in the income allocation. Property is averaged by adding beginning-of-year and end-of-year values and dividing by two; rented property is capitalized at eight times the annual rent. Payroll includes wages paid for work performed in Minnesota and guaranteed payments to partners for services.

If the single-sales-factor formula produces an unreasonable result for your partnership, you can petition the Department of Revenue to use an alternative method by filing Form ALT.

Composite Tax for Nonresident Partners

A partnership that has not elected pass-through entity (PTE) tax treatment can pay composite Minnesota income tax on behalf of eligible nonresident individual partners, which lets those partners skip filing their own Minnesota return. A partner qualifies only if their Minnesota-source income comes solely from this partnership and from any other entities for which they also elect composite or PTE filing.⁴ A partner with installment-sale income reported on line 7a or 7b of Schedule KPI is not eligible.

For each electing partner, composite tax equals Minnesota taxable income (Schedule KPI, line 53) times 9.85 percent, minus any pass-through credits. Add up the composite tax from every electing partner’s KPI and enter the total on line 3 of Form M3.

Withholding on Nonresident Partners

For nonresident partners who do not join composite filing, the partnership withholds Minnesota income tax at 9.85 percent of the partner’s Minnesota-source distributive income, less any pass-through credits.⁸ That rate matches the top individual income tax bracket.⁹

Withholding applies when all four of these are true:

The partner does not live in Minnesota.
The partner has not elected composite filing.
The partner received at least $1,000 of Minnesota-source distributive income (not wages) from the partnership.
The income is not from the closure of a partnership in which no cash or property was distributed in the current or prior year.⁸

Withholding is not required on publicly traded partnership interests or on income from the discharge of a debt.

Filing and Paying

Minnesota’s electronic filing mandate attaches to the tax preparer rather than to the partnership. Under Minnesota Statutes 289A.08, subdivision 16, any preparer who reasonably expects to prepare more than ten Minnesota income, franchise, S corporation, partnership, or fiduciary returns for the year must e-file all of them.¹⁰ If your preparer is under that threshold, or if the partnership self-prepares on paper, mail the return to:

Minnesota Partnership Tax
Mail Station 1760
600 N. Robert St.
St. Paul, MN 55146-1760¹¹

Pay the minimum fee, composite tax, and withholding through the Department of Revenue’s e-Services portal, or include a payment voucher and check with a paper return. Pay by the original March deadline to avoid interest, which accrues daily on any unpaid balance.

Late Filing Penalties

Miss the filing deadline (including the automatic extension) and the penalty is $50 for each partner, assessed once per delinquent return rather than monthly. The total for all failures in a single calendar year is capped at $25,000.¹² A 20-partner entity that misses one return is looking at $1,000.

If the Department of Revenue determines the failure was intentional, the penalty jumps to at least 10 percent of the total items required to be reported on the return, with no cap.¹² A separate $50 penalty applies each time the partnership files a return with an incorrect partner tax identification number after the Department has already notified it that the number is wrong.

Correcting a Return You Already Filed

To fix a previously filed Form M3, use Form M3X, the amended partnership return. File M3X only after the original has gone in. The form uses three columns: original amounts in A, the increase or decrease in B, and corrected figures in C. Write a detailed explanation of the changes on page 2 and attach corrected schedules for any line that changed.¹³

You generally have three and a half years from the original due date to amend. If you filed under extension, that clock runs from the extended due date. When the IRS changes your federal return through audit, or you file a federal amended return on Form 1065-X, you have 180 days from the date of the federal determination to file M3X. Check the IRS adjustment box on the form, enter the determination date, and attach a complete copy of the amended federal return or the IRS correction notice.¹³

A general partner must sign the amended return. Mail it to the same Mail Station 1760 address as the original.

1
Minnesota Department of Revenue. Partnership Filing Requirements
2
Minnesota Department of Revenue. Partnership Due Dates
3
Minnesota Department of Revenue. Partnership Extensions
4
Minnesota Department of Revenue. Minnesota Form M3 Partnership Return Instructions
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Minnesota Department of Employment and Economic Development. Business Income Tax Returns
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Minnesota Office of the Revisor of Statutes. Minnesota Statutes 289A.12 – Filing Requirements for Information Returns and Reports
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Minnesota Department of Revenue. Minimum Fee
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Minnesota Department of Revenue. Nonresident Withholding
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Minnesota Department of Revenue. Income Tax Rates and Brackets
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Minnesota Office of the Revisor of Statutes. Minnesota Statutes 289A.08 – Filing Requirements
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Minnesota Department of Revenue. 2025 M3, Partnership Return
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Minnesota Office of the Revisor of Statutes. Minnesota Statutes 289A.60 – Penalty Provisions
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Minnesota Department of Revenue. M3X, Amended Partnership Return/Claim for Refund