HF 445

as introduced - 86th Legislature (2009 - 2010) Posted on 02/09/2010 01:37am

A bill for an act
relating to taxation; corporate franchise tax; allowing a five-year tax exemption
for certain new facilities and expansions; amending Minnesota Statutes 2008,
sections 290.01, subdivision 29; 290.0921, subdivision 3; 290.0922, subdivisions
2, 3; 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.8751] TAX EXEMPTION FOR NEW AND EXPANDING
BUSINESSES.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) As used in the section, the following terms have
the meanings given.
new text end

new text begin (b) "Project" means any revenue-producing enterprise, or any combination of two or
more of these enterprises, if the project is conducted by a qualifying business.
new text end

new text begin (c) "Project percentage" means the following fraction reduced to a percentage for
an approved project:
new text end

new text begin (1) the numerator of the fraction is:
new text end

new text begin (i) the ratio of the taxpayer's property factor under section 290.191 attributable to
the project for the taxable year over the property factor numerator determined under
section 290.191, plus
new text end

new text begin (ii) the ratio of the taxpayer's project payroll factor under paragraph (d) over the
payroll factor numerator determined under section 290.191; and
new text end

new text begin (2) the denominator of the fraction is two.
new text end

new text begin When calculating the project percentage for a business that is part of a unitary
business as defined under section 290.17, subdivision 4, the denominator of the payroll
and property factors is the Minnesota payroll and property of the unitary business as
reported on the combined report under section 290.17, subdivision 4, paragraph (j).
new text end

new text begin (d) "Project payroll factor" is that portion of the payroll factor under section 290.191
attributable to wages or salaries paid to individuals employed as a result of the project.
new text end

new text begin (e) "Qualifying business" means a corporation or other entity subject to tax under
section 290.02 that either:
new text end

new text begin (1) through the employment of knowledge or labor adds value to a product, process,
or service that results in the creation of new wealth; or
new text end

new text begin (2) operates tourism-related businesses and activities, including recreation, historical
and cultural events, guide services, and unique lodging and food services that serve as
destination attractions.
new text end

new text begin (f) "Relocates" means that the trade or business:
new text end

new text begin (1) ceases one or more operations or functions at another location in Minnesota and
begins performing substantially the same operations or functions in connection with the
eligible project; or
new text end

new text begin (2) reduces employment at another location in Minnesota during a period starting
one year before and ending one year after it begins operation of the project and its
employees in the project are engaged in the same line of business as the employees at the
location where it reduced employment; but excludes
new text end

new text begin (3) an expansion by a business that establishes a new facility that does not replace or
supplant an existing operation or employment, in whole or in part.
new text end

new text begin "Trade or business" includes any business entity that is substantially similar in operation
or ownership to the business entity seeking to be a qualified business under this section.
new text end

new text begin (g) "Relocation payroll percentage" is a fraction, the numerator of which is the
project payroll of the business for the taxable year minus the payroll from the relocated
operations in the last full year of operations prior to the relocation, and the denominator of
which is the project payroll of the business for the taxable year. The relocation payroll
percentage of a business that is not a relocating business is 100 percent.
new text end

new text begin Subd. 2. new text end

new text begin Application for tax exemption. new text end

new text begin Upon application by a project operator to
the commissioner, the net income of a project may be exempt from corporate franchise
tax for a period not exceeding five years from commencement of project operations. The
application for the exemption must be reviewed as to the eligibility of the project by
the commissioner who shall determine whether the granting of the exemption is in the
best interest of the people of Minnesota and, if the commissioner so determines, shall
approve the exemption. A qualified business is eligible only if it either is a new business
or is an existing business that is constructing, purchasing or leasing additional facilities
in Minnesota, and is employing ... or more additional employees in Minnesota. The
commissioner shall, after making its determination, enter a business subsidy agreement
with the applicant and after doing so shall certify the findings to the commissioner of
revenue.
new text end

new text begin Subd. 3. new text end

new text begin Notice to competitors. new text end

new text begin The project operator shall provide notice to
competitors in the manner prescribed by the commissioner.
new text end

new text begin Subd. 4. new text end

new text begin Calculation of exemption. new text end

new text begin (a) A qualified business is exempt from
taxation on its income attributable to an eligible project approved by the commissioner.
The exemption applies to the tax under section 290.02, the alternative minimum tax under
section 290.0921, and the minimum fee under section 290.0922, on the portion of its
income attributable to the eligible project. This exemption is determined as follows:
new text end

new text begin (1) for purposes of the tax imposed under section 290.02, by multiplying its
taxable net income by its project percentage and by its relocation payroll percentage and
subtracting the result in determining taxable income;
new text end

new text begin (2) for purposes of the alternative minimum tax under section 290.0921, by
multiplying its alternative minimum taxable income by its project percentage and by
its relocation payroll percentage and reducing alternative minimum taxable income by
this amount; and
new text end

new text begin (3) for purposes of the minimum fee under section 290.0922, by excluding project
property and payroll from the computations of the fee or by exempting the entity under
section 290.0922, subdivision 2, clause (9).
new text end

new text begin (b) No subtraction is allowed under this section in excess of 20 percent of the sum of
the corporation's project payroll and the adjusted basis of the property when the property
is first used in the project by the corporation.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2009, and applies to taxable
years beginning after December 31, 2008.
new text end

Sec. 2.

Minnesota Statutes 2008, section 290.01, subdivision 29, is amended to read:

Subd. 29.

Taxable income.

The term "taxable income" means:

(1) for individuals, estates, and trusts, the same as taxable net income;

(2) for corporations, the taxable net income less

(i) the net operating loss deduction under section 290.095;

(ii) the dividends received deduction under section 290.21, subdivision 4;

(iii) the exemption for operating in a job opportunity building zone under section
469.317;

(iv) the exemption for operating in a biotechnology and health sciences industry
zone under section 469.337; deleted text begin and
deleted text end

(v) the exemption for operating in an international economic development zone
under section 469.326 deleted text begin . deleted text end new text begin ; and
new text end

new text begin (vi) the exemption for projects approved under section 116J.8751.
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, 2008.
new text end

Sec. 3.

Minnesota Statutes 2008, section 290.0921, subdivision 3, is amended to read:

Subd. 3.

Alternative minimum taxable income.

"Alternative minimum taxable
income" is Minnesota net income as defined in section 290.01, subdivision 19, and
includes the adjustments and tax preference items in sections 56, 57, 58, and 59(d), (e),
(f), and (h) of the Internal Revenue Code. If a corporation files a separate company
Minnesota tax return, the minimum tax must be computed on a separate company basis.
If a corporation is part of a tax group filing a unitary return, the minimum tax must be
computed on a unitary basis. The following adjustments must be made.

(1) For purposes of the depreciation adjustments under section 56(a)(1) and
56(g)(4)(A) of the Internal Revenue Code, the basis for depreciable property placed in
service in a taxable year beginning before January 1, 1990, is the adjusted basis for federal
income tax purposes, including any modification made in a taxable year under section
290.01, subdivision 19e, or Minnesota Statutes 1986, section 290.09, subdivision 7,
paragraph (c).

For taxable years beginning after December 31, 2000, the amount of any remaining
modification made under section 290.01, subdivision 19e, or Minnesota Statutes 1986,
section 290.09, subdivision 7, paragraph (c), not previously deducted is a depreciation
allowance in the first taxable year after December 31, 2000.

(2) The portion of the depreciation deduction allowed for federal income tax
purposes under section 168(k) of the Internal Revenue Code that is required as an
addition under section 290.01, subdivision 19c, clause (15), is disallowed in determining
alternative minimum taxable income.

(3) The subtraction for depreciation allowed under section 290.01, subdivision 19d,
clause (18), is allowed as a depreciation deduction in determining alternative minimum
taxable income.

(4) The alternative tax net operating loss deduction under sections 56(a)(4) and 56(d)
of the Internal Revenue Code does not apply.

(5) The special rule for certain dividends under section 56(g)(4)(C)(ii) of the Internal
Revenue Code does not apply.

(6) The special rule for dividends from section 936 companies under section
56(g)(4)(C)(iii) does not apply.

(7) The tax preference for depletion under section 57(a)(1) of the Internal Revenue
Code does not apply.

(8) The tax preference for intangible drilling costs under section 57(a)(2) of the
Internal Revenue Code must be calculated without regard to subparagraph (E) and the
subtraction under section 290.01, subdivision 19d, clause (4).

(9) The tax preference for tax exempt interest under section 57(a)(5) of the Internal
Revenue Code does not apply.

(10) The tax preference for charitable contributions of appreciated property under
section 57(a)(6) of the Internal Revenue Code does not apply.

(11) For purposes of calculating the tax preference for accelerated depreciation or
amortization on certain property placed in service before January 1, 1987, under section
57(a)(7) of the Internal Revenue Code, the deduction allowable for the taxable year is the
deduction allowed under section 290.01, subdivision 19e.

For taxable years beginning after December 31, 2000, the amount of any remaining
modification made under section 290.01, subdivision 19e, not previously deducted is a
depreciation or amortization allowance in the first taxable year after December 31, 2004.

(12) For purposes of calculating the adjustment for adjusted current earnings in
section 56(g) of the Internal Revenue Code, the term "alternative minimum taxable
income" as it is used in section 56(g) of the Internal Revenue Code, means alternative
minimum taxable income as defined in this subdivision, determined without regard to the
adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code.

(13) For purposes of determining the amount of adjusted current earnings under
section 56(g)(3) of the Internal Revenue Code, no adjustment shall be made under section
56(g)(4) of the Internal Revenue Code with respect to (i) the amount of foreign dividend
gross-up subtracted as provided in section 290.01, subdivision 19d, clause (1), (ii) the
amount of refunds of income, excise, or franchise taxes subtracted as provided in section
290.01, subdivision 19d, clause (9), or (iii) the amount of royalties, fees or other like
income subtracted as provided in section 290.01, subdivision 19d, clause (10).

(14) Alternative minimum taxable income excludes the income from operating in a
job opportunity building zone as provided under section 469.317.

(15) Alternative minimum taxable income excludes the income from operating in a
biotechnology and health sciences industry zone as provided under section 469.337.

(16) Alternative minimum taxable income excludes the income from operating in an
international economic development zone as provided under section 469.326.

new text begin (17) Alternative minimum taxable income excludes the income attributable to an
approved project under section 116J.8751.
new text end

Items of tax preference must not be reduced below zero as a result of the
modifications in this subdivision.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2008.
new text end

Sec. 4.

Minnesota Statutes 2008, section 290.0922, subdivision 2, is amended to read:

Subd. 2.

Exemptions.

The following entities are exempt from the tax imposed
by this section:

(1) corporations exempt from tax under section 290.05;

(2) real estate investment trusts;

(3) regulated investment companies or a fund thereof; and

(4) entities having a valid election in effect under section 860D(b) of the Internal
Revenue Code;

(5) town and farmers' mutual insurance companies;

(6) cooperatives organized under chapter 308A or 308B that provide housing
exclusively to persons age 55 and over and are classified as homesteads under section
273.124, subdivision 3;

(7) an entity, if for the taxable year all of its property is located in a job opportunity
building zone designated under section 469.314 and all of its payroll is a job opportunity
building zone payroll under section 469.310; deleted text begin and
deleted text end

(8) an entity, if for the taxable year all of its property is located in an international
economic development zone designated under section 469.322, and all of its payroll is
international economic development zone payroll under section 469.321. The exemption
under this clause applies to taxable years beginning during the duration of the international
economic development zone deleted text begin . deleted text end new text begin ; and
new text end

new text begin (9) an entity, if for the taxable year its project percentage under section 116J.8751
is 100 percent.
new text end

Entities not specifically exempted by this subdivision are subject to tax under this
section, notwithstanding section 290.05.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2008.
new text end

Sec. 5.

Minnesota Statutes 2008, section 290.0922, subdivision 3, is amended to read:

Subd. 3.

Definitions.

(a) "Minnesota sales or receipts" means the total sales
apportioned to Minnesota pursuant to section 290.191, subdivision 5, the total receipts
attributed to Minnesota pursuant to section 290.191, subdivisions 6 to 8, and/or the
total sales or receipts apportioned or attributed to Minnesota pursuant to any other
apportionment formula applicable to the taxpayer.

(b) "Minnesota property" means total Minnesota tangible property as provided in
section 290.191, subdivisions 9 to 11, any other tangible property located in Minnesota,
but does not include: (1) property located in a job opportunity building zone designated
under section 469.314, (2) property of a qualified business located in a biotechnology and
health sciences industry zone designated under section 469.334, deleted text begin or deleted text end (3) for taxable years
beginning during the duration of the zone, property of a qualified business located in
the international economic development zone designated under section 469.322 new text begin , or (4)
property attributable to a project approved under section 116J.8751 new text end . Intangible property
shall not be included in Minnesota property for purposes of this section. Taxpayers who
do not utilize tangible property to apportion income shall nevertheless include Minnesota
property for purposes of this section. On a return for a short taxable year, the amount of
Minnesota property owned, as determined under section 290.191, shall be included in
Minnesota property based on a fraction in which the numerator is the number of days in
the short taxable year and the denominator is 365.

(c) "Minnesota payrolls" means total Minnesota payrolls as provided in section
290.191, subdivision 12, but does not include: (1) job opportunity building zone payrolls
under section 469.310, subdivision 8, (2) biotechnology and health sciences industry zone
payrolls under section 469.330, subdivision 8, deleted text begin or deleted text end (3) for taxable years beginning during
the duration of the zone, international economic development zone payrolls under section
469.321, subdivision 9 new text begin , or (4) payroll attributable to a project approved under section
116J.8751 new text end . Taxpayers who do not utilize payrolls to apportion income shall nevertheless
include Minnesota payrolls for purposes of this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2008.
new text end