1998 Minnesota Statutes

     469.1734 Tax incentives outside zones. 

    Subdivision 1.    Authority.  A city with authority to 
 establish a border city development zone under section 469.1731 
 may grant the tax incentives provided by this section.  This 
 authority applies only to projects located outside of a zone, 
 except as provided in subdivision 6. 

    Subd. 2.    Definitions.  For purposes of this section, 
 "qualifying business" means the business conducted by a 
 corporation, partnership, or individual doing business from a 
 fixed location within the border city but located outside of the 
 border city development zone. 

    Subd. 3.    Property tax.  (a) A city may grant a 
 partial or complete exemption from property taxation of all 
 buildings, structures, fixtures, and improvements used in or 
 necessary to a qualifying business for a period not exceeding 
 five taxes payable years.  A partial exemption must be stated as 
 a percentage of the total ad valorem taxes assessed against the 
 property. 

    (b) In addition to, or in lieu of, a property tax exemption 
 under paragraph (a), a city may establish an amount due as 
 payments in lieu of ad valorem taxes on buildings, structures, 
 fixtures, and improvements used by the qualifying business.  The 
 city council shall designate the amount of the payments for each 
 year and the beginning year and the concluding year for payments 
 in lieu of taxes.  The option to make payments in lieu of taxes 
 under this section is limited to 20 consecutive taxes payable 
 years for any qualifying business.  To establish the amount of 
 payments in lieu of taxes, the city council may use actual or 
 estimated levels of assessment and taxation or may designate 
 different amounts of payments in lieu of other taxes in 
 different years to recognize future expansion plans of a 
 qualifying business or other considerations.  The payments in 
 lieu shall be collected and distributed in the same manner as ad 
 valorem taxes. 

    (c) The city council must determine whether granting the 
 exemption or payments in lieu of taxes, or both, is necessary to 
 enable a business to expand in the city or to attract a business 
 to the city and is in the best interest of the city.  If it so 
 determines, the city must give its approval. 

    Subd. 4.    Income tax.  (a) Upon application by the 
 qualifying business to the city, and approval of the city, a 
 qualifying business shall receive a credit against taxes imposed 
 under chapter 290, other than the tax imposed under section 
 290.92, based on the taxable net income of the qualified 
 business attributable to the border city, but outside the border 
 city development zone, multiplied by 9.8 percent in the case of 
 a taxpayer under section 290.02, and 8.5 percent in the case of 
 a taxpayer taxable under section 290.06, subdivision 2c.  The 
 attributable net income of a qualified business in the border 
 city is determined by multiplying the taxable net income of the 
 business entity, determined as if the business were a C 
 corporation, by a fraction: 

    (1) the numerator of which is: 

    (i) the ratio of the taxpayer's property factor under 
 section 290.191 located in the border city, but outside of the 
 border city development zone, for the taxable year over the 
 property factor numerator determined under section 290.191, plus 

    (ii) the ratio of the taxpayer's payroll factor under 
 section 290.191 located in the border city, but outside of the 
 border city development zone, for the taxable year over the 
 payroll factor numerator determined under section 290.191; and 

    (2) the denominator of which is two. 

    (b) The credit under this subdivision applies after any 
 credit allowed under subdivision 5. 

    (c) After any notice period required by subdivision 7, the 
 city council must determine whether granting the credit is in 
 the best interest of the city, and if it so determines, must 
 approve the granting of the credit and determine its amount. 

    (d) The credit under this subdivision may not exceed the 
 amount of the tax credit certificates received by the taxpayer 
 from the city, less any tax credit certificates used under 
 section 469.1732, subdivision 2, and subdivisions 5 and 6. 

    (e) No taxpayer may receive the credit under this 
 subdivision for more than five taxable years. 

    Subd. 5.    Border city new industry credit.  (a) To 
 provide a tax incentive for new industry in border cities, a 
 corporation may be allowed a credit against the tax imposed by 
 section 290.02.  The commissioner shall prescribe the method in 
 which the credit may be claimed.  This may include allowing the 
 credit only as a separately processed claim for refund. 

    (b) The credit equals one percent of the wages and salaries 
 paid by the taxpayer during the taxable year for employees whose 
 principal place of work is located in a border city but outside 
 of a zone designated under section 469.1731.  The credit applies 
 for the first three taxable years of the operation of the 
 corporation in the border city.  In the fourth and fifth taxable 
 years of the operation of the corporation in the border city, 
 the credit equals 0.5 percent of the wages and salaries.  After 
 the fifth year, no credit is allowed.  The city shall determine 
 the amount of wages that qualify for the credit and issue tax 
 credit certificates in the correct amount. 

    (c) The credit under this subdivision applies only to a 
 corporate enterprise engaged in assembling, fabricating, 
 manufacturing, mixing, or processing of any agricultural, 
 mineral, or manufactured product or combinations of them. 

    (d) The credit allowed under this subdivision may not 
 exceed the lesser of: 

    (1) the tax liability of the taxpayer for the taxable year; 
 or 

    (2) the amount of the tax credit certificates received by 
 the taxpayer from the city, less any tax credit certificates 
 used under subdivisions 4 and 6, and section 469.1732, 
 subdivision 2. 

    Subd. 6.    Sales tax exemption; equipment; construction 
 materials.  (a) The gross receipts from the sale of machinery 
 and equipment and repair parts are exempt from taxation under 
 chapter 297A, if the machinery and equipment: 

    (1) are used in connection with a trade or business; 

    (2) are placed in service in a city that is authorized to 
 designate a zone under section 469.1731, regardless of whether 
 the machinery and equipment are used in a zone; and 

    (3) have a useful life of 12 months or more. 

    (b) The gross receipts from the sale of construction 
 materials are exempt, if they are used to construct a facility 
 for use in a trade or business located in a city that is 
 authorized to designate a zone under section 469.1731, 
 regardless of whether the facility is located in a zone.  The 
 exemptions under this paragraph apply regardless of whether the 
 purchase is made by the owner, the user, or a contractor. 

    (c) A purchaser may claim an exemption under this 
 subdivision for tax on the purchases up to, but not exceeding: 

    (1) the amount of the tax credit certificates received from 
 the city, less 

    (2) any tax credit certificates used under the provisions 
 of subdivisions 4 and 5, and section 469.1732, subdivision 2. 

    (d) The tax on sales of items exempted under this 
 subdivision shall be imposed and collected as if the applicable 
 rate under section 297A.02 applied.  Upon application by the 
 purchaser, on forms prescribed by the commissioner, a refund 
 equal to the tax paid shall be paid to the purchaser.  The 
 application must include sufficient information to permit the 
 commissioner to verify the sales tax paid and the eligibility of 
 the claimant to receive the credit.  No more than two 
 applications for refunds may be filed under this subdivision in 
 a calendar year.  The provisions of section 289A.40 apply to the 
 refunds payable under this subdivision.  There is annually 
 appropriated to the commissioner of revenue the amount required 
 to make the refunds, which must be deducted from the amount of 
 the city's allocation under section 469.169, subdivision 12, 
 that remains available and its limitation under section 469.1735.
 The amount to be refunded shall bear interest at the rate in 
 section 270.76 from the date the refund claim is filed with the 
 commissioner. 

    Subd. 7.    Notice to competitors.  (a) Before an 
 exemption or other concession is granted under subdivision 3 or 
 4, the procedure under this subdivision applies. 

    (b) Unless the city council determines that no existing 
 business within the city would be a potential competitor of the 
 project, the project operator shall publish two notices to 
 competitors of the application of the tax exemption or payments 
 in lieu in the official newspaper of the city.  The city shall 
 prescribe the form of the notice.  The two notices must be 
 published at least one week apart.  The publications must be 
 completed not less than 15 days nor more than 30 days before the 
 city council approves the tax exemption or payments in lieu of 
 taxes. 

    HIST: 1998 c 389 art 12 s 9; 1Sp1998 c 3 s 5