HF 2538

1st Committee Engrossment - 87th Legislature (2011 - 2012) Posted on 03/19/2013 07:33pm

1.1A bill for an act

1.2relating to taxation; making technical, minor, and clarifying changes in enterprise
1.3zone and economic development powers; eliminating obsolete provisions;
1.4amending Minnesota Statutes 2010, sections 16C.16, subdivision 7; 41A.036,
1.5subdivision 2; 117.025, subdivision 10; 270B.14, subdivision 3; 272.02,
1.6subdivision 77; 273.13, subdivision 24; 273.1398, subdivision 4; 276A.01,
1.7subdivision 3; 290.01, subdivision 29; 290.067, subdivision 1; 290.0921,
1.8subdivision 3; 469.015, subdivision 4; 469.033, subdivision 7; 469.166,
1.9subdivisions 3, 5, 6; 469.167, subdivision 2; 469.171, subdivisions 1, 4, 6a, 7, 9,
1.1011; 469.172; 469.173, subdivisions 5, 6; 469.174, subdivisions 20, 25; 469.176,
1.11subdivision 7; 469.1763, subdivision 6; 469.1764, subdivision 1; 469.177,
1.12subdivision 1; 469.1793; 469.1813, subdivision 6b; 473F.02, subdivision 3;
1.13Minnesota Statutes 2011 Supplement, sections 290.01, subdivision 19b; 290.06,
1.14subdivision 2c; 290.0671, subdivision 1; 290.091, subdivision 2; 290.0922,
1.15subdivisions 2, 3; 297A.75, subdivision 1; repealing Minnesota Statutes
1.162010, sections 272.02, subdivision 83; 290.06, subdivisions 24, 32; 297A.68,
1.17subdivision 41; 469.042, subdivisions 2, 3, 4; 469.043; 469.059, subdivision 13;
1.18469.129; 469.134; 469.162, subdivision 2; 469.1651; 469.166, subdivisions 7, 8,
1.199, 10, 11, 12; 469.167, subdivisions 1, 3; 469.168; 469.169, subdivisions 1, 2,
1.203, 4, 5, 6, 7, 8, 9, 10, 11, 13; 469.170, subdivisions 1, 2, 3, 4, 5, 5a, 5b, 5c, 5d,
1.215e, 6, 7, 8; 469.171, subdivisions 2, 5, 6b; 469.173, subdivisions 1, 3; 469.1765;
1.22469.1791; 469.1799, subdivision 2; 469.301, subdivisions 1, 2, 3, 4, 5; 469.302;
1.23469.303; 469.304; 469.321; 469.3215; 469.322; 469.323; 469.324; 469.325;
1.24469.326; 469.327; 469.328; 469.329; 473.680.
1.25BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.26    Section 1. Minnesota Statutes 2010, section 16C.16, subdivision 7, is amended to read:
1.27    Subd. 7. Economically disadvantaged areas. (a) Except as otherwise provided in
1.28paragraph (b), the commissioner may award up to a six percent preference in the amount
1.29bid on state procurement to small businesses located in an economically disadvantaged
1.30area.
1.31(b) The commissioner may award up to a four percent preference in the amount bid
1.32on state construction to small businesses located in an economically disadvantaged area.
2.1(c) A business is located in an economically disadvantaged area if:
2.2(1) the owner resides in or the business is located in a county in which the median
2.3income for married couples is less than 70 percent of the state median income for married
2.4couples;
2.5(2) the owner resides in or the business is located in an area designated a labor
2.6surplus area by the United States Department of Labor; or
2.7(3) the business is a certified rehabilitation facility or extended employment provider
2.8as described in chapter 268A.
2.9(d) The commissioner may designate one or more areas designated as targeted
2.10neighborhoods under section 469.202 or as border city enterprise zones under section
2.11469.167 469.166 as economically disadvantaged areas for purposes of this subdivision
2.12if the commissioner determines that this designation would further the purposes of this
2.13section. If the owner of a small business resides or is employed in a designated area, the
2.14small business is eligible for any preference provided under this subdivision.
2.15(e) The Department of Revenue shall gather data necessary to make the
2.16determinations required by paragraph (c), clause (1), and shall annually certify counties
2.17that qualify under paragraph (c), clause (1). An area designated a labor surplus area
2.18retains that status for 120 days after certified small businesses in the area are notified of
2.19the termination of the designation by the United States Department of Labor.

2.20    Sec. 2. Minnesota Statutes 2010, section 41A.036, subdivision 2, is amended to read:
2.21    Subd. 2. Small business development loans; preferences. The following eligible
2.22small businesses have preference among all business applicants for small business
2.23development loans:
2.24(1) businesses located in rural areas of the state that are experiencing the most
2.25severe unemployment rates in the state;
2.26(2) businesses that are likely to expand and provide additional permanent
2.27employment in rural areas of the state, or enhance the quality of existing jobs in those
2.28areas;
2.29(3) businesses located in border communities that experience a competitive
2.30disadvantage due to location;
2.31(4) businesses that have been unable to obtain traditional financial assistance due to
2.32a disadvantageous location, minority ownership, or other factors rather than due to the
2.33business having been considered a poor financial risk;
3.1(5) businesses that utilize state resources and reduce state dependence on outside
3.2resources, and that produce products or services consistent with the long-term social and
3.3economic needs of the state; and
3.4(6) businesses located in designated border city enterprise zones, as described in
3.5section 469.168 469.166.

3.6    Sec. 3. Minnesota Statutes 2010, section 117.025, subdivision 10, is amended to read:
3.7    Subd. 10. Public service corporation. "Public service corporation" means a
3.8utility, as defined by section 216E.01, subdivision 10; gas, electric, telephone, or cable
3.9communications company; cooperative association; natural gas pipeline company;
3.10crude oil or petroleum products pipeline company; municipal utility; municipality when
3.11operating its municipally owned utilities; joint venture created pursuant to section 452.25
3.12or 452.26; or municipal power or gas agency. Public service corporation also means a
3.13municipality or public corporation when operating an airport under chapter 360 or 473, a
3.14common carrier, a watershed district, or a drainage authority. Public service corporation
3.15also means an entity operating a regional distribution center within an international
3.16economic development zone designated under section 469.322.

3.17    Sec. 4. Minnesota Statutes 2010, section 270B.14, subdivision 3, is amended to read:
3.18    Subd. 3. Administration of enterprise, job opportunity, and biotechnology
3.19and health sciences industry zone programs. The commissioner may disclose return
3.20information relating to the taxes imposed by chapters 290 and 297A to the Department of
3.21Employment and Economic Development or a municipality receiving an with a border
3.22city enterprise zone designation as defined under section 469.169 469.166, but only as
3.23necessary to administer the funding limitations under section 469.169, subdivision 7, or
3.24to the Department of Employment and Economic Development and appropriate officials
3.25from the local government units in which a qualified business is located but only as
3.26necessary to enforce the job opportunity building zone benefits under section 469.315, or
3.27biotechnology and health sciences industry zone benefits under section 469.336.

3.28    Sec. 5. Minnesota Statutes 2010, section 272.02, subdivision 77, is amended to read:
3.29    Subd. 77. Property of housing and redevelopment authorities. Property of
3.30projects of housing and redevelopment authorities are exempt to the extent permitted by
3.31sections section 469.042, subdivision 1, and 469.043, subdivisions 2 and 5.

3.32    Sec. 6. Minnesota Statutes 2010, section 273.13, subdivision 24, is amended to read:
4.1    Subd. 24. Class 3. (a) Commercial and industrial property and utility real and
4.2personal property is class 3a.
4.3(1) Except as otherwise provided, each parcel of commercial, industrial, or utility
4.4real property has a class rate of 1.5 percent of the first tier of market value, and 2.0 percent
4.5of the remaining market value. In the case of contiguous parcels of property owned by the
4.6same person or entity, only the value equal to the first-tier value of the contiguous parcels
4.7qualifies for the reduced class rate, except that contiguous parcels owned by the same
4.8person or entity shall be eligible for the first-tier value class rate on each separate business
4.9operated by the owner of the property, provided the business is housed in a separate
4.10structure. For the purposes of this subdivision, the first tier means the first $150,000 of
4.11market value. Real property owned in fee by a utility for transmission line right-of-way
4.12shall be classified at the class rate for the higher tier.
4.13For purposes of this subdivision, parcels are considered to be contiguous even if
4.14they are separated from each other by a road, street, waterway, or other similar intervening
4.15type of property. Connections between parcels that consist of power lines or pipelines do
4.16not cause the parcels to be contiguous. Property owners who have contiguous parcels of
4.17property that constitute separate businesses that may qualify for the first-tier class rate shall
4.18notify the assessor by July 1, for treatment beginning in the following taxes payable year.
4.19(2) All personal property that is: (i) part of an electric generation, transmission, or
4.20distribution system; or (ii) part of a pipeline system transporting or distributing water, gas,
4.21crude oil, or petroleum products; and (iii) not described in clause (3), and all railroad
4.22operating property has a class rate as provided under clause (1) for the first tier of market
4.23value and the remaining market value. In the case of multiple parcels in one county that
4.24are owned by one person or entity, only one first tier amount is eligible for the reduced rate.
4.25(3) The entire market value of personal property that is: (i) tools, implements, and
4.26machinery of an electric generation, transmission, or distribution system; (ii) tools,
4.27implements, and machinery of a pipeline system transporting or distributing water, gas,
4.28crude oil, or petroleum products; or (iii) the mains and pipes used in the distribution of
4.29steam or hot or chilled water for heating or cooling buildings, has a class rate as provided
4.30under clause (1) for the remaining market value in excess of the first tier.
4.31(b) Employment property defined in section 469.166, during the period provided
4.32in section 469.170, shall constitute class 3b. The class rates for class 3b property are
4.33determined under paragraph (a).

4.34    Sec. 7. Minnesota Statutes 2010, section 273.1398, subdivision 4, is amended to read:
5.1    Subd. 4. Disparity reduction credit. (a) Beginning with taxes payable in 1989,
5.2class 4a, and class 3a, and class 3b property qualifies for a disparity reduction credit if: (1)
5.3the property is located in a border city that has an enterprise zone designated pursuant to
5.4section 469.168, subdivision 4, as defined in section 469.166; (2) the property is located
5.5in a city with a population greater than 2,500 and less than 35,000 according to the
5.61980 decennial census; (3) the city is adjacent to a city in another state or immediately
5.7adjacent to a city adjacent to a city in another state; and (4) the adjacent city in the
5.8other state has a population of greater than 5,000 and less than 75,000 according to the
5.91980 decennial census.
5.10    (b) The credit is an amount sufficient to reduce (i) the taxes levied on class 4a
5.11property to 2.3 percent of the property's market value and (ii) the tax on class 3a and class
5.123b property to 2.3 percent of market value.
5.13    (c) The county auditor shall annually certify the costs of the credits to the
5.14Department of Revenue. The department shall reimburse local governments for the
5.15property taxes forgone as the result of the credits in proportion to their total levies.

5.16    Sec. 8. Minnesota Statutes 2010, section 276A.01, subdivision 3, is amended to read:
5.17    Subd. 3. Commercial-industrial property. "Commercial-industrial property"
5.18means the following categories of property, as defined in section 273.13, excluding that
5.19portion of the property (i) that may, by law, constitute the tax base for a tax increment
5.20pledged pursuant to section 469.042 or 469.162 or sections 469.174 to 469.178,
5.21certification of which was requested prior to May 1, 1996, to the extent and while the tax
5.22increment is so pledged; or (ii) that is exempt from taxation under section 272.02:
5.23    (1) that portion of class 5 property consisting of unmined iron ore and low-grade
5.24iron-bearing formations as defined in section 273.14, tools, implements, and machinery,
5.25except the portion of high voltage transmission lines, the value of which is deducted from
5.26net tax capacity under section 273.425; and
5.27    (2) that portion of class 3 and class 5 property which is either used or zoned for
5.28use for any commercial or industrial purpose, including property that becomes taxable
5.29under section 298.25, except for such property which is, or, in the case of property under
5.30construction, will when completed be used exclusively for residential occupancy and
5.31the provision of services to residential occupants thereof. Property must be considered
5.32as used exclusively for residential occupancy only if each of not less than 80 percent
5.33of its occupied residential units is, or, in the case of property under construction, will
5.34when completed be occupied under an oral or written agreement for occupancy over a
5.35continuous period of not less than 30 days.
6.1    If the classification of property prescribed by section 273.13 is modified by
6.2legislative amendment, the references in this subdivision are to the successor class or
6.3classes of property, or portions thereof, that include the kinds of property designated
6.4in this subdivision.

6.5    Sec. 9. Minnesota Statutes 2011 Supplement, section 290.01, subdivision 19b, is
6.6amended to read:
6.7    Subd. 19b. Subtractions from federal taxable income. For individuals, estates,
6.8and trusts, there shall be subtracted from federal taxable income:
6.9    (1) net interest income on obligations of any authority, commission, or
6.10instrumentality of the United States to the extent includable in taxable income for federal
6.11income tax purposes but exempt from state income tax under the laws of the United States;
6.12    (2) if included in federal taxable income, the amount of any overpayment of income
6.13tax to Minnesota or to any other state, for any previous taxable year, whether the amount
6.14is received as a refund or as a credit to another taxable year's income tax liability;
6.15    (3) the amount paid to others, less the amount used to claim the credit allowed under
6.16section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
6.17to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
6.18transportation of each qualifying child in attending an elementary or secondary school
6.19situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
6.20resident of this state may legally fulfill the state's compulsory attendance laws, which
6.21is not operated for profit, and which adheres to the provisions of the Civil Rights Act
6.22of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
6.23tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
6.24"textbooks" includes books and other instructional materials and equipment purchased
6.25or leased for use in elementary and secondary schools in teaching only those subjects
6.26legally and commonly taught in public elementary and secondary schools in this state.
6.27Equipment expenses qualifying for deduction includes expenses as defined and limited in
6.28section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
6.29books and materials used in the teaching of religious tenets, doctrines, or worship, the
6.30purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
6.31or materials for, or transportation to, extracurricular activities including sporting events,
6.32musical or dramatic events, speech activities, driver's education, or similar programs. No
6.33deduction is permitted for any expense the taxpayer incurred in using the taxpayer's or
6.34the qualifying child's vehicle to provide such transportation for a qualifying child. For
7.1purposes of the subtraction provided by this clause, "qualifying child" has the meaning
7.2given in section 32(c)(3) of the Internal Revenue Code;
7.3    (4) income as provided under section 290.0802;
7.4    (5) to the extent included in federal adjusted gross income, income realized on
7.5disposition of property exempt from tax under section 290.491;
7.6    (6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E)
7.7of the Internal Revenue Code in determining federal taxable income by an individual
7.8who does not itemize deductions for federal income tax purposes for the taxable year, an
7.9amount equal to 50 percent of the excess of charitable contributions over $500 allowable
7.10as a deduction for the taxable year under section 170(a) of the Internal Revenue Code,
7.11under the provisions of Public Law 109-1 and Public Law 111-126;
7.12    (7) for individuals who are allowed a federal foreign tax credit for taxes that do not
7.13qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
7.14of subnational foreign taxes for the taxable year, but not to exceed the total subnational
7.15foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
7.16"federal foreign tax credit" means the credit allowed under section 27 of the Internal
7.17Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
7.18under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
7.19the extent they exceed the federal foreign tax credit;
7.20    (8) in each of the five tax years immediately following the tax year in which an
7.21addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
7.22of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth
7.23of the delayed depreciation. For purposes of this clause, "delayed depreciation" means
7.24the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or
7.25subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the
7.26positive value of any net operating loss under section 172 of the Internal Revenue Code
7.27generated for the tax year of the addition. The resulting delayed depreciation cannot be
7.28less than zero;
7.29    (9) job opportunity building zone income as provided under section 469.316;
7.30    (10) to the extent included in federal taxable income, the amount of compensation
7.31paid to members of the Minnesota National Guard or other reserve components of the
7.32United States military for active service, excluding compensation for services performed
7.33under the Active Guard Reserve (AGR) program. For purposes of this clause, "active
7.34service" means (i) state active service as defined in section 190.05, subdivision 5a, clause
7.35(1); or (ii) federally funded state active service as defined in section 190.05, subdivision
8.15b , but "active service" excludes service performed in accordance with section 190.08,
8.2subdivision 3 ;
8.3    (11) to the extent included in federal taxable income, the amount of compensation
8.4paid to Minnesota residents who are members of the armed forces of the United States
8.5or United Nations for active duty performed under United States Code, title 10; or the
8.6authority of the United Nations;
8.7    (12) an amount, not to exceed $10,000, equal to qualified expenses related to a
8.8qualified donor's donation, while living, of one or more of the qualified donor's organs
8.9to another person for human organ transplantation. For purposes of this clause, "organ"
8.10means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
8.11"human organ transplantation" means the medical procedure by which transfer of a human
8.12organ is made from the body of one person to the body of another person; "qualified
8.13expenses" means unreimbursed expenses for both the individual and the qualified donor
8.14for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
8.15may be subtracted under this clause only once; and "qualified donor" means the individual
8.16or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
8.17individual may claim the subtraction in this clause for each instance of organ donation for
8.18transplantation during the taxable year in which the qualified expenses occur;
8.19    (13) in each of the five tax years immediately following the tax year in which an
8.20addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
8.21shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
8.22addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
8.23case of a shareholder of a corporation that is an S corporation, minus the positive value of
8.24any net operating loss under section 172 of the Internal Revenue Code generated for the
8.25tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
8.26subtraction is not allowed under this clause;
8.27    (14) to the extent included in the federal taxable income of a nonresident of
8.28Minnesota, compensation paid to a service member as defined in United States Code, title
8.2910, section 101(a)(5), for military service as defined in the Servicemembers Civil Relief
8.30Act, Public Law 108-189, section 101(2);
8.31    (15) international economic development zone income as provided under section
8.32469.325;
8.33    (16) to the extent included in federal taxable income, the amount of national service
8.34educational awards received from the National Service Trust under United States Code,
8.35title 42, sections 12601 to 12604, for service in an approved Americorps National Service
8.36program;
9.1(17) (16) to the extent included in federal taxable income, discharge of indebtedness
9.2income resulting from reacquisition of business indebtedness included in federal taxable
9.3income under section 108(i) of the Internal Revenue Code. This subtraction applies only
9.4to the extent that the income was included in net income in a prior year as a result of the
9.5addition under section 290.01, subdivision 19a, clause (16); and
9.6(18) (17) the amount of the net operating loss allowed under section 290.095,
9.7subdivision 11, paragraph (c).

9.8    Sec. 10. Minnesota Statutes 2010, section 290.01, subdivision 29, is amended to read:
9.9    Subd. 29. Taxable income. The term "taxable income" means:
9.10(1) for individuals, estates, and trusts, the same as taxable net income;
9.11(2) for corporations, the taxable net income less
9.12(i) the net operating loss deduction under section 290.095;
9.13(ii) the dividends received deduction under section 290.21, subdivision 4;
9.14(iii) the exemption for operating in a job opportunity building zone under section
9.15469.317 ; and
9.16(iv) the exemption for operating in a biotechnology and health sciences industry
9.17zone under section 469.337; and
9.18(v) the exemption for operating in an international economic development zone
9.19under section 469.326.

9.20    Sec. 11. Minnesota Statutes 2011 Supplement, section 290.06, subdivision 2c, is
9.21amended to read:
9.22    Subd. 2c. Schedules of rates for individuals, estates, and trusts. (a) The income
9.23taxes imposed by this chapter upon married individuals filing joint returns and surviving
9.24spouses as defined in section 2(a) of the Internal Revenue Code must be computed by
9.25applying to their taxable net income the following schedule of rates:
9.26    (1) On the first $25,680, 5.35 percent;
9.27    (2) On all over $25,680, but not over $102,030, 7.05 percent;
9.28    (3) On all over $102,030, 7.85 percent.
9.29    Married individuals filing separate returns, estates, and trusts must compute their
9.30income tax by applying the above rates to their taxable income, except that the income
9.31brackets will be one-half of the above amounts.
9.32    (b) The income taxes imposed by this chapter upon unmarried individuals must be
9.33computed by applying to taxable net income the following schedule of rates:
9.34    (1) On the first $17,570, 5.35 percent;
10.1    (2) On all over $17,570, but not over $57,710, 7.05 percent;
10.2    (3) On all over $57,710, 7.85 percent.
10.3    (c) The income taxes imposed by this chapter upon unmarried individuals qualifying
10.4as a head of household as defined in section 2(b) of the Internal Revenue Code must be
10.5computed by applying to taxable net income the following schedule of rates:
10.6    (1) On the first $21,630, 5.35 percent;
10.7    (2) On all over $21,630, but not over $86,910, 7.05 percent;
10.8    (3) On all over $86,910, 7.85 percent.
10.9    (d) In lieu of a tax computed according to the rates set forth in this subdivision, the
10.10tax of any individual taxpayer whose taxable net income for the taxable year is less than
10.11an amount determined by the commissioner must be computed in accordance with tables
10.12prepared and issued by the commissioner of revenue based on income brackets of not
10.13more than $100. The amount of tax for each bracket shall be computed at the rates set
10.14forth in this subdivision, provided that the commissioner may disregard a fractional part of
10.15a dollar unless it amounts to 50 cents or more, in which case it may be increased to $1.
10.16    (e) An individual who is not a Minnesota resident for the entire year must compute
10.17the individual's Minnesota income tax as provided in this subdivision. After the
10.18application of the nonrefundable credits provided in this chapter, the tax liability must
10.19then be multiplied by a fraction in which:
10.20    (1) the numerator is the individual's Minnesota source federal adjusted gross income
10.21as defined in section 62 of the Internal Revenue Code and increased by the additions
10.22required under section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12),
10.23(13), and (16) to (18), and reduced by the Minnesota assignable portion of the subtraction
10.24for United States government interest under section 290.01, subdivision 19b, clause (1),
10.25and the subtractions under section 290.01, subdivision 19b, clauses (8), (9), (13), (14),
10.26(15), (17), (16), and (18) (17), after applying the allocation and assignability provisions of
10.27section 290.081, clause (a), or 290.17; and
10.28    (2) the denominator is the individual's federal adjusted gross income as defined in
10.29section 62 of the Internal Revenue Code of 1986, increased by the amounts specified in
10.30section 290.01, subdivision 19a, clauses (1), (5), (6), (7), (8), (9), (12), (13), and (16) to
10.31(18), and reduced by the amounts specified in section 290.01, subdivision 19b, clauses (1),
10.32(8), (9), (13), (14), (15), (17) (16), and (18) (17).

10.33    Sec. 12. Minnesota Statutes 2010, section 290.067, subdivision 1, is amended to read:
10.34    Subdivision 1. Amount of credit. (a) A taxpayer may take as a credit against the
10.35tax due from the taxpayer and a spouse, if any, under this chapter an amount equal to the
11.1dependent care credit for which the taxpayer is eligible pursuant to the provisions of
11.2section 21 of the Internal Revenue Code subject to the limitations provided in subdivision
11.32 except that in determining whether the child qualified as a dependent, income received
11.4as a Minnesota family investment program grant or allowance to or on behalf of the child
11.5must not be taken into account in determining whether the child received more than half
11.6of the child's support from the taxpayer, and the provisions of section 32(b)(1)(D) of
11.7the Internal Revenue Code do not apply.
11.8(b) If a child who has not attained the age of six years at the close of the taxable year
11.9is cared for at a licensed family day care home operated by the child's parent, the taxpayer
11.10is deemed to have paid employment-related expenses. If the child is 16 months old or
11.11younger at the close of the taxable year, the amount of expenses deemed to have been paid
11.12equals the maximum limit for one qualified individual under section 21(c) and (d) of the
11.13Internal Revenue Code. If the child is older than 16 months of age but has not attained the
11.14age of six years at the close of the taxable year, the amount of expenses deemed to have
11.15been paid equals the amount the licensee would charge for the care of a child of the same
11.16age for the same number of hours of care.
11.17(c) If a married couple:
11.18(1) has a child who has not attained the age of one year at the close of the taxable
11.19year;
11.20(2) files a joint tax return for the taxable year; and
11.21(3) does not participate in a dependent care assistance program as defined in section
11.22129 of the Internal Revenue Code, in lieu of the actual employment related expenses paid
11.23for that child under paragraph (a) or the deemed amount under paragraph (b), the lesser of
11.24(i) the combined earned income of the couple or (ii) the amount of the maximum limit for
11.25one qualified individual under section 21(c) and (d) of the Internal Revenue Code will
11.26be deemed to be the employment related expense paid for that child. The earned income
11.27limitation of section 21(d) of the Internal Revenue Code shall not apply to this deemed
11.28amount. These deemed amounts apply regardless of whether any employment-related
11.29expenses have been paid.
11.30(d) If the taxpayer is not required and does not file a federal individual income tax
11.31return for the tax year, no credit is allowed for any amount paid to any person unless:
11.32(1) the name, address, and taxpayer identification number of the person are included
11.33on the return claiming the credit; or
11.34(2) if the person is an organization described in section 501(c)(3) of the Internal
11.35Revenue Code and exempt from tax under section 501(a) of the Internal Revenue Code,
11.36the name and address of the person are included on the return claiming the credit.
12.1In the case of a failure to provide the information required under the preceding sentence,
12.2the preceding sentence does not apply if it is shown that the taxpayer exercised due
12.3diligence in attempting to provide the information required.
12.4In the case of a nonresident, part-year resident, or a person who has earned income
12.5not subject to tax under this chapter including earned income excluded pursuant to section
12.6290.01, subdivision 19b , clause (9) or (15), the credit determined under section 21 of the
12.7Internal Revenue Code must be allocated based on the ratio by which the earned income
12.8of the claimant and the claimant's spouse from Minnesota sources bears to the total earned
12.9income of the claimant and the claimant's spouse.
12.10For residents of Minnesota, the subtractions for military pay under section 290.01,
12.11subdivision 19b , clauses (10) and (11), are not considered "earned income not subject to
12.12tax under this chapter."
12.13For residents of Minnesota, the exclusion of combat pay under section 112 of the
12.14Internal Revenue Code is not considered "earned income not subject to tax under this
12.15chapter."

12.16    Sec. 13. Minnesota Statutes 2011 Supplement, section 290.0671, subdivision 1,
12.17is amended to read:
12.18    Subdivision 1. Credit allowed. (a) An individual is allowed a credit against the tax
12.19imposed by this chapter equal to a percentage of earned income. To receive a credit, a
12.20taxpayer must be eligible for a credit under section 32 of the Internal Revenue Code.
12.21(b) For individuals with no qualifying children, the credit equals 1.9125 percent of
12.22the first $4,620 of earned income. The credit is reduced by 1.9125 percent of earned
12.23income or adjusted gross income, whichever is greater, in excess of $5,770, but in no
12.24case is the credit less than zero.
12.25(c) For individuals with one qualifying child, the credit equals 8.5 percent of the first
12.26$6,920 of earned income and 8.5 percent of earned income over $12,080 but less than
12.27$13,450. The credit is reduced by 5.73 percent of earned income or adjusted gross income,
12.28whichever is greater, in excess of $15,080, but in no case is the credit less than zero.
12.29(d) For individuals with two or more qualifying children, the credit equals ten
12.30percent of the first $9,720 of earned income and 20 percent of earned income over
12.31$14,860 but less than $16,800. The credit is reduced by 10.3 percent of earned income
12.32or adjusted gross income, whichever is greater, in excess of $17,890, but in no case is
12.33the credit less than zero.
12.34(e) For a nonresident or part-year resident, the credit must be allocated based on the
12.35percentage calculated under section 290.06, subdivision 2c, paragraph (e).
13.1(f) For a person who was a resident for the entire tax year and has earned income
13.2not subject to tax under this chapter, including income excluded under section 290.01,
13.3subdivision 19b , clause (9) or (15), the credit must be allocated based on the ratio of
13.4federal adjusted gross income reduced by the earned income not subject to tax under
13.5this chapter over federal adjusted gross income. For purposes of this paragraph, the
13.6subtractions for military pay under section 290.01, subdivision 19b, clauses (10) and (11),
13.7are not considered "earned income not subject to tax under this chapter."
13.8For the purposes of this paragraph, the exclusion of combat pay under section 112
13.9of the Internal Revenue Code is not considered "earned income not subject to tax under
13.10this chapter."
13.11(g) For tax years beginning after December 31, 2007, and before December 31,
13.122010, the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in
13.13paragraph (d), after being adjusted for inflation under subdivision 7, are each increased by
13.14$3,000 for married taxpayers filing joint returns. For tax years beginning after December
13.1531, 2008, the commissioner shall annually adjust the $3,000 by the percentage determined
13.16pursuant to the provisions of section 1(f) of the Internal Revenue Code, except that in
13.17section 1(f)(3)(B), the word "2007" shall be substituted for the word "1992." For 2009,
13.18the commissioner shall then determine the percent change from the 12 months ending on
13.19August 31, 2007, to the 12 months ending on August 31, 2008, and in each subsequent
13.20year, from the 12 months ending on August 31, 2007, to the 12 months ending on August
13.2131 of the year preceding the taxable year. The earned income thresholds as adjusted
13.22for inflation must be rounded to the nearest $10. If the amount ends in $5, the amount
13.23is rounded up to the nearest $10. The determination of the commissioner under this
13.24subdivision is not a rule under the Administrative Procedure Act.
13.25(h) For tax years beginning after December 31, 2010, and before January 1, 2012,
13.26the $5,770 in paragraph (b), the $15,080 in paragraph (c), and the $17,890 in paragraph
13.27(d), after being adjusted for inflation under subdivision 7, are each increased by $5,000
13.28for married taxpayers filing joint returns. For tax years beginning after December 31,
13.292010, and before January 1, 2012, the commissioner shall annually adjust the $5,000
13.30by the percentage determined pursuant to the provisions of section 1(f) of the Internal
13.31Revenue Code, except that in section 1(f)(3)(B), the word "2008" shall be substituted for
13.32the word "1992." For 2011, the commissioner shall then determine the percent change
13.33from the 12 months ending on August 31, 2008, to the 12 months ending on August
13.3431, 2010. The earned income thresholds as adjusted for inflation must be rounded to
13.35the nearest $10. If the amount ends in $5, the amount is rounded up to the nearest $10.
14.1The determination of the commissioner under this subdivision is not a rule under the
14.2Administrative Procedure Act.
14.3(i) The commissioner shall construct tables showing the amount of the credit at
14.4various income levels and make them available to taxpayers. The tables shall follow
14.5the schedule contained in this subdivision, except that the commissioner may graduate
14.6the transition between income brackets.

14.7    Sec. 14. Minnesota Statutes 2011 Supplement, section 290.091, subdivision 2, is
14.8amended to read:
14.9    Subd. 2. Definitions. For purposes of the tax imposed by this section, the following
14.10terms have the meanings given:
14.11    (a) "Alternative minimum taxable income" means the sum of the following for
14.12the taxable year:
14.13    (1) the taxpayer's federal alternative minimum taxable income as defined in section
14.1455(b)(2) of the Internal Revenue Code;
14.15    (2) the taxpayer's itemized deductions allowed in computing federal alternative
14.16minimum taxable income, but excluding:
14.17    (i) the charitable contribution deduction under section 170 of the Internal Revenue
14.18Code;
14.19    (ii) the medical expense deduction;
14.20    (iii) the casualty, theft, and disaster loss deduction; and
14.21    (iv) the impairment-related work expenses of a disabled person;
14.22    (3) for depletion allowances computed under section 613A(c) of the Internal
14.23Revenue Code, with respect to each property (as defined in section 614 of the Internal
14.24Revenue Code), to the extent not included in federal alternative minimum taxable income,
14.25the excess of the deduction for depletion allowable under section 611 of the Internal
14.26Revenue Code for the taxable year over the adjusted basis of the property at the end of the
14.27taxable year (determined without regard to the depletion deduction for the taxable year);
14.28    (4) to the extent not included in federal alternative minimum taxable income, the
14.29amount of the tax preference for intangible drilling cost under section 57(a)(2) of the
14.30Internal Revenue Code determined without regard to subparagraph (E);
14.31    (5) to the extent not included in federal alternative minimum taxable income, the
14.32amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and
14.33    (6) the amount of addition required by section 290.01, subdivision 19a, clauses (7)
14.34to (9), (12), (13), and (16) to (18);
14.35    less the sum of the amounts determined under the following:
15.1    (1) interest income as defined in section 290.01, subdivision 19b, clause (1);
15.2    (2) an overpayment of state income tax as provided by section 290.01, subdivision
15.319b , clause (2), to the extent included in federal alternative minimum taxable income;
15.4    (3) the amount of investment interest paid or accrued within the taxable year on
15.5indebtedness to the extent that the amount does not exceed net investment income, as
15.6defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include
15.7amounts deducted in computing federal adjusted gross income;
15.8    (4) amounts subtracted from federal taxable income as provided by section 290.01,
15.9subdivision 19b , clauses (6), (8) to (15) (14), and (17) (16); and
15.10(5) the amount of the net operating loss allowed under section 290.095, subdivision
15.1111, paragraph (c).
15.12    In the case of an estate or trust, alternative minimum taxable income must be
15.13computed as provided in section 59(c) of the Internal Revenue Code.
15.14    (b) "Investment interest" means investment interest as defined in section 163(d)(3)
15.15of the Internal Revenue Code.
15.16    (c) "Net minimum tax" means the minimum tax imposed by this section.
15.17    (d) "Regular tax" means the tax that would be imposed under this chapter (without
15.18regard to this section and section 290.032), reduced by the sum of the nonrefundable
15.19credits allowed under this chapter.
15.20    (e) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable
15.21income after subtracting the exemption amount determined under subdivision 3.

15.22    Sec. 15. Minnesota Statutes 2010, section 290.0921, subdivision 3, is amended to read:
15.23    Subd. 3. Alternative minimum taxable income. "Alternative minimum taxable
15.24income" is Minnesota net income as defined in section 290.01, subdivision 19, and
15.25includes the adjustments and tax preference items in sections 56, 57, 58, and 59(d), (e),
15.26(f), and (h) of the Internal Revenue Code. If a corporation files a separate company
15.27Minnesota tax return, the minimum tax must be computed on a separate company basis.
15.28If a corporation is part of a tax group filing a unitary return, the minimum tax must be
15.29computed on a unitary basis. The following adjustments must be made.
15.30(1) For purposes of the depreciation adjustments under section 56(a)(1) and
15.3156(g)(4)(A) of the Internal Revenue Code, the basis for depreciable property placed in
15.32service in a taxable year beginning before January 1, 1990, is the adjusted basis for federal
15.33income tax purposes, including any modification made in a taxable year under section
15.34290.01, subdivision 19e , or Minnesota Statutes 1986, section 290.09, subdivision 7,
15.35paragraph (c).
16.1For taxable years beginning after December 31, 2000, the amount of any remaining
16.2modification made under section 290.01, subdivision 19e, or Minnesota Statutes 1986,
16.3section 290.09, subdivision 7, paragraph (c), not previously deducted is a depreciation
16.4allowance in the first taxable year after December 31, 2000.
16.5(2) The portion of the depreciation deduction allowed for federal income tax
16.6purposes under section 168(k) of the Internal Revenue Code that is required as an
16.7addition under section 290.01, subdivision 19c, clause (15), is disallowed in determining
16.8alternative minimum taxable income.
16.9(3) The subtraction for depreciation allowed under section 290.01, subdivision 19d,
16.10clause (17), is allowed as a depreciation deduction in determining alternative minimum
16.11taxable income.
16.12(4) The alternative tax net operating loss deduction under sections 56(a)(4) and 56(d)
16.13of the Internal Revenue Code does not apply.
16.14(5) The special rule for certain dividends under section 56(g)(4)(C)(ii) of the Internal
16.15Revenue Code does not apply.
16.16(6) The special rule for dividends from section 936 companies under section
16.1756(g)(4)(C)(iii) does not apply.
16.18(7) The tax preference for depletion under section 57(a)(1) of the Internal Revenue
16.19Code does not apply.
16.20(8) The tax preference for intangible drilling costs under section 57(a)(2) of the
16.21Internal Revenue Code must be calculated without regard to subparagraph (E) and the
16.22subtraction under section 290.01, subdivision 19d, clause (4).
16.23(9) The tax preference for tax exempt interest under section 57(a)(5) of the Internal
16.24Revenue Code does not apply.
16.25(10) The tax preference for charitable contributions of appreciated property under
16.26section 57(a)(6) of the Internal Revenue Code does not apply.
16.27(11) For purposes of calculating the tax preference for accelerated depreciation or
16.28amortization on certain property placed in service before January 1, 1987, under section
16.2957(a)(7) of the Internal Revenue Code, the deduction allowable for the taxable year is the
16.30deduction allowed under section 290.01, subdivision 19e.
16.31For taxable years beginning after December 31, 2000, the amount of any remaining
16.32modification made under section 290.01, subdivision 19e, not previously deducted is a
16.33depreciation or amortization allowance in the first taxable year after December 31, 2004.
16.34(12) For purposes of calculating the adjustment for adjusted current earnings in
16.35section 56(g) of the Internal Revenue Code, the term "alternative minimum taxable
16.36income" as it is used in section 56(g) of the Internal Revenue Code, means alternative
17.1minimum taxable income as defined in this subdivision, determined without regard to the
17.2adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code.
17.3(13) For purposes of determining the amount of adjusted current earnings under
17.4section 56(g)(3) of the Internal Revenue Code, no adjustment shall be made under section
17.556(g)(4) of the Internal Revenue Code with respect to (i) the amount of foreign dividend
17.6gross-up subtracted as provided in section 290.01, subdivision 19d, clause (1), (ii) the
17.7amount of refunds of income, excise, or franchise taxes subtracted as provided in section
17.8290.01, subdivision 19d , clause (9), or (iii) the amount of royalties, fees or other like
17.9income subtracted as provided in section 290.01, subdivision 19d, clause (10).
17.10(14) Alternative minimum taxable income excludes the income from operating in a
17.11job opportunity building zone as provided under section 469.317.
17.12(15) Alternative minimum taxable income excludes the income from operating in a
17.13biotechnology and health sciences industry zone as provided under section 469.337.
17.14(16) Alternative minimum taxable income excludes the income from operating in an
17.15international economic development zone as provided under section 469.326.
17.16Items of tax preference must not be reduced below zero as a result of the
17.17modifications in this subdivision.

17.18    Sec. 16. Minnesota Statutes 2011 Supplement, section 290.0922, subdivision 2,
17.19is amended to read:
17.20    Subd. 2. Exemptions. The following entities are exempt from the tax imposed
17.21by this section:
17.22(1) corporations exempt from tax under section 290.05;
17.23(2) real estate investment trusts;
17.24(3) regulated investment companies or a fund thereof; and
17.25(4) entities having a valid election in effect under section 860D(b) of the Internal
17.26Revenue Code;
17.27(5) town and farmers' mutual insurance companies;
17.28(6) cooperatives organized under chapter 308A or 308B that provide housing
17.29exclusively to persons age 55 and over and are classified as homesteads under section
17.30273.124, subdivision 3 ; and
17.31(7) a qualified business as defined under section 469.310, subdivision 11, if for the
17.32taxable year all of its property is located in a job opportunity building zone designated
17.33under section 469.314 and all of its payroll is a job opportunity building zone payroll
17.34under section 469.310; and.
18.1(8) an entity, if for the taxable year all of its property is located in an international
18.2economic development zone designated under section 469.322, and all of its payroll is
18.3international economic development zone payroll under section 469.321. The exemption
18.4under this clause applies to taxable years beginning during the duration of the international
18.5economic development zone.
18.6Entities not specifically exempted by this subdivision are subject to tax under this
18.7section, notwithstanding section 290.05.

18.8    Sec. 17. Minnesota Statutes 2011 Supplement, section 290.0922, subdivision 3,
18.9is amended to read:
18.10    Subd. 3. Definitions. (a) "Minnesota sales or receipts" means the total sales
18.11apportioned to Minnesota pursuant to section 290.191, subdivision 5, the total receipts
18.12attributed to Minnesota pursuant to section 290.191, subdivisions 6 to 8, and/or the
18.13total sales or receipts apportioned or attributed to Minnesota pursuant to any other
18.14apportionment formula applicable to the taxpayer.
18.15(b) "Minnesota property" means total Minnesota tangible property as provided in
18.16section 290.191, subdivisions 9 to 11, any other tangible property located in Minnesota,
18.17but does not include: (1) the property of a qualified business as defined under section
18.18469.310, subdivision 11 , that is located in a job opportunity building zone designated under
18.19section 469.314, and (2) property of a qualified business located in a biotechnology and
18.20health sciences industry zone designated under section 469.334, or (3) for taxable years
18.21beginning during the duration of the zone, property of a qualified business located in the
18.22international economic development zone designated under section 469.322. Intangible
18.23property shall not be included in Minnesota property for purposes of this section.
18.24Taxpayers who do not utilize tangible property to apportion income shall nevertheless
18.25include Minnesota property for purposes of this section. On a return for a short taxable
18.26year, the amount of Minnesota property owned, as determined under section 290.191,
18.27shall be included in Minnesota property based on a fraction in which the numerator is the
18.28number of days in the short taxable year and the denominator is 365.
18.29(c) "Minnesota payrolls" means total Minnesota payrolls as provided in section
18.30290.191, subdivision 12 , but does not include: (1) the job opportunity building zone
18.31payroll under section 469.310, subdivision 8, of a qualified business as defined under
18.32section 469.310, subdivision 11, and (2) biotechnology and health sciences industry zone
18.33payrolls under section 469.330, subdivision 8, or (3) for taxable years beginning during
18.34the duration of the zone, international economic development zone payrolls under section
19.1469.321, subdivision 9. Taxpayers who do not utilize payrolls to apportion income shall
19.2nevertheless include Minnesota payrolls for purposes of this section.

19.3    Sec. 18. Minnesota Statutes 2011 Supplement, section 297A.75, subdivision 1, is
19.4amended to read:
19.5    Subdivision 1. Tax collected. The tax on the gross receipts from the sale of the
19.6following exempt items must be imposed and collected as if the sale were taxable and the
19.7rate under section 297A.62, subdivision 1, applied. The exempt items include:
19.8    (1) capital equipment exempt under section 297A.68, subdivision 5;
19.9    (2) building materials for an agricultural processing facility exempt under section
19.10297A.71, subdivision 13 ;
19.11    (3) building materials for mineral production facilities exempt under section
19.12297A.71, subdivision 14 ;
19.13    (4) building materials for correctional facilities under section 297A.71, subdivision
19.143 ;
19.15    (5) building materials used in a residence for disabled veterans exempt under section
19.16297A.71, subdivision 11 ;
19.17    (6) elevators and building materials exempt under section 297A.71, subdivision 12;
19.18    (7) building materials for the Long Lake Conservation Center exempt under section
19.19297A.71, subdivision 17 ;
19.20    (8) materials and supplies for qualified low-income housing under section 297A.71,
19.21subdivision 23 ;
19.22    (9) materials, supplies, and equipment for municipal electric utility facilities under
19.23section 297A.71, subdivision 35;
19.24    (10) equipment and materials used for the generation, transmission, and distribution
19.25of electrical energy and an aerial camera package exempt under section 297A.68,
19.26subdivision 37;
19.27    (11) tangible personal property and taxable services and construction materials,
19.28supplies, and equipment exempt under section 297A.68, subdivision 41;
19.29    (12) commuter rail vehicle and repair parts under section 297A.70, subdivision
19.303, clause (11);
19.31    (13) (12) materials, supplies, and equipment for construction or improvement of
19.32projects and facilities under section 297A.71, subdivision 40;
19.33(14) (13) materials, supplies, and equipment for construction or improvement of a
19.34meat processing facility exempt under section 297A.71, subdivision 41;
20.1(15) (14) materials, supplies, and equipment for construction, improvement, or
20.2expansion of an aerospace defense manufacturing facility exempt under section 297A.71,
20.3subdivision 42; and
20.4(16) (15) enterprise information technology equipment and computer software for
20.5use in a qualified data center exempt under section 297A.68, subdivision 42.

20.6    Sec. 19. Minnesota Statutes 2010, section 469.015, subdivision 4, is amended to read:
20.7    Subd. 4. Exceptions. (a) An authority need not require competitive bidding in the
20.8following circumstances:
20.9(1) in the case of a contract for the acquisition of a low-rent housing project:
20.10(i) for which financial assistance is provided by the federal government;
20.11(ii) which does not require any direct loan or grant of money from the municipality
20.12as a condition of the federal financial assistance; and
20.13(iii) for which the contract provides for the construction of the project upon land that
20.14is either owned by the authority for redevelopment purposes or not owned by the authority
20.15at the time of the contract but the contract provides for the conveyance or lease to the
20.16authority of the project or improvements upon completion of construction;
20.17(2) with respect to a structured parking facility:
20.18(i) constructed in conjunction with, and directly above or below, a development; and
20.19(ii) financed with the proceeds of tax increment or parking ramp general obligation
20.20or revenue bonds; and
20.21(3) until August 1, 2009, with respect to a facility built for the purpose of facilitating
20.22the operation of public transit or encouraging its use:
20.23(i) constructed in conjunction with, and directly above or below, a development; and
20.24(ii) financed with the proceeds of parking ramp general obligation or revenue bonds
20.25or with at least 60 percent of the construction cost being financed with funding provided
20.26by the federal government; and
20.27(4) in the case of any building in which at least 75 percent of the usable square
20.28footage constitutes a housing development project if:
20.29(i) the project is financed with the proceeds of bonds issued under section 469.034 or
20.30from nongovernmental sources;
20.31(ii) the project is either located on land that is owned or is being acquired by the
20.32authority only for development purposes, or is not owned by the authority at the time the
20.33contract is entered into but the contract provides for conveyance or lease to the authority
20.34of the project or improvements upon completion of construction; and
21.1(iii) the authority finds and determines that elimination of the public bidding
21.2requirements is necessary in order for the housing development project to be economical
21.3and feasible.
21.4(b) An authority need not require a performance bond for the following projects:
21.5(1) a contract described in paragraph (a), clause (1);
21.6(2) a construction change order for a housing project in which 30 percent of the
21.7construction has been completed;
21.8(3) a construction contract for a single-family housing project in which the authority
21.9acts as the general construction contractor; or
21.10(4) a services or materials contract for a housing project.
21.11For purposes of this paragraph, "services or materials contract" does not include
21.12construction contracts.

21.13    Sec. 20. Minnesota Statutes 2010, section 469.033, subdivision 7, is amended to read:
21.14    Subd. 7. Inactive authorities; transfer of funds; dissolution. The authority may
21.15transfer to the city in and for which it was created all property, assets, cash or other
21.16funds held or used by the authority which were derived from the special benefit tax
21.17for redevelopment levied pursuant to subdivision 6 prior to March 6, 1953, whenever
21.18collected. Upon any such transfer, an authority shall not thereafter levy the tax or exercise
21.19the redevelopment powers of sections 469.001 to 469.047. All cash or other funds
21.20transferred to the city shall be used exclusively for permanent improvements in the city
21.21or the retirement of debts or bonds incurred for permanent improvements in the city.
21.22An authority which transfers its property, assets, cash, or other funds derived from the
21.23special benefit tax for redevelopment and which has not entered into a contract with
21.24the federal government with respect to any low-rent public housing project prior to
21.25March 6, 1953, shall be dissolved as herein provided in this subdivision. After a public
21.26hearing after ten days' published notice thereof in a newspaper of general circulation in
21.27the city, the governing body of a city in and for which an authority has been created
21.28may dissolve the authority if the authority has not entered into any contract with the
21.29federal government or any agency or instrumentality thereof for a loan or a grant with
21.30respect to any urban redevelopment or low-rent public housing project that remains in
21.31effect. The resolution or ordinance dissolving the authority shall be published in the
21.32same manner in which ordinances are published in the city and the authority shall be
21.33dissolved when the resolution or ordinance becomes finally effective. The clerk of the
21.34governing body of the municipality shall furnish to the commissioner of employment and
21.35economic development a certified copy of the resolution or ordinance of the governing
22.1body dissolving the authority. All property, records, assets, cash, or other funds held or
22.2used by an authority shall be transferred to and become the property of the municipality
22.3and cash or other funds shall be used as herein provided. Upon dissolution of an authority,
22.4all rights of an authority against any person, firm, or corporation shall accrue to and
22.5be enforced by the municipality.

22.6    Sec. 21. Minnesota Statutes 2010, section 469.166, subdivision 3, is amended to read:
22.7    Subd. 3. Border city enterprise zone. "Border city enterprise zone" means an area
22.8in the state designated as such an enterprise zone by the commissioner in the cities of
22.9Breckenridge, Dilworth, East Grand Forks, Moorhead, or Ortonville.

22.10    Sec. 22. Minnesota Statutes 2010, section 469.166, subdivision 5, is amended to read:
22.11    Subd. 5. Municipality. "Municipality" means a city, or a county for an area located
22.12outside the boundaries of a city. If an area lies in two or more cities or in both incorporated
22.13and unincorporated areas, "municipality" shall include an entity formed pursuant to
22.14section 471.59 by the governing bodies of the cities with jurisdiction over the incorporated
22.15area and the counties with jurisdiction over the unincorporated area.

22.16    Sec. 23. Minnesota Statutes 2010, section 469.166, subdivision 6, is amended to read:
22.17    Subd. 6. Governing body. "Governing body" means the county board in the case
22.18of a county, the city council or other body designated by its the charter in the case of a
22.19of the city, or the tribal or federal agency recognized as the governing body of an Indian
22.20reservation by the United States Secretary of the Interior.

22.21    Sec. 24. Minnesota Statutes 2010, section 469.167, subdivision 2, is amended to read:
22.22    Subd. 2. Duration. The designation of an area as an a border city enterprise zone
22.23shall be effective for seven years after the date of designation, except that enterprise zones
22.24in border cities eligible to receive allocations for tax reductions under section 469.169,
22.25subdivisions 7 and 8 , and under section 469.171, subdivision 6a or 6b, shall be is effective
22.26until terminated by resolution adopted by the city in which the border city enterprise
22.27zone is located.

22.28    Sec. 25. Minnesota Statutes 2010, section 469.171, subdivision 1, is amended to read:
22.29    Subdivision 1. Authorized types. (a) The following types of tax reductions may
22.30be approved by the commissioner for businesses located in an a border city enterprise
22.31zone, after the governing body of the border city has designated an area or areas, each
23.1consisting of at least 100 acres, of the city not in excess of a total of 400 acres in which the
23.2tax reductions may be provided:
23.3(1) an exemption from the general sales tax imposed by chapter 297A for purchases
23.4of construction materials or equipment for use in the zone if the purchase was made
23.5after the date of application for the zone;
23.6(2) a credit against the income tax of an employer for additional workers employed
23.7in the zone, other than workers employed in construction, up to a maximum of $3,000
23.8per employee per year;
23.9(3) an income tax credit for a percentage of the cost of debt financing to construct
23.10new or expanded facilities in the zone; and
23.11(4) a state paid property tax credit for a portion of the property taxes paid by a new
23.12commercial or industrial facility or the additional property taxes paid by an expansion of
23.13an existing commercial or industrial facility in the zone.
23.14(b) An application for a tax reduction under this subdivision may not be approved
23.15unless the governing body finds that the construction or improvement of the facility is
23.16not likely to have the effect of transferring existing employment from a location outside
23.17of the municipality but within the state.

23.18    Sec. 26. Minnesota Statutes 2010, section 469.171, subdivision 4, is amended to read:
23.19    Subd. 4. Restriction. The tax reductions provided by this section shall not
23.20apply to (1) a facility the primary purpose of which is one of the following: retail food
23.21and beverage services, automobile sales or service, or the provision of recreation or
23.22entertainment, or a private or commercial golf course, country club, massage parlor, tennis
23.23club, skating facility including roller skating, skateboard, and ice skating, racquet sports
23.24facility, including any handball or racquetball court, hot tub facility, suntan facility, or
23.25racetrack; (2) property of a public utility; (3) property used in the operation of a financial
23.26institution; (4) property owned by a fraternal or veterans' organization; or (5) property of a
23.27business operating under a franchise agreement that requires the business to be located in
23.28the state; except that, in an enterprise zone designated under section 469.168, subdivision
23.294, paragraph (c) , that is not in a city of the first class, tax reductions may be provided to
23.30a retail food or beverage facility or an automobile sales or service facility, or a business
23.31operating under a franchise agreement that requires the business to be located in this state
23.32except for such a franchised retail food or beverage facility.

23.33    Sec. 27. Minnesota Statutes 2010, section 469.171, subdivision 6a, is amended to read:
24.1    Subd. 6a. Additional border city allocations. In addition to tax reductions
24.2authorized in section 469.169, subdivisions 7 and 8, The commissioner may allocate
24.3$2,000,000 for tax reductions pursuant to subdivision 9 to border city enterprise zones
24.4designated under section 469.168, subdivision 4, paragraph (c), except for zones located
24.5in cities of the first class. This money shall be allocated among the zones on a per
24.6capita basis. Limits on the maximum allocation to a zone imposed by section 469.169,
24.7subdivision 7 , do not apply to allocations made under this subdivision. Tax reductions
24.8authorized by this subdivision may not be allocated to any property which is:
24.9(1) a facility the primary purpose of which is one of the following: the provision
24.10of recreation or entertainment, or a private or commercial golf course, country club,
24.11massage parlor, tennis club, skating facility including roller skating, skateboard, and
24.12ice skating, racquet sports facility, including any handball or racquetball court, hot tub
24.13facility, suntan facility, or racetrack;
24.14(2) property of a public utility;
24.15(3) property used in the operation of a financial institution;
24.16(4) property owned by a fraternal or veterans' organization;
24.17(5) property of a retail food or beverage service business operating under a franchise
24.18agreement that requires the business to be located in the state.

24.19    Sec. 28. Minnesota Statutes 2010, section 469.171, subdivision 7, is amended to read:
24.20    Subd. 7. Duration. Each tax reduction provided to a business pursuant to this
24.21subdivision shall terminate not longer than five years after the effective date of the tax
24.22reduction for the business unless the business is located in a border city enterprise zone
24.23designated under section 469.168, subdivision 4, paragraph (c), that is not a city of the
24.24first class. Each tax reduction provided to a business that is located in a border city
24.25enterprise zone designated under section 469.168, subdivision 4, paragraph (c), that is not
24.26located in a city of the first class, may be provided until the allocations provided under
24.27subdivision 6a, and under section 469.169, subdivisions 7 and 8, have been expended.
24.28Subject to the limitation in this subdivision, the tax reductions may be provided after
24.29expiration of the zone's designation.

24.30    Sec. 29. Minnesota Statutes 2010, section 469.171, subdivision 9, is amended to read:
24.31    Subd. 9. Recapture. Any business that (1) receives tax reductions authorized by
24.32subdivisions 1 to 8, classification as employment property pursuant to section 469.170, or
24.33an alternative local contribution under section 469.169, subdivision 5; and (2) ceases to
24.34operate its facility located within the border city enterprise zone shall repay the amount of
25.1the tax reduction or local contribution received during the two years immediately before
25.2it ceased to operate in the zone.
25.3The repayment must be paid to the state to the extent it represents a tax reduction
25.4under subdivisions 1 to 8 and to the municipality to the extent it represents a property tax
25.5reduction or other local contribution. Any amount repaid to the state must be credited
25.6to the amount certified as available for tax reductions in the zone pursuant to section
25.7469.169, subdivision 7 the city's allocation. Any amount repaid to the municipality must
25.8be used by the municipality for economic development purposes. The commissioner of
25.9revenue may seek repayment of tax credits from a business ceasing to operate within an
25.10enterprise zone by utilizing any remedies available for the collection of tax.

25.11    Sec. 30. Minnesota Statutes 2010, section 469.171, subdivision 11, is amended to read:
25.12    Subd. 11. Limitations; last eight months of duration. This subdivision applies
25.13only to state tax reductions first authorized by the municipality to be provided to a business
25.14within eight months of the expiration of the border city enterprise zone's designation.
25.15Before agreeing with a business to provide tax reductions, the municipality must
25.16submit the proposed tax reductions to the commissioner for approval. The commissioner
25.17shall review and analyze the proposal in light of, at least: (1) the proposed investment that
25.18the business will make in the zone, (2) the number and quality of new jobs that will be
25.19created in the zone, (3) the overall positive impact on economic activity in the zone, and
25.20(4) the extent to which the impacts in clauses (1) to (3) are dependent upon providing the
25.21state tax reductions to the business. The commissioner shall disapprove the proposal if the
25.22commissioner determines the public benefits of increased investment and employment
25.23resulting from the tax reductions is disproportionately small relative to the cost of the
25.24state tax reductions. If the commissioner disapproves of the proposal, the tax reductions
25.25are not allowed to the business.
25.26If the municipality submits the proposal to the commissioner before expiration
25.27of the zone designation, the authority to grant the tax reductions continues until the
25.28commissioner acts on the proposal.

25.29    Sec. 31. Minnesota Statutes 2010, section 469.172, is amended to read:
25.30469.172 DEVELOPMENT AND REDEVELOPMENT POWERS.
25.31Notwithstanding any contrary provision of law or charter, any city of the first or
25.32second class that contains an a border city enterprise zone or that has been designated as
25.33an enterprise zone may, in addition to its other powers, exercise the powers granted to
25.34a governmental subdivision by sections 469.001 to 469.047, 469.048 to 469.068, and
26.1469.109 to 469.113. Section 469.059, subdivision 15, shall apply applies to the city in
26.2the exercise of the powers granted pursuant to this section. It may exercise the powers
26.3assigned to redevelopment agencies pursuant to sections 469.152 to 469.165, without
26.4limitation to further the purposes of sections 469.001 to 469.047, 469.048 to 469.068, and
26.5469.109 to 469.134. It may exercise the powers set forth in sections 469.001 to 469.047,
26.6469.048 to 469.068, and 469.109 to 469.164 without limitation to further the purposes
26.7and policies set forth in sections 469.152 to 469.165. It may exercise the powers granted
26.8by this subdivision and any other development or redevelopment powers authorized by
26.9other laws, including sections 469.124 to 469.134 and 469.152 to 469.165, independently
26.10or in conjunction with each other as though all the powers had been granted to a single
26.11entity. Any project undertaken to accomplish the purposes of sections 469.001 to 469.047
26.12that qualifies as single-family housing under section 462C.02, subdivision 4, shall be is
26.13subject to the provisions of chapter 462C.
26.14Upon expiration of the designation of the enterprise zone, the powers granted by
26.15this subdivision may be exercised only with respect to any project, program, or activity
26.16commenced or established prior to that date. The powers granted by this subdivision may
26.17only be exercised within the zone.

26.18    Sec. 32. Minnesota Statutes 2010, section 469.173, subdivision 5, is amended to read:
26.19    Subd. 5. Information sharing. Pursuant to section 270B.14, subdivision 3,
26.20the commissioner of revenue may share information with the commissioner or with a
26.21municipality receiving an enterprise zone designation, insofar as necessary to administer
26.22the funding limitations provided by section 469.169, subdivision 7.

26.23    Sec. 33. Minnesota Statutes 2010, section 469.173, subdivision 6, is amended to read:
26.24    Subd. 6. Zone boundary realignment. The commissioner may approve specific
26.25applications by a municipality to amend the boundaries of a border city enterprise zone
26.26or of an area or areas designated pursuant to section 469.171, subdivision 5, at any time.
26.27Boundaries of a zone may not be amended to create noncontiguous subdivisions. If the
26.28commissioner approves the amended boundaries, the change is effective on the date of
26.29approval. Notwithstanding the area limitation under section 469.168, subdivision 3, the
26.30commissioner may approve a specific application to amend the boundaries of an enterprise
26.31zone which is located within five municipalities and was designated in 1984, to increase
26.32its area to not more than 800 acres, and may approve an additional specific application to
26.33amend the boundaries of that enterprise zone to include a sixth municipality or to further
27.1increase its area to include all or part of the territory of a town that surrounds one of
27.2the five municipalities, or both.
27.3Notwithstanding the area limitation under section 469.168, subdivision 3, the
27.4commissioner may approve a specific application to amend the boundaries of an enterprise
27.5zone that is located within four municipalities to include a fifth municipality. The addition
27.6of the fifth municipality may only be approved after the existing municipalities, by
27.7adoption of a resolution by each municipality's governing board, agree to the addition
27.8of the fifth municipality.

27.9    Sec. 34. Minnesota Statutes 2010, section 469.174, subdivision 20, is amended to read:
27.10    Subd. 20. Internal Revenue Code. "Internal Revenue Code" means the Internal
27.11Revenue Code of 1986, as amended through December 31, 1993.

27.12    Sec. 35. Minnesota Statutes 2010, section 469.174, subdivision 25, is amended to read:
27.13    Subd. 25. Increment. "Increment," "tax increment," "tax increment revenues,"
27.14"revenues derived from tax increment," and other similar terms for a district include:
27.15(1) taxes paid by the captured net tax capacity, but excluding any excess taxes, as
27.16computed under section 469.177;
27.17(2) the proceeds from the sale or lease of property, tangible or intangible, to the
27.18extent the property was purchased by the authority with tax increments;
27.19(3) principal and interest received on loans or other advances made by the authority
27.20with tax increments;
27.21(4) interest or other investment earnings on or from tax increments; and
27.22(5) repayments or return of tax increments made to the authority under agreements
27.23for districts for which the request for certification was made after August 1, 1993; and
27.24(6) the market value homestead credit paid to the authority under section 273.1384.

27.25    Sec. 36. Minnesota Statutes 2010, section 469.176, subdivision 7, is amended to read:
27.26    Subd. 7. Parcels not includable in districts. (a) The authority may request
27.27inclusion in a tax increment financing district and the county auditor may certify the
27.28original tax capacity of a parcel or a part of a parcel that qualified under the provisions of
27.29section 273.111 or, 273.112, 273.114, or chapter 473H for taxes payable in any of the five
27.30calendar years before the filing of the request for certification only for:
27.31    (1) a district in which 85 percent or more of the planned buildings and facilities
27.32(determined on the basis of square footage) are a qualified manufacturing facility or a
27.33qualified distribution facility or a combination of both; or
28.1    (2) a housing district.
28.2    (b)(1) A distribution facility means buildings and other improvements to real
28.3property that are used to conduct activities in at least each of the following categories:
28.4    (i) to store or warehouse tangible personal property;
28.5    (ii) to take orders for shipment, mailing, or delivery;
28.6    (iii) to prepare personal property for shipment, mailing, or delivery; and
28.7    (iv) to ship, mail, or deliver property.
28.8    (2) A manufacturing facility includes space used for manufacturing or producing
28.9tangible personal property, including processing resulting in the change in condition of the
28.10property, and space necessary for and related to the manufacturing activities.
28.11    (3) To be a qualified facility, the owner or operator of a manufacturing or distribution
28.12facility must agree to pay and pay 90 percent or more of the employees of the facility at
28.13a rate equal to or greater than 160 percent of the federal minimum wage for individuals
28.14over the age of 20.

28.15    Sec. 37. Minnesota Statutes 2010, section 469.1763, subdivision 6, is amended to read:
28.16    Subd. 6. Pooling permitted for deficits. (a) This subdivision applies only to
28.17districts for which the request for certification was made before August 1, 2001, and
28.18without regard to whether the request for certification was made prior to August 1, 1979.
28.19(b) The municipality for the district may transfer available increments from another
28.20tax increment financing district located in the municipality, if the transfer is necessary to
28.21eliminate a deficit in the district to which the increments are transferred. The municipality
28.22may transfer increments as provided by this subdivision without regard to whether the
28.23transfer or expenditure is authorized by the tax increment financing plan for the district
28.24from which the transfer is made. A deficit in the district for purposes of this subdivision
28.25means the lesser of the following two amounts:
28.26(1)(i) the amount due during the calendar year to pay preexisting obligations of
28.27the district; minus
28.28(ii) the total increments collected or to be collected from properties located within
28.29the district that are available for the calendar year including amounts collected in prior
28.30years that are currently available; plus
28.31(iii) total increments from properties located in other districts in the municipality
28.32including amounts collected in prior years that are available to be used to meet the district's
28.33obligations under this section, excluding this subdivision, or other provisions of law (but
28.34excluding a special tax under section 469.1791 and the grant program under Laws 1997,
28.35chapter 231, article 1, section 19, or Laws 2001, First Special Session chapter 5); or
29.1(2) the reduction in increments collected from properties located in the district for
29.2the calendar year as a result of the changes in class rates in Laws 1997, chapter 231, article
29.31; Laws 1998, chapter 389, article 2; and Laws 1999, chapter 243, and Laws 2001, First
29.4Special Session chapter 5, or the elimination of the general education tax levy under
29.5Laws 2001, First Special Session chapter 5.
29.6The authority may compute the deficit amount under clause (1) only (without regard
29.7to the limit under clause (2)) if the authority makes an irrevocable commitment, by
29.8resolution, to use increments from the district to which increments are to be transferred and
29.9any transferred increments are only used to pay preexisting obligations and administrative
29.10expenses for the district that are required to be paid under section 469.176, subdivision
29.114h , paragraph (a).
29.12(c) A preexisting obligation means:
29.13(1) bonds issued and sold before August 1, 2001, or bonds issued pursuant to a
29.14binding contract requiring the issuance of bonds entered into before July 1, 2001, and
29.15bonds issued to refund such bonds or to reimburse expenditures made in conjunction with
29.16a signed contractual agreement entered into before August 1, 2001, to the extent that the
29.17bonds are secured by a pledge of increments from the tax increment financing district; and
29.18(2) binding contracts entered into before August 1, 2001, to the extent that the
29.19contracts require payments secured by a pledge of increments from the tax increment
29.20financing district.
29.21(d) The municipality may require a development authority, other than a seaway port
29.22authority, to transfer available increments including amounts collected in prior years that
29.23are currently available for any of its tax increment financing districts in the municipality to
29.24make up an insufficiency in another district in the municipality, regardless of whether the
29.25district was established by the development authority or another development authority.
29.26This authority applies notwithstanding any law to the contrary, but applies only to a
29.27development authority that:
29.28(1) was established by the municipality; or
29.29(2) the governing body of which is appointed, in whole or part, by the municipality
29.30or an officer of the municipality or which consists, in whole or part, of members of
29.31the governing body of the municipality. The municipality may use this authority only
29.32after it has first used all available increments of the receiving development authority to
29.33eliminate the insufficiency and exercised any permitted action under section 469.1792,
29.34subdivision 3 , for preexisting districts of the receiving development authority to eliminate
29.35the insufficiency.
30.1(e) The authority under this subdivision to spend tax increments outside of the area
30.2of the district from which the tax increments were collected:
30.3(1) is an exception to the restrictions under section 469.176, subdivisions 4b, 4c,
30.44d, 4e, 4i, and 4j ; the expenditure limits under section 469.176, subdivision 1c; and the
30.5other provisions of this section; and the percentage restrictions under subdivision 2 must
30.6be calculated after deducting increments spent under this subdivision from the total
30.7increments for the district; and
30.8(2) applies notwithstanding the provisions of the Tax Increment Financing Act in
30.9effect for districts for which the request for certification was made before June 30, 1982,
30.10or any other law to the contrary.
30.11(f) If a preexisting obligation requires the development authority to pay an amount
30.12that is limited to the increment from the district or a specific development within the
30.13district and if the obligation requires paying a higher amount to the extent that increments
30.14are available, the municipality may determine that the amount due under the preexisting
30.15obligation equals the higher amount and may authorize the transfer of increments
30.16under this subdivision to pay up to the higher amount. The existence of a guarantee of
30.17obligations by the individual or entity that would receive the payment under this paragraph
30.18is disregarded in the determination of eligibility to pool under this subdivision. The
30.19authority to transfer increments under this paragraph may only be used to the extent
30.20that the payment of all other preexisting obligations in the municipality due during the
30.21calendar year have been satisfied.
30.22(g) For transfers of increments made in calendar year 2005 and later, the reduction in
30.23increments as a result of the elimination of the general education tax levy for purposes of
30.24paragraph (b), clause (2), for a taxes payable year equals the general education tax rate
30.25for the school district under Minnesota Statutes 2000, section 273.1382, subdivision 1,
30.26for taxes payable in 2001, multiplied by the captured tax capacity of the district for the
30.27current taxes payable year.

30.28    Sec. 38. Minnesota Statutes 2010, section 469.1764, subdivision 1, is amended to read:
30.29    Subdivision 1. Scope; application. (a) This section applies to a tax increment
30.30financing district or area added to a district, if the request for certification of the district or
30.31the area added to the district was made after July 31, 1979, and before July 1, 1982.
30.32(b) This section, section 469.1763, subdivision 6, and any special law applying to
30.33the district are the exclusive authority to spend tax increments on activities located outside
30.34of the geographic area of a tax increment financing district that is subject to this section.
31.1(c) This section does not apply to increments from a district that is subject to the
31.2provisions of this section, if:
31.3(1) the district was decertified before the enactment of this section and all increments
31.4spent on activities located outside of the geographic area of the district were repaid and
31.5distributed as excess increments under section 469.176, subdivision 2; or
31.6(2) the use of increments on activities located outside of the geographic area of
31.7the district consists solely of payment of debt service on bonds under section 469.129,
31.8subdivision 2 , before its repeal, and any bonds issued to refund bonds issued under that
31.9subdivision.

31.10    Sec. 39. Minnesota Statutes 2010, section 469.177, subdivision 1, is amended to read:
31.11    Subdivision 1. Original net tax capacity. (a) Upon or after adoption of a tax
31.12increment financing plan, the auditor of any county in which the district is situated shall,
31.13upon request of the authority, certify the original net tax capacity of the tax increment
31.14financing district and that portion of the district overlying any subdistrict as described in
31.15the tax increment financing plan and shall certify in each year thereafter the amount by
31.16which the original net tax capacity has increased or decreased as a result of a change in tax
31.17exempt status of property within the district and any subdistrict, reduction or enlargement
31.18of the district or changes pursuant to subdivision 4. The auditor shall certify the amount
31.19within 30 days after receipt of the request and sufficient information to identify the parcels
31.20included in the district. The certification relates to the taxes payable year as provided in
31.21subdivision 6.
31.22    (b) If the classification under section 273.13 of property located in a district changes
31.23to a classification that has a different assessment ratio, the original net tax capacity of that
31.24property must be redetermined at the time when its use is changed as if the property had
31.25originally been classified in the same class in which it is classified after its use is changed.
31.26    (c) The amount to be added to the original net tax capacity of the district as a result
31.27of previously tax exempt real property within the district becoming taxable equals the net
31.28tax capacity of the real property as most recently assessed pursuant to section 273.18 or, if
31.29that assessment was made more than one year prior to the date of title transfer rendering
31.30the property taxable, the net tax capacity assessed by the assessor at the time of the
31.31transfer. If improvements are made to tax exempt property after the municipality approves
31.32the district and before the parcel becomes taxable, the assessor shall, at the request of
31.33the authority, separately assess the estimated market value of the improvements. If the
31.34property becomes taxable, the county auditor shall add to original net tax capacity, the net
31.35tax capacity of the parcel, excluding the separately assessed improvements. If substantial
32.1taxable improvements were made to a parcel after certification of the district and if the
32.2property later becomes tax exempt, in whole or part, as a result of the authority acquiring
32.3the property through foreclosure or exercise of remedies under a lease or other revenue
32.4agreement or as a result of tax forfeiture, the amount to be added to the original net tax
32.5capacity of the district as a result of the property again becoming taxable is the amount
32.6of the parcel's value that was included in original net tax capacity when the parcel was
32.7first certified. The amount to be added to the original net tax capacity of the district as a
32.8result of enlargements equals the net tax capacity of the added real property as most
32.9recently certified by the commissioner of revenue as of the date of modification of the tax
32.10increment financing plan pursuant to section 469.175, subdivision 4.
32.11    (d) If the net tax capacity of a property increases because the property no longer
32.12qualifies under the Minnesota Agricultural Property Tax Law, section 273.111; the
32.13Minnesota Open Space Property Tax Law, section 273.112; or the Metropolitan
32.14Agricultural Preserves Act, chapter 473H, the Rural Preserve Property Tax Program under
32.15section 273.114, or because platted, unimproved property is improved or market value
32.16is increased after approval of the plat under section 273.11, subdivision 14, 14a, or 14b,
32.17the increase in net tax capacity must be added to the original net tax capacity. If the
32.18net tax capacity of a property increases because the property no longer qualifies for the
32.19homestead market value exclusion under section 273.13, subdivision 35, the increase in
32.20net tax capacity must be added to original net tax capacity if the original construction of
32.21the affected home was completed before the date the assessor certified the original net
32.22tax capacity of the district.
32.23    (e) The amount to be subtracted from the original net tax capacity of the district as a
32.24result of previously taxable real property within the district becoming tax exempt or
32.25qualifying in whole or part for an exclusion from taxable market value, or a reduction in
32.26the geographic area of the district, shall be the amount of original net tax capacity initially
32.27attributed to the property becoming tax exempt, being excluded from taxable market
32.28value, or being removed from the district. If the net tax capacity of property located within
32.29the tax increment financing district is reduced by reason of a court-ordered abatement,
32.30stipulation agreement, voluntary abatement made by the assessor or auditor or by order
32.31of the commissioner of revenue, the reduction shall be applied to the original net tax
32.32capacity of the district when the property upon which the abatement is made has not been
32.33improved since the date of certification of the district and to the captured net tax capacity
32.34of the district in each year thereafter when the abatement relates to improvements made
32.35after the date of certification. The county auditor may specify reasonable form and content
33.1of the request for certification of the authority and any modification thereof pursuant to
33.2section 469.175, subdivision 4.
33.3    (f) If a parcel of property contained a substandard building or improvements
33.4described in section 469.174, subdivision 10, paragraph (e), that were demolished or
33.5removed and if the authority elects to treat the parcel as occupied by a substandard
33.6building under section 469.174, subdivision 10, paragraph (b), or by improvements under
33.7section 469.174, subdivision 10, paragraph (e), the auditor shall certify the original net tax
33.8capacity of the parcel using the greater of (1) the current net tax capacity of the parcel, or
33.9(2) the estimated market value of the parcel for the year in which the building or other
33.10improvements were demolished or removed, but applying the class rates for the current
33.11year.
33.12    (g) For a redevelopment district qualifying under section 469.174, subdivision 10,
33.13paragraph (a), clause (4), as a qualified disaster area, the auditor shall certify the value of
33.14the land as the original tax capacity for any parcel in the district that contains a building
33.15that suffered substantial damage as a result of the disaster or emergency.

33.16    Sec. 40. Minnesota Statutes 2010, section 469.1793, is amended to read:
33.17469.1793 DEVELOPER OBLIGATIONS CONTINUED.
33.18If a developer or other private entity agreed to make payments to the authority or
33.19municipality to reimburse the municipality for the state aid offset under Minnesota Statutes
33.202000, section 273.1399, the obligation continues in effect, notwithstanding the repeal of
33.21section 273.1399. Payments received by the development authority are increments for
33.22purposes of the state grant program under section 469.1799.

33.23    Sec. 41. Minnesota Statutes 2010, section 469.1813, subdivision 6b, is amended to
33.24read:
33.25    Subd. 6b. Extended duration limit. (a) Notwithstanding the provisions of
33.26subdivision 6, a political subdivision may grant an abatement for a period of up to 20
33.27years, if the abatement is for a qualified business.
33.28(b) To be a qualified business for purposes of this subdivision, at least 50 percent of
33.29the payroll of the operations of the business that qualify for the abatement must be for
33.30employees engaged in one of the following lines of business or any combination of them:
33.31(1) manufacturing;
33.32(2) agricultural processing;
33.33(3) mining;
33.34(4) research and development;
34.1(5) warehousing; or
34.2(6) qualified high technology.
34.3Alternatively, a qualified business also includes a taxpayer whose real and personal
34.4property is subject to valuation under Minnesota Rules, chapter 8100.
34.5(c)(1) "Manufacturing" means the material staging and production of tangible
34.6personal property by procedures commonly regarded as manufacturing, processing,
34.7fabrication, or assembling which changes some existing material into new shapes, new
34.8qualities, or new combinations.
34.9(2) "Mining" has the meaning given in section 613(c) of the Internal Revenue Code
34.10of 1986.
34.11(3) "Agricultural processing" means transforming, packaging, sorting, or grading
34.12livestock or livestock products, agricultural commodities, or plants or plant products into
34.13goods that are used for intermediate or final consumption including goods for nonfood use.
34.14(4) "Research and development" means qualified research as defined in section
34.1541(d) of the Internal Revenue Code of 1986.
34.16(5) "Qualified high technology" means one or more of the following activities:
34.17(i) advanced computing, which is any technology used in the design and development
34.18of any of the following:
34.19(A) computer hardware and software;
34.20(B) data communications; and
34.21(C) information technologies;
34.22(ii) advanced materials, which are materials with engineered properties created
34.23through the development of specialized process and synthesis technology;
34.24(iii) biotechnology, which is any technology that uses living organisms, cells,
34.25macromolecules, microorganisms, or substances from living organisms to make or modify
34.26a product, improve plants or animals, or develop microorganisms for useful purposes;
34.27(iv) electronic device technology, which is any technology that involves
34.28microelectronics, semiconductors, electronic equipment, and instrumentation, radio
34.29frequency, microwave, and millimeter electronics, and optical and optic-electrical devices,
34.30or data and digital communications and imaging devices;
34.31(v) engineering or laboratory testing related to the development of a product;
34.32(vi) technology that assists in the assessment or prevention of threats or damage to
34.33human health or the environment, including, but not limited to, environmental cleanup
34.34technology, pollution prevention technology, or development of alternative energy sources;
35.1(vii) medical device technology, which is any technology that involves medical
35.2equipment or products other than a pharmaceutical product that has therapeutic or
35.3diagnostic value and is regulated; or
35.4(viii) advanced vehicles technology which is any technology that involves electric
35.5vehicles, hybrid vehicles, or alternative fuel vehicles, or components used in the
35.6construction of electric vehicles, hybrid vehicles, or alternative fuel vehicles. An electric
35.7vehicle is a road vehicle that draws propulsion energy only from an onboard source of
35.8electrical energy. A hybrid vehicle is a road vehicle that can draw propulsion energy from
35.9both a consumable fuel and a rechargeable energy storage system.
35.10(d) The authority to grant new abatements under this subdivision expires on July 1,
35.112004, except that the authority to grant new abatements for real and personal property
35.12subject to valuation under Minnesota Rules, chapter 8100, does not expire.

35.13    Sec. 42. Minnesota Statutes 2010, section 473F.02, subdivision 3, is amended to read:
35.14    Subd. 3. Commercial-industrial property. "Commercial-industrial property"
35.15means the following categories of property, as defined in section 273.13, excluding that
35.16portion of such property (1) which may, by law, constitute the tax base for a tax increment
35.17pledged under section 469.042 or 469.162, certification of which was requested prior to
35.18August 1, 1979, to the extent and while such tax increment is so pledged; or (2) which is
35.19exempt from taxation under section 272.02:
35.20(a) That portion of class 3 property defined in Minnesota Statutes 1971, section
35.21273.13 , consisting of stocks of merchandise and furniture and fixtures used therewith;
35.22manufacturers' materials and manufactured articles; and tools, implements and machinery,
35.23whether fixtures or otherwise.
35.24(b) That portion of class 4 property defined in Minnesota Statutes 1971, section
35.25273.13 , which is either used or zoned for use for any commercial or industrial purpose,
35.26except for such property which is, or, in the case of property under construction, will when
35.27completed be used exclusively for residential occupancy and the provision of services
35.28to residential occupants thereof. Property shall be considered as used exclusively for
35.29residential occupancy only if each of not less than 80 percent of its occupied residential
35.30units is, or, in the case of property under construction, will when completed be occupied
35.31under an oral or written agreement for occupancy over a continuous period of not less
35.32than 30 days.
35.33If the classification of property prescribed by section 273.13 is modified by
35.34legislative amendment, the references in this subdivision shall be to such successor class
36.1or classes of property, or portions thereof, as embrace the kinds of property designated
36.2in this subdivision.

36.3    Sec. 43. REPEALER.
36.4Minnesota Statutes 2010, sections 272.02, subdivision 83; 290.06, subdivisions
36.524 and 32; 297A.68, subdivision 41; 469.042, subdivisions 2, 3, and 4; 469.043;
36.6469.059, subdivision 13; 469.129; 469.134; 469.162, subdivision 2; 469.1651; 469.166,
36.7subdivisions 7, 8, 9, 10, 11, and 12; 469.167, subdivisions 1 and 3; 469.168; 469.169,
36.8subdivisions 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, and 13; 469.170, subdivisions 1, 2, 3, 4, 5, 5a,
36.95b, 5c, 5d, 5e, 6, 7, and 8; 469.171, subdivisions 2, 5, and 6b; 469.173, subdivisions 1
36.10and 3; 469.1765; 469.1791; 469.1799, subdivision 2; 469.301, subdivisions 1, 2, 3, 4, and
36.115; 469.302; 469.303; 469.304; 469.321; 469.3215; 469.322; 469.323; 469.324; 469.325;
36.12469.326; 469.327; 469.328; 469.329; and 473.680, are repealed.

36.13    Sec. 44. EFFECTIVE DATE.
36.14This act is effective August 1, 2012, and the tax increment financing provisions
36.15apply to all districts, regardless of when the request for certification was made, provided
36.16that the adjustments to original tax capacity required under section 39 apply only to
36.17exclusions that reduced taxable market value beginning with taxes payable in 2012 or
36.18thereafter, regardless of when the law authorizing the exclusion became effective.