SF 764

1st Engrossment - 89th Legislature (2015 - 2016) Posted on 03/17/2015 02:50pm

A bill for an act
relating to economic development; creating an Office of Workforce Housing;
creating a workforce housing grant program; creating tax credits for workforce
housing; appropriating money for grants for workforce housing; requiring
reports; amending Minnesota Statutes 2014, section 290.06, by adding a
subdivision; 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.549] OFFICE OF WORKFORCE HOUSING.
new text end

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 in this subdivision.
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new text begin (b) "City" means any statutory or home rule charter city.
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new text begin (c) "Consolidated population center" means a census block with a population density
over 200 persons per square mile according to the most recent United States census data
available, or an eligible county.
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new text begin (d) "Director" means the director of the Office of Workforce Housing.
new text end

new text begin (e) "Eligible county" means a county that is not a metropolitan county as defined
in section 473.121, subdivision 4, with a population of 7,000 or less, based on the most
recent United States census data available.
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new text begin (f) "Family" means a family member within the meaning of the Internal Revenue
Code, section 267(c)(4).
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new text begin (g) "Fund" means the workforce housing fund created under subdivision 5.
new text end

new text begin (h) "Greater Minnesota" means the area of Minnesota located outside the
metropolitan area as defined in section 473.121, subdivision 2.
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new text begin (i) "Market rate residential rental properties" means properties that are rented at
market value and excludes: (i) properties constructed with financial assistance requiring
the property to be occupied by residents that meet income limits under federal or state
law of initial occupancy; and (ii) properties constructed with federal, state, or local flood
recovery assistance, regardless of whether that assistance imposed income limits as a
condition of receiving assistance.
new text end

new text begin (j) "Nonstate funding" means funding that is not part of a state-funded grant
program, including any funds from the workforce housing fund created under this section.
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new text begin (k) "Office" means the Office of Workforce Housing.
new text end

new text begin (l) "Officer" means a person elected or appointed by the board of directors to manage
the daily operations of a business.
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new text begin (m) "Principal" means a person having authority to act on behalf of a business.
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new text begin (n) "Qualified investment" means a cash investment or the fair market value
equivalent for common stock, a partnership or membership interest, preferred stock,
debt with mandatory conversion to equity, land, or an equivalent ownership interest as
determined by the director that is made in a qualified workforce housing project.
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new text begin (o) "Qualified local investor" means an investor who has been certified by the
director under subdivision 7.
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new text begin (p) "Qualified project investor" means an investor who has been certified by the
director under subdivision 8.
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new text begin (q) "Qualifying workforce housing project" means a project:
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new text begin (1) for market rate residential rental properties with a minimum of three dwelling
units;
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new text begin (2) with an average cost per unit of no more than $250,000;
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new text begin (3) located in a greater Minnesota city or in an eligible county where the median
number of full time private sector jobs was 500 or more for the last five years;
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new text begin (4) located in a city or eligible county with a rental vacancy rate lower than three
percent for more than two years based on the most recently available data in a city or
county housing analysis;
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new text begin (5) have more than 50 percent nonstate funding proposed to fund the project;
new text end

new text begin (6) have a jobs-to-population ratio of greater than 40 percent as measured by the
median number of jobs in a city or eligible county for the last five years compared with the
median population of the city or county for the last five years;
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new text begin (7) located in a consolidated population center; and new text end

new text begin
(8) that has been designated by the director as a qualifying workforce housing project.
new text end

new text begin Subd. 2. new text end

new text begin Office of Workforce Housing; purpose. new text end

new text begin (a) The Office of Workforce
Housing is established within the Department of Employment and Economic
Development. The director must be appointed by the governor and serves in the
unclassified service. The director must be qualified by experience and training in housing
development and community development. The office may employ staff necessary to
carry out the office's duties under subdivision 4.
new text end

new text begin (b) The purpose of the office is to encourage, foster, develop, and improve workforce
housing within the state in order to promote job creation and to provide a high quality
workforce for Minnesota businesses by increasing the supply of housing in greater
Minnesota.
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new text begin Subd. 3. new text end

new text begin Director and staff. new text end

new text begin The office consists of a director of the Office of
Workforce Housing and any other staff necessary to carry out the office's duties under
subdivision 4.
new text end

new text begin Subd. 4. new text end

new text begin Duties. new text end

new text begin The office has the power and duty to:
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new text begin (1) administer the workforce housing fund for the state of Minnesota;
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new text begin (2) coordinate with state, regional, local, and private entities to develop workforce
housing;
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new text begin (3) provide consultation services to local units of government or other project
sponsors in connection with the financing, planning, acquisition, improvement,
construction, or development of any workforce housing project;
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new text begin (4) consult with the Housing Finance Agency and community housing organizations
to organize workforce housing projects and programs;
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new text begin (5) serve as an information clearinghouse for other programs that provide assistance
and funding to developers or others seeking to build workforce housing;
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new text begin (6) provide grants and certify investor tax credits for qualifying workforce housing
projects;
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new text begin (7) provide an annual report as required by subdivision 12;
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new text begin (8) set and collect reasonable application fees for grant programs and tax credit
applications available under this section; and
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new text begin (9) perform any other activities consistent with the office's purpose.
new text end

new text begin Subd. 5. new text end

new text begin Workforce housing fund. new text end

new text begin (a) The workforce housing fund is created as a
separate account in the special revenue fund in the state treasury. Money in the account
may be used for the purpose of construction, acquisition, rehabilitation, demolition,
removal, and development, including the cost of infrastructure and materials necessary for
the creation and production of workforce housing in greater Minnesota.
new text end

new text begin (b) The fund shall consist of:
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new text begin (1) state appropriations;
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new text begin (2) contributions made by companies, individuals, and others including local units of
government, nonprofits, and tribes;
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new text begin (3) investment earnings on money in the fund; and
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new text begin (4) application fees paid pursuant to programs in this section.
new text end

new text begin (c) Money in the fund is appropriated to the director of workforce housing to carry
out the purposes of this section.
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new text begin (d) Contributions made to the fund are not refundable.
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new text begin Subd. 6. new text end

new text begin Grants; project eligibility and preferences. new text end

new text begin (a) The director shall award
grants through a competitive grants program for the purposes defined in this section
using the eligibility and preferences provided in this subdivision. If a project meets the
qualifications in paragraph (b), the director may certify the project as a qualifying workforce
housing project based on the eligibility of the program and the preference in paragraph (c).
The total grant to a qualified workforce housing project must not exceed $1,000,000.
new text end

new text begin (b) To be eligible for a grant, the project must:
new text end

new text begin (1) be for market rate residential rental properties with a minimum of three dwelling
units;
new text end

new text begin (2) have an average cost per unit of no more than $250,000;
new text end

new text begin (3) be located in a greater Minnesota city or eligible county where the median
number of full time private sector jobs was 500 or more for the last five years;
new text end

new text begin (4) be located in a city or eligible county with a rental vacancy rate lower than three
percent for more than two years based on the most recently available data in a city or
county housing analysis;
new text end

new text begin (5) have more than 50 percent nonstate funding proposed to fund the project;
new text end

new text begin (6) have a jobs-to-population ratio of greater than 40 percent as measured by the
median number of jobs in a city or eligible county for the last five years compared with the
median population of the city or county for the last five years; and
new text end

new text begin (7) be located in a consolidated population center.
new text end

new text begin (c) Preferences for grants from the workforce housing fund must be given to projects
that have the largest total private investment in a project per total project cost.
new text end

new text begin Subd. 7. new text end

new text begin Qualified local investor tax credit. new text end

new text begin (a) A qualified local investor is
allowed a tax credit in an amount equal to 80 percent of the qualified investment in a
qualified workforce housing project but no more than $1,000,000 in the taxable year to
reduce the taxpayer's income or corporate franchise tax imposed under chapter 290 in the
year that the qualified workforce housing project has housing units that are certified for
occupancy by the Department of Labor and Industry or a city inspector. The director must
not allocate more than $10,000,000 in credits to qualified local investors for a taxable year,
except that the director may use available tax credit allocations from subdivision 8 for
qualified local investor tax credits under this subdivision when necessary to achieve the
goals of the Office of Workforce Housing. The director must not exceed a total allocation
of tax credits for both programs in an amount greater than $30,000,000 annually.
new text end

new text begin (b) For the purposes of this section, a qualified local investor is an investor that is:
new text end

new text begin (1) an individual or a business with less than 50 full-time equivalent employees;
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new text begin (2) located in greater Minnesota; and
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new text begin (3) resides or has an office or production facility within 120 miles of a qualified
workforce housing project.
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new text begin (c) The director shall not allocate a credit to a qualified local investor if the investor
is an officer or principal of a business or a family member of an officer or principal of
a business, or sole proprietorship that is competing for a grant through the workforce
housing fund in the year the tax credit would be awarded. A taxpayer may only be
awarded one tax credit available in this section, however a taxpayer may apply for a credit
under both this subdivision and subdivision 8.
new text end

new text begin (d) Applications for tax credits for a taxable year must be made available by the
office by November 1 of the prior year. The office must make every effort to provide
applications and relevant data to applicants in a simple, concise manner using plain
language. Tax credits must be allocated to qualified local investors in the order that the
tax credit request applications are filed with the office. The director must approve or
reject tax credit request applications within 15 days of receiving the application. The
investment specified in the application must be made within 60 days of the allocation of
the credit. If the investment is not made within 60 days, the credit allocation is canceled.
A qualified local investor that fails to invest as specified in the application must notify
the commissioner immediately and no later than five business days after the expiration
of the 60-day investment period. The director may require an application fee for the
applications submitted under this subdivision.
new text end

new text begin (e) All tax credit request applications filed with the department on the same day must
be treated as having been filed contemporaneously. If two or more qualified local investors
file tax credit request applications on the same day, and the aggregate amount of credit
allocation claims exceeds the aggregate limit of credits under this section or the lesser
amount of credits that remain unallocated on that day, then the credits must be allocated
among the qualified local investors who filed on that day on a pro rata basis with respect to
the amounts claimed. The pro rata allocation for any one qualified local investor is the
product obtained by multiplying a fraction, the numerator of which is the amount of the
credit allocation claim filed on behalf of a qualified local investor and the denominator of
which is the total of all credit allocation claims filed on behalf of all applicants on that day,
by the amount of credits that remain unallocated on that day for the taxable year.
new text end

new text begin (f) The director must notify the commissioner of revenue of credit certificates issued
under this subdivision.
new text end

new text begin Subd. 8. new text end

new text begin Qualified project investor tax credits. new text end

new text begin (a) A taxpayer who makes a
qualified investment in a qualified workforce housing project is allowed a tax credit
for 50 percent of the amount of the qualified investment, up to $1,000,000, to reduce
the taxpayer's income or corporate franchise tax under chapter 290 in the year that the
qualified workforce housing project has housing units that are certified for occupancy by
the Department of Labor and Industry or a city inspector. The director must not allocate
more than $20,000,000 in credits to qualified project investors for a taxable year, except
that the director may use available tax credit allocations from subdivision 7 for the
qualified project investor tax credits under this subdivision when necessary to achieve the
goals of the Office of Workforce Housing. The director must not exceed a total allocation
of tax credits for both programs in an amount greater than $30,000,000 annually.
new text end

new text begin (b) The director shall not allocate a credit if the investor is an officer or principal of a
business or sole proprietorship, or a family member of an officer or principal of a business
or sole proprietorship, that is competing for a grant through the workforce housing fund in
the year the tax credit would be awarded.
new text end

new text begin (c) Applications for tax credits for a taxable year must be made available by the
Office of Workforce Housing by November 1 of the prior year. The office must make
every effort to provide applications and relevant data to applicants in a simple, concise
manner using plain language. Tax credits must be allocated to qualified project investors
in the order that the tax credit request applications are filed with the office. The director
must approve or reject tax credit request applications within 15 days of receiving the
application. The investment specified in the application must be made within 60 days
of the allocation of the credit. If the investment is not made within 60 days, the credit
allocation is canceled. A qualified project investor who fails to invest as specified in the
application must notify the commissioner immediately and no later than five business
days after the expiration of the 60-day investment period. The director may require an
application fee for the applications submitted under this subdivision. A taxpayer may only
be awarded one tax credit available in this section, however a taxpayer may apply for a
credit under both subdivision 7 and this subdivision.
new text end

new text begin (d) All tax credit request applications filed with the department on the same day
must be treated as having been filed contemporaneously. If two or more qualified project
investors file tax credit request applications on the same day, and the aggregate amount of
credit allocation claims exceeds the aggregate limit of credits under this section or the lesser
amount of credits that remain unallocated on that day, then the credits must be allocated
among the qualified project investors who filed on that day on a pro rata basis with respect
to the amounts claimed. The pro rata allocation for any one qualified project investor is the
product obtained by multiplying a fraction, the numerator of which is the amount of the
credit allocation claim filed on behalf of a qualified project investor and the denominator
of which is the total of all credit allocation claims filed on behalf of all applicants on that
day, by the amount of credits that remain unallocated on that day for the taxable year.
new text end

new text begin (e) The director must notify the commissioner of revenue of credit certificates issued
under this subdivision.
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new text begin Subd. 9. new text end

new text begin Transfer and revocation of credits. new text end

new text begin (a) A tax credit under this section
is not transferable to any other taxpayer.
new text end

new text begin (b) If the director discovers that a qualified local investor or qualified project investor
did not meet the eligibility requirements for the tax credits under this section after the
credits have been allocated, the director may determine that credit allocated is revoked
and must be repaid by the investor. The director must notify the commissioner of revenue
of every credit revoked and subject to full or partial repayment under this section.
new text end

new text begin Subd. 10. new text end

new text begin Reporting. new text end

new text begin Beginning in 2016, the director must annually report by
March 15 to the chairs and ranking minority members of the legislative committees
with jurisdiction over taxes and economic development in the senate and house of
representatives, in compliance with sections 3.195 and 3.197, on tax credits issued
under this section and the workforce housing projects funded by the workforce housing
development fund. The report must include:
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new text begin (1) information about the availability of workforce housing in greater Minnesota;
new text end

new text begin (2) information from employers and communities in greater Minnesota about
whether or not workforce housing needs are being met;
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new text begin (3) which projects have been funded by the workforce housing fund and whether
previously funded projects have created economic growth;
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new text begin (4) a summary of the Office of Workforce Housing activities to coordinate workforce
housing for the state;
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new text begin (5) any suggested legislation to accelerate construction of workforce housing;
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new text begin (6) the number and amount of tax credits issued and the identity of the recipients;
new text end

new text begin (7) the amount of investments made to the fund and whether or not those funds
were for a preferred project;
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new text begin (8) the number and amount of tax credits revoked under subdivision 10; and
new text end

new text begin (9) any other relevant information needed to evaluate the effect of the grants and tax
credits available through the Office of Workforce Housing.
new text end

new text begin Subd. 11. new text end

new text begin Appropriations. new text end

new text begin Amounts in the workforce housing fund are appropriated
to the commissioner of employment and economic development for costs associated with
the administration of applications and for the personnel and administrative expenses related
to administering the workforce housing grant program and investor tax credit programs.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin The tax credits in this section are effective for taxable years
beginning after December 31, 2015.
new text end

Sec. 2.

Minnesota Statutes 2014, section 290.06, is amended by adding a subdivision
to read:

new text begin Subd. 37. new text end

new text begin Workforce housing tax credit. new text end

new text begin (a) A taxpayer is allowed a credit against
the tax under subdivision 1 or 2c equal to the amount certified by the director of workforce
housing under section 116J.549, to the taxpayer for the taxable year.
new text end

new text begin (b) Credits allowed to a partnership, limited liability company taxed as a partnership,
corporation, or multiple owners of property are passed through to the partners, members,
shareholders, or owners, respectively, pro rata to each partner, member, shareholder, or
owner based on that person's share of the entity's income for the taxable year.
new text end

new text begin (c)(1) The credit is limited to the liability for tax. "Liability for tax" for purposes of
this subdivision means the tax imposed under subdivision 1 or 2c, as applicable, for the
taxable year reduced by the sum of the nonrefundable credits allowed under this chapter.
new text end

new text begin (2) For a corporation that is a partner in a partnership, the credit allowed for the
taxable year is limited to the lesser of the amount determined under clause (1) for the
taxable year or an amount, separately computed with respect to the corporation's interest
in the trade, business, or entity, equal to the amount of tax attributable to that portion of
taxable income that is allocable or apportionable to the corporation's interest in the trade,
business, or entity.
new text end

new text begin (3) If the amount of the credit determined under this subdivision for any taxable year
exceeds the limitation under clause (1), the excess is a credit carryover to each of the ten
succeeding taxable years. The entire amount of the excess unused credit for the taxable
year is carried first to the earliest of the taxable years to which the credit may be carried
and then to each successive year to which the credit may be carried. The amount of the
unused credit that may be added under this clause is limited to the taxpayer's liability
for tax, less the credit for the taxable year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin The tax credits in this section are effective for taxable years
beginning after December 31, 2015.
new text end

Sec. 3. new text begin APPROPRIATION; OFFICE OF WORKFORCE HOUSING.
new text end

new text begin $20,000,000 in fiscal year 2016 and $20,000,000 in fiscal year 2017 are appropriated
from the general fund to the commissioner of employment and economic development for
deposit in the workforce housing fund account for grants under Minnesota Statutes, section
116J.549, subdivision 6. Up to five percent of the appropriation in each year is available to
the commissioner for the administration of Minnesota Statutes, section 116J.549.
new text end