HF 2580

as introduced - 86th Legislature (2009 - 2010) Posted on 02/09/2010 11:32pm

A bill for an act
relating to economic development; providing an angel investment grant;
delaying phase-in of single sales apportionment; appropriating money; amending
Minnesota Statutes 2008, section 290.191, subdivision 2; proposing coding for
new law in Minnesota Statutes, chapter 116J.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [116J.8737] ANGEL INVESTMENT GRANT PROGRAM.
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new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the following terms
have the meanings given.
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new text begin (b) "Immediate family" means the investor's parent, sibling, or child, or the spouse
of any person listed in this paragraph.
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new text begin (c) "Qualified biotechnology or medical device field" means the business of
manufacturing, processing, assembling, researching, or developing biotechnology,
medical device, pharmaceutical, or diagnostic products, including products of those types
used in agriculture.
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new text begin (d) "Qualified business venture" means a business that satisfies all of the following
conditions:
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new text begin (1) the business has its headquarters in Minnesota;
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new text begin (2) at least 51 percent of the business's employees are employed in Minnesota, and
51 percent of the business's total payroll is paid or incurred in the state;
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new text begin (3) the business is engaged in, or is committed to engage in:
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new text begin (i) using advanced technology to add value to a product, process, or service in a
qualified high-technology field or qualified biotechnology or medical device field;
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new text begin (ii) conducting research in and development of a product, process, or service in a
qualified high-technology field or qualified biotechnology or medical device field;
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new text begin (iii) developing a new product, process, or service in a qualified high-technology
field or qualified biotechnology or medical device field; or
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new text begin (iv) qualified green manufacturing;
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new text begin (4) the business is not engaged in real estate development, insurance, banking,
lending, lobbying, political consulting, information technology consulting, wholesale or
retail trade, leisure, hospitality, transportation, construction, ethanol production from
corn, or professional services provided by attorneys, accountants, business consultants,
physicians, or health care consultants;
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new text begin (5) the business has fewer than 25 employees;
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new text begin (6) a business with more than five employees, measured on a full-time equivalent
basis, pays wages and benefits to all of its employees, other than its first five employees,
equal to or greater than 175 percent of the federal poverty level for a family of four;
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new text begin new text end

new text begin (7) the business has not been in operation for more than ten consecutive years;
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new text begin (8) the business has not previously received total equity investments of more than
$2,000,000, including any grants received under this section;
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new text begin (9) the business had less than $2,000,000 in annual gross sales receipts for the
previous year; and
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new text begin (10) the business is not a subsidiary or an affiliate of a business that employs
more than 100 employees or has gross sales receipts for the previous year of more than
$2,000,000, computed by aggregating all of the employees and gross sales receipts of the
business entities affiliated with the business.
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new text begin (e) "Qualified green manufacturing" means a business whose primary business
activity is production of products, processes, methods, technologies, or services intended
to do one or more of the following:
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new text begin (1) increase the use of energy from renewable sources, as defined in section
216B.1691;
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new text begin (2) increase the energy efficiency of the electric utility infrastructure system or to
increase energy conservation related to electricity use, as provided in sections 216B.2401
and 216B.241;
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new text begin (3) reduce greenhouse gas emissions, as defined in section 216H.01, subdivision
2, or to mitigate greenhouse gas emissions through, but not limited to, carbon capture,
storage, or sequestration;
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new text begin (4) monitor, protect, restore, and preserve the quality of surface waters;
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new text begin (5) expand use of biofuels, including expanding the feasibility or reducing the
cost of producing biofuels or the types of equipment, machinery, and vehicles that can
use biofuels; or
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new text begin (6) reduce waste products resulting from a process, method, or technology.
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new text begin (f) "Qualified high-technology field" means aerospace, agricultural processing,
alternative energy, environmental engineering, food technology, cellulosic ethanol,
information technology, materials science technology, nanotechnology, and
telecommunications.
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new text begin (g) "Qualified investor" means:
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new text begin (1) a qualified individual investor; or
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new text begin (2) a qualified investment fund.
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new text begin (h) "Qualified individual investor" means an accredited investor, within the
meaning of Regulation D of the Securities and Exchange Commission, Code of Federal
Regulations, title 17, section 230.501(a), whether part of a pass-through entity or not, who:
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new text begin (1) does not own, control, or hold power to vote 20 percent or more of the
outstanding securities of the qualified new business venture in which the eligible
investment is proposed; or
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new text begin (2) does not receive more than 50 percent of the gross annual income from the
qualified new business venture in which the eligible investment is proposed.
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new text begin A member of the immediate family of an investor disqualified by this paragraph is not a
qualified individual investor.
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new text begin (i) "Qualified investment fund" means a pooled investment fund that:
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new text begin (1) invests in qualifying business ventures;
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new text begin (2) is organized as a limited liability company or other pass-through entity; and
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new text begin (3) has no fewer than five separate investors, each of whom is a qualified individual
investor, and owns no more than 20 percent of the outstanding ownership interests in the
fund. For purposes of determining the number of investors and the ownership interests
of an investor under this clause, the ownership interests of an investor include a member
of the investor's immediate family, and any corporation, limited liability company,
partnership, or trust in which the investor or a member of the investor's immediate family
has a controlling equity interest or in which the investor exercises management control.
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new text begin (j) "Qualified private investment" means an equity investment made in the qualified
business venture by a qualified investor.
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new text begin Subd. 2. new text end

new text begin Angel investment grants authorized. new text end

new text begin The commissioner may make grants
to qualified business ventures that have obtained at least $100,000 in qualified private
investments. The grant amount equals one-third of the qualified private investment, but
the total grant to a qualified business venture made may not exceed:
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new text begin (1) the sum of the lesser of the following amounts for each qualified investor in the
qualified business venture:
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new text begin (i) one-third of the investment made; or
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new text begin (ii) $100,000; or
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new text begin (2) $500,000.
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new text begin Subd. 3. new text end

new text begin Application; provisional certification of qualified business ventures. new text end

new text begin (a)
A qualified business venture must apply to the commissioner for provisional certification
to receive grants under this section. The application must be in the form, contain
the information, and be made under the procedures specified by the commissioner,
accompanied by an application fee of $250. Fees are appropriated to the commissioner for
personnel and administrative expenses related to administering the program.
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new text begin (b) The commissioner shall provide a provisional certification to each qualified
business venture, upon a showing by the applicant that it meets the requirements of
subdivision 1, paragraph (d), and that it intends to seek and obtain qualified private
investments within the following 12-month period. The provisional certification must
state the maximum dollar amount of the grant to which the business would be entitled
based upon the business's application, but not to exceed the maximum grant permitted
under subdivision 2.
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new text begin (c) A provisional certification expires 12 months after it is issued, unless the
commissioner grants an extension of up to 90 days based on a showing that the business
intends to close on financing qualifying for a grant under this section during that period.
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new text begin (d) The commissioner shall maintain and regularly update a list, posted on the
department's Web site, itemizing the qualified business ventures with provisional
certifications, the provisional dollar amounts certified for each business, and the remaining
available funding for grants for each fiscal year under this section. The commissioner may
post other information on the funding availability and pending grant awards that the
commissioner determines to be useful to apprise the public of the availability of grants. A
qualified business venture may use its provisional certification and the information on the
availability of funding in soliciting qualified private investments.
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new text begin Subd. 4. new text end

new text begin Grant awards. new text end

new text begin (a) Upon verification, provided in the form and following
the procedures specified by the commissioner, that the qualified business venture has
received a qualified private investment of $100,000 or more, the commissioner shall
award an angel investment grant to the qualified business venture up to the amount of
its provisional certification to the extent that funding is available under subdivision 6
for the fiscal year.
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new text begin (b) If insufficient funding is available for the fiscal year, award of the grant is
deferred until funding becomes available in the following fiscal year or a subsequent fiscal
year. Each qualified business has priority for funding based on the date on which the grant
was approved following verification by the commissioner of its entitlement. If two grants
were approved on the same day, funding must be allocated based on a secondary priority
of the date of issuance of the provisional certification of the business.
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new text begin Subd. 5. new text end

new text begin Funding; appropriation. new text end

new text begin (a) For purposes of paying the grants authorized
by this section, the following amounts are appropriated to the commissioner from the
general fund:
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new text begin (1) $11,000,000 for fiscal year 2011;
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new text begin (2) $14,000,000 for fiscal year 2012; and
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new text begin (3) $15,000,000 for fiscal year 2013.
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new text begin (b) Notwithstanding the provisions of section 16A.28, the appropriations under this
subdivision are available until expended, except any amounts remaining unexpended
on October 15, 2013, cancel at that time.
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new text begin Subd. 6. new text end

new text begin Repayment obligation. new text end

new text begin (a) A qualified business venture must repay the
amount of the grant received under this section during the current year and four preceding
years if it:
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new text begin (1) no longer has its headquarters in Minnesota; or
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new text begin (2) no longer employs at least 51 percent of its employees in Minnesota or no longer
pays or incurs 51 percent of its total payrolls in Minnesota.
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new text begin (b) A qualified business that ceases business operations is not subject to the
repayment obligation in this subdivision.
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new text begin Subd. 7. new text end

new text begin Data availability. new text end

new text begin (a) Notwithstanding the provisions of chapter 13, data
collected by the commissioner in awarding grants under this section is available to the
public to the same extent and must be treated by the commissioner in the same manner
as return information under chapter 270B.
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new text begin (b) Notwithstanding paragraph (a), information related to provisional certification
of a qualified business venture is public, including the name, address, and amount
of the provisional grant certification for the business, as well as the information the
commissioner posts on the department's Web site under subdivision 3, paragraph (d).
new text end

new text begin Subd. 8. new text end

new text begin Report. new text end

new text begin By February 1 of each year, the commissioner must report to the
committees of the legislature with jurisdiction over economic development issues, in
compliance with sections 3.195 and 3.197, on the number and amount of grants awarded
under this section, the number of employees, payroll, and other relevant activities of
grant recipients in the aggregate, and the geographic distribution of businesses receiving
grants. These reports must be made in a manner that preserves the proprietary and trade
secret information of the grant recipients, but provides sufficient information to permit the
legislature to evaluate the public costs and benefits of the grant program. Upon request
and upon entering appropriate agreements to preserve the nonpublic nature of any of the
information, more detailed information must be made available to researchers affiliated
with the University of Minnesota or other similar higher education institutions seeking to
evaluate the grant program.
new text end

new text begin Subd. 9. new text end

new text begin Rulemaking. new text end

new text begin The commissioner's actions in establishing procedures and
requirements and in making determinations and certifications to administer this section are
not a rule for purposes of chapter 14, are not subject to the Administrative Procedure Act
contained in chapter 14, and are not subject to section 14.386.
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new text begin Subd. 10. new text end

new text begin Expiration. new text end

new text begin The authority to make grants under this section expires on
June 30, 2013, but grants made prior to that date may be paid through October 15, 2013.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2010, and only applies
to investments made after the qualified business venture has been certified by the
commissioner of employment and economic development.
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Sec. 2.

Minnesota Statutes 2008, section 290.191, subdivision 2, is amended to read:

Subd. 2.

Apportionment formula of general application.

(a) Except for those
trades or businesses required to use a different formula under subdivision 3 or section
290.36, and for those trades or businesses that receive permission to use some other
method under section 290.20 or under subdivision 4, a trade or business required to
apportion its net income must apportion its income to this state on the basis of the
percentage obtained by taking the sum of:

(1) the percent for the sales factor under paragraph (b) of the percentage which
the sales made within this state in connection with the trade or business during the tax
period are of the total sales wherever made in connection with the trade or business during
the tax period;

(2) the percent for the property factor under paragraph (b) of the percentage which
the total tangible property used by the taxpayer in this state in connection with the trade or
business during the tax period is of the total tangible property, wherever located, used by
the taxpayer in connection with the trade or business during the tax period; and

(3) the percent for the payroll factor under paragraph (b) of the percentage which
the taxpayer's total payrolls paid or incurred in this state or paid in respect to labor
performed in this state in connection with the trade or business during the tax period are
of the taxpayer's total payrolls paid or incurred in connection with the trade or business
during the tax period.

(b) For purposes of paragraph (a) and subdivision 3, the following percentages apply
for the taxable years specified:

Taxable years beginning during calendar year			Sales factor percent			Property factor percent		Payroll factor percent
2007			78			11		11
2008			81			9.5		9.5
2009 new text begin through 2011 new text end			84			8		8
deleted text begin 2010 deleted text end			deleted text begin 87 deleted text end			deleted text begin 6.5 deleted text end		deleted text begin 6.5 deleted text end
deleted text begin 2011 deleted text end			deleted text begin 90 deleted text end			deleted text begin 5 deleted text end		deleted text begin 5 deleted text end
2012			deleted text begin 93 deleted text end new text begin 87 new text end			deleted text begin 3.5 deleted text end new text begin 6.5 new text end		deleted text begin 3.5 deleted text end new text begin 6.5 new text end
2013			96			2		2
2014 and later calendar years			100			0		0

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2009.
new text end