HF 1110

as introduced - 87th Legislature (2011 - 2012) Posted on 03/14/2011 11:00am

A bill for an act
relating to economic development; modifying certain small business investment
tax credit provisions; amending Minnesota Statutes 2010, section 116J.8737,
subdivisions 1, 2, 4.

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

Section 1.

Minnesota Statutes 2010, section 116J.8737, subdivision 1, is amended to
read:

Subdivision 1.

Definitions.

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

(b) "Qualified small business" means a business that has been certified by the
commissioner under subdivision 2.

(c) "Qualified investor" means an investor who has been certified by the
commissioner under subdivision 3.

(d) "Qualified fund" means a pooled angel investment network fund that has been
certified by the commissioner under subdivision 4.

(e) "Qualified investment" means a cash investment in a qualified small business
of a minimum of:

(1) $10,000 in a calendar year by a qualified investor; or

(2) $30,000 in a calendar year by a qualified fund.

A qualified investment must be made in exchange for common stock, a partnership
or membership interest, preferred stock, debt with mandatory conversion to equity, or an
equivalent ownership interest as determined by the commissioner.

(f) "Family" means a family member within the meaning of the Internal Revenue
Code, section 267(c)(4).

(g) "Pass-through entity" means a corporation that for the applicable taxable year is
treated as an S corporation or a general partnership, limited partnership, limited liability
partnership, trust, or limited liability company and which for the applicable taxable year is
not taxed as a corporation under chapter 290.

new text begin (h) "Intern" means a student of an accredited institution of higher education, or a
former student who has graduated in the past six months from an accredited institution
of higher education, who is employed by a qualified small business in a nonpermanent
position for a duration of nine months or less that provides training and experience in the
primary business activity of the business.
new text end

Sec. 2.

Minnesota Statutes 2010, section 116J.8737, subdivision 2, is amended to read:

Subd. 2.

Certification of qualified small businesses.

(a) Businesses may apply
to the commissioner for certification as a qualified small business for a calendar year.
The application must be in the form and be made under the procedures specified by the
commissioner, accompanied by an application fee of $150. Application fees are deposited
in the small business investment tax credit administration account in the special revenue
fund. The application for certification for 2010 must be made available on the department's
Web site by August 1, 2010. Applications for subsequent years' certification must be made
available on the department's Web site by November 1 of the preceding year.

(b) Within 30 days of receiving an application for certification under this subdivision,
the commissioner must either certify the business as satisfying the conditions required of a
qualified small business, request additional information from the business, or reject the
application for certification. If the commissioner requests additional information from the
business, the commissioner must either certify the business 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.

(c) To receive certification, a business must satisfy all of the following conditions:

(1) the business has its headquarters in Minnesota;

(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;

(3) the business is engaged in, or is committed to engage in, innovation in Minnesota
in one of the following as its primary business activity:

(i) using proprietary technology to add value to a product, process, or service in a
qualified high-technology field;

(ii) researching or developing a proprietary product, process, or service in a qualified
high-technology field; or

(iii) researching, developing, or producing a new proprietary technology for use in
the fields of agriculture, tourism, forestry, mining, manufacturing, or transportation;

(4) other than the activities specifically listed in clause (3), 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;

(5) the business has fewer than 25 employees;

(6) the business must pay its employees annual wages of at least 175 percent of the
federal poverty guideline for the year for a family of four new text begin and must pay its interns annual
wages of at least 175 percent of the federal minimum wage used for federally covered
employers new text end , except that this requirement must be reduced proportionately for employees
new text begin and interns new text end who work less than full-time, and does not apply to an executive, officer, or
member of the board of the business, or to any employee who owns, controls, or holds
power to vote more than 20 percent of the outstanding securities of the business;

(7) the business has not been in operation for more than ten years;

(8) the business has not previously received private equity investments of more
than deleted text begin $2,000,000 deleted text end new text begin $4,000,000 new text end ; and

(9) the business is not an entity disqualified under section 80A.50, paragraph (b),
clause (3).

(d) In applying the limit under paragraph (c), clause (5), the employees in all
members of the unitary business, as defined in section 290.17, subdivision 4, must be
included.

(e) In order for a qualified investment in a business to be eligible for tax credits, the
business must have applied for and received certification for the calendar year in which
the investment was made prior to the date on which the qualified investment was made.

(f) The commissioner must maintain a list of businesses certified under this
subdivision for the calendar year and make the list accessible to the public on the
department's Web site.

(g) For purposes of this subdivision, the following terms have the meanings given:

(1) "qualified high-technology field" includes aerospace, agricultural processing,
renewable energy, energy efficiency and conservation, environmental engineering, food
technology, cellulosic ethanol, information technology, materials science technology,
nanotechnology, telecommunications, biotechnology, medical device products,
pharmaceuticals, diagnostics, biologicals, chemistry, veterinary science, and similar
fields; and

(2) "proprietary technology" means the technical innovations that are unique and
legally owned or licensed by a business and includes, without limitation, those innovations
that are patented, patent pending, a subject of trade secrets, or copyrighted.

Sec. 3.

Minnesota Statutes 2010, section 116J.8737, subdivision 4, is amended to read:

Subd. 4.

Certification of qualified funds.

(a) A pass-through entity may apply to
the commissioner for certification as a qualified fund for a calendar year. The application
must be in the form and be made under the procedures specified by the commissioner,
accompanied by an application fee of $1,000. Application fees are deposited in the small
business investment tax credit administration account in the special revenue fund. The
application for certification for 2010 of qualified funds must be made available on the
department's Web site by August 1, 2010. Applications for subsequent years' certification
must be made available by November 1 of the preceding year.

(b) Within 30 days of receiving an application for certification under this subdivision,
the commissioner must either certify the fund as satisfying the conditions required of a
qualified fund, request additional information from the fund, or reject the application
for certification. If the commissioner requests additional information from the fund,
the commissioner must either certify the fund or reject the application within 30 days
of receiving the additional information. If the commissioner neither certifies the fund
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 $1,000 application
fee. A fund that applies for certification and is rejected may reapply.

(c) To receive certification, a fund must:

(1) invest or intend to invest in qualified small businesses;

(2) be organized as a pass-through entity; and

(3) have at least three separate investors, deleted text begin all deleted text end of whom new text begin at least three whose investment
is made in the certified business and who seek a tax credit allocation new text end satisfy the conditions
in subdivision 3, paragraph (c).

(d) Investments in the fund may consist of equity investments or notes that pay
interest or other fixed amounts, or any combination of both.

(e) In order for a qualified investment in a qualified small business to be eligible for
tax credits, a qualified fund that makes the investment must have applied for and received
certification for the calendar year prior to making the qualified investment.

Sec. 4. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 3 are effective retroactively from January 1, 2011.
new text end