HF 1235

as introduced - 90th Legislature (2017 - 2018) Posted on 03/08/2017 12:42pm

A bill for an act
relating to taxation; income; creating the investment in rural jobs tax credit;
amending Minnesota Statutes 2016, sections 290.06, by adding a subdivision;
297I.20, 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.8739] INVESTMENT IN RURAL JOBS TAX CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Title. new text end

new text begin This section may be cited as the "Minnesota Rural Jobs Act."
new text end

new text begin Subd. 2. 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.
new text end

new text begin (b) "Affiliate" means an entity that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with another entity.
For the purposes of this paragraph, an entity is controlled by another entity if the controlling
person holds, directly or indirectly, the majority voting or ownership interest in the controlled
person or has control over the day-to-day operations of the controlled person by contract
or by law.
new text end

new text begin (c) "Closing date" means the date on which a rural growth fund has collected all of the
amounts specified in subdivision 3, paragraph (g).
new text end

new text begin (d) "Commissioner" means the commissioner of employment and economic development.
new text end

new text begin (e) "Credit-eligible capital contribution" means an investment of cash in a rural growth
fund by a person subject to tax under chapter 290 or 297I that:
new text end

new text begin (1) equals the amount specified on a tax credit certificate issued by the commissioner
under subdivision 3, paragraph (f); and
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new text begin (2) is either (i) an equity interest in a rural growth fund, or (ii) a purchase, at par value
or premium, of a debt instrument issued by a rural growth fund that has a maturity date at
least five years from the closing date.
new text end

new text begin (f) "Investment authority" means the amount stated on the notice issued under subdivision
3, paragraph (f), certifying the rural growth fund.
new text end

new text begin (g) "Principal business operations" means the place or places where at least 60 percent
of a business's employees work or where employees that are paid at least 60 percent of a
business's payroll work. An out-of-state business that has agreed to relocate employees
using the proceeds of a rural growth investment to establish its principal business operations
in a rural area in Minnesota shall be deemed to have its principal business operations in this
new location provided it satisfies this definition within 180 days after receiving the rural
growth investment, unless the department agrees to a later date.
new text end

new text begin (h) "Rural area" means an area in Minnesota:
new text end

new text begin (1) excluding (i) the metropolitan area, as defined in section 473.121, subdivision 2, (ii)
any area located in a city or town that has a population of more than 50,000 according to
the latest decennial census of the United States, and (iii) any area in the urbanized area
contiguous and adjacent to a city or town that has a population of more than 50,000
inhabitants; or
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new text begin (2) determined to be rural in character by the undersecretary of agriculture for rural
development within the United States Department of Agriculture.
new text end

new text begin (i) "Rural business concern" means a business that, at the time of the initial investment
in the company by a rural growth fund:
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new text begin (1) has fewer than 250 employees and not more than $15,000,000 in net income for the
preceding taxable year;
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new text begin (2) has its principal business operations located in one or more rural areas; and
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new text begin (3) is engaged in industries related to manufacturing, plant sciences, services, or
technology or, if not engaged in such industries, the commissioner makes a determination
that the investment will be highly beneficial to the economic growth of the state.
new text end

new text begin (j) "Rural growth fund" means an entity certified by the commissioner under subdivision
3, paragraph (f), and whose investment authority is comprised of at least 60 percent
credit-eligible capital contributions.
new text end

new text begin (k) "Rural growth investment" means any capital or equity investment in a rural business
concern or any loan to a rural business concern with a stated maturity at least one year after
the date of issuance.
new text end

new text begin Subd. 3. new text end

new text begin Application, certification, and allocation. new text end

new text begin (a) Businesses may apply to the
commissioner for certification as a rural growth fund. The application must be in the form
and be made under the procedures specified by the commissioner, accompanied by an
application fee of $....... Application fees are deposited in the investment in rural jobs tax
credit administration account which is established in the special revenue fund. The application
for certification must be made available on the commissioner's Web site by August 1, 2017.
new text end

new text begin (b) Within 30 days of receiving an application for certification under this subdivision,
the commissioner must either certify the applicant as satisfying the conditions required of
a rural growth fund, request additional information from the business, or reject the application
for certification. If the commissioner requests additional information from the applicant,
the commissioner must either certify the applicant or reject the application within 30 days
of receiving the additional information. If the commissioner neither certifies the business
nor rejects the application within 30 days of receiving the original application or within 30
days of receiving the additional information requested, whichever is later, then the application
is deemed rejected, and the commissioner must refund the $150 application fee. A business
that applies for certification and is rejected may reapply.
new text end

new text begin (c) A business must include on its application:
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new text begin (1) the total investment authority sought by the applicant under the business plan;
new text end

new text begin (2) documents and other evidence sufficient to prove, to the satisfaction of the
commissioner, that the applicant or an affiliate of the applicant is: (i) licensed as a rural
business investment company under United States Code, title 7, section 2009cc, or as a
small business investment company under United States Code, title 15, section 681, and
(ii) that as of the date the application is submitted, the applicant or affiliates of the applicant
have invested at least $100,000,000 in nonpublic companies located in rural areas;
new text end

new text begin (3) an estimate of the number of jobs that will be created or retained in this state as a
result of the applicant's rural growth investments;
new text end

new text begin (4) a business plan that includes a revenue impact assessment projecting state and local
tax revenue to be generated by the applicant's proposed rural growth investments prepared
by a nationally recognized third-party independent economic forecasting firm using a
dynamic economic forecasting model that analyzes the applicant's business plan over the
ten years following the date the application is submitted to the commissioner; and
new text end

new text begin (5) a signed affidavit from each investor stating the amount of credit-eligible capital
contributions each taxpayer commits to make.
new text end

new text begin (d) The commissioner must deny an application submitted under this section if any of
the following are true:
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new text begin (1) the application is incomplete or the application fee is not paid in full;
new text end

new text begin (2) the applicant does not satisfy all the criteria described in paragraph (c);
new text end

new text begin (3) the revenue impact assessment submitted under paragraph (c), clause (4), does not
demonstrate that the applicant's business plan will result in a positive economic impact on
this state over a ten-year period that exceeds the cumulative amount of tax credits that would
be issued to the applicant's investors if the application were approved; or
new text end

new text begin (4) the credit-eligible capital contributions described in affidavits submitted under
paragraph (c), clause (5), do not equal at least 60 percent of the total amount of investment
authority sought under the applicant's business plan.
new text end

new text begin (e) The commissioner must not approve more than $100,000,000 in investment authority
and not more than $60,000,000 in credit-eligible capital contributions under this section. If
requests for investment authority exceed this limitation, the commissioner shall proportionally
reduce the investment authority and the credit-eligible capital contributions for each approved
application as necessary to avoid exceeding the limit.
new text end

new text begin (f) The commissioner shall not deny a rural growth fund application or reduce the
requested investment authority for reasons other than those described in this subdivision.
Upon approval of an application, the commissioner must:
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new text begin (1) provide a written approval and certification to the applicant as a rural growth fund;
new text end

new text begin (2) specify the amount of the applicant's investment authority; and
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new text begin (3) provide a tax credit certificate to each investor whose affidavit was included in the
application specifying the amount of the investor's credit-eligible capital contribution.
new text end

new text begin (g) After receiving the approval issued under this subdivision, a rural growth fund must,
within 60 days:
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new text begin (1) collect the credit-eligible capital contributions from each taxpayer issued a tax credit
certificate under paragraph (f);
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new text begin (2) collect one or more investments of cash that, when added to the contributions collected
under clause (1), equal the rural growth fund's investment authority; and
new text end

new text begin (3) send to the commissioner documentation sufficient to prove that the amounts described
in clauses (1) and (2) have been collected.
new text end

new text begin (h) At least ten percent of a rural growth fund's investment authority must be comprised
of equity investments contributed by affiliates of the rural growth fund, including employees,
officers, and directors of such affiliates.
new text end

new text begin (i) If the rural growth fund fails to fully comply with paragraphs (g) and (h), the rural
growth fund's approval lapses and the corresponding investment authority and credit-eligible
capital contributions under this subdivision will not count toward the limits on the program
size total investment authority and credit-eligible capital contributions under this section.
The commissioner shall first award lapsed investment authority pro rata to each rural growth
fund that was awarded less than the requested investment authority which a rural growth
fund may allocate to its investors in its discretion. Any remaining investment authority may
be awarded by the commissioner to new applicants.
new text end

new text begin Subd. 4. new text end

new text begin Credit allowed. new text end

new text begin A tax credit is allowed for taxpayers who make a credit-eligible
capital contribution to a rural growth fund and are issued a tax credit certificate under
subdivision 3. The credit may be claimed against the tax imposed under chapter 290 or
297I. The credit may not be sold, transferred, or allocated to any other entity other than an
affiliate subject to the tax imposed under chapter 290 or 297I.
new text end

new text begin Subd. 5. new text end

new text begin Revocation; exit from program. new text end

new text begin (a) The commissioner shall revoke a tax
credit certificate issued under this section if any of the following occur with respect to a
rural growth fund before it exits the program under paragraph (e):
new text end

new text begin (1) the rural growth fund does not invest 100 percent of its investment authority in rural
growth investments in this state within two years of the closing date with at least 25 percent
of its investment authority initially invested in rural business concerns engaged in
manufacturing;
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new text begin (2) the rural growth fund fails to maintain rural growth investments equal to 100 percent
of its investment authority until the sixth anniversary of the closing date;
new text end

new text begin (3) the rural growth fund makes a distribution or payment that results in the rural growth
fund having less than 100 percent of its investment authority invested in rural growth
investments in this state or available for investment in rural growth investments and held
in cash and other marketable securities;
new text end

new text begin (4) the rural growth fund invests more than 20 percent of its investment authority in the
same rural business concern, including amounts invested in affiliates of the rural business
concern, but excluding rural growth investments made with repaid or redeemed rural growth
investments, or interest or profits realized from repaid or redeemed rural growth investments,
from the rural business concern or an affiliate of the rural business concern; or
new text end

new text begin (5) the rural growth fund makes a rural growth investment in a rural business concern
that directly, or indirectly through an affiliate, owns, has the right to acquire an ownership
interest in, makes a loan to, or makes an investment in the rural growth fund, an affiliate of
the rural growth fund, or an investor in the rural growth fund, not including investments in
publicly traded securities by a rural business concern or an owner or affiliate of such concern.
new text end

new text begin (b) For purposes of this subdivision, a rural growth fund will not be considered an affiliate
of a rural business concern solely as a result of its rural growth investment, and an investment
is maintained even if the investment is sold or repaid so long as the rural growth fund
reinvests an amount equal to the capital returned or recovered by the fund from the original
investment, exclusive of any profits realized, in other rural growth investments in this state
within 12 months of the receipt of such capital. Amounts received periodically by a rural
growth fund shall be treated as continually invested in rural growth investments if the
amounts are reinvested in one or more rural growth investments by the end of the following
calendar year. A rural growth fund is not required to reinvest capital returned from rural
growth investments after the fifth anniversary of the closing date, and such rural growth
investments shall be considered held continuously by the rural growth fund through the
sixth anniversary of the closing date.
new text end

new text begin (c) Before revoking one or more tax credit certificates under this subdivision, the
commissioner shall notify the rural growth fund of the reasons for the revocation. The rural
growth fund shall have 90 days from the date the notice was issued by the commissioner
to correct any violation outlined in the notice to the satisfaction of the commissioner and
avoid revocation of the tax credit certificate.
new text end

new text begin (d) If the commissioner revokes tax credit certificates under this section, the associated
investment authority and credit-eligible capital contributions shall not count toward the
limit on total investment authority and credit-eligible capital contributions described by
subdivision 3, paragraph (e). The commissioner shall first award reverted authority pro rata
to each rural growth fund that was awarded less than the requested investment authority
under subdivision 3, paragraph (e). The commissioner may award any remaining investment
authority to new applicants.
new text end

new text begin (e) On or after the sixth anniversary of the closing date, a rural growth fund may apply
to the commissioner to exit the program and no longer be subject to the provisions of this
section. The commissioner must respond to an application to exit within 30 days of receiving
the application. In evaluating the application, the fact that no tax credit certificates have
been revoked, and that the rural growth fund has not received a notice of revocation that
has not been cured, is sufficient evidence to prove that the rural growth fund is eligible for
exit. The commissioner shall not unreasonably deny an application submitted under this
subdivision. If the application is denied, the notice shall include the reasons for the
determination.
new text end

new text begin (f) The commissioner shall not revoke a tax credit certificate after the rural growth fund's
exit from the program.
new text end

new text begin Subd. 6. new text end

new text begin Commissioner opinion on investment. new text end

new text begin Before making a rural growth
investment, a rural growth fund may request from the commissioner a written opinion as
to whether the business in which it proposes to invest is a rural business concern. The
commissioner, not later than the 15th business day after the date of receipt of the request,
shall notify the rural growth fund of its determination. If the commissioner fails to notify
the rural growth fund by the 15th business day of its determination, the business in which
the rural growth fund proposes to invest shall be considered a rural business concern.
new text end

new text begin Subd. 7. new text end

new text begin Reports to commissioner. new text end

new text begin (a) Each rural growth fund shall submit a report to
the commissioner on or before the fifth business day after the second anniversary of the
closing date. The report shall provide documentation regarding the rural growth fund's rural
growth investments and must include:
new text end

new text begin (1) a bank statement evidencing each rural growth investment;
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new text begin (2) the name, location, and industry of each business receiving a rural growth investment,
including either the opinion letter set forth in subdivision 6, or evidence that the business
qualified as a rural business concern at the time the investment was made;
new text end

new text begin (3) the number of employment positions created or retained as a result of the rural growth
fund's rural growth investments as of the last day of the preceding calendar year; and
new text end

new text begin (4) any other information required by the commissioner.
new text end

new text begin (b) On or before the last day of February of each year following the year in which the
report required under paragraph (a) is submitted, the rural growth fund shall submit an
annual report to the commissioner including the following:
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new text begin (1) the number of employment positions created or retained as a result of the rural growth
fund's rural growth investments as of the last day of the preceding calendar year;
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new text begin (2) the average annual salary of the positions described in paragraph (a), clause (3); and
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new text begin (3) any other information required by the commissioner.
new text end

new text begin Subd. 8. new text end

new text begin Appropriations. new text end

new text begin Amounts in the investment in rural jobs tax credit
administration account in the special revenue fund are appropriated to the commissioner of
employment and economic development for costs associated with certifying applications
and refunding application fees as provided in this section, and for personnel and
administrative expenses related to administering the investment in rural jobs tax credit in
this section.
new text end

new text begin Subd. 9. new text end

new text begin Rulemaking. new text end

new text begin The commissioner shall adopt rules under chapter 14 necessary
to implement this section.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2016, section 290.06, is amended by adding a subdivision to
read:

new text begin Subd. 37. new text end

new text begin Investment in rural jobs tax credit. new text end

new text begin (a) For purposes of this subdivision, the
terms defined in section 116J.8739 have the meanings given in that section.
new text end

new text begin (b) A taxpayer is allowed a credit against the tax imposed by this chapter for
credit-eligible capital contributions to a rural growth fund. The credit equals the amount
indicated on the certificate provided to the taxpayer under section 116J.8739. A taxpayer
may claim up to 25 percent of the credit authorized under this section for each of the taxable
years that includes the third through sixth anniversaries of the closing date, in addition to
credit amounts carried forward under paragraph (c).
new text end

new text begin (c) If the amount of the credit for a taxable year exceeds the taxpayer's liability for tax,
the excess is carried forward to ensuing taxable years until fully used.
new text end

new text begin (d) A taxpayer claiming a credit under this section shall submit a copy of the tax credit
certificate with the taxpayer's return for each taxable year for which the credit is claimed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2017.
new text end

Sec. 3.

Minnesota Statutes 2016, section 297I.20, is amended by adding a subdivision to
read:

new text begin Subd. 4. new text end

new text begin Investment in rural jobs tax credit. new text end

new text begin (a) For purposes of this subdivision, the
terms defined in section 116J.8739 have the meanings given in that section.
new text end

new text begin (b) An insurance company that makes a credit-eligible capital contribution to a rural
growth fund and is issued a tax credit certificate under section 116J.8739 may claim a credit
against the premiums and retaliatory taxes imposed under this chapter equal to the amount
provided under section 116J.8739, subdivision 3. A taxpayer may claim up to 25 percent
of the credit authorized under this section for each of the taxable years that includes the
third through sixth anniversaries of the closing date, in addition to credit amounts carried
forward under paragraph (c).
new text end

new text begin (c) If the amount of the credit for a taxable year exceeds the taxpayer's liability for tax,
the excess is carried forward to ensuing taxable years until fully used.
new text end

new text begin (d) This credit does not affect the calculation of police and fire aid under section 69.021.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies to premium tax returns originally due on or after December 31, 2017.
new text end