HF 1578

as introduced - 88th Legislature (2013 - 2014) Posted on 03/14/2013 02:31pm

A bill for an act
relating to taxation; providing sales and property tax incentives for certain
businesses; closing JOBZ to new businesses; appropriating money; amending
Minnesota Statutes 2012, sections 272.02, by adding a subdivision; 297A.68, by
adding a subdivision; 469.310, subdivision 11; proposing coding for new law in
Minnesota Statutes, chapters 116J; 290.

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

Section 1.

new text begin [116J.3738] TAX INCENTIVES FOR CERTAIN EXPANSIONS OF
GREATER MINNESOTA BUSINESSES.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms
have the meanings given unless the context clearly indicates otherwise.
new text end

new text begin (b) "Agricultural processing facility" means one or more facilities or operations
that transform, package, sort, or grade livestock or livestock products, agricultural
commodities, or plants or plant products into goods that are used for intermediate or final
consumption including goods for nonfood use, and surrounding property.
new text end

new text begin (c) "Business" means an individual, corporation, partnership, limited liability
company, association, or any other entity engaged in operating a trade or business located
in greater Minnesota.
new text end

new text begin (d) "City" means a statutory or home rule charter city.
new text end

new text begin (e) "Greater Minnesota" means the area of the state that excludes the metropolitan
area, as defined in section 473.121, subdivision 2.
new text end

new text begin (f) "Qualified business" means a business that satisfies the requirements of subdivision
2, has been certified under subdivision 3, and has not been terminated under subdivision 5.
new text end

new text begin Subd. 2. new text end

new text begin Qualified business. new text end

new text begin (a) A business is a qualified business if it satisfies the
requirement of this paragraph and is not disqualified under the provisions of paragraph
(b). To qualify, the business must:
new text end

new text begin (1) have operated its trade or business in a city or cities in greater Minnesota for at
least one year before applying under subdivision 3;
new text end

new text begin (2) pay or agree to pay in the future each employee compensation, including benefits
not mandated by law, that on an annualized basis equal at least 120 percent of the federal
poverty level for a family of four;
new text end

new text begin (3) plan and agree to expand its employment in one or more cities in greater Minnesota
by the minimum number of employees required under subdivision 3, paragraph (c); and
new text end

new text begin (4) received certification from the commissioner under subdivision 3 that it is a
qualified business.
new text end

new text begin (b) A business is not a qualified business if it is either:
new text end

new text begin (1) primarily engaged in making retail sales to purchasers who are physically present
at the business's location or locations in greater Minnesota; or
new text end

new text begin (2) a public utility, as defined in section 336B.01.
new text end

new text begin (c) The requirements in paragraph (a) that the business' operations and expansion be
located in a city do not apply to an agricultural processing facility.
new text end

new text begin Subd. 3. new text end

new text begin Certification of qualified business. new text end

new text begin (a) A business may apply to
the commissioner for certification as a qualified business under this section. The
commissioner shall specify the form of the application, the manner and times for applying,
and the information required to be included in the application. The commissioner may
impose an application fee in an amount sufficient to defray the commissioner's cost of
processing certifications. A business must file a copy of its application with the chief
clerical officer of the city at the same it applies to the commissioner. For an agricultural
processing facility located outside the boundaries of a city, the business must file a copy
of the application with the county auditor.
new text end

new text begin (b) The commissioner shall certify each business as a qualified business that:
new text end

new text begin (1) satisfies the requirements of subdivision 2;
new text end

new text begin (2) the commissioner determines would not expand its operations in greater
Minnesota without the provision of one or more of the tax incentives available under
subdivision 4; and
new text end

new text begin (3) enters a business subsidy agreement with the commissioner that pledges to
satisfy the minimum expansion requirements of paragraph (c) within three years or less
following execution of the agreement.
new text end

new text begin The commissioner must act on an application within 60 days after its filing. Failure
by the commissioner to take action within the 60-day period is deemed approval of the
application.
new text end

new text begin (c) The following minimum expansion requirements apply, based on the number of
employees of the business at locations in greater Minnesota:
new text end

new text begin (1) a business that employees 50 or fewer full-time equivalent employees in greater
Minnesota when the agreement is executed must increase its employment by five or more
full-time equivalent employees;
new text end

new text begin (2) a business that employees more than 50 but fewer than 200 full-time equivalent
employees in greater Minnesota when the agreement is executed must increase the number
of its full-time equivalent employees in greater Minnesota by at least ten percent; or
new text end

new text begin (3) a business that employees 200 or more full-time equivalent employees in greater
Minnesota when the agreement is executed must increase its employment by at least 21
full-time equivalent employees.
new text end

new text begin (d) The city, or a county for an agricultural processing facility located outside the
boundaries of a city, in which the business proposes to expand its operations may file
comments supporting or opposing the application with the commissioner. The comments
must be filed within 30 days after receipt by the city of the application and may include a
notice of any contribution the city or county intends to make to encourage or support the
business expansion, such as the use of tax increment financing, property tax abatement,
additional city or county services, or other financial assistance.
new text end

new text begin (e) Certification of a qualified business is effective for the 12-year period beginning
on the first day of the calendar month immediately following execution of the business
subsidy agreement.
new text end

new text begin Subd. 4. new text end

new text begin Available tax incentives. new text end

new text begin A qualified business is entitled to one or more
of the following tax incentives as provided under its business subsidy agreement with
the commissioner:
new text end

new text begin (1) a sales tax exemption, as provided in section 297A.68, subdivision 44, for
purchases made during the period the business was certified as a qualified business
under this section;
new text end

new text begin (2) exemption from the state general tax as provided under section 272.02,
subdivision 98, of the improvements to real estate made by the qualified business in
greater Minnesota in any calendar year in which certification of the business as a qualified
business applies under this section; and
new text end

new text begin (3) the jobs credit, as provided in section 290.0682, effective for taxable years
beginning during a calendar year in which certification of the business as a qualified
business applies under this section.
new text end

new text begin Subd. 5. new text end

new text begin Termination of status as a qualified business. new text end

new text begin (a) The commissioner shall
put in place a system for monitoring and ensuring that each certified business meets within
three years or less the minimum expansion requirement in its business subsidy agreement
and continues to satisfy those requirements for the rest of the duration of the certification
under subdivision 3. This system must include regular reporting by the business to the
commissioner of its baseline and current employment levels and any other information
the commissioner determines may be useful to ensure compliance and for legislative
evaluation of the effectiveness of the tax incentives.
new text end

new text begin (b) A business ceases to be a qualified business and to qualify for the tax incentives
under subdivision 4 upon the earlier of the following dates:
new text end

new text begin (1) the end of the duration of its designation under subdivision 3, paragraph (e),
effective as provided under subdivision 4 or other provision of law for the tax incentive; or
new text end

new text begin (2) the date the commissioner finds that the business has breached its business
subsidy agreement and failed to satisfy the minimum expansion required by subdivision 3
and its agreement.
new text end

new text begin (c) A business may contest the commissioner's finding that it breached its business
subsidy agreement under paragraph (b), clause (2), under the contested case procedures in
the Administrative Procedure Act, chapter 14.
new text end

new text begin (d) The commissioner, after consulting with the commissioner of revenue, may
waive a breach of the business subsidy agreement and permit continued receipt of tax
incentives, if the commissioner determines that termination of the tax incentives is not in
the best interest of the state or the local government units and the business' breach of the
agreement is a result of circumstances beyond its control including, but not limited to:
new text end

new text begin (1) a natural disaster;
new text end

new text begin (2) unforeseen industry trends;
new text end

new text begin (3) a decline in economic activity in the overall or greater Minnesota economy; or
new text end

new text begin (4) loss of a major supplier or customer of the business.
new text end

new text begin Subd. 6. new text end

new text begin Statement of tax expenditure purpose. new text end

new text begin (a) In accordance with the
requirements of section 3.192, the legislature states that its purpose in enacting this
section, as well as the coordinate provisions in chapters 272, 290, and 297A, is to induce
existing businesses in greater Minnesota to increase investment and expand employment
in greater Minnesota.
new text end

new text begin (b) The standards or goals against which to measure the effectiveness of these tax
expenditures are that:
new text end

new text begin (1) qualified businesses increase their investments in the land and
commercial-industrial improvements in greater Minnesota by at least ten percent;
new text end

new text begin (2) qualified businesses increase their greater Minnesota payrolls by ten percent in
the three-year period after the businesses are certified; and
new text end

new text begin (3) the foregone tax revenues under this section are less than $7,000 per year for each
additional employment position established by a qualified business following certification.
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: (1) beginning for property taxes assessed in 2014; (2) to sales and use taxes
on sales and purchases made after June 30, 2013; and (3) for jobs credits for taxable
years beginning after December 31, 2013.
new text end

Sec. 2.

Minnesota Statutes 2012, section 272.02, is amended by adding a subdivision
to read:

new text begin Subd. 98. new text end

new text begin Greater Minnesota business expansion property. new text end

new text begin (a) Improvements to
real property, classified under section 273.13, subdivision 24, and located within greater
Minnesota, of a qualified business are exempt from the taxes levied under section 275.025
to the extent provided in the business subsidy agreement. The exemption is limited to the
market value of improvements made after certification of the qualified business and applies
only to assessment years in which the certification of the qualified business is in effect.
new text end

new text begin (b) The business must notify the county assessor in writing of eligibility under this
subdivision by July 1 in order to begin receiving the exemption under this subdivision
for taxes payable in the following year. The business need not annually notify the county
assessor of its continued exemption under this subdivision, but must notify the county
assessor immediately if the exemption no longer applies.
new text end

new text begin (c) The definitions under section 116J.3738, subdivision 1, apply for purposes of
this subdivision.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for property taxes assessed in 2014.
new text end

Sec. 3.

new text begin [290.0682] JOBS CREDIT; GREATER MINNESOTA BUSINESS
EXPANSIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Credit allowed. new text end

new text begin If authorized by its business subsidy agreement, a
qualified business is allowed a credit against the taxes imposed under chapter 290. The
credit equals seven percent of the:
new text end

new text begin (1) lesser of:
new text end

new text begin (i) the greater Minnesota payroll for the taxable year, less the greater Minnesota
payroll for the base year; or
new text end

new text begin (ii) the total Minnesota payroll for the taxable year, less the total Minnesota payroll
for the base year; minus
new text end

new text begin (2)(i) $35,000 multiplied by (ii) the number of full-time equivalent employees that
the qualified business employs in greater Minnesota for the taxable year, minus the
number of full-time equivalent employees the business employed in greater Minnesota in
the base year, but not less than zero.
new text end

new text begin Subd. 2. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms have
the meanings given.
new text end

new text begin (b) "Base year" means the taxable year beginning during the calendar year prior to
the calendar year in which the qualified business was certified under section 116J.3738.
new text end

new text begin (c) "Full-time equivalent employees" means the equivalent of annualized expected
hours of work equal to 2,080 hours.
new text end

new text begin (d) "Greater Minnesota" has the meaning given in section 116J.3738.
new text end

new text begin (e) "Greater Minnesota payroll" is that portion of the payroll factor under section
290.191 that represents:
new text end

new text begin (1) wages or salaries paid to an individual for services performed in greater
Minnesota; plus
new text end

new text begin (2) wages or salaries paid to individuals working from offices within greater
Minnesota if their employment requires them to work outside of greater Minnesota and the
work is incidental to the work performed by the individual within greater Minnesota; less
new text end

new text begin (3) the amount of compensation attributable to any employee whose wages or salary
are included in clause (1) or (2) that exceeds $125,000.
new text end

new text begin (f) "Minnesota payroll" means the wages or salaries attributed to Minnesota under
section 290.191, subdivision 12, for the qualified business or the unitary business of which
the qualified business is a part, whichever is greater.
new text end

new text begin (g) "Qualified business" means a qualified business certified under section
116J.3738, subdivision 3.
new text end

new text begin Subd. 3. new text end

new text begin Inflation adjustment. new text end

new text begin For taxable years beginning after December 31,
2014, the dollar amounts in subdivision 1, clause (2), and subdivision 2, paragraph (e), are
annually adjusted for inflation. The commissioner of revenue shall adjust the amounts by
the percentage determined under section 290.06, subdivision 2d, for the taxable year.
new text end

new text begin Subd. 4. new text end

new text begin Refundable. new text end

new text begin If the amount of the credit exceeds the liability for tax under
this chapter, the commissioner of revenue shall refund the excess to the qualified business.
new text end

new text begin Subd. 5. new text end

new text begin Appropriation. new text end

new text begin An amount sufficient to pay the refunds authorized by this
section is appropriated to the commissioner of revenue from the general fund.
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, 2013.
new text end

Sec. 4.

Minnesota Statutes 2012, section 297A.68, is amended by adding a subdivision
to read:

new text begin Subd. 44. new text end

new text begin Greater Minnesota business expansions. new text end

new text begin (a) Purchases and use of
tangible personal property or taxable services by a qualified business, as defined in section
116J.3738, are exempt if:
new text end

new text begin (1) the business subsidy agreement provides that the exemption under this
subdivision applies;
new text end

new text begin (2) the property or services are primarily used or consumed in greater Minnesota; and
new text end

new text begin (3) the purchase was made and delivery received during the duration of the
certification of the business as a qualified business under section 116J.3738.
new text end

new text begin (b) Purchase and use of construction materials and supplies used or consumed in,
and equipment incorporated into, the construction of improvements to real property in
greater Minnesota are exempt if the improvements after completion of construction are
to be used in the conduct of the trade or business of the qualified business, as defined in
section 116J.3738. This exemption applies regardless of whether the purchases are made
by the business or a contractor.
new text end

new text begin (c) The exemptions under this subdivision apply to a local sales and use tax.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after
June 30, 2013.
new text end

Sec. 5.

Minnesota Statutes 2012, section 469.310, subdivision 11, is amended to read:

Subd. 11.

Qualified business.

(a) A person carrying on a trade or business at a place
of business located within a job opportunity building zone is a qualified business for the
purposes of sections 469.310 to 469.320 according to the criteria in paragraphs (b) to (f).

(b) A person is a qualified business only on those parcels of land for which the
person has entered into a business subsidy agreement, as required under section 469.313,
with the appropriate local government unit in which the parcels are located.

(c) Prior to execution of the business subsidy agreement, the local government
unit must consider the following factors:

(1) how wages compare to the regional industry average;

(2) the number of jobs that will be provided relative to overall employment in the
community;

(3) the economic outlook for the industry the business will engage in;

(4) sales that will be generated from outside the state of Minnesota;

(5) how the business will build on existing regional strengths or diversify the
regional economy;

(6) how the business will increase capital investment in the zone; and

(7) any other criteria the commissioner deems necessary.

(d) A person that relocates a trade or business from outside a job opportunity
building zone into a zone is not a qualified business unless the business meets all of the
requirements of paragraphs (b) and (c) and:

(1) increases full-time employment in the first full year of operation within the job
opportunity building zone by a minimum of five jobs or 20 percent, whichever is greater,
measured relative to the operations that were relocated and maintains the required level of
employment for each year the zone designation applies; and

(2) enters a binding written agreement with the commissioner that:

(i) pledges the business will meet the requirements of clause (1);

(ii) provides for repayment of all tax benefits enumerated under section 469.315 to
the business under the procedures in section 469.319, if the requirements of clause (1) are
not met for the taxable year or for taxes payable during the year in which the requirements
were not met; and

(iii) contains any other terms the commissioner determines appropriate.

(e) The commissioner may waive the requirements under paragraph (d), clause (1),
if the commissioner determines that the qualified business will substantially achieve
the factors under this subdivision.

(f) A business is not a qualified business if, at its location or locations in the zone,
the business is primarily engaged in making retail sales to purchasers who are physically
present at the business's zone location.

(g) A qualifying business must pay each employee compensation, including benefits
not mandated by law, that on an annualized basis is equal to at least 110 percent of the
federal poverty level for a family of four.

(h) A public utility, as defined in section 336B.01, is not a qualified business.

(i) A business operating in a create automotive recovery zone is a qualified business
only if it engages in the assembly of motor vehicles at the zone location.

new text begin (j) No local government or business may enter a new business subsidy agreement
after June 30, 2013.
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