1.1                          A bill for an act 
  1.2             relating to financing and operation of government in 
  1.3             this state; providing for job opportunity building 
  1.4             zones; providing for a biotechnology and health 
  1.5             services industry zone; providing for tax increment 
  1.6             financing; providing for accelerated payment of June 
  1.7             mortgage registry and deed, cigarette and tobacco 
  1.8             products, liquor taxes; providing for distribution of 
  1.9             funds; providing for certain payments to counties; 
  1.10            requiring payment of certain lawful gambling taxes; 
  1.11            imposing penalties; appropriating money; amending 
  1.12            Minnesota Statutes 2002, sections 62J.692, subdivision 
  1.13            4, by adding a subdivision; 270.60, subdivision 4; 
  1.14            272.02, by adding subdivisions; 272.029, by adding a 
  1.15            subdivision; 287.12; 287.29, subdivision 1; 287.31, by 
  1.16            adding a subdivision; 290.01, subdivisions 19b, 29; 
  1.17            290.06, subdivision 2c, by adding subdivisions; 
  1.18            290.067, subdivision 1; 290.0671, subdivision 1; 
  1.19            290.091, subdivision 2; 290.0921, subdivision 3; 
  1.20            290.0922, subdivisions 2, 3; 297A.68, by adding 
  1.21            subdivisions; 297B.03; 297F.09, subdivisions 1, 2, by 
  1.22            adding a subdivision; 297F.10, subdivision 1; 297G.09, 
  1.23            by adding a subdivision; 349.16, by adding a 
  1.24            subdivision; 469.174, subdivision 10, by adding a 
  1.25            subdivision; 469.1763, subdivisions 2, 4; 469.177, 
  1.26            subdivision 1; proposing coding for new law in 
  1.27            Minnesota Statutes, chapters 469; 477A. 
  1.28  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.29                             ARTICLE 1 
  1.30                   JOB OPPORTUNITY BUILDING ZONES 
  1.31     Section 1.  Minnesota Statutes 2002, section 272.02, is 
  1.32  amended by adding a subdivision to read: 
  1.33     Subd. 56.  [JOB OPPORTUNITY BUILDING ZONE PROPERTY.] (a) 
  1.34  Improvements to real property, and personal property, classified 
  1.35  under section 273.13, subdivision 24, and located within a job 
  1.36  opportunity building zone, designated under section 469.314, are 
  2.1   exempt from ad valorem taxes levied under chapter 275. 
  2.2      (b) Improvements to real property, and tangible personal 
  2.3   property, of an agricultural production facility located within 
  2.4   an agricultural processing facility zone, designated under 
  2.5   section 469.314, is exempt from ad valorem taxes levied under 
  2.6   chapter 275. 
  2.7      (c) For property to qualify for exemption under paragraph 
  2.8   (a), the occupant must be a qualified business, as defined in 
  2.9   section 469.310. 
  2.10     (d) The exemption applies beginning for the first 
  2.11  assessment year after designation of the job opportunity 
  2.12  building zone by the commissioner of trade and economic 
  2.13  development.  The exemption applies to each assessment year that 
  2.14  begins during the duration of the job opportunity building zone 
  2.15  and to property occupied by July 1 of the assessment year by a 
  2.16  qualified business.  This exemption does not apply to: 
  2.17     (1) the levy under section 475.61 or similar levy 
  2.18  provisions under any other law to pay general obligation bonds; 
  2.19  or 
  2.20     (2) a levy under section 126C.17, if the levy was approved 
  2.21  by the voters before the designation of the job opportunity 
  2.22  building zone. 
  2.23     <b>[EFFECTIVE DATE.]</b> This section is effective beginning for 
  2.24  property taxes assessed in 2004, payable in 2005. 
  2.25     Sec. 2.  Minnesota Statutes 2002, section 272.029, is 
  2.26  amended by adding a subdivision to read: 
  2.27     Subd. 7.  [EXEMPTION.] The tax imposed under this section 
  2.28  does not apply to electricity produced by wind energy conversion 
  2.29  systems located in a job opportunity building zone, designated 
  2.30  under section 469.314, for the duration of the zone.  The 
  2.31  exemption applies beginning for the first calendar year after 
  2.32  designation of the zone and applies to each calendar year that 
  2.33  begins during the designation of the zone. 
  2.34     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  2.35  following final enactment. 
  2.36     Sec. 3.  Minnesota Statutes 2002, section 290.01, 
  2.37  subdivision 19b, is amended to read: 
  3.1      Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  3.2   individuals, estates, and trusts, there shall be subtracted from 
  3.3   federal taxable income: 
  3.4      (1) interest income on obligations of any authority, 
  3.5   commission, or instrumentality of the United States to the 
  3.6   extent includable in taxable income for federal income tax 
  3.7   purposes but exempt from state income tax under the laws of the 
  3.8   United States; 
  3.9      (2) if included in federal taxable income, the amount of 
  3.10  any overpayment of income tax to Minnesota or to any other 
  3.11  state, for any previous taxable year, whether the amount is 
  3.12  received as a refund or as a credit to another taxable year's 
  3.13  income tax liability; 
  3.14     (3) the amount paid to others, less the amount used to 
  3.15  claim the credit allowed under section 290.0674, not to exceed 
  3.16  $1,625 for each qualifying child in grades kindergarten to 6 and 
  3.17  $2,500 for each qualifying child in grades 7 to 12, for tuition, 
  3.18  textbooks, and transportation of each qualifying child in 
  3.19  attending an elementary or secondary school situated in 
  3.20  Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
  3.21  wherein a resident of this state may legally fulfill the state's 
  3.22  compulsory attendance laws, which is not operated for profit, 
  3.23  and which adheres to the provisions of the Civil Rights Act of 
  3.24  1964 and chapter 363.  For the purposes of this clause, 
  3.25  "tuition" includes fees or tuition as defined in section 
  3.26  290.0674, subdivision 1, clause (1).  As used in this clause, 
  3.27  "textbooks" includes books and other instructional materials and 
  3.28  equipment purchased or leased for use in elementary and 
  3.29  secondary schools in teaching only those subjects legally and 
  3.30  commonly taught in public elementary and secondary schools in 
  3.31  this state.  Equipment expenses qualifying for deduction 
  3.32  includes expenses as defined and limited in section 290.0674, 
  3.33  subdivision 1, clause (3).  "Textbooks" does not include 
  3.34  instructional books and materials used in the teaching of 
  3.35  religious tenets, doctrines, or worship, the purpose of which is 
  3.36  to instill such tenets, doctrines, or worship, nor does it 
  4.1   include books or materials for, or transportation to, 
  4.2   extracurricular activities including sporting events, musical or 
  4.3   dramatic events, speech activities, driver's education, or 
  4.4   similar programs.  For purposes of the subtraction provided by 
  4.5   this clause, "qualifying child" has the meaning given in section 
  4.6   32(c)(3) of the Internal Revenue Code; 
  4.7      (4) income as provided under section 290.0802; 
  4.8      (5) to the extent included in federal adjusted gross 
  4.9   income, income realized on disposition of property exempt from 
  4.10  tax under section 290.491; 
  4.11     (6) to the extent not deducted in determining federal 
  4.12  taxable income or used to claim the long-term care insurance 
  4.13  credit under section 290.0672, the amount paid for health 
  4.14  insurance of self-employed individuals as determined under 
  4.15  section 162(l) of the Internal Revenue Code, except that the 
  4.16  percent limit does not apply.  If the individual deducted 
  4.17  insurance payments under section 213 of the Internal Revenue 
  4.18  Code of 1986, the subtraction under this clause must be reduced 
  4.19  by the lesser of: 
  4.20     (i) the total itemized deductions allowed under section 
  4.21  63(d) of the Internal Revenue Code, less state, local, and 
  4.22  foreign income taxes deductible under section 164 of the 
  4.23  Internal Revenue Code and the standard deduction under section 
  4.24  63(c) of the Internal Revenue Code; or 
  4.25     (ii) the lesser of (A) the amount of insurance qualifying 
  4.26  as "medical care" under section 213(d) of the Internal Revenue 
  4.27  Code to the extent not deducted under section 162(1) of the 
  4.28  Internal Revenue Code or excluded from income or (B) the total 
  4.29  amount deductible for medical care under section 213(a); 
  4.30     (7) the exemption amount allowed under Laws 1995, chapter 
  4.31  255, article 3, section 2, subdivision 3; 
  4.32     (8) to the extent included in federal taxable income, 
  4.33  postservice benefits for youth community service under section 
  4.34  124D.42 for volunteer service under United States Code, title 
  4.35  42, sections 12601 to 12604; 
  4.36     (9) to the extent not deducted in determining federal 
  5.1   taxable income by an individual who does not itemize deductions 
  5.2   for federal income tax purposes for the taxable year, an amount 
  5.3   equal to 50 percent of the excess of charitable contributions 
  5.4   allowable as a deduction for the taxable year under section 
  5.5   170(a) of the Internal Revenue Code over $500; 
  5.6      (10) for taxable years beginning before January 1, 2008, 
  5.7   the amount of the federal small ethanol producer credit allowed 
  5.8   under section 40(a)(3) of the Internal Revenue Code which is 
  5.9   included in gross income under section 87 of the Internal 
  5.10  Revenue Code; 
  5.11     (11) for individuals who are allowed a federal foreign tax 
  5.12  credit for taxes that do not qualify for a credit under section 
  5.13  290.06, subdivision 22, an amount equal to the carryover of 
  5.14  subnational foreign taxes for the taxable year, but not to 
  5.15  exceed the total subnational foreign taxes reported in claiming 
  5.16  the foreign tax credit.  For purposes of this clause, "federal 
  5.17  foreign tax credit" means the credit allowed under section 27 of 
  5.18  the Internal Revenue Code, and "carryover of subnational foreign 
  5.19  taxes" equals the carryover allowed under section 904(c) of the 
  5.20  Internal Revenue Code minus national level foreign taxes to the 
  5.21  extent they exceed the federal foreign tax credit; and 
  5.22     (12) in each of the five tax years immediately following 
  5.23  the tax year in which an addition is required under subdivision 
  5.24  19a, clause (7), an amount equal to one-fifth of the delayed 
  5.25  depreciation.  For purposes of this clause, "delayed 
  5.26  depreciation" means the amount of the addition made by the 
  5.27  taxpayer under subdivision 19a, clause (7), minus the positive 
  5.28  value of any net operating loss under section 172 of the 
  5.29  Internal Revenue Code generated for the tax year of the 
  5.30  addition.  The resulting delayed depreciation cannot be less 
  5.31  than zero; and 
  5.32     (13) job opportunity building zone income as provided under 
  5.33  section 469.316. 
  5.34     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
  5.35  years beginning after December 31, 2003. 
  5.36     Sec. 4.  Minnesota Statutes 2002, section 290.01, 
  6.1   subdivision 29, is amended to read: 
  6.2      Subd. 29.  [TAXABLE INCOME.] The term "taxable income" 
  6.3   means:  
  6.4      (1) for individuals, estates, and trusts, the same as 
  6.5   taxable net income; 
  6.6      (2) for corporations, the taxable net income less 
  6.7      (i) the net operating loss deduction under section 290.095; 
  6.8   and 
  6.9      (ii) the dividends received deduction under section 290.21, 
  6.10  subdivision 4; and 
  6.11     (iii) the exemption for operating in a job opportunity 
  6.12  building zone under section 469.317. 
  6.13     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
  6.14  years beginning after December 31, 2003. 
  6.15     Sec. 5.  Minnesota Statutes 2002, section 290.06, 
  6.16  subdivision 2c, is amended to read: 
  6.17     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
  6.18  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
  6.19  married individuals filing joint returns and surviving spouses 
  6.20  as defined in section 2(a) of the Internal Revenue Code must be 
  6.21  computed by applying to their taxable net income the following 
  6.22  schedule of rates: 
  6.23     (1) On the first $25,680, 5.35 percent; 
  6.24     (2) On all over $25,680, but not over $102,030, 7.05 
  6.25  percent; 
  6.26     (3) On all over $102,030, 7.85 percent. 
  6.27     Married individuals filing separate returns, estates, and 
  6.28  trusts must compute their income tax by applying the above rates 
  6.29  to their taxable income, except that the income brackets will be 
  6.30  one-half of the above amounts.  
  6.31     (b) The income taxes imposed by this chapter upon unmarried 
  6.32  individuals must be computed by applying to taxable net income 
  6.33  the following schedule of rates: 
  6.34     (1) On the first $17,570, 5.35 percent; 
  6.35     (2) On all over $17,570, but not over $57,710, 7.05 
  6.36  percent; 
  7.1      (3) On all over $57,710, 7.85 percent. 
  7.2      (c) The income taxes imposed by this chapter upon unmarried 
  7.3   individuals qualifying as a head of household as defined in 
  7.4   section 2(b) of the Internal Revenue Code must be computed by 
  7.5   applying to taxable net income the following schedule of rates: 
  7.6      (1) On the first $21,630, 5.35 percent; 
  7.7      (2) On all over $21,630, but not over $86,910, 7.05 
  7.8   percent; 
  7.9      (3) On all over $86,910, 7.85 percent. 
  7.10     (d) In lieu of a tax computed according to the rates set 
  7.11  forth in this subdivision, the tax of any individual taxpayer 
  7.12  whose taxable net income for the taxable year is less than an 
  7.13  amount determined by the commissioner must be computed in 
  7.14  accordance with tables prepared and issued by the commissioner 
  7.15  of revenue based on income brackets of not more than $100.  The 
  7.16  amount of tax for each bracket shall be computed at the rates 
  7.17  set forth in this subdivision, provided that the commissioner 
  7.18  may disregard a fractional part of a dollar unless it amounts to 
  7.19  50 cents or more, in which case it may be increased to $1. 
  7.20     (e) An individual who is not a Minnesota resident for the 
  7.21  entire year must compute the individual's Minnesota income tax 
  7.22  as provided in this subdivision.  After the application of the 
  7.23  nonrefundable credits provided in this chapter, the tax 
  7.24  liability must then be multiplied by a fraction in which:  
  7.25     (1) the numerator is the individual's Minnesota source 
  7.26  federal adjusted gross income as defined in section 62 of the 
  7.27  Internal Revenue Code and increased by the additions required 
  7.28  under section 290.01, subdivision 19a, clauses (1) and (6), and 
  7.29  reduced by the subtraction under section 290.01, subdivision 
  7.30  19b, clause (13), and the Minnesota assignable portion of the 
  7.31  subtraction for United States government interest under section 
  7.32  290.01, subdivision 19b, clause (1), after applying the 
  7.33  allocation and assignability provisions of section 290.081, 
  7.34  clause (a), or 290.17; and 
  7.35     (2) the denominator is the individual's federal adjusted 
  7.36  gross income as defined in section 62 of the Internal Revenue 
  8.1   Code of 1986, increased by the amounts specified in section 
  8.2   290.01, subdivision 19a, clauses (1) and (6), and reduced by the 
  8.3   amounts specified in section 290.01, subdivision 19b, clause 
  8.4   clauses (1) and (13). 
  8.5      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
  8.6   years beginning after December 31, 2003. 
  8.7      Sec. 6.  Minnesota Statutes 2002, section 290.06, is 
  8.8   amended by adding a subdivision to read: 
  8.9      Subd. 29.  [JOB OPPORTUNITY BUILDING ZONE JOB CREDIT.] A 
  8.10  taxpayer that is a qualified business, as defined in section 
  8.11  469.310, subdivision 11, is allowed a credit as determined under 
  8.12  section 469.318 against the tax imposed by this chapter. 
  8.13     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  8.14  following final enactment. 
  8.15     Sec. 7.  Minnesota Statutes 2002, section 290.067, 
  8.16  subdivision 1, is amended to read: 
  8.17     Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
  8.18  as a credit against the tax due from the taxpayer and a spouse, 
  8.19  if any, under this chapter an amount equal to the dependent care 
  8.20  credit for which the taxpayer is eligible pursuant to the 
  8.21  provisions of section 21 of the Internal Revenue Code subject to 
  8.22  the limitations provided in subdivision 2 except that in 
  8.23  determining whether the child qualified as a dependent, income 
  8.24  received as a Minnesota family investment program grant or 
  8.25  allowance to or on behalf of the child must not be taken into 
  8.26  account in determining whether the child received more than half 
  8.27  of the child's support from the taxpayer, and the provisions of 
  8.28  section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
  8.29     (b) If a child who has not attained the age of six years at 
  8.30  the close of the taxable year is cared for at a licensed family 
  8.31  day care home operated by the child's parent, the taxpayer is 
  8.32  deemed to have paid employment-related expenses.  If the child 
  8.33  is 16 months old or younger at the close of the taxable year, 
  8.34  the amount of expenses deemed to have been paid equals the 
  8.35  maximum limit for one qualified individual under section 21(c) 
  8.36  and (d) of the Internal Revenue Code.  If the child is older 
  9.1   than 16 months of age but has not attained the age of six years 
  9.2   at the close of the taxable year, the amount of expenses deemed 
  9.3   to have been paid equals the amount the licensee would charge 
  9.4   for the care of a child of the same age for the same number of 
  9.5   hours of care.  
  9.6      (c) If a married couple: 
  9.7      (1) has a child who has not attained the age of one year at 
  9.8   the close of the taxable year; 
  9.9      (2) files a joint tax return for the taxable year; and 
  9.10     (3) does not participate in a dependent care assistance 
  9.11  program as defined in section 129 of the Internal Revenue Code, 
  9.12  in lieu of the actual employment related expenses paid for that 
  9.13  child under paragraph (a) or the deemed amount under paragraph 
  9.14  (b), the lesser of (i) the combined earned income of the couple 
  9.15  or (ii) the amount of the maximum limit for one qualified 
  9.16  individual under section 21(c) and (d) of the Internal Revenue 
  9.17  Code will be deemed to be the employment related expense paid 
  9.18  for that child.  The earned income limitation of section 21(d) 
  9.19  of the Internal Revenue Code shall not apply to this deemed 
  9.20  amount.  These deemed amounts apply regardless of whether any 
  9.21  employment-related expenses have been paid.  
  9.22     (d) If the taxpayer is not required and does not file a 
  9.23  federal individual income tax return for the tax year, no credit 
  9.24  is allowed for any amount paid to any person unless: 
  9.25     (1) the name, address, and taxpayer identification number 
  9.26  of the person are included on the return claiming the credit; or 
  9.27     (2) if the person is an organization described in section 
  9.28  501(c)(3) of the Internal Revenue Code and exempt from tax under 
  9.29  section 501(a) of the Internal Revenue Code, the name and 
  9.30  address of the person are included on the return claiming the 
  9.31  credit.  
  9.32  In the case of a failure to provide the information required 
  9.33  under the preceding sentence, the preceding sentence does not 
  9.34  apply if it is shown that the taxpayer exercised due diligence 
  9.35  in attempting to provide the information required. 
  9.36     In the case of a nonresident, part-year resident, or a 
 10.1   person who has earned income not subject to tax under this 
 10.2   chapter including earned income excluded pursuant to section 
 10.3   290.01, subdivision 19b, clause (13), the credit determined 
 10.4   under section 21 of the Internal Revenue Code must be allocated 
 10.5   based on the ratio by which the earned income of the claimant 
 10.6   and the claimant's spouse from Minnesota sources bears to the 
 10.7   total earned income of the claimant and the claimant's spouse. 
 10.8      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 10.9   years beginning after December 31, 2003. 
 10.10     Sec. 8.  Minnesota Statutes 2002, section 290.0671, 
 10.11  subdivision 1, is amended to read: 
 10.12     Subdivision 1.  [CREDIT ALLOWED.] (a) An individual is 
 10.13  allowed a credit against the tax imposed by this chapter equal 
 10.14  to a percentage of earned income.  To receive a credit, a 
 10.15  taxpayer must be eligible for a credit under section 32 of the 
 10.16  Internal Revenue Code.  
 10.17     (b) For individuals with no qualifying children, the credit 
 10.18  equals 1.9125 percent of the first $4,620 of earned income.  The 
 10.19  credit is reduced by 1.9125 percent of earned income or modified 
 10.20  adjusted gross income, whichever is greater, in excess of 
 10.21  $5,770, but in no case is the credit less than zero. 
 10.22     (c) For individuals with one qualifying child, the credit 
 10.23  equals 8.5 percent of the first $6,920 of earned income and 8.5 
 10.24  percent of earned income over $12,080 but less than $13,450.  
 10.25  The credit is reduced by 5.73 percent of earned income or 
 10.26  modified adjusted gross income, whichever is greater, in excess 
 10.27  of $15,080, but in no case is the credit less than zero. 
 10.28     (d) For individuals with two or more qualifying children, 
 10.29  the credit equals ten percent of the first $9,720 of earned 
 10.30  income and 20 percent of earned income over $14,860 but less 
 10.31  than $16,800.  The credit is reduced by 10.3 percent of earned 
 10.32  income or modified adjusted gross income, whichever is greater, 
 10.33  in excess of $17,890, but in no case is the credit less than 
 10.34  zero. 
 10.35     (e) For a nonresident or part-year resident, the credit 
 10.36  must be allocated based on the percentage calculated under 
 11.1   section 290.06, subdivision 2c, paragraph (e). 
 11.2      (f) For a person who was a resident for the entire tax year 
 11.3   and has earned income not subject to tax under this 
 11.4   chapter including income excluded under section 290.01, 
 11.5   subdivision 19b, clause (13), the credit must be allocated based 
 11.6   on the ratio of federal adjusted gross income reduced by the 
 11.7   earned income not subject to tax under this chapter over federal 
 11.8   adjusted gross income. 
 11.9      (g) For tax years beginning after December 31, 2001, and 
 11.10  before December 31, 2004, the $5,770 in paragraph (b) is 
 11.11  increased to $6,770, the $15,080 in paragraph (c) is increased 
 11.12  to $16,080, and the $17,890 in paragraph (d) is increased to 
 11.13  $18,890 for married taxpayers filing joint returns. 
 11.14     (h) For tax years beginning after December 31, 2004, and 
 11.15  before December 31, 2007, the $5,770 in paragraph (b) is 
 11.16  increased to $7,770, the $15,080 in paragraph (c) is increased 
 11.17  to $17,080, and the $17,890 in paragraph (d) is increased to 
 11.18  $19,890 for married taxpayers filing joint returns. 
 11.19     (i) For tax years beginning after December 31, 2007, and 
 11.20  before December 31, 2010, the $5,770 in paragraph (b) is 
 11.21  increased to $8,770, the $15,080 in paragraph (c) is increased 
 11.22  to $18,080 and the $17,890 in paragraph (d) is increased to 
 11.23  $20,890 for married taxpayers filing joint returns. 
 11.24     (j) The commissioner shall construct tables showing the 
 11.25  amount of the credit at various income levels and make them 
 11.26  available to taxpayers.  The tables shall follow the schedule 
 11.27  contained in this subdivision, except that the commissioner may 
 11.28  graduate the transition between income brackets. 
 11.29     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 11.30  years beginning after December 31, 2003. 
 11.31     Sec. 9.  Minnesota Statutes 2002, section 290.091, 
 11.32  subdivision 2, is amended to read: 
 11.33     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
 11.34  this section, the following terms have the meanings given: 
 11.35     (a) "Alternative minimum taxable income" means the sum of 
 11.36  the following for the taxable year: 
 12.1      (1) the taxpayer's federal alternative minimum taxable 
 12.2   income as defined in section 55(b)(2) of the Internal Revenue 
 12.3   Code; 
 12.4      (2) the taxpayer's itemized deductions allowed in computing 
 12.5   federal alternative minimum taxable income, but excluding: 
 12.6      (i) the charitable contribution deduction under section 170 
 12.7   of the Internal Revenue Code to the extent that the deduction 
 12.8   exceeds 1.3 percent of adjusted gross income, as defined in 
 12.9   section 62 of the Internal Revenue Code; 
 12.10     (ii) the medical expense deduction; 
 12.11     (iii) the casualty, theft, and disaster loss deduction; and 
 12.12     (iv) the impairment-related work expenses of a disabled 
 12.13  person; 
 12.14     (3) for depletion allowances computed under section 613A(c) 
 12.15  of the Internal Revenue Code, with respect to each property (as 
 12.16  defined in section 614 of the Internal Revenue Code), to the 
 12.17  extent not included in federal alternative minimum taxable 
 12.18  income, the excess of the deduction for depletion allowable 
 12.19  under section 611 of the Internal Revenue Code for the taxable 
 12.20  year over the adjusted basis of the property at the end of the 
 12.21  taxable year (determined without regard to the depletion 
 12.22  deduction for the taxable year); 
 12.23     (4) to the extent not included in federal alternative 
 12.24  minimum taxable income, the amount of the tax preference for 
 12.25  intangible drilling cost under section 57(a)(2) of the Internal 
 12.26  Revenue Code determined without regard to subparagraph (E); 
 12.27     (5) to the extent not included in federal alternative 
 12.28  minimum taxable income, the amount of interest income as 
 12.29  provided by section 290.01, subdivision 19a, clause (1); and 
 12.30     (6) the amount of addition required by section 290.01, 
 12.31  subdivision 19a, clause (7); 
 12.32     less the sum of the amounts determined under the following: 
 12.33     (1) interest income as defined in section 290.01, 
 12.34  subdivision 19b, clause (1); 
 12.35     (2) an overpayment of state income tax as provided by 
 12.36  section 290.01, subdivision 19b, clause (2), to the extent 
 13.1   included in federal alternative minimum taxable income; 
 13.2      (3) the amount of investment interest paid or accrued 
 13.3   within the taxable year on indebtedness to the extent that the 
 13.4   amount does not exceed net investment income, as defined in 
 13.5   section 163(d)(4) of the Internal Revenue Code.  Interest does 
 13.6   not include amounts deducted in computing federal adjusted gross 
 13.7   income; and 
 13.8      (4) amounts subtracted from federal taxable income as 
 13.9   provided by section 290.01, subdivision 19b, clause clauses (12) 
 13.10  and (13). 
 13.11     In the case of an estate or trust, alternative minimum 
 13.12  taxable income must be computed as provided in section 59(c) of 
 13.13  the Internal Revenue Code. 
 13.14     (b) "Investment interest" means investment interest as 
 13.15  defined in section 163(d)(3) of the Internal Revenue Code. 
 13.16     (c) "Tentative minimum tax" equals 6.4 percent of 
 13.17  alternative minimum taxable income after subtracting the 
 13.18  exemption amount determined under subdivision 3. 
 13.19     (d) "Regular tax" means the tax that would be imposed under 
 13.20  this chapter (without regard to this section and section 
 13.21  290.032), reduced by the sum of the nonrefundable credits 
 13.22  allowed under this chapter.  
 13.23     (e) "Net minimum tax" means the minimum tax imposed by this 
 13.24  section. 
 13.25     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 13.26  years beginning after December 31, 2003. 
 13.27     Sec. 10.  Minnesota Statutes 2002, section 290.0921, 
 13.28  subdivision 3, is amended to read: 
 13.29     Subd. 3.  [ALTERNATIVE MINIMUM TAXABLE INCOME.] 
 13.30  "Alternative minimum taxable income" is Minnesota net income as 
 13.31  defined in section 290.01, subdivision 19, and includes the 
 13.32  adjustments and tax preference items in sections 56, 57, 58, and 
 13.33  59(d), (e), (f), and (h) of the Internal Revenue Code.  If a 
 13.34  corporation files a separate company Minnesota tax return, the 
 13.35  minimum tax must be computed on a separate company basis.  If a 
 13.36  corporation is part of a tax group filing a unitary return, the 
 14.1   minimum tax must be computed on a unitary basis.  The following 
 14.2   adjustments must be made. 
 14.3      (1) For purposes of the depreciation adjustments under 
 14.4   section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 
 14.5   the basis for depreciable property placed in service in a 
 14.6   taxable year beginning before January 1, 1990, is the adjusted 
 14.7   basis for federal income tax purposes, including any 
 14.8   modification made in a taxable year under section 290.01, 
 14.9   subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 14.10  subdivision 7, paragraph (c). 
 14.11     For taxable years beginning after December 31, 2000, the 
 14.12  amount of any remaining modification made under section 290.01, 
 14.13  subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 14.14  subdivision 7, paragraph (c), not previously deducted is a 
 14.15  depreciation allowance in the first taxable year after December 
 14.16  31, 2000. 
 14.17     (2) The portion of the depreciation deduction allowed for 
 14.18  federal income tax purposes under section 168(k) of the Internal 
 14.19  Revenue Code that is required as an addition under section 
 14.20  290.01, subdivision 19c, clause (16), is disallowed in 
 14.21  determining alternative minimum taxable income. 
 14.22     (3) The subtraction for depreciation allowed under section 
 14.23  290.01, subdivision 19d, clause (19), is allowed as a 
 14.24  depreciation deduction in determining alternative minimum 
 14.25  taxable income. 
 14.26     (4) The alternative tax net operating loss deduction under 
 14.27  sections 56(a)(4) and 56(d) of the Internal Revenue Code does 
 14.28  not apply. 
 14.29     (5) The special rule for certain dividends under section 
 14.30  56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 
 14.31     (6) The special rule for dividends from section 936 
 14.32  companies under section 56(g)(4)(C)(iii) does not apply. 
 14.33     (7) The tax preference for depletion under section 57(a)(1) 
 14.34  of the Internal Revenue Code does not apply. 
 14.35     (8) The tax preference for intangible drilling costs under 
 14.36  section 57(a)(2) of the Internal Revenue Code must be calculated 
 15.1   without regard to subparagraph (E) and the subtraction under 
 15.2   section 290.01, subdivision 19d, clause (4). 
 15.3      (9) The tax preference for tax exempt interest under 
 15.4   section 57(a)(5) of the Internal Revenue Code does not apply.  
 15.5      (10) The tax preference for charitable contributions of 
 15.6   appreciated property under section 57(a)(6) of the Internal 
 15.7   Revenue Code does not apply. 
 15.8      (11) For purposes of calculating the tax preference for 
 15.9   accelerated depreciation or amortization on certain property 
 15.10  placed in service before January 1, 1987, under section 57(a)(7) 
 15.11  of the Internal Revenue Code, the deduction allowable for the 
 15.12  taxable year is the deduction allowed under section 290.01, 
 15.13  subdivision 19e. 
 15.14     For taxable years beginning after December 31, 2000, the 
 15.15  amount of any remaining modification made under section 290.01, 
 15.16  subdivision 19e, not previously deducted is a depreciation or 
 15.17  amortization allowance in the first taxable year after December 
 15.18  31, 2004. 
 15.19     (12) For purposes of calculating the adjustment for 
 15.20  adjusted current earnings in section 56(g) of the Internal 
 15.21  Revenue Code, the term "alternative minimum taxable income" as 
 15.22  it is used in section 56(g) of the Internal Revenue Code, means 
 15.23  alternative minimum taxable income as defined in this 
 15.24  subdivision, determined without regard to the adjustment for 
 15.25  adjusted current earnings in section 56(g) of the Internal 
 15.26  Revenue Code. 
 15.27     (13) For purposes of determining the amount of adjusted 
 15.28  current earnings under section 56(g)(3) of the Internal Revenue 
 15.29  Code, no adjustment shall be made under section 56(g)(4) of the 
 15.30  Internal Revenue Code with respect to (i) the amount of foreign 
 15.31  dividend gross-up subtracted as provided in section 290.01, 
 15.32  subdivision 19d, clause (1), (ii) the amount of refunds of 
 15.33  income, excise, or franchise taxes subtracted as provided in 
 15.34  section 290.01, subdivision 19d, clause (10), or (iii) the 
 15.35  amount of royalties, fees or other like income subtracted as 
 15.36  provided in section 290.01, subdivision 19d, clause (11). 
 16.1      (14) Alternative minimum taxable income excludes the income 
 16.2   from operating in a job opportunity building zone as provided 
 16.3   under section 469.317. 
 16.4      Items of tax preference must not be reduced below zero as a 
 16.5   result of the modifications in this subdivision. 
 16.6      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 16.7   years beginning after December 31, 2003. 
 16.8      Sec. 11.  Minnesota Statutes 2002, section 290.0922, 
 16.9   subdivision 2, is amended to read: 
 16.10     Subd. 2.  [EXEMPTIONS.] The following entities are exempt 
 16.11  from the tax imposed by this section: 
 16.12     (1) corporations exempt from tax under section 290.05; 
 16.13     (2) real estate investment trusts; 
 16.14     (3) regulated investment companies or a fund thereof; and 
 16.15     (4) entities having a valid election in effect under 
 16.16  section 860D(b) of the Internal Revenue Code; 
 16.17     (5) town and farmers' mutual insurance companies; and 
 16.18     (6) cooperatives organized under chapter 308A that provide 
 16.19  housing exclusively to persons age 55 and over and are 
 16.20  classified as homesteads under section 273.124, subdivision 3; 
 16.21  and 
 16.22     (7) an entity, if for the taxable year all of its property 
 16.23  is located in a job opportunity building zone designated under 
 16.24  section 469.314 and all of its payroll is a job opportunity 
 16.25  building zone payroll under section 469.310. 
 16.26     Entities not specifically exempted by this subdivision are 
 16.27  subject to tax under this section, notwithstanding section 
 16.28  290.05.  
 16.29     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 16.30  years beginning after December 31, 2003. 
 16.31     Sec. 12.  Minnesota Statutes 2002, section 290.0922, 
 16.32  subdivision 3, is amended to read: 
 16.33     Subd. 3.  [DEFINITIONS.] (a) "Minnesota sales or receipts" 
 16.34  means the total sales apportioned to Minnesota pursuant to 
 16.35  section 290.191, subdivision 5, the total receipts attributed to 
 16.36  Minnesota pursuant to section 290.191, subdivisions 6 to 8, 
 17.1   and/or the total sales or receipts apportioned or attributed to 
 17.2   Minnesota pursuant to any other apportionment formula applicable 
 17.3   to the taxpayer. 
 17.4      (b) "Minnesota property" means total Minnesota tangible 
 17.5   property as provided in section 290.191, subdivisions 9 to 11, 
 17.6   and any other tangible property located in Minnesota, but does 
 17.7   not include property located in a job opportunity building zone 
 17.8   designated under section 469.314.  Intangible property shall not 
 17.9   be included in Minnesota property for purposes of this section.  
 17.10  Taxpayers who do not utilize tangible property to apportion 
 17.11  income shall nevertheless include Minnesota property for 
 17.12  purposes of this section.  On a return for a short taxable year, 
 17.13  the amount of Minnesota property owned, as determined under 
 17.14  section 290.191, shall be included in Minnesota property based 
 17.15  on a fraction in which the numerator is the number of days in 
 17.16  the short taxable year and the denominator is 365.  
 17.17     (c) "Minnesota payrolls" means total Minnesota payrolls as 
 17.18  provided in section 290.191, subdivision 12, but does not 
 17.19  include job opportunity building zone payrolls under section 
 17.20  469.310, subdivision 8.  Taxpayers who do not utilize payrolls 
 17.21  to apportion income shall nevertheless include Minnesota 
 17.22  payrolls for purposes of this section. 
 17.23     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 17.24  years beginning after December 31, 2003. 
 17.25     Sec. 13.  Minnesota Statutes 2002, section 297A.68, is 
 17.26  amended by adding a subdivision to read: 
 17.27     Subd. 37.  [JOB OPPORTUNITY BUILDING ZONES.] (a) Purchases 
 17.28  of tangible personal property or taxable services by a qualified 
 17.29  business, as defined in section 469.310, are exempt if the 
 17.30  property or services are primarily used or consumed in a job 
 17.31  opportunity building zone designated under section 469.314. 
 17.32     (b) Purchase and use of construction materials and supplies 
 17.33  for construction of improvements to real property in a job 
 17.34  opportunity building zone are exempt if the improvements after 
 17.35  completion of construction are to be used in the conduct of a 
 17.36  qualified business, as defined in section 469.310.  This 
 18.1   exemption applies regardless of whether the purchases are made 
 18.2   by the business or a contractor. 
 18.3      (c) The exemptions under this subdivision apply to a local 
 18.4   sales and use tax regardless of whether the local sales tax is 
 18.5   imposed on the sales taxable as defined under this chapter. 
 18.6      (d) This subdivision applies to sales, if the purchase was 
 18.7   made and delivery received during the duration of the zone. 
 18.8      <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 18.9   on or after the day following final enactment. 
 18.10     Sec. 14.  Minnesota Statutes 2002, section 297B.03, is 
 18.11  amended to read: 
 18.12     297B.03 [EXEMPTIONS.] 
 18.13     There is specifically exempted from the provisions of this 
 18.14  chapter and from computation of the amount of tax imposed by it 
 18.15  the following:  
 18.16     (1) purchase or use, including use under a lease purchase 
 18.17  agreement or installment sales contract made pursuant to section 
 18.18  465.71, of any motor vehicle by the United States and its 
 18.19  agencies and instrumentalities and by any person described in 
 18.20  and subject to the conditions provided in section 297A.67, 
 18.21  subdivision 11; 
 18.22     (2) purchase or use of any motor vehicle by any person who 
 18.23  was a resident of another state or country at the time of the 
 18.24  purchase and who subsequently becomes a resident of Minnesota, 
 18.25  provided the purchase occurred more than 60 days prior to the 
 18.26  date such person began residing in the state of Minnesota and 
 18.27  the motor vehicle was registered in the person's name in the 
 18.28  other state or country; 
 18.29     (3) purchase or use of any motor vehicle by any person 
 18.30  making a valid election to be taxed under the provisions of 
 18.31  section 297A.90; 
 18.32     (4) purchase or use of any motor vehicle previously 
 18.33  registered in the state of Minnesota when such transfer 
 18.34  constitutes a transfer within the meaning of section 118, 331, 
 18.35  332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 
 18.36  1563(a) of the Internal Revenue Code of 1986, as amended through 
 19.1   December 31, 1999; 
 19.2      (5) purchase or use of any vehicle owned by a resident of 
 19.3   another state and leased to a Minnesota based private or for 
 19.4   hire carrier for regular use in the transportation of persons or 
 19.5   property in interstate commerce provided the vehicle is titled 
 19.6   in the state of the owner or secured party, and that state does 
 19.7   not impose a sales tax or sales tax on motor vehicles used in 
 19.8   interstate commerce; 
 19.9      (6) purchase or use of a motor vehicle by a private 
 19.10  nonprofit or public educational institution for use as an 
 19.11  instructional aid in automotive training programs operated by 
 19.12  the institution.  "Automotive training programs" includes motor 
 19.13  vehicle body and mechanical repair courses but does not include 
 19.14  driver education programs; 
 19.15     (7) purchase of a motor vehicle for use as an ambulance by 
 19.16  an ambulance service licensed under section 144E.10; 
 19.17     (8) purchase of a motor vehicle by or for a public library, 
 19.18  as defined in section 134.001, subdivision 2, as a bookmobile or 
 19.19  library delivery vehicle; 
 19.20     (9) purchase of a ready-mixed concrete truck; 
 19.21     (10) purchase or use of a motor vehicle by a town for use 
 19.22  exclusively for road maintenance, including snowplows and dump 
 19.23  trucks, but not including automobiles, vans, or pickup trucks; 
 19.24     (11) purchase or use of a motor vehicle by a corporation, 
 19.25  society, association, foundation, or institution organized and 
 19.26  operated exclusively for charitable, religious, or educational 
 19.27  purposes, except a public school, university, or library, but 
 19.28  only if the vehicle is: 
 19.29     (i) a truck, as defined in section 168.011, a bus, as 
 19.30  defined in section 168.011, or a passenger automobile, as 
 19.31  defined in section 168.011, if the automobile is designed and 
 19.32  used for carrying more than nine persons including the driver; 
 19.33  and 
 19.34     (ii) intended to be used primarily to transport tangible 
 19.35  personal property or individuals, other than employees, to whom 
 19.36  the organization provides service in performing its charitable, 
 20.1   religious, or educational purpose; 
 20.2      (12) purchase of a motor vehicle for use by a transit 
 20.3   provider exclusively to provide transit service is exempt if the 
 20.4   transit provider is either (i) receiving financial assistance or 
 20.5   reimbursement under section 174.24 or 473.384, or (ii) operating 
 20.6   under section 174.29, 473.388, or 473.405; 
 20.7      (13) purchase or use of a motor vehicle by a qualified 
 20.8   business, as defined in section 469.310, located in a job 
 20.9   opportunity building zone, if the motor vehicle is principally 
 20.10  garaged in the job opportunity building zone and is primarily 
 20.11  used as part of or in direct support of the person's operations 
 20.12  carried on in the job opportunity building zone.  The exemption 
 20.13  under this clause applies to sales, if the purchase was made and 
 20.14  delivery received during the duration of the job opportunity 
 20.15  building zone.  The exemption under this clause also applies to 
 20.16  any local sales and use tax. 
 20.17     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 20.18  after December 31, 2003. 
 20.19     Sec. 15.  [469.310] [DEFINITIONS.] 
 20.20     Subdivision 1.  [SCOPE.] For purposes of sections 469.310 
 20.21  to 469.320, the following terms have the meanings given. 
 20.22     Subd. 2.  [AGRICULTURAL PROCESSING FACILITY.] "Agricultural 
 20.23  processing facility" means one or more facilities or operations 
 20.24  that transform, package, sort, or grade livestock or livestock 
 20.25  products, agricultural commodities, or plants or plant products 
 20.26  into goods that are used for intermediate or final consumption 
 20.27  including goods for nonfood use, and surrounding property. 
 20.28     Subd. 3.  [APPLICANT.] "Applicant" means a local government 
 20.29  unit or units applying for designation of an area as a job 
 20.30  opportunity building zone or a joint powers board, established 
 20.31  under section 471.59, acting on behalf of two or more local 
 20.32  government units. 
 20.33     Subd. 4.  [COMMISSIONER.] "Commissioner" means the 
 20.34  commissioner of trade and economic development. 
 20.35     Subd. 5.  [DEVELOPMENT PLAN.] "Development plan" means a 
 20.36  plan meeting the requirements of section 469.311. 
 21.1      Subd. 6.  [JOB OPPORTUNITY BUILDING ZONE OR ZONE.] "Job 
 21.2   opportunity building zone" or "zone" means a zone designated by 
 21.3   the commissioner under section 469.314, and includes an 
 21.4   agricultural processing facility zone. 
 21.5      Subd. 7.  [JOB OPPORTUNITY BUILDING ZONE PERCENTAGE OR ZONE 
 21.6   PERCENTAGE.] "Job opportunity building zone percentage" or "zone 
 21.7   percentage" means the following fraction reduced to a percentage:
 21.8      (1) the numerator of the fraction is: 
 21.9      (i) the ratio of the taxpayer's property factor under 
 21.10  section 290.191 located in the zone for the taxable year over 
 21.11  the property factor numerator determined under section 290.191, 
 21.12  plus 
 21.13     (ii) the ratio of the taxpayer's job opportunity building 
 21.14  zone payroll factor under subdivision 8 over the payroll factor 
 21.15  numerator determined under section 290.191; and 
 21.16     (2) the denominator of the fraction is two. 
 21.17     When calculating the zone percentage for a business that is 
 21.18  part of a unitary business as defined under section 290.17, 
 21.19  subdivision 4, the denominator of the payroll and property 
 21.20  factors is the Minnesota payroll and property of the unitary 
 21.21  business as reported on the combined report under section 
 21.22  290.17, subdivision 4, paragraph (j). 
 21.23     Subd. 8.  [JOB OPPORTUNITY BUILDING ZONE PAYROLL 
 21.24  FACTOR.] "Job opportunity building zone payroll factor" or "job 
 21.25  opportunity building zone payroll" is that portion of the 
 21.26  payroll factor under section 290.191 that represents: 
 21.27     (1) wages or salaries paid to an individual for services 
 21.28  performed in a job opportunity building zone; or 
 21.29     (2) wages or salaries paid to individuals working from 
 21.30  offices within a job opportunity building zone if their 
 21.31  employment requires them to work outside the zone and the work 
 21.32  is incidental to the work performed by the individual within the 
 21.33  zone. 
 21.34     Subd. 9.  [LOCAL GOVERNMENT UNIT.] "Local government unit" 
 21.35  means a statutory or home rule charter city, county, town, iron 
 21.36  range resources and rehabilitation agency, regional development 
 22.1   commission, or a federally designated economic development 
 22.2   district. 
 22.3      Subd. 10.  [PERSON.] "Person" includes an individual, 
 22.4   corporation, partnership, limited liability company, 
 22.5   association, or any other entity. 
 22.6      Subd. 11.  [QUALIFIED BUSINESS.] (a) "Qualified business" 
 22.7   means a person carrying on a trade or business at a place of 
 22.8   business located within a job opportunity building zone. 
 22.9      (b) A person that relocates a trade or business from 
 22.10  outside a job opportunity building zone into a zone is not a 
 22.11  qualified business, unless the business: 
 22.12     (1)(i) increases full-time employment in the first full 
 22.13  year of operation within the job opportunity building zone by at 
 22.14  least 20 percent measured relative to the operations that were 
 22.15  relocated and maintains the required level of employment for 
 22.16  each year the zone designation applies; or 
 22.17     (ii) makes a capital investment in the property located 
 22.18  within a zone equivalent to ten percent of the gross revenues of 
 22.19  operation that were relocated in the immediately preceding 
 22.20  taxable year; and 
 22.21     (2) enters a binding written agreement with the 
 22.22  commissioner that: 
 22.23     (i) pledges the business will meet the requirements of 
 22.24  clause (1); 
 22.25     (ii) provides for repayment of all tax benefits enumerated 
 22.26  under section 469.315 to the business under the procedures in 
 22.27  section 469.319, if the requirements of clause (1) are not met 
 22.28  for the taxable year or for taxes payable during the year in 
 22.29  which the requirements were not met; and 
 22.30     (iii) contains any other terms the commissioner determines 
 22.31  appropriate. 
 22.32     Subd. 12.  [RELOCATES.] (a) "Relocates" means that the 
 22.33  trade or business: 
 22.34     (1) ceases one or more operations or functions at another 
 22.35  location in Minnesota and begins performing substantially the 
 22.36  same operations or functions at a location in a job opportunity 
 23.1   building zone; or 
 23.2      (2) reduces employment at another location in Minnesota 
 23.3   during a period starting one year before and ending one year 
 23.4   after it begins operations in a job opportunity building zone 
 23.5   and its employees in the job opportunity building zone are 
 23.6   engaged in the same line of business as the employees at the 
 23.7   location where it reduced employment. 
 23.8      (b) "Relocate" does not include an expansion by a business 
 23.9   that establishes a new facility that does not replace or 
 23.10  supplant an existing operation or employment, in whole or in 
 23.11  part. 
 23.12     (c) "Trade or business" includes any business entity that 
 23.13  is substantially similar in operation or ownership to the 
 23.14  business entity seeking to be a qualified business under this 
 23.15  section. 
 23.16     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 23.17  following final enactment. 
 23.18     Sec. 16.  [469.311] [DEVELOPMENT PLAN.] 
 23.19     (a) An applicant for designation of a job opportunity 
 23.20  building zone must adopt a written development plan for the zone 
 23.21  before submitting the application to the commissioner. 
 23.22     (b) The development plan must contain, at least, the 
 23.23  following: 
 23.24     (1) a map of the proposed zone that indicates the 
 23.25  geographic boundaries of the zone, the total area, and present 
 23.26  use and conditions generally of the land and structures within 
 23.27  those boundaries; 
 23.28     (2) evidence of community support and commitment from local 
 23.29  government, local workforce investment boards, school districts, 
 23.30  and other education institutions, business groups, and the 
 23.31  public; 
 23.32     (3) a description of the methods proposed to increase 
 23.33  economic opportunity and expansion, facilitate infrastructure 
 23.34  improvement, reduce the local regulatory burden, and identify 
 23.35  job-training opportunities; 
 23.36     (4) current social, economic, and demographic 
 24.1   characteristics of the proposed zone and anticipated 
 24.2   improvements in education, health, human services, and 
 24.3   employment if the zone is created; 
 24.4      (5) a description of anticipated activity in the zone and 
 24.5   each subzone, including, but not limited to, industrial use, 
 24.6   industrial site reuse, commercial or retail use, and residential 
 24.7   use; and 
 24.8      (6) any other information required by the commissioner. 
 24.9      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 24.10  following final enactment. 
 24.11     Sec. 17.  [469.312] [JOB OPPORTUNITY BUILDING ZONES; 
 24.12  LIMITATIONS.] 
 24.13     Subdivision 1.  [MAXIMUM SIZE.] A job opportunity building 
 24.14  zone may not exceed 5,000 acres.  For a zone designated as an 
 24.15  agricultural processing facility zone, the zone also may not 
 24.16  exceed the size of a site necessary for the agricultural 
 24.17  processing facility, including ancillary operations and space 
 24.18  for expansion in the reasonably foreseeable future. 
 24.19     Subd. 2.  [SUBZONES.] The area of a job opportunity 
 24.20  building zone may consist of one or more noncontiguous areas or 
 24.21  subzones. 
 24.22     Subd. 3.  [OUTSIDE METROPOLITAN AREA.] The area of a job 
 24.23  opportunity building zone must be located outside of the 
 24.24  metropolitan area, as defined in section 473.121, subdivision 2. 
 24.25     Subd. 4.  [BORDER CITY DEVELOPMENT ZONES.] (a) The area of 
 24.26  a job opportunity building zone may not include the area of a 
 24.27  border city development zone designated under section 469.1731.  
 24.28  The city may remove property from a border city development zone 
 24.29  contingent upon the area being designated as a job opportunity 
 24.30  building zone.  Before removing a parcel of property from a 
 24.31  border city development zone, the city must obtain the written 
 24.32  consent to the removal from each recipient that is located on 
 24.33  the parcel and receives incentives under the border city 
 24.34  development zone.  Consent of any other property owner or 
 24.35  taxpayer in the border city development zone is not required. 
 24.36     (b) A city may not provide tax incentives under section 
 25.1   469.1734 to individuals or businesses for operations or activity 
 25.2   in a job opportunity building zone. 
 25.3      Subd. 5.  [DURATION LIMIT.] The maximum duration of a zone 
 25.4   is 12 years.  The applicant may request a shorter duration.  The 
 25.5   commissioner may specify a shorter duration, regardless of the 
 25.6   requested duration. 
 25.7      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 25.8   following final enactment. 
 25.9      Sec. 18.  [469.313] [APPLICATION FOR DESIGNATION.] 
 25.10     Subdivision 1.  [WHO MAY APPLY.] One or more local 
 25.11  government units, or a joint powers board under section 471.59, 
 25.12  acting on behalf of two or more units, may apply for designation 
 25.13  of an area as a job opportunity building zone.  All or part of 
 25.14  the area proposed for designation as a zone must be located 
 25.15  within the boundaries of each of the governmental units.  A 
 25.16  local government unit may not submit or have submitted on its 
 25.17  behalf more than one application for designation of a job 
 25.18  opportunity building zone. 
 25.19     Subd. 2.  [APPLICATION CONTENT.] The application must 
 25.20  include: 
 25.21     (1) a development plan meeting the requirements of section 
 25.22  469.311; 
 25.23     (2) the proposed duration of the zone, not to exceed 12 
 25.24  years; 
 25.25     (3) a resolution or ordinance adopted by each of the cities 
 25.26  or towns and the counties in which the zone is located, agreeing 
 25.27  to provide all of the local tax exemptions provided under 
 25.28  section 469.315; 
 25.29     (4) if the proposed zone includes area in a border city 
 25.30  development zone, written consent to removal of the property 
 25.31  from the border city development zone to the extent required by 
 25.32  section 469.312, subdivision 4; and 
 25.33     (5) supporting evidence to allow the commissioner to 
 25.34  evaluate the application under the criteria in section 469.314. 
 25.35     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 25.36  following final enactment. 
 26.1      Sec. 19.  [469.314] [DESIGNATION OF JOB OPPORTUNITY 
 26.2   BUILDING ZONES.] 
 26.3      Subdivision 1.  [COMMISSIONER TO DESIGNATE.] (a) The 
 26.4   commissioner, in consultation with the commissioner of revenue, 
 26.5   shall designate not more than ten job opportunity building 
 26.6   zones.  In making the designations, the commissioner shall 
 26.7   consider need and likelihood of success to yield the most 
 26.8   economic development and revitalization of economically 
 26.9   distressed rural areas of Minnesota. 
 26.10     (b) In addition to the designations under paragraph (a), 
 26.11  the commissioner may, in consultation with the commissioners of 
 26.12  agriculture and revenue, designate up to five agricultural 
 26.13  processing facility zones. 
 26.14     (c) The commissioner may, upon designation of a zone, 
 26.15  modify the development plan, including the boundaries of the 
 26.16  zone or subzones, if in the commissioner's opinion a modified 
 26.17  plan would better meet the objectives of the job opportunity 
 26.18  building zone program.  The commissioner shall notify the 
 26.19  applicant of the modification and provide a statement of the 
 26.20  reasons for the modifications. 
 26.21     Subd. 2.  [NEED INDICATORS.] (a) In evaluating applications 
 26.22  to determine the need for designation of a job opportunity 
 26.23  building zone, the commissioner shall consider the following 
 26.24  factors as indicators of need: 
 26.25     (1) the percentage of the population that is below 200 
 26.26  percent of the poverty rate, compared with the state as a whole; 
 26.27     (2) the extent to which the area's average weekly wage is 
 26.28  significantly lower than the state average weekly wage; 
 26.29     (3) the amount of property in or near the proposed zone 
 26.30  that is deteriorated or underutilized; 
 26.31     (4) the extent to which the median sale price of housing 
 26.32  units in the area is below the state median; 
 26.33     (5) the extent to which the median household income of the 
 26.34  area is lower than the state median household income; 
 26.35     (6) the extent to which the area experienced a population 
 26.36  loss during the 20-year period ending the year before the 
 27.1   application is made; 
 27.2      (7) the extent to which an area has experienced sudden or 
 27.3   severe job loss as a result of closing of businesses or other 
 27.4   employers; 
 27.5      (8) the extent to which property in the area would remain 
 27.6   underdeveloped or nonperforming due to physical characteristics; 
 27.7      (9) the extent to which the area has substantial real 
 27.8   property with adequate infrastructure and energy to support new 
 27.9   or expanded development; and 
 27.10     (10) the extent to which the business startup or expansion 
 27.11  rates are significantly lower than the respective rate for the 
 27.12  state.  
 27.13     (b) In applying the need indicators, the best available 
 27.14  data should be used.  If reported data are not available for the 
 27.15  proposed zone, data for the smallest area that is available and 
 27.16  includes the area of the proposed zone may be used.  The 
 27.17  commissioner may require applicants to provide data to 
 27.18  demonstrate how the area meets one or more of the indicators of 
 27.19  need. 
 27.20     Subd. 3.  [SUCCESS INDICATORS.] In determining the 
 27.21  likelihood of success of a proposed zone, the commissioner shall 
 27.22  consider: 
 27.23     (1) the strength and viability of the proposed development 
 27.24  goals, objectives, and strategies in the development plan; 
 27.25     (2) whether the development plan is creative and innovative 
 27.26  in comparison to other applications; 
 27.27     (3) local public and private commitment to development of 
 27.28  the proposed zone and the potential cooperation of surrounding 
 27.29  communities; 
 27.30     (4) existing resources available to the proposed zone; 
 27.31     (5) how the designation of the zone would relate to other 
 27.32  economic and community development projects and to regional 
 27.33  initiatives or programs; 
 27.34     (6) how the regulatory burden will be eased for businesses 
 27.35  operating in the proposed zone; 
 27.36     (7) proposals to establish and link job creation and job 
 28.1   training; and 
 28.2      (8) the extent to which the development is directed at 
 28.3   encouraging and that designation of the zone is likely to result 
 28.4   in the creation of high-paying jobs. 
 28.5      Subd. 4.  [DESIGNATION SCHEDULE.] (a) The schedule in 
 28.6   paragraphs (b) to (e) applies to the designation of job 
 28.7   opportunity building zones. 
 28.8      (b) The commissioner shall publish the form for 
 28.9   applications and any procedural, form, or content requirements 
 28.10  for applications by no later than August 1, 2003.  The 
 28.11  commissioner may publish these requirements on the Internet, in 
 28.12  the State Register, or by any other means the commissioner 
 28.13  determines appropriate to disseminate the information to 
 28.14  potential applicants for designation. 
 28.15     (c) Applications must be submitted by October 15, 2003. 
 28.16     (d) The commissioner shall designate the zones by no later 
 28.17  than December 31, 2003. 
 28.18     (e) The designation of the zones takes effect January 1, 
 28.19  2004. 
 28.20     Subd. 5.  [GEOGRAPHIC DISTRIBUTION.] The commissioner shall 
 28.21  have as a goal the geographic distribution of zones around the 
 28.22  state. 
 28.23     Subd. 6.  [RULEMAKING EXEMPTION.] The commissioner's 
 28.24  actions in establishing procedures, requirements, and making 
 28.25  determinations to administer sections 469.310 to 469.320 are not 
 28.26  a rule for purposes of chapter 14 and are not subject to the 
 28.27  Administrative Procedure Act contained in chapter 14 and are not 
 28.28  subject to section 14.386. 
 28.29     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 28.30  following final enactment. 
 28.31     Sec. 20.  [469.315] [TAX INCENTIVES AVAILABLE IN ZONES.] 
 28.32     Qualified businesses that operate in a job opportunity 
 28.33  building zone, individuals who invest in a qualified business 
 28.34  that operates in a job opportunity building zone, and property 
 28.35  located in a job opportunity building zone qualify for: 
 28.36     (1) exemption from individual income taxes as provided 
 29.1   under section 469.316; 
 29.2      (2) exemption from corporate franchise taxes as provided 
 29.3   under section 469.317; 
 29.4      (3) exemption from the state sales and use tax and any 
 29.5   local sales and use taxes on qualifying purchases as provided in 
 29.6   section 297A.68, subdivision 37; 
 29.7      (4) exemption from the state sales tax on motor vehicles 
 29.8   and any local sales tax on motor vehicles as provided under 
 29.9   section 297B.03; 
 29.10     (5) exemption from the property tax as provided in section 
 29.11  272.02, subdivision 56; 
 29.12     (6) exemption from the wind energy production tax under 
 29.13  section 272.029, subdivision 7; and 
 29.14     (7) the jobs credit allowed under section 469.318. 
 29.15     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 29.16  following final enactment. 
 29.17     Sec. 21.  [469.316] [INDIVIDUAL INCOME TAX EXEMPTION.] 
 29.18     Subdivision 1.  [APPLICATION.] An individual operating a 
 29.19  trade or business in a job opportunity building zone, and an 
 29.20  individual making a qualifying investment in a qualified 
 29.21  business operating in a job opportunity building zone qualifies 
 29.22  for the exemptions from taxes imposed under chapter 290, as 
 29.23  provided in this section.  The exemptions provided under this 
 29.24  section apply only to the extent that the income otherwise would 
 29.25  be taxable under chapter 290.  Subtractions under this section 
 29.26  from federal taxable income, alternative minimum taxable income, 
 29.27  or any other base subject to tax are limited to the amount that 
 29.28  otherwise would be included in the tax base absent the exemption 
 29.29  under this section.  This section applies only to taxable years 
 29.30  beginning during the duration of the job opportunity building 
 29.31  zone. 
 29.32     Subd. 2.  [RENTS.] An individual is exempt from the taxes 
 29.33  imposed under chapter 290 on net rents derived from real or 
 29.34  tangible personal property located in a zone for a taxable year 
 29.35  in which the zone was designated a job opportunity building 
 29.36  zone.  If tangible personal property was used both within and 
 30.1   outside of the zone, the exemption amount for the net rental 
 30.2   income must be multiplied by a fraction, the numerator of which 
 30.3   is the number of days the property was used in the zone and the 
 30.4   denominator of which is the total days. 
 30.5      Subd. 3.  [BUSINESS INCOME.] An individual is exempt from 
 30.6   the taxes imposed under chapter 290 on net income from the 
 30.7   operation of a qualified business in a job opportunity building 
 30.8   zone.  If the trade or business is carried on within and without 
 30.9   the zone and the individual is not a resident of Minnesota, the 
 30.10  exemption must be apportioned based on the zone percentage for 
 30.11  the taxable year.  If the trade or business is carried on within 
 30.12  and without the zone and the individual is a resident of 
 30.13  Minnesota, the exemption must be apportioned based on the zone 
 30.14  percentage for the taxable year, except the ratios under section 
 30.15  469.310, subdivision 7, clause (1), items (i) and (ii), must use 
 30.16  the denominators of the property and payroll factors determined 
 30.17  under section 290.191.  No subtraction is allowed under this 
 30.18  section in excess of 20 percent of the sum of the job 
 30.19  opportunity building zone payroll and the adjusted basis of the 
 30.20  property at the time that the property is first used in the job 
 30.21  opportunity building zone by the business. 
 30.22     Subd. 4.  [CAPITAL GAINS.] (a) An individual is exempt from 
 30.23  the taxes imposed under chapter 290 on: 
 30.24     (1) net gain derived on a sale or exchange of real property 
 30.25  located in the zone and used by a qualified business.  If the 
 30.26  property was held by the individual during a period when the 
 30.27  zone was not designated, the gain must be prorated based on the 
 30.28  percentage of time, measured in calendar days, that the real 
 30.29  property was held by the individual during the period the zone 
 30.30  designation was in effect to the total period of time the real 
 30.31  property was held by the individual; 
 30.32     (2) net gain derived on a sale or exchange of tangible 
 30.33  personal property used by a qualified business in the zone.  If 
 30.34  the property was held by the individual during a period when the 
 30.35  zone was not designated, the gain must be prorated based on the 
 30.36  percentage of time, measured in calendar days, that the property 
 31.1   was held by the individual during the period the zone 
 31.2   designation was in effect to the total period of time the 
 31.3   property was held by the individual.  If the tangible personal 
 31.4   property was used outside of the zone during the period of the 
 31.5   zone's designation, the exemption must be multiplied by a 
 31.6   fraction, the numerator of which is the number of days the 
 31.7   property was used in the zone during the time of the designation 
 31.8   and the denominator of which is the total days the property was 
 31.9   held during the time of the designation; and 
 31.10     (3) net gain derived on a sale of an ownership interest in 
 31.11  a qualified business operating in the job opportunity building 
 31.12  zone, meeting the requirements of paragraph (b).  The exemption 
 31.13  on the gain must be multiplied by the zone percentage of the 
 31.14  business for the taxable year prior to the sale. 
 31.15     (b) A qualified business meets the requirements of 
 31.16  paragraph (a), clause (3), if it is a corporation, an S 
 31.17  corporation, or a partnership, and for the taxable year its job 
 31.18  opportunity building zone percentage exceeds 25 percent.  For 
 31.19  purposes of paragraph (a), clause (3), the zone percentage must 
 31.20  be calculated by modifying the ratios under section 469.310, 
 31.21  subdivision 7, clause (1), items (i) and (ii), to use the 
 31.22  denominators of the property and payroll factors determined 
 31.23  under section 290.191.  Upon the request of an individual 
 31.24  holding an ownership interest in the entity, the entity must 
 31.25  certify to the owner, in writing, the job opportunity building 
 31.26  zone percentage needed to determine the exemption. 
 31.27     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 31.28  years beginning after December 31, 2003. 
 31.29     Sec. 22.  [469.317] [CORPORATE FRANCHISE TAX EXEMPTION.] 
 31.30     (a) A qualified business is exempt from taxation under 
 31.31  section 290.02, the alternative minimum tax under section 
 31.32  290.0921, and the minimum fee under section 290.0922, on the 
 31.33  portion of its income attributable to operations within the 
 31.34  zone.  This exemption is determined as follows: 
 31.35     (1) for purposes of the tax imposed under section 290.02, 
 31.36  by multiplying its taxable net income by its zone percentage and 
 32.1   subtracting the result in determining taxable income; 
 32.2      (2) for purposes of the alternative minimum tax under 
 32.3   section 290.0921, by multiplying its alternative minimum taxable 
 32.4   income by its zone percentage and reducing alternative minimum 
 32.5   taxable income by this amount; and 
 32.6      (3) for purposes of the minimum fee under section 290.0922, 
 32.7   by excluding property and payroll in the zone from the 
 32.8   computations of the fee or by exempting the entity under section 
 32.9   290.0922, subdivision 2, clause (7). 
 32.10     (b) No subtraction is allowed under this section in excess 
 32.11  of 20 percent of the sum of the corporation's job opportunity 
 32.12  building zone payroll and the adjusted basis of the property at 
 32.13  the time that the property is first used in the job opportunity 
 32.14  building zone by the corporation. 
 32.15     (c) This section applies only to taxable years beginning 
 32.16  during the duration of the job opportunity building zone. 
 32.17     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 32.18  years beginning after December 31, 2003. 
 32.19     Sec. 23.  [469.318] [JOBS CREDIT.] 
 32.20     Subdivision 1.  [CREDIT ALLOWED.] A qualified business is 
 32.21  allowed a credit against the taxes imposed under chapter 290.  
 32.22  The credit equals seven percent of the: 
 32.23     (1) lesser of: 
 32.24     (i) zone payroll for the taxable year, less the zone 
 32.25  payroll for the base year; or 
 32.26     (ii) total Minnesota payroll for the taxable year, less 
 32.27  total Minnesota payroll for the base year; minus 
 32.28     (2) $30,000 multiplied by (the number of full-time 
 32.29  equivalent employees that the qualified business employs in the 
 32.30  job opportunity building zone for the taxable year, minus the 
 32.31  number of full-time equivalent employees the business employed 
 32.32  in the zone in the base year, but not less than zero). 
 32.33     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 32.34  the following terms have the meanings given. 
 32.35     (b) "Base year" means the taxable year beginning during the 
 32.36  calendar year prior to the calendar year in which the zone 
 33.1   designation took effect. 
 33.2      (c) "Full-time equivalent employees" means the equivalent 
 33.3   of annualized expected hours of work equal to 2,080 hours. 
 33.4      (d) "Minnesota payroll" means the wages or salaries 
 33.5   attributed to Minnesota under section 290.191, subdivision 12, 
 33.6   for the qualified business or the unitary business of which the 
 33.7   qualified business is a part, whichever is greater. 
 33.8      (e) "Zone payroll" means wages or salaries used to 
 33.9   determine the zone payroll factor for the qualified business, 
 33.10  less the amount of compensation attributable to any employee 
 33.11  that exceeds $100,000. 
 33.12     Subd. 3.  [INFLATION ADJUSTMENT.] For taxable years 
 33.13  beginning after December 31, 2004, the dollar amounts in 
 33.14  subdivision 1, clause (2), and subdivision 2, paragraph (e), are 
 33.15  annually adjusted for inflation.  The commissioner of revenue 
 33.16  shall adjust the amounts by the percentage determined under 
 33.17  section 290.06, subdivision 2d, for the taxable year. 
 33.18     Subd. 4.  [REFUNDABLE.] If the amount of the credit exceeds 
 33.19  the liability for tax under chapter 290, the commissioner of 
 33.20  revenue shall refund the excess to the qualified business. 
 33.21     Subd. 5.  [APPROPRIATION.] An amount sufficient to pay the 
 33.22  refunds authorized by this section is appropriated to the 
 33.23  commissioner of revenue from the general fund. 
 33.24     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 33.25  years beginning after December 31, 2003. 
 33.26     Sec. 24.  [469.319] [REPAYMENT OF TAX BENEFITS.] 
 33.27     Subdivision 1.  [REPAYMENT OBLIGATION.] A business must 
 33.28  repay the amount of the total tax reduction listed in section 
 33.29  469.315 and any refund under section 469.318 in excess of tax 
 33.30  liability, received during the two years immediately before it 
 33.31  ceased to operate in the zone, if the business: 
 33.32     (1) received tax reductions authorized by section 469.315; 
 33.33  and 
 33.34     (2)(i) did not meet the goals specified in an agreement 
 33.35  entered into with the applicant that states any obligation the 
 33.36  qualified business must fulfill in order to be eligible for tax 
 34.1   benefits.  The commissioner may extend for up to one year the 
 34.2   period for meeting any goals provided in an agreement.  The 
 34.3   applicant may extend the period for meeting other goals by 
 34.4   documenting in writing the reason for the extension and 
 34.5   attaching a copy of the document to its next annual report to 
 34.6   the commissioner; or 
 34.7      (ii) ceased to operate its facility located within the job 
 34.8   opportunity building zone or otherwise ceases to be or is not a 
 34.9   qualified business. 
 34.10     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 34.11  the following terms have the meanings given. 
 34.12     (b) "Business" means any person who received tax benefits 
 34.13  enumerated in section 469.315. 
 34.14     (c) "Commissioner" means the commissioner of revenue. 
 34.15     Subd. 3.  [DISPOSITION OR REPAYMENT.] The repayment must be 
 34.16  paid to the state to the extent it represents a state tax 
 34.17  reduction and to the county to the extent it represents a 
 34.18  property tax reduction.  Any amount repaid to the state must be 
 34.19  deposited in the general fund.  Any amount repaid to the county 
 34.20  for the property tax exemption must be distributed to the local 
 34.21  governments with authority to levy taxes in the zone in the same 
 34.22  manner provided for distribution of payment of delinquent 
 34.23  property taxes.  Any repayment of local sales taxes must be 
 34.24  repaid to the city or county imposing the local sales tax. 
 34.25     Subd. 4.  [REPAYMENT PROCEDURES.] (a) For the repayment of 
 34.26  taxes imposed under chapter 290 or 297A or local taxes collected 
 34.27  pursuant to section 297A.99, a business must file an amended 
 34.28  return with the commissioner of revenue and pay any taxes 
 34.29  required to be repaid within 30 days after ceasing to do 
 34.30  business in the zone.  The amount required to be repaid is 
 34.31  determined by calculating the tax for the period or periods for 
 34.32  which repayment is required without regard to the exemptions and 
 34.33  credits allowed under section 469.315. 
 34.34     (b) For the repayment of taxes imposed under chapter 297B, 
 34.35  a business must pay any taxes required to be repaid to the motor 
 34.36  vehicle registrar, as agent for the commissioner of revenue, 
 35.1   within 30 days after ceasing to do business in the zone. 
 35.2      (c) For the repayment of property taxes, the county auditor 
 35.3   shall prepare a tax statement for the business, applying the 
 35.4   applicable tax extension rates for each payable year and provide 
 35.5   a copy to the business.  The business must pay the taxes to the 
 35.6   county treasurer within 30 days after receipt of the tax 
 35.7   statement.  The taxpayer may appeal the valuation and 
 35.8   determination of the property tax to the tax court within 30 
 35.9   days after receipt of the tax statement. 
 35.10     (d) The provisions of chapters 270 and 289A relating to the 
 35.11  commissioner's authority to audit, assess, and collect the tax 
 35.12  and to hear appeals are applicable to the repayment required 
 35.13  under paragraphs (a) and (b).  The commissioner may impose civil 
 35.14  penalties as provided in chapter 289A, and the additional tax 
 35.15  and penalties are subject to interest at the rate provided in 
 35.16  section 270.75, from 30 days after ceasing to do business in the 
 35.17  job opportunity building zone until the date the tax is paid. 
 35.18     (e) If a property tax is not repaid under paragraph (c), 
 35.19  the county treasurer shall add the amount required to be repaid 
 35.20  to the property taxes assessed against the property for payment 
 35.21  in the year following the year in which the treasurer discovers 
 35.22  that the business ceased to operate in the job opportunity 
 35.23  building zone. 
 35.24     (f) For determining the tax required to be repaid, a tax 
 35.25  reduction is deemed to have been received on the date that the 
 35.26  tax would have been due if the taxpayer had not been entitled to 
 35.27  the exemption or on the date a refund was issued for a 
 35.28  refundable tax credit. 
 35.29     (g) The commissioner may assess the repayment of taxes 
 35.30  under paragraph (d) any time within two years after the business 
 35.31  ceases to operate in the job opportunity building zone, or 
 35.32  within any period of limitations for the assessment of tax under 
 35.33  section 289A.38, whichever period is later. 
 35.34     Subd. 5.  [WAIVER AUTHORITY.] The commissioner may waive 
 35.35  all or part of a repayment, if the commissioner, in consultation 
 35.36  with the commissioner of trade and economic development and 
 36.1   appropriate officials from the local government units in which 
 36.2   the qualified business is located, determines that requiring 
 36.3   repayment of the tax is not in the best interest of the state or 
 36.4   the local government units and the business ceased operating as 
 36.5   a result of circumstances beyond its control including, but not 
 36.6   limited to: 
 36.7      (1) a natural disaster; 
 36.8      (2) unforeseen industry trends; or 
 36.9      (3) loss of a major supplier or customer. 
 36.10     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 36.11  following final enactment. 
 36.12     Sec. 25.  [469.320] [ZONE PERFORMANCE; REMEDIES.] 
 36.13     Subdivision 1.  [REPORTING REQUIREMENT.] An applicant 
 36.14  receiving designation of a job opportunity building zone under 
 36.15  section 469.314 must annually report to the commissioner on its 
 36.16  progress in meeting the zone performance goals under the 
 36.17  development plan for the zone. 
 36.18     Subd. 2.  [PROCEDURES.] For reports required by subdivision 
 36.19  1, the commissioner may prescribe: 
 36.20     (1) the required time or times by which the reports must be 
 36.21  filed; 
 36.22     (2) the form of the report; and 
 36.23     (3) the information required to be included in the report. 
 36.24     Subd. 3.  [REMEDIES.] If the commissioner determines, based 
 36.25  on a report filed under subdivision 1 or other available 
 36.26  information, that a zone or subzone is failing to meet its 
 36.27  performance goals, the commissioner may take any actions the 
 36.28  commissioner determines appropriate, including modification of 
 36.29  the boundaries of the zone or a subzone or termination of the 
 36.30  zone or a subzone.  Before taking any action, the commissioner 
 36.31  shall consult with the applicant and the affected local 
 36.32  government units, including notifying them of the proposed 
 36.33  actions to be taken.  The commissioner shall publish any order 
 36.34  modifying a zone in the State Register and on the Internet.  The 
 36.35  applicant may appeal the commissioner's order under the 
 36.36  contested case procedures of chapter 14. 
 37.1      Subd. 4.  [EXISTING BUSINESSES.] (a) An action to remove 
 37.2   area from a zone or to terminate a zone under this section does 
 37.3   not apply to: 
 37.4      (1) the property tax on improvements constructed before the 
 37.5   first January 2 following publication of the commissioner's 
 37.6   order; 
 37.7      (2) sales tax on purchases made before the first day of the 
 37.8   next calendar month beginning at least 30 days after publication 
 37.9   of the commissioner's order; and 
 37.10     (3) individual income tax or corporate franchise tax 
 37.11  attributable to a facility that was in operation before the 
 37.12  publication of the commissioner's order. 
 37.13     (b) The tax exemptions specified in paragraph (a) terminate 
 37.14  on the date on which the zone expires under the original 
 37.15  designation. 
 37.16     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 37.17  following final enactment. 
 37.18     Sec. 26.  [477A.08] [JOB OPPORTUNITY BUILDING ZONE AID.] 
 37.19     Subdivision 1.  [ELIGIBILITY.] (a) For each assessment year 
 37.20  that the exemption for job opportunity building zone property is 
 37.21  in effect under section 272.02, subdivision 56, the assessor 
 37.22  shall determine the difference between the actual net tax 
 37.23  capacity and the net tax capacity that would be determined for 
 37.24  the job opportunity building zone, including any property 
 37.25  removed from the zone that continues to qualify under section 
 37.26  469.320, subdivision 4, if the exemption were not in effect. 
 37.27     (b) Each city and county is eligible for aid equal to 
 37.28  one-half of: 
 37.29     (1) the amount by which the sum of the differences 
 37.30  determined in paragraph (a) for the corresponding assessment 
 37.31  year exceeds three percent of the city's or county's total 
 37.32  taxable net tax capacity for taxes payable in 2003, multiplied 
 37.33  by 
 37.34     (2) the city's or the county's, as applicable, average 
 37.35  local tax rate for taxes payable in 2003. 
 37.36     Subd. 2.  [CERTIFICATION.] The county assessor shall notify 
 38.1   the commissioner of revenue of the amount determined under 
 38.2   subdivision 1, paragraph (b), clause (1), for any city or county 
 38.3   that qualifies for aid under this section by June 30 of the 
 38.4   assessment year, in a form prescribed by the commissioner.  The 
 38.5   commissioner shall notify each city and county of its qualifying 
 38.6   aid amount by August 15 of the assessment year. 
 38.7      Subd. 3.  [APPROPRIATION; PAYMENT.] The commissioner shall 
 38.8   pay each city and county its qualifying aid amount by July 20 of 
 38.9   the following year.  An amount sufficient to pay the aid under 
 38.10  this section is appropriated to the commissioner of revenue from 
 38.11  the general fund. 
 38.12     <b>[EFFECTIVE DATE.]</b> This section is effective beginning for 
 38.13  aid based on property taxes assessed in 2004, payable in 2005. 
 38.14     Sec. 27.  [APPROPRIATION; COST OF ADMINISTRATION.] 
 38.15     $100,000 in fiscal year 2004 and $30,000 in fiscal year 
 38.16  2005 are appropriated to the commissioner of trade and economic 
 38.17  development for the cost of designating job opportunity building 
 38.18  zones. 
 38.19     $53,000 in fiscal year 2004 and $29,000 in fiscal year 2005 
 38.20  are appropriated to the commissioner of revenue for the cost of 
 38.21  administering the tax provisions of this act. 
 38.22     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 38.23  following final enactment. 
 38.24                             ARTICLE 2 
 38.25               BIOTECHNOLOGY AND HEALTH SCIENCE ZONES 
 38.26     Section 1.  [LEGISLATIVE FINDINGS.] 
 38.27     The legislature finds, as a matter of public policy, that 
 38.28  biotechnology and the health sciences hold immense promise in 
 38.29  improving the quality of our lives, including curing diseases, 
 38.30  making our foods safer and more abundant, reducing our 
 38.31  dependence on fossil fuels and foreign oil, making better use of 
 38.32  Minnesota agriculture products, and growing tens of thousands of 
 38.33  new, high-paying jobs. 
 38.34     The legislature further finds that there are hundreds of 
 38.35  discoveries made each year at the University of Minnesota, the 
 38.36  Mayo Clinic, and other research institutions that, if properly 
 39.1   commercialized, could help provide these benefits.  
 39.2      The legislature further finds that biotechnology and health 
 39.3   sciences companies benefit from location in proximity to these 
 39.4   research institutions and the many faculty, students, and other 
 39.5   intellectual and physical infrastructure these institutions 
 39.6   provide.  
 39.7      The legislature further finds that Minnesota's high-quality 
 39.8   workforce is attractive to biotechnology and health sciences 
 39.9   companies that would want to relocate, start up, or expand in 
 39.10  Minnesota. 
 39.11     The legislature further finds and declares that it is 
 39.12  appropriate and necessary, to improve our quality of life and as 
 39.13  a matter of economic development, that Minnesota take rapid and 
 39.14  affirmative steps to encourage the development of biotechnology 
 39.15  and the health sciences and the commercialization of important 
 39.16  discoveries, especially through expansion of business 
 39.17  opportunities in proximity to the research institutions where 
 39.18  those discoveries occur.  This must include attention to the 
 39.19  ethical, legal, and societal impacts of the industry, including 
 39.20  risk assessment and environmental protection. 
 39.21     Sec. 2.  Minnesota Statutes 2002, section 272.02, is 
 39.22  amended by adding a subdivision to read: 
 39.23     Subd. 56.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 39.24  PROPERTY.] (a) Improvements to real property, and personal 
 39.25  property, classified under section 273.13, subdivision 24, and 
 39.26  located within a biotechnology and health sciences industry zone 
 39.27  are exempt from ad valorem taxes levied under chapter 275. 
 39.28     (b) For property to qualify for exemption under paragraph 
 39.29  (a), the occupant must be a qualified business, as defined in 
 39.30  section 469.310. 
 39.31     (c) The exemption applies beginning for the first 
 39.32  assessment year after designation of the biotechnology and 
 39.33  health sciences industry zone by the commissioner of trade and 
 39.34  economic development.  The exemption applies to each assessment 
 39.35  year that begins during the duration of the biotechnology and 
 39.36  health sciences industry zone.  This exemption does not apply to:
 40.1      (1) a levy under section 475.61 or similar levy provisions 
 40.2   under any other law to pay general obligation bonds; or 
 40.3      (2) a levy under section 126C.17, if the levy was approved 
 40.4   by the voters before the designation of the biotechnology and 
 40.5   health sciences industry zone. 
 40.6      (d) This subdivision does not apply to any taxes payable to 
 40.7   a city, town, or county that chose not to provide property tax 
 40.8   exemptions to qualified businesses in the biotechnology and 
 40.9   health sciences industry zone in the application submitted under 
 40.10  section 469.313. 
 40.11     <b>[EFFECTIVE DATE.]</b> This section is effective beginning for 
 40.12  property taxes assessed in 2004, payable in 2005. 
 40.13     Sec. 3.  Minnesota Statutes 2002, section 290.01, 
 40.14  subdivision 29, is amended to read: 
 40.15     Subd. 29.  [TAXABLE INCOME.] The term "taxable income" 
 40.16  means:  
 40.17     (1) for individuals, estates, and trusts, the same as 
 40.18  taxable net income; 
 40.19     (2) for corporations, the taxable net income less 
 40.20     (i) the net operating loss deduction under section 290.095; 
 40.21  and 
 40.22     (ii) the dividends received deduction under section 290.21, 
 40.23  subdivision 4; and 
 40.24     (iii) the exemption for operating in a biotechnology and 
 40.25  health sciences industry zone under section 469.317. 
 40.26     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 40.27  years beginning after December 31, 2003. 
 40.28     Sec. 4.  Minnesota Statutes 2002, section 290.06, is 
 40.29  amended by adding a subdivision to read: 
 40.30     Subd. 29.  [BIOTECHNOLOGY AND HEALTH SCIENCE INDUSTRY ZONE 
 40.31  JOB CREDIT.] A taxpayer that is a qualified business, as defined 
 40.32  in section 469.310, subdivision 11, is allowed a credit as 
 40.33  determined under section 469.318 against the franchise tax 
 40.34  imposed under section 290.06, subdivision 1, or the alternative 
 40.35  minimum tax imposed under section 290.0921. 
 40.36     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 41.1   following final enactment.  
 41.2      Sec. 5.  Minnesota Statutes 2002, section 290.06, is 
 41.3   amended by adding a subdivision to read: 
 41.4      Subd. 30.  [BIOTECHNOLOGY AND HEALTH SCIENCE INDUSTRY ZONE 
 41.5   RESEARCH AND DEVELOPMENT CREDIT.] A taxpayer that is a qualified 
 41.6   business, as defined in section 469.310, subdivision 11, is 
 41.7   allowed a credit as determined under section 469.3181 against 
 41.8   the franchise tax imposed under section 290.06, subdivision 1, 
 41.9   or the alternative minimum tax imposed under section 290.0921. 
 41.10     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 41.11  following final enactment.  
 41.12     Sec. 6.  Minnesota Statutes 2002, section 290.0921, 
 41.13  subdivision 3, is amended to read: 
 41.14     Subd. 3.  [ALTERNATIVE MINIMUM TAXABLE INCOME.] 
 41.15  "Alternative minimum taxable income" is Minnesota net income as 
 41.16  defined in section 290.01, subdivision 19, and includes the 
 41.17  adjustments and tax preference items in sections 56, 57, 58, and 
 41.18  59(d), (e), (f), and (h) of the Internal Revenue Code.  If a 
 41.19  corporation files a separate company Minnesota tax return, the 
 41.20  minimum tax must be computed on a separate company basis.  If a 
 41.21  corporation is part of a tax group filing a unitary return, the 
 41.22  minimum tax must be computed on a unitary basis.  The following 
 41.23  adjustments must be made. 
 41.24     (1) For purposes of the depreciation adjustments under 
 41.25  section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 
 41.26  the basis for depreciable property placed in service in a 
 41.27  taxable year beginning before January 1, 1990, is the adjusted 
 41.28  basis for federal income tax purposes, including any 
 41.29  modification made in a taxable year under section 290.01, 
 41.30  subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 41.31  subdivision 7, paragraph (c). 
 41.32     For taxable years beginning after December 31, 2000, the 
 41.33  amount of any remaining modification made under section 290.01, 
 41.34  subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 41.35  subdivision 7, paragraph (c), not previously deducted is a 
 41.36  depreciation allowance in the first taxable year after December 
 42.1   31, 2000. 
 42.2      (2) The portion of the depreciation deduction allowed for 
 42.3   federal income tax purposes under section 168(k) of the Internal 
 42.4   Revenue Code that is required as an addition under section 
 42.5   290.01, subdivision 19c, clause (16), is disallowed in 
 42.6   determining alternative minimum taxable income. 
 42.7      (3) The subtraction for depreciation allowed under section 
 42.8   290.01, subdivision 19d, clause (19), is allowed as a 
 42.9   depreciation deduction in determining alternative minimum 
 42.10  taxable income. 
 42.11     (4) The alternative tax net operating loss deduction under 
 42.12  sections 56(a)(4) and 56(d) of the Internal Revenue Code does 
 42.13  not apply. 
 42.14     (5) The special rule for certain dividends under section 
 42.15  56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 
 42.16     (6) The special rule for dividends from section 936 
 42.17  companies under section 56(g)(4)(C)(iii) does not apply. 
 42.18     (7) The tax preference for depletion under section 57(a)(1) 
 42.19  of the Internal Revenue Code does not apply. 
 42.20     (8) The tax preference for intangible drilling costs under 
 42.21  section 57(a)(2) of the Internal Revenue Code must be calculated 
 42.22  without regard to subparagraph (E) and the subtraction under 
 42.23  section 290.01, subdivision 19d, clause (4). 
 42.24     (9) The tax preference for tax exempt interest under 
 42.25  section 57(a)(5) of the Internal Revenue Code does not apply.  
 42.26     (10) The tax preference for charitable contributions of 
 42.27  appreciated property under section 57(a)(6) of the Internal 
 42.28  Revenue Code does not apply. 
 42.29     (11) For purposes of calculating the tax preference for 
 42.30  accelerated depreciation or amortization on certain property 
 42.31  placed in service before January 1, 1987, under section 57(a)(7) 
 42.32  of the Internal Revenue Code, the deduction allowable for the 
 42.33  taxable year is the deduction allowed under section 290.01, 
 42.34  subdivision 19e. 
 42.35     For taxable years beginning after December 31, 2000, the 
 42.36  amount of any remaining modification made under section 290.01, 
 43.1   subdivision 19e, not previously deducted is a depreciation or 
 43.2   amortization allowance in the first taxable year after December 
 43.3   31, 2004. 
 43.4      (12) For purposes of calculating the adjustment for 
 43.5   adjusted current earnings in section 56(g) of the Internal 
 43.6   Revenue Code, the term "alternative minimum taxable income" as 
 43.7   it is used in section 56(g) of the Internal Revenue Code, means 
 43.8   alternative minimum taxable income as defined in this 
 43.9   subdivision, determined without regard to the adjustment for 
 43.10  adjusted current earnings in section 56(g) of the Internal 
 43.11  Revenue Code. 
 43.12     (13) For purposes of determining the amount of adjusted 
 43.13  current earnings under section 56(g)(3) of the Internal Revenue 
 43.14  Code, no adjustment shall be made under section 56(g)(4) of the 
 43.15  Internal Revenue Code with respect to (i) the amount of foreign 
 43.16  dividend gross-up subtracted as provided in section 290.01, 
 43.17  subdivision 19d, clause (1), (ii) the amount of refunds of 
 43.18  income, excise, or franchise taxes subtracted as provided in 
 43.19  section 290.01, subdivision 19d, clause (10), or (iii) the 
 43.20  amount of royalties, fees or other like income subtracted as 
 43.21  provided in section 290.01, subdivision 19d, clause (11). 
 43.22     (14) Alternative minimum taxable income excludes the income 
 43.23  from operating in a biotechnology and health sciences industry 
 43.24  zone as provided under section 469.317. 
 43.25     Items of tax preference must not be reduced below zero as a 
 43.26  result of the modifications in this subdivision. 
 43.27     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 43.28  years beginning after December 31, 2003. 
 43.29     Sec. 7.  Minnesota Statutes 2002, section 290.0922, 
 43.30  subdivision 3, is amended to read: 
 43.31     Subd. 3.  [DEFINITIONS.] (a) "Minnesota sales or receipts" 
 43.32  means the total sales apportioned to Minnesota pursuant to 
 43.33  section 290.191, subdivision 5, the total receipts attributed to 
 43.34  Minnesota pursuant to section 290.191, subdivisions 6 to 8, 
 43.35  and/or the total sales or receipts apportioned or attributed to 
 43.36  Minnesota pursuant to any other apportionment formula applicable 
 44.1   to the taxpayer. 
 44.2      (b) "Minnesota property" means total Minnesota tangible 
 44.3   property as provided in section 290.191, subdivisions 9 to 11, 
 44.4   and any other tangible property located in Minnesota, and 
 44.5   Minnesota property of a corporation, other than a corporation 
 44.6   treated as an "S" corporation under section 290.9725, but does 
 44.7   not include property of a qualified business located in a 
 44.8   biotechnology and health sciences zone designated under section 
 44.9   469.314.  Intangible property shall not be included in Minnesota 
 44.10  property for purposes of this section.  Taxpayers who do not 
 44.11  utilize tangible property to apportion income shall nevertheless 
 44.12  include Minnesota property for purposes of this section.  On a 
 44.13  return for a short taxable year, the amount of Minnesota 
 44.14  property owned, as determined under section 290.191, shall be 
 44.15  included in Minnesota property based on a fraction in which the 
 44.16  numerator is the number of days in the short taxable year and 
 44.17  the denominator is 365.  
 44.18     (c) "Minnesota payrolls"  means total Minnesota payrolls as 
 44.19  provided in section 290.191, subdivision 12, and Minnesota 
 44.20  payroll of a corporation, other than a corporation treated as an 
 44.21  "S" corporation under section 290.9725, but does not include 
 44.22  biotechnology and health sciences zone payroll under section 
 44.23  469.310, subdivision 8.  Taxpayers who do not utilize payrolls 
 44.24  to apportion income shall nevertheless include Minnesota 
 44.25  payrolls for purposes of this section. 
 44.26     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 44.27  years beginning after December 31, 2003. 
 44.28     Sec. 8.  Minnesota Statutes 2002, section 297A.68, is 
 44.29  amended by adding a subdivision to read: 
 44.30     Subd. 37.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY 
 44.31  ZONE.] (a) Purchases of tangible personal property or taxable 
 44.32  services by a qualified business, as defined in section 469.310, 
 44.33  are exempt if the property or services are primarily used or 
 44.34  consumed in a biotechnology and health sciences industry zone 
 44.35  designated under section 469.314. 
 44.36     (b) Purchase and use of construction materials and supplies 
 45.1   for construction of improvements to real property in a 
 45.2   biotechnology and health sciences industry zone are exempt if 
 45.3   the improvements after completion of construction are to be used 
 45.4   in the conduct of a qualified business, as defined in section 
 45.5   469.310.  This exemption applies regardless of whether the 
 45.6   purchases are made by the business or a contractor. 
 45.7      (c) The exemptions under this subdivision apply to a local 
 45.8   sales and use tax regardless of whether the local sales tax is 
 45.9   imposed on the sales taxable as defined under this chapter. 
 45.10     (d)(1) The tax on sales of goods or services exempted under 
 45.11  this subdivision shall be imposed and collected as if the 
 45.12  applicable rate under section 297A.62 applied.  Upon application 
 45.13  by the purchaser, on forms prescribed by the commissioner, a 
 45.14  refund equal to the tax paid shall be paid to the purchaser.  
 45.15  The application must include sufficient information to permit 
 45.16  the commissioner to verify the sales tax paid and the 
 45.17  eligibility of the claimant to receive the credit.  No more than 
 45.18  two applications for refunds may be filed under this subdivision 
 45.19  in a calendar year.  The provisions of section 289A.40 apply to 
 45.20  the refunds payable under this subdivision. 
 45.21     (2) There is annually appropriated to the commissioner of 
 45.22  revenue the amount required to make the refunds. 
 45.23     (3) The aggregate amount refunded to a qualified business 
 45.24  cannot exceed the amount allocated to the qualified business 
 45.25  under section 469.3141. 
 45.26     (e) This subdivision applies to sales made during the 
 45.27  duration of the designation of the zone. 
 45.28     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 45.29  on or after the day following final enactment. 
 45.30     Sec. 9.  [469.310] [DEFINITIONS.] 
 45.31     Subdivision 1.  [SCOPE.] For purposes of sections 469.310 
 45.32  to 469.320, the following terms have the meanings given. 
 45.33     Subd. 2.  [APPLICANT.] "Applicant" means a local government 
 45.34  unit or units applying for designation of an area as a 
 45.35  biotechnology and health sciences industry zone or a joint 
 45.36  powers board, established under section 471.59, acting on behalf 
 46.1   of two or more local government units. 
 46.2      Subd. 3.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY 
 46.3   FACILITY.] "Biotechnology and health sciences industry facility" 
 46.4   means one or more facilities or operations involved in:  (1) 
 46.5   researching, developing, and/or manufacturing a biotechnology 
 46.6   product or service or a biotechnology-related health sciences 
 46.7   product or service; (2) researching, developing, and/or 
 46.8   manufacturing a biotechnology medical device product or service 
 46.9   or a biotechnology-related medical device product or service; or 
 46.10  (3) promoting, supplying, or servicing a facility or operation 
 46.11  involved in clause (1) or (2), if the business derives more than 
 46.12  50 percent of its gross receipts from those activities. 
 46.13     Subd. 4.  [COMMISSIONER.] "Commissioner" means the 
 46.14  commissioner of trade and economic development. 
 46.15     Subd. 5.  [DEVELOPMENT PLAN.] "Development plan" means a 
 46.16  plan meeting the requirements of section 469.311. 
 46.17     Subd. 6.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 46.18  OR ZONE.] "Biotechnology and health sciences industry zone" or 
 46.19  "zone" means a zone designated by the commissioner under section 
 46.20  469.314. 
 46.21     Subd. 7.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 46.22  PERCENTAGE OR ZONE PERCENTAGE.] "Biotechnology and health 
 46.23  sciences industry zone percentage" or "zone percentage" means 
 46.24  the following fraction reduced to a percentage: 
 46.25     (1) the numerator of the fraction is: 
 46.26     (i) the ratio of the taxpayer's property factor under 
 46.27  section 290.191 located in the zone for the taxable year over 
 46.28  the property factor numerator determined under section 290.191, 
 46.29  plus 
 46.30     (ii) the ratio of the taxpayer's biotechnology and health 
 46.31  sciences industry zone payroll factor under subdivision 8 over 
 46.32  the payroll factor numerator determined under section 290.191; 
 46.33  and 
 46.34     (2) the denominator of the fraction is two. 
 46.35     When calculating the zone percentage for a business that is 
 46.36  part of a unitary business as defined under section 290.17, 
 47.1   subdivision 4, the denominator of the payroll and property 
 47.2   factors is the Minnesota payroll and property of the unitary 
 47.3   business as reported on the combined report under section 
 47.4   290.17, subdivision 4, paragraph (j). 
 47.5      Subd. 8.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 47.6   PAYROLL FACTOR.] "Biotechnology and health sciences industry 
 47.7   zone payroll factor" or "biotechnology and health sciences 
 47.8   industry zone payroll" is that portion of the payroll factor 
 47.9   under section 290.191 that represents: 
 47.10     (1) wages or salaries paid to an individual for services 
 47.11  performed for a qualified business in a biotechnology and health 
 47.12  sciences industry zone; or 
 47.13     (2) wages or salaries paid to individuals working from 
 47.14  offices of a qualified business within a biotechnology and 
 47.15  health sciences industry zone if their employment requires them 
 47.16  to work outside the zone and the work is incidental to the work 
 47.17  performed by the individual within the zone. 
 47.18     Subd. 9.  [LOCAL GOVERNMENT UNIT.] "Local government unit" 
 47.19  means a statutory or home rule charter city, county, town, or 
 47.20  school district. 
 47.21     Subd. 10.  [PERSON.] "Person" includes an individual, 
 47.22  corporation, partnership, limited liability company, 
 47.23  association, or any other entity. 
 47.24     Subd. 11.  [QUALIFIED BUSINESS.] (a) "Qualified business" 
 47.25  means a person carrying on a trade or business at a 
 47.26  biotechnology and health sciences industry facility located 
 47.27  within a biotechnology and health sciences industry zone. 
 47.28     (b) A person that relocates a biotechnology and health 
 47.29  sciences industry facility from outside a biotechnology and 
 47.30  health sciences industry zone into a zone is not a qualified 
 47.31  business, unless the business: 
 47.32     (1)(i) increases full-time employment in the first full 
 47.33  year of operation within the biotechnology and health sciences 
 47.34  industry zone by at least 20 percent measured relative to the 
 47.35  operations that were relocated; or 
 47.36     (ii) makes a capital investment in the property located 
 48.1   within a zone equivalent to ten percent of the gross revenues of 
 48.2   operation that were relocated in the immediately preceding 
 48.3   taxable year; and 
 48.4      (2) enters a binding written agreement with the 
 48.5   commissioner that: 
 48.6      (i) pledges the business will meet the requirements of 
 48.7   clause (1); 
 48.8      (ii) provides for repayment of all tax benefits enumerated 
 48.9   under section 469.315 to the business under the procedures in 
 48.10  section 469.319, if the requirements of clause (1) are not met; 
 48.11  and 
 48.12     (iii) contains any other terms the commissioner determines 
 48.13  appropriate. 
 48.14     Subd. 12.  [RELOCATES.] (a) "Relocates" means that the 
 48.15  trade or business: 
 48.16     (1) ceases one or more operations or functions at another 
 48.17  location in Minnesota and begins performing substantially the 
 48.18  same operations or functions at a location in a biotechnology 
 48.19  and health sciences industry zone; or 
 48.20     (2) reduces employment at another location in Minnesota 
 48.21  during a period starting one year before and ending one year 
 48.22  after it begins operations in a biotechnology and health 
 48.23  sciences industry zone and its employees in the biotechnology 
 48.24  and health sciences industry zone are engaged in the same line 
 48.25  of business as the employees at the location where it reduced 
 48.26  employment. 
 48.27     (b) "Relocate" does not include an expansion by a business 
 48.28  that establishes a new facility that does not replace or 
 48.29  supplant an existing operation or employment, in whole or in 
 48.30  part. 
 48.31     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 48.32  following final enactment. 
 48.33     Sec. 10.  [469.311] [DEVELOPMENT PLAN.] 
 48.34     (a) An applicant for designation of a biotechnology and 
 48.35  health sciences industry zone must adopt a written development 
 48.36  plan for the zone before submitting the application to the 
 49.1   commissioner. 
 49.2      (b) The development plan must contain, at least, the 
 49.3   following: 
 49.4      (1) a map of the proposed zone that indicates the 
 49.5   geographic boundaries of the zone, the total area, and present 
 49.6   use and conditions generally of the land and structures within 
 49.7   those boundaries; 
 49.8      (2) evidence of community support and commitment from local 
 49.9   government, local workforce investment boards, school districts, 
 49.10  and other education institutions, business groups, and the 
 49.11  public; 
 49.12     (3) a description of the methods proposed to increase 
 49.13  economic opportunity and expansion, facilitate infrastructure 
 49.14  improvement, reduce the local regulatory burden, and identify 
 49.15  job-training opportunities; 
 49.16     (4) current social, economic, and demographic 
 49.17  characteristics of the proposed zone and anticipated 
 49.18  improvements in education, health, human services, and 
 49.19  employment if the zone is created; 
 49.20     (5) a description of anticipated activity in the zone and 
 49.21  each subzone, including, but not limited to, industrial use and 
 49.22  industrial site reuse; and 
 49.23     (6) any other information required by the commissioner. 
 49.24     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 49.25  following final enactment. 
 49.26     Sec. 11.  [469.312] [BIOTECHNOLOGY AND HEALTH SCIENCES 
 49.27  INDUSTRY ZONE; LIMITATIONS.] 
 49.28     Subdivision 1.  [MAXIMUM SIZE.] A biotechnology and health 
 49.29  sciences industry zone may not exceed 5,000 acres.  
 49.30     Subd. 2.  [SUBZONES.] The area of a biotechnology and 
 49.31  health sciences industry zone may consist of one or more 
 49.32  noncontiguous areas or subzones. 
 49.33     Subd. 3.  [DURATION LIMIT.] The maximum duration of a zone 
 49.34  is 12 years.  The applicant may request a shorter duration.  The 
 49.35  commissioner may specify a shorter duration, regardless of the 
 49.36  requested duration. 
 50.1      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 50.2   following final enactment. 
 50.3      Sec. 12.  [469.313] [APPLICATION FOR DESIGNATION.] 
 50.4      Subdivision 1.  [WHO MAY APPLY.] One or more local 
 50.5   government units, or a joint powers board under section 471.59, 
 50.6   acting on behalf of two or more units, may apply for designation 
 50.7   of an area as a biotechnology and health sciences industry 
 50.8   zone.  All or part of the area proposed for designation as a 
 50.9   zone must be located within the boundaries of each of the 
 50.10  governmental units.  A local government unit may not submit or 
 50.11  have submitted on its behalf more than one application for 
 50.12  designation of a biotechnology and health sciences industry zone.
 50.13     Subd. 2.  [APPLICATION CONTENT.] The application must 
 50.14  include: 
 50.15     (1) a development plan meeting the requirements of section 
 50.16  469.311; 
 50.17     (2) the proposed duration of the zone, not to exceed 12 
 50.18  years; 
 50.19     (3)(i) a resolution or ordinance adopted by each of the 
 50.20  cities or towns and the counties in which the zone is located, 
 50.21  agreeing to provide all of the local sales and use tax 
 50.22  exemptions provided under section 469.315; (ii) a resolution or 
 50.23  ordinance adopted by each of the cities or towns and the 
 50.24  counties in which the zone is located that declares whether it 
 50.25  will provide property tax exemptions under section 469.315; and 
 50.26     (4) supporting evidence to allow the commissioner to 
 50.27  evaluate the application under the criteria in section 469.314. 
 50.28     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 50.29  following final enactment. 
 50.30     Sec. 13.  [469.314] [DESIGNATION OF BIOTECHNOLOGY AND 
 50.31  HEALTH SCIENCES INDUSTRY ZONE.] 
 50.32     Subdivision 1.  [COMMISSIONER TO DESIGNATE.] (a) The 
 50.33  commissioner, in consultation with the commissioner of revenue 
 50.34  and the director of the office of strategic and long-range 
 50.35  planning, shall designate not more than one biotechnology and 
 50.36  health sciences industry zone.  Priority must be given to 
 51.1   applicants with a development plan that links a higher 
 51.2   education/research institution with a biotechnology and health 
 51.3   sciences industry facility. 
 51.4      (b) The commissioner may, upon designation of a zone, 
 51.5   modify the development plan, including the boundaries of the 
 51.6   zone or subzones, if in the commissioner's opinion a modified 
 51.7   plan would better meet the objectives of the biotechnology and 
 51.8   health sciences industry zone program.  The commissioner shall 
 51.9   notify the applicant of the modification and provide a statement 
 51.10  of the reasons for the modifications. 
 51.11     Subd. 2.  [NEED INDICATORS.] (a) In evaluating applications 
 51.12  to determine the need for designation of a biotechnology and 
 51.13  health sciences industry zone, the commissioner shall consider 
 51.14  the following factors as indicators of need: 
 51.15     (1) the extent to which land in proximity to a significant 
 51.16  scientific research institution could be developed as a higher 
 51.17  and better use for biotechnology and health sciences industry 
 51.18  facilities; 
 51.19     (2) the amount of property in or near the zone that is 
 51.20  deteriorated or underutilized; and 
 51.21     (3) the extent to which property in the area would remain 
 51.22  underdeveloped or nonperforming due to physical characteristics. 
 51.23     (b) The commissioner may require applicants to provide data 
 51.24  to demonstrate how the area meets one or more of the indicators 
 51.25  of need. 
 51.26     Subd. 3.  [SUCCESS INDICATORS.] In determining the 
 51.27  likelihood of success of a proposed zone, the commissioner shall 
 51.28  consider: 
 51.29     (1) applicants that show a viable link between a higher 
 51.30  education/research institution, the biotechnology and/or medical 
 51.31  devices business sectors, and one or more units of local 
 51.32  government with a development plan; 
 51.33     (2) the extent to which the area has substantial real 
 51.34  property with adequate infrastructure and energy to support new 
 51.35  or expanded development; 
 51.36     (3) the strength and viability of the proposed development 
 52.1   goals, objectives, and strategies in the development plan; 
 52.2      (4) whether the development plan is creative and innovative 
 52.3   in comparison to other applications; 
 52.4      (5) local public and private commitment to development of a 
 52.5   biotechnology and health sciences industry facility or 
 52.6   facilities in the proposed zone and the potential cooperation of 
 52.7   surrounding communities; 
 52.8      (6) existing resources available to the proposed zone; 
 52.9      (7) how the designation of the zone would relate to other 
 52.10  economic and community development projects and to regional 
 52.11  initiatives or programs; 
 52.12     (8) how the regulatory burden will be eased for 
 52.13  biotechnology and health sciences industry facilities located in 
 52.14  the proposed zone; 
 52.15     (9) proposals to establish and link job creation and job 
 52.16  training in the biotechnology and health sciences industry with 
 52.17  research/educational institutions; and 
 52.18     (10) the extent to which the development is directed at 
 52.19  encouraging, and that designation of the zone is likely to 
 52.20  result in, the creation of high-paying jobs. 
 52.21     Subd. 4.  [DESIGNATION SCHEDULE.] (a) The schedule in 
 52.22  paragraphs (b) to (e) applies to the designation of the 
 52.23  biotechnology and health sciences industry zone. 
 52.24     (b) The commissioner shall publish the form for 
 52.25  applications and any procedural, form, or content requirements 
 52.26  for applications by no later than August 1, 2003.  The 
 52.27  commissioner may publish these requirements on the Internet, in 
 52.28  the State Register, or by any other means the commissioner 
 52.29  determines appropriate to disseminate the information to 
 52.30  potential applicants for designation. 
 52.31     (c) Applications must be submitted by October 15, 2003. 
 52.32     (d) The commissioner shall designate the zones by no later 
 52.33  than December 31, 2003. 
 52.34     (e) The designation of the zones takes effect January 1, 
 52.35  2004. 
 52.36     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 53.1   following final enactment. 
 53.2      Sec. 14.  [469.3141] [APPLICATION FOR TAX BENEFITS.] 
 53.3      (a) To claim a tax credit or exemption under section 
 53.4   469.315, clauses (2) through (5), a business must apply to the 
 53.5   commissioner for a tax credit certificate.  As a condition of 
 53.6   its application, the business must agree to furnish information 
 53.7   to the commissioner that is sufficient to verify the eligibility 
 53.8   for any credits or exemptions claimed.  The total amount of the 
 53.9   state tax credits and exemptions allowed for the specified 
 53.10  period may not exceed the amount of the tax credit certificates 
 53.11  provided by the commissioner to the business.  The commissioner 
 53.12  must verify to the commissioner of revenue the amount of tax 
 53.13  exemptions or credits for which each business is eligible. 
 53.14     (b) A tax credit certificate issued under this section may 
 53.15  specify the particular tax exemptions or credits that the 
 53.16  qualified business is eligible to claim under section 469.315, 
 53.17  clauses (2) through (5), and the amount of each exemption or 
 53.18  credit allowed. 
 53.19     (c) The commissioner may issue $1,000,000 of tax credits or 
 53.20  exemptions in fiscal year 2004.  Any tax credits or exemptions 
 53.21  not awarded in fiscal year 2004 may be awarded in fiscal year 
 53.22  2005. 
 53.23     (d) A qualified business must use the tax credits or tax 
 53.24  exemptions granted under this section by the later of the end of 
 53.25  the state fiscal year or the taxpayer's tax year in which the 
 53.26  credits or exemptions are granted. 
 53.27     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 53.28  following final enactment. 
 53.29     Sec. 15.  [469.315] [TAX INCENTIVES AVAILABLE IN ZONES.] 
 53.30     Qualified businesses that operate in a biotechnology and 
 53.31  health sciences industry zone, individuals who invest in a 
 53.32  qualified business that operates in a biotechnology and health 
 53.33  sciences industry zone, and property of a qualified business 
 53.34  located in a biotechnology and health sciences industry zone 
 53.35  qualify for: 
 53.36     (1) exemption from the property tax as provided in section 
 54.1   272.02, subdivision 56; 
 54.2      (2) exemption from corporate franchise taxes as provided 
 54.3   under section 469.317; 
 54.4      (3) exemption from the state sales and use tax and any 
 54.5   local sales and use taxes on qualifying purchases as provided in 
 54.6   section 297A.68, subdivision 37; 
 54.7      (4) research and development credits as provided under 
 54.8   section 469.3181; 
 54.9      (5) jobs credits as provided under section 469.318. 
 54.10     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 54.11  following final enactment. 
 54.12     Sec. 16.  [469.317] [CORPORATE FRANCHISE TAX EXEMPTION.] 
 54.13     (a) A qualified business is exempt from taxation under 
 54.14  section 290.02, the alternative minimum tax under section 
 54.15  290.0921, and the minimum fee under section 290.0922, on the 
 54.16  portion of its income attributable to operations of a qualified 
 54.17  business within the biotechnology and health sciences industry 
 54.18  zone.  This exemption is determined as follows: 
 54.19     (1) for purposes of the tax imposed under section 290.02, 
 54.20  by multiplying its taxable net income by its zone percentage and 
 54.21  subtracting the result in determining taxable income; 
 54.22     (2) for purposes of the alternative minimum tax under 
 54.23  section 290.0921, by multiplying its alternative minimum taxable 
 54.24  income by its zone percentage and reducing alternative minimum 
 54.25  taxable income by this amount; and 
 54.26     (3) for purposes of the minimum fee under section 290.0922, 
 54.27  by excluding property and payroll in the zone from the 
 54.28  computations of the fee. 
 54.29     (b) No subtraction is allowed under this section in excess 
 54.30  of 20 percent of the sum of the corporation's biotechnology and 
 54.31  health sciences industry zone payroll and the adjusted basis of 
 54.32  the property at the time that the property is first used in the 
 54.33  biotechnology and health sciences industry zone by the 
 54.34  corporation. 
 54.35     (c) No reduction in tax is allowed in excess of the amount 
 54.36  allocated under section 469.3141. 
 55.1      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 55.2   years beginning after December 31, 2003. 
 55.3      Sec. 17.  [469.318] [JOBS CREDIT.] 
 55.4      Subdivision 1.  [CREDIT ALLOWED.] A qualified business is 
 55.5   allowed a credit against the taxes imposed under chapter 290. 
 55.6      The credit equals seven percent of the (1) lesser of (i) 
 55.7   zone payroll for the taxable year, less the zone payroll for the 
 55.8   base year; or (ii) total Minnesota payroll for the taxable year, 
 55.9   less total Minnesota payroll for the base year; minus (2) 
 55.10  $30,000 multiplied by the number of full-time equivalent 
 55.11  employee positions that the qualified business employs in the 
 55.12  biotechnology and health sciences industry zone for the taxable 
 55.13  year, minus the number of full-time equivalent employees the 
 55.14  business employed in the zone in the base year, but not less 
 55.15  than zero. 
 55.16     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 55.17  the following terms have the meaning given. 
 55.18     (b) "Base year" means the taxable year beginning during the 
 55.19  calendar year in which the commissioner designated the zone. 
 55.20     (c) "Full-time equivalent employee position" means the 
 55.21  equivalent of annualized expected hours of work equal to 2,080 
 55.22  hours. 
 55.23     (d) "Minnesota payroll" means the wages or salaries 
 55.24  attributed to Minnesota under section 290.191, subdivision 12, 
 55.25  for the qualified business or the unitary business of which the 
 55.26  qualified business is a part, whichever is greater. 
 55.27     (e) "Zone payroll" means wages or salaries used to 
 55.28  determine the zone payroll factor for the qualified business. 
 55.29     Subd. 3.  [INFLATION ADJUSTMENT.] For taxable years 
 55.30  beginning after December 31, 2004, the dollar amount in 
 55.31  subdivision 1, clause (2), is annually adjusted for inflation.  
 55.32  The commissioner of revenue shall adjust the amount by the 
 55.33  percentage determined under section 290.06, subdivision 2d, for 
 55.34  the taxable year. 
 55.35     Subd. 4.  [REFUNDABLE.] If the amount of the credit 
 55.36  calculated under this section and allocated to the qualified 
 56.1   business under section 14 exceeds the liability for tax under 
 56.2   chapter 290, the commissioner of revenue shall refund the excess 
 56.3   to the qualified business. 
 56.4      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 56.5   following final enactment. 
 56.6      Sec. 18.  [469.3181] [CREDIT FOR INCREASING RESEARCH 
 56.7   ACTIVITIES IN A BIOTECHNOLOGY AND HEALTH SCIENCES ZONE.] 
 56.8      Subdivision 1.  [CREDIT ALLOWED.] A corporation, other than 
 56.9   a corporation treated as an "S" corporation under section 
 56.10  290.9725, is allowed a credit against the portion of the 
 56.11  franchise tax computed under section 290.06, subdivision 1, for 
 56.12  the taxable year equal to:  (1) five percent of the first 
 56.13  $2,000,000 of the excess (if any) of (i) the qualified research 
 56.14  expenses for the taxable year, over (ii) the base amount; and 
 56.15  (2) 2.5 percent of all such excess expenses over $2,000,000. 
 56.16     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 56.17  the following terms have the meanings given. 
 56.18     (b) "Qualified research expenses" means qualified research 
 56.19  expenses and basic research payments as defined in section 41(b) 
 56.20  and (e) of the Internal Revenue Code. 
 56.21     (c) "Qualified research" means activities in the fields of 
 56.22  biotechnology or health sciences that are "qualified research" 
 56.23  as defined in section 41(d) of the Internal Revenue Code, except 
 56.24  that the term does not include qualified research conducted 
 56.25  outside the biotechnology and health sciences industry zone. 
 56.26     (d) "Base amount" means base amount as defined in section 
 56.27  4(c) of the Internal Revenue Code, except that the average 
 56.28  annual gross receipts must be calculated using Minnesota sales 
 56.29  or receipts under section 290.191 and the definitions contained 
 56.30  in paragraphs (b) and (c) shall apply. 
 56.31     (e) "Liability for tax" for purposes of this section means 
 56.32  the tax imposed under this chapter for the taxable year reduced 
 56.33  by the sum of the nonrefundable credits allowed under this 
 56.34  chapter. 
 56.35     Subd. 3.  [REFUNDABLE CREDIT.] If the credit determined 
 56.36  under this section and allocated to the taxpayer under section 
 57.1   469.3141 for the taxable year exceeds the taxpayer's liability 
 57.2   for tax for the year, the commissioner shall refund the 
 57.3   difference to the taxpayer. 
 57.4      Subd. 4.  [PARTNERSHIPS.] In the case of partnerships the 
 57.5   credit shall be allocated in the same manner provided by section 
 57.6   41(f)(2) of the Internal Revenue Code. 
 57.7      Subd. 5.  [ADJUSTMENTS; ACQUISITIONS AND DISPOSITIONS.] If 
 57.8   a taxpayer acquires or disposes of the major portion of a trade 
 57.9   or business or the major portion of a separate unit of a trade 
 57.10  or business in a transaction with another taxpayer, the 
 57.11  taxpayer's qualified research expenses and base amount are 
 57.12  adjusted in the same manner provided by section 41(f)(3) of the 
 57.13  Internal Revenue Code. 
 57.14     Subd. 6.  Any amount used to calculate a credit under this 
 57.15  section may not be used to generate a credit under section 
 57.16  290.068. 
 57.17     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 57.18  following final enactment.  
 57.19     Sec. 19.  [469.319] [REPAYMENT OF TAX BENEFITS.] 
 57.20     Subdivision 1.  [REPAYMENT OBLIGATION.] A business must 
 57.21  repay the amount of the tax reduction listed in section 469.315 
 57.22  and any refunds under sections 469.318 and 469.3181 in excess of 
 57.23  tax liability, received during the two years immediately before 
 57.24  it ceased to operate in the zone, if the business: 
 57.25     (1) received tax reductions authorized by section 469.315; 
 57.26  and 
 57.27     (2)(i) did not meet the goals specified in an agreement 
 57.28  entered into with the applicant that states any obligation the 
 57.29  qualified business must fulfill in order to be eligible for tax 
 57.30  benefits.  The commissioner may extend for up to one year the 
 57.31  period for meeting any goals provided in an agreement.  The 
 57.32  applicant may extend the period for meeting other goals by 
 57.33  documenting in writing the reason for the extension and 
 57.34  attaching a copy of the document to its next annual report to 
 57.35  the commissioner; or 
 57.36     (ii) ceased to operate its facility located within the 
 58.1   biotechnology and health sciences industry zone or otherwise 
 58.2   ceases to be or is not a qualified business. 
 58.3      Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 58.4   the following terms have the meanings given. 
 58.5      (b) "Business" means any person who received tax benefits 
 58.6   enumerated in section 469.315. 
 58.7      (c) "Commissioner" means the commissioner of revenue. 
 58.8      Subd. 3.  [DISPOSITION OR REPAYMENT.] The repayment must be 
 58.9   paid to the state to the extent it represents a state tax 
 58.10  reduction and to the county to the extent it represents a 
 58.11  property tax reduction.  Any amount repaid to the state must be 
 58.12  deposited in the general fund.  Any amount repaid to the county 
 58.13  for the property tax exemption must be distributed to the local 
 58.14  governments with authority to levy taxes in the zone in the same 
 58.15  manner provided for distribution of payment of delinquent 
 58.16  property taxes.  Any repayment of local sales taxes must be 
 58.17  repaid to the city or county imposing the local sales tax. 
 58.18     Subd. 4.  [REPAYMENT PROCEDURES.] (a) For the repayment of 
 58.19  taxes imposed under chapter 290 or 297A or local taxes collected 
 58.20  pursuant to section 297A.99, a business must file an amended 
 58.21  return with the commissioner of revenue and pay any taxes 
 58.22  required to be repaid within 30 days after ceasing to do 
 58.23  business in the zone.  The amount required to be repaid is 
 58.24  determined by calculating the tax for the period or periods for 
 58.25  which repayment is required without regard to the exemptions and 
 58.26  credits allowed under section 469.315. 
 58.27     (b) For the repayment of property taxes, the county auditor 
 58.28  shall prepare a tax statement for the business, applying the 
 58.29  applicable tax extension rates for each payable year and provide 
 58.30  a copy to the business.  The business must pay the taxes to the 
 58.31  county treasurer within 30 days after receipt of the tax 
 58.32  statement.  The taxpayer may appeal the valuation and 
 58.33  determination of the property tax to the tax court within 30 
 58.34  days after receipt of the tax statement. 
 58.35     (c) The provisions of chapters 270 and 289A relating to the 
 58.36  commissioner's authority to audit, assess, and collect the tax 
 59.1   and to hear appeals are applicable to the repayment required 
 59.2   under paragraph (a).  The commissioner may impose civil 
 59.3   penalties as provided in chapter 289A, and the additional tax 
 59.4   and penalties are subject to interest at the rate provided in 
 59.5   section 270.75, from 30 days after ceasing to do business in the 
 59.6   biotechnology and health sciences industry zone until the date 
 59.7   the tax is paid. 
 59.8      (d) If a property tax is not repaid under paragraph (b), 
 59.9   the county treasurer shall add the amount required to be repaid 
 59.10  to the property taxes assessed against the property for payment 
 59.11  in the year following the year in which the treasurer discovers 
 59.12  that the business ceased to operate in the biotechnology and 
 59.13  health sciences industry zone. 
 59.14     (e) For determining the tax required to be repaid, a tax 
 59.15  reduction is deemed to have been received on the date that the 
 59.16  tax would have been due if the taxpayer had not been entitled to 
 59.17  the exemption, or on the date a refund was issued for a 
 59.18  refundable credit. 
 59.19     (f) The commissioner may assess the repayment of taxes 
 59.20  under paragraph (c) any time within two years after the business 
 59.21  ceases to operate in the biotechnology and health sciences 
 59.22  industry zone, or within any period of limitations for the 
 59.23  assessment of tax under section 289A.38, whichever period is 
 59.24  later. 
 59.25     Subd. 5.  [WAIVER AUTHORITY.] The commissioner may waive 
 59.26  all or part of a repayment, if the commissioner, in consultation 
 59.27  with the commissioner of trade and economic development and 
 59.28  appropriate officials from the local government units in which 
 59.29  the business is located, determines that requiring repayment of 
 59.30  the tax is not in the best interest of the state or the local 
 59.31  government units and the business ceased operating as a result 
 59.32  of circumstances beyond its control including, but not limited 
 59.33  to: 
 59.34     (1) a natural disaster; 
 59.35     (2) unforeseen industry trends; or 
 59.36     (3) loss of a major supplier or customer. 
 60.1      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 60.2   following final enactment. 
 60.3      Sec. 20.  [469.320] [ZONE PERFORMANCE; REMEDIES.] 
 60.4      Subdivision 1.  [REPORTING REQUIREMENT.] An applicant 
 60.5   receiving designation of a biotechnology and health sciences 
 60.6   industry zone under section 469.314 must annually report to the 
 60.7   commissioner on its progress in meeting the zone performance 
 60.8   goals under the development plan for the zone. 
 60.9      Subd. 2.  [PROCEDURES.] For reports required by subdivision 
 60.10  1, the commissioner may prescribe: 
 60.11     (1) the required time or times by which the reports must be 
 60.12  filed; 
 60.13     (2) the form of the report; and 
 60.14     (3) the information required to be included in the report. 
 60.15     Subd. 3.  [REMEDIES.] If the commissioner determines, based 
 60.16  on a report filed under subdivision 1 or other available 
 60.17  information, that a zone or subzone is failing to meet its 
 60.18  performance goals, the commissioner may take any actions the 
 60.19  commissioner determines appropriate, including modification of 
 60.20  the boundaries of the zone or a subzone or termination of the 
 60.21  zone or a subzone.  Before taking any action, the commissioner 
 60.22  shall consult with the applicant and the affected local 
 60.23  government units, including notifying them of the proposed 
 60.24  actions to be taken.  The commissioner shall publish any order 
 60.25  modifying a zone in the State Register and on the Internet.  The 
 60.26  applicant may appeal the commissioner's order under the 
 60.27  contested case procedures of chapter 14. 
 60.28     Subd. 4.  [EXISTING BUSINESSES.] (a) An action to remove 
 60.29  area from a zone or to terminate a zone under this section does 
 60.30  not apply to: 
 60.31     (1) the property tax on improvements constructed before the 
 60.32  first January 2 following publication of the commissioner's 
 60.33  order; 
 60.34     (2) sales tax on purchases made before the first day of the 
 60.35  next calendar month beginning at least 30 days after publication 
 60.36  of the commissioner's order; and 
 61.1      (3) individual income tax or corporate franchise tax 
 61.2   attributable to a facility that was in operation before the 
 61.3   publication of the commissioner's order. 
 61.4      (b) The tax exemptions specified in paragraph (a) terminate 
 61.5   on the date on which the zone expires under the original 
 61.6   designation. 
 61.7                              ARTICLE 3 
 61.8                            SPECIAL TAXES 
 61.9      Section 1.  Minnesota Statutes 2002, section 62J.692, 
 61.10  subdivision 4, is amended to read: 
 61.11     Subd. 4.  [DISTRIBUTION OF FUNDS.] (a) The commissioner 
 61.12  shall annually distribute medical education funds to all 
 61.13  qualifying applicants based on the following criteria:  
 61.14     (1) total medical education funds available for 
 61.15  distribution; 
 61.16     (2) total number of eligible trainee FTEs in each clinical 
 61.17  medical education program; and 
 61.18     (3) the statewide average cost per trainee as determined by 
 61.19  the application information provided in the first year of the 
 61.20  biennium, by type of trainee, in each clinical medical education 
 61.21  program.  
 61.22     (b) Funds distributed shall not be used to displace current 
 61.23  funding appropriations from federal or state sources.  
 61.24     (c) Funds shall be distributed to the sponsoring 
 61.25  institutions indicating the amount to be distributed to each of 
 61.26  the sponsor's clinical medical education programs based on the 
 61.27  criteria in this subdivision and in accordance with the 
 61.28  commissioner's approval letter.  Each clinical medical education 
 61.29  program must distribute funds to the training sites as specified 
 61.30  in the commissioner's approval letter.  Sponsoring institutions, 
 61.31  which are accredited through an organization recognized by the 
 61.32  department of education or the Centers for Medicare and Medicaid 
 61.33  Services, may contract directly with training sites to provide 
 61.34  clinical training.  To ensure the quality of clinical training, 
 61.35  those accredited sponsoring institutions must: 
 61.36     (1) develop contracts specifying the terms, expectations, 
 62.1   and outcomes of the clinical training conducted at sites; and 
 62.2      (2) take necessary action if the contract requirements are 
 62.3   not met.  Action may include the withholding of payments under 
 62.4   this section or the removal of students from the site.  
 62.5      (d) Any funds not distributed in accordance with the 
 62.6   commissioner's approval letter must be returned to the medical 
 62.7   education and research fund within 30 days of receiving notice 
 62.8   from the commissioner.  The commissioner shall distribute 
 62.9   returned funds to the appropriate training sites in accordance 
 62.10  with the commissioner's approval letter. 
 62.11     (e) The commissioner shall distribute by June 30 of each 
 62.12  year an amount equal to the funds transferred under section 
 62.13  62J.694, subdivision 2a, paragraph (b) subdivision 10, plus five 
 62.14  percent interest to the University of Minnesota board of regents 
 62.15  for the costs of the academic health center as specified under 
 62.16  section 62J.694, subdivision 2a, paragraph (a) instructional 
 62.17  costs of health professional programs at the academic health 
 62.18  center and for interdisciplinary academic initiatives within the 
 62.19  academic health center. 
 62.20     (f) A maximum of $150,000 of the funds dedicated to the 
 62.21  commissioner under section 297F.10, subdivision 1, paragraph 
 62.22  (b), clause (2), may be used by the commissioner for 
 62.23  administrative expenses associated with implementing this 
 62.24  section. 
 62.25     Sec. 2.  Minnesota Statutes 2002, section 62J.692, is 
 62.26  amended by adding a subdivision to read: 
 62.27     Subd. 10.  [TRANSFERS FROM UNIVERSITY OF MINNESOTA.] Of the 
 62.28  funds dedicated to the academic health center under section 
 62.29  297F.10, subdivision 1, paragraph (b), clause (1), $4,850,000 
 62.30  shall be transferred annually to the commissioner of health no 
 62.31  later than April 15 of each year for distribution under 
 62.32  subdivision 4, paragraph (e).  
 62.33     Sec. 3.  Minnesota Statutes 2002, section 270.60, 
 62.34  subdivision 4, is amended to read: 
 62.35     Subd. 4.  [PAYMENTS TO COUNTIES.] (a) The commissioner 
 62.36  shall pay to a county in which an Indian gaming casino is 
 63.1   located: 
 63.2      (1) ten percent of the state share of all taxes generated 
 63.3   from activities on reservations and collected under a tax 
 63.4   agreement under this section with the tribal government for the 
 63.5   reservation located in the county; or 
 63.6      (2) five percent of excise taxes collected by the state 
 63.7   that are determined by the department of revenue to have been 
 63.8   generated from activities on a reservation located in the 
 63.9   county, the tribal government of which does not have a tax 
 63.10  agreement under this section and did not have a tax agreement on 
 63.11  June 30, 2003. 
 63.12     If the tribe has casinos located in more than one county, 
 63.13  the payment must be divided equally among the counties in which 
 63.14  the casinos are located. 
 63.15     (b) The commissioner shall make the payments required under 
 63.16  this subdivision by February 28 of the year following the year 
 63.17  the taxes are collected. 
 63.18     (c) An amount sufficient to make the payments authorized by 
 63.19  this subdivision is annually appropriated from the general fund 
 63.20  to the commissioner.  
 63.21     <b>[EFFECTIVE DATE.]</b> This section is effective for taxes 
 63.22  collected after June 30, 2003. 
 63.23     Sec. 4.  Minnesota Statutes 2002, section 287.12, is 
 63.24  amended to read: 
 63.25     287.12 [TAXES, HOW APPORTIONED.] 
 63.26     (a) All taxes paid to the county treasurer under the 
 63.27  provisions of sections 287.01 to 287.12 must be apportioned, 97 
 63.28  percent to the general fund of the state, and three percent to 
 63.29  the county revenue fund. 
 63.30     (b) On or before the 20th day of each month the county 
 63.31  treasurer shall determine and pay to the commissioner of revenue 
 63.32  for deposit in the state treasury and credit to the general fund 
 63.33  the state's portion of the receipts from the mortgage registry 
 63.34  tax during the preceding month subject to the electronic payment 
 63.35  requirements of section 270.771.  The county treasurer shall 
 63.36  provide any related reports requested by the commissioner of 
 64.1   revenue. 
 64.2      (c) Counties must remit the state's portion of the June 
 64.3   receipts collected through June 25 and the estimated state's 
 64.4   portion of the receipts to be collected during the remainder of 
 64.5   the month to the commissioner of revenue two business days 
 64.6   before June 30 of each year.  The remaining amount of the June 
 64.7   receipts is due on August 20. 
 64.8      <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2004.
 64.9      Sec. 5.  Minnesota Statutes 2002, section 287.29, 
 64.10  subdivision 1, is amended to read: 
 64.11     Subdivision 1.  [APPOINTMENT AND PAYMENT OF TAX PROCEEDS.] 
 64.12  (a) The proceeds of the taxes levied and collected under 
 64.13  sections 287.21 to 287.39 must be apportioned, 97 percent to the 
 64.14  general fund of the state, and three percent to the county 
 64.15  revenue fund. 
 64.16     (b) On or before the 20th day of each month, the county 
 64.17  treasurer shall determine and pay to the commissioner of revenue 
 64.18  for deposit in the state treasury and credit to the general fund 
 64.19  the state's portion of the receipts for deed tax from the 
 64.20  preceding month subject to the electronic transfer requirements 
 64.21  of section 270.771.  The county treasurer shall provide any 
 64.22  related reports requested by the commissioner of revenue. 
 64.23     (c) Counties must remit the state's portion of the June 
 64.24  receipts collected through June 25 and the estimated state's 
 64.25  portion of the receipts to be collected during the remainder of 
 64.26  the month to the commissioner of revenue two business days 
 64.27  before June 30 of each year.  The remaining amount of the June 
 64.28  receipts is due on August 20. 
 64.29     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2004.
 64.30     Sec. 6.  Minnesota Statutes 2002, section 287.31, is 
 64.31  amended by adding a subdivision to read: 
 64.32     Subd. 3.  [UNDERPAYMENTS OF ACCELERATED PAYMENT OF JUNE TAX 
 64.33  RECEIPTS.] If a county fails to timely remit the state portion 
 64.34  of the actual June tax receipts at the time required by section 
 64.35  287.12 or 287.29, the county shall pay a penalty equal to ten 
 64.36  percent of the state portion of actual June receipts less the 
 65.1   amount remitted to the commissioner of revenue in June.  The 
 65.2   penalty must not be imposed, however, if the amount remitted in 
 65.3   June equals either: 
 65.4      (1) 90 percent of the state's portion of the preceding 
 65.5   May's receipts; or 
 65.6      (2) 90 percent of the average monthly amount of the state's 
 65.7   portion for the previous calendar year. 
 65.8      <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2004.
 65.9      Sec. 7.  Minnesota Statutes 2002, section 297F.09, 
 65.10  subdivision 1, is amended to read: 
 65.11     Subdivision 1.  [MONTHLY RETURN; CIGARETTE DISTRIBUTOR.] On 
 65.12  or before the 18th day of each calendar month, a distributor 
 65.13  with a place of business in this state shall file a return with 
 65.14  the commissioner showing the quantity of cigarettes manufactured 
 65.15  or brought in from outside the state or purchased during the 
 65.16  preceding calendar month and the quantity of cigarettes sold or 
 65.17  otherwise disposed of in this state and outside this state 
 65.18  during that month.  A licensed distributor outside this state 
 65.19  shall in like manner file a return showing the quantity of 
 65.20  cigarettes shipped or transported into this state during the 
 65.21  preceding calendar month.  Returns must be made in the form and 
 65.22  manner prescribed by the commissioner and must contain any other 
 65.23  information required by the commissioner.  The return must be 
 65.24  accompanied by a remittance for the full unpaid tax liability 
 65.25  shown by it.  The return for the May liability and 85 percent of 
 65.26  the estimated June liability is due on the date payment of the 
 65.27  tax is due. 
 65.28     <b>[EFFECTIVE DATE.]</b> This section is effective January 1, 2004.
 65.29     Sec. 8.  Minnesota Statutes 2002, section 297F.09, 
 65.30  subdivision 2, is amended to read: 
 65.31     Subd. 2.  [MONTHLY RETURN; TOBACCO PRODUCTS DISTRIBUTOR.] 
 65.32  On or before the 18th day of each calendar month, a distributor 
 65.33  with a place of business in this state shall file a return with 
 65.34  the commissioner showing the quantity and wholesale sales price 
 65.35  of each tobacco product: 
 65.36     (1) brought, or caused to be brought, into this state for 
 66.1   sale; and 
 66.2      (2) made, manufactured, or fabricated in this state for 
 66.3   sale in this state, during the preceding calendar month.  
 66.4   Every licensed distributor outside this state shall in like 
 66.5   manner file a return showing the quantity and wholesale sales 
 66.6   price of each tobacco product shipped or transported to 
 66.7   retailers in this state to be sold by those retailers, during 
 66.8   the preceding calendar month.  Returns must be made in the form 
 66.9   and manner prescribed by the commissioner and must contain any 
 66.10  other information required by the commissioner.  The return must 
 66.11  be accompanied by a remittance for the full tax liability shown, 
 66.12  less 1.5 percent of the liability as compensation to reimburse 
 66.13  the distributor for expenses incurred in the administration of 
 66.14  this chapter.  The return for the May liability and 85 percent 
 66.15  of the estimated June liability is due on the date payment of 
 66.16  the tax is due. 
 66.17     <b>[EFFECTIVE DATE.]</b> The part of this section abolishing the 
 66.18  1.5 percent reimbursement is effective for sales made after June 
 66.19  30, 2003.  The rest of this section is effective January 1, 2004.
 66.20     Sec. 9.  Minnesota Statutes 2002, section 297F.09, is 
 66.21  amended by adding a subdivision to read: 
 66.22     Subd. 10.  [ACCELERATED TAX PAYMENT; CIGARETTE OR TOBACCO 
 66.23  PRODUCTS DISTRIBUTOR.] A cigarette or tobacco products 
 66.24  distributor having a liability of $120,000 or more during a 
 66.25  fiscal year ending June 30, shall remit the June liability for 
 66.26  the next year in the following manner:  
 66.27     (a) Two business days before June 30 of the year, the 
 66.28  distributor shall remit the actual May liability and 85 percent 
 66.29  of the estimated June liability to the commissioner and file the 
 66.30  return in the form and manner prescribed by the commissioner. 
 66.31     (b) On or before August 18 of the year, the distributor 
 66.32  shall submit a return showing the actual June liability and pay 
 66.33  any additional amount of tax not remitted in June.  A penalty is 
 66.34  imposed equal to ten percent of the amount of June liability 
 66.35  required to be paid in June, less the amount remitted in June.  
 66.36  However, the penalty is not imposed if the amount remitted in 
 67.1   June equals the lesser of:  
 67.2      (1) 85 percent of the actual June liability; or 
 67.3      (2) 85 percent of the preceding May's liability. 
 67.4      <b>[EFFECTIVE DATE.]</b> This section is effective for taxpayers 
 67.5   having a liability of $120,000 or more during the fiscal year 
 67.6   ending June 30, 2003, and each fiscal year thereafter, and for 
 67.7   accelerated payments becoming due in 2004 and thereafter. 
 67.8      Sec. 10.  Minnesota Statutes 2002, section 297F.10, 
 67.9   subdivision 1, is amended to read: 
 67.10     Subdivision 1.  [TAX AND USE TAX ON CIGARETTES.] Revenue 
 67.11  received from cigarette taxes, as well as related penalties, 
 67.12  interest, license fees, and miscellaneous sources of revenue 
 67.13  shall be deposited by the commissioner in the state treasury and 
 67.14  credited as follows: 
 67.15     (a) first to the general obligation special tax bond debt 
 67.16  service account in each fiscal year the amount required to 
 67.17  increase the balance on hand in the account on each December 1 
 67.18  to an amount equal to the full amount of principal and interest 
 67.19  to come due on all outstanding bonds whose debt service is 
 67.20  payable primarily from the proceeds of the tax to and including 
 67.21  the second following July 1; and 
 67.22     (b) after the requirements of paragraph (a) have been met: 
 67.23     (1) the revenue produced by one mill 3.25 mills of the tax 
 67.24  on cigarettes weighing not more than three pounds a thousand and 
 67.25  two 6.5 mills of the tax on cigarettes weighing more than three 
 67.26  pounds a thousand must be credited to the Minnesota future 
 67.27  resources fund academic health center special revenue fund 
 67.28  hereby created and is annually appropriated to the board of 
 67.29  regents at the University of Minnesota for academic health 
 67.30  center funding at the University of Minnesota; and 
 67.31     (2) the revenue produced by 1.25 mills of the tax on 
 67.32  cigarettes weighing not more than three pounds a thousand and 
 67.33  2.5 mills of the tax on cigarettes weighing more than three 
 67.34  pounds a thousand must be credited to the medical education and 
 67.35  research costs account hereby created in the special revenue 
 67.36  fund and is annually appropriated to the commissioner of health 
 68.1   for distribution under section 62J.692, subdivision 4; and 
 68.2      (3) the balance of the revenues derived from taxes, 
 68.3   penalties, and interest (under this chapter) and from license 
 68.4   fees and miscellaneous sources of revenue shall be credited to 
 68.5   the general fund. 
 68.6      <b>[EFFECTIVE DATE.]</b> This section is effective for all 
 68.7   revenues received after June 30, 2003. 
 68.8      Sec. 11.  Minnesota Statutes 2002, section 297G.09, is 
 68.9   amended by adding a subdivision to read: 
 68.10     Subd. 9.  [ACCELERATED TAX PAYMENT; PENALTY.] A person 
 68.11  liable for tax under this chapter having a liability of $120,000 
 68.12  or more during a fiscal year ending June 30, shall remit the 
 68.13  June liability for the next year in the following manner:  
 68.14     (a) Two business days before June 30 of the year, the 
 68.15  taxpayer shall remit the actual May liability and 85 percent of 
 68.16  the estimated June liability to the commissioner and file the 
 68.17  return in the form and manner prescribed by the commissioner. 
 68.18     (b) On or before August 18 of the year, the taxpayer shall 
 68.19  submit a return showing the actual June liability and pay any 
 68.20  additional amount of tax not remitted in June.  A penalty is 
 68.21  imposed equal to ten percent of the amount of June liability 
 68.22  required to be paid in June less the amount remitted in June.  
 68.23  However, the penalty is not imposed if the amount remitted in 
 68.24  June equals the lesser of:  
 68.25     (1) 85 percent of the actual June liability; or 
 68.26     (2) 85 percent of the preceding May liability. 
 68.27     <b>[EFFECTIVE DATE.]</b> This section is effective for taxpayers 
 68.28  having a liability of $120,000 or more during the fiscal year 
 68.29  ending June 30, 2003, and each fiscal year thereafter, and for 
 68.30  accelerated payments becoming due in 2004 and thereafter. 
 68.31     Sec. 12.  Minnesota Statutes 2002, section 349.16, is 
 68.32  amended by adding a subdivision to read: 
 68.33     Subd. 11.  [AGREEMENT TO PAY TAXES.] An organization which 
 68.34  is recognized by federal law, regulation, or other ruling as a 
 68.35  quasi-governmental organization that would otherwise be exempt 
 68.36  from one or more taxes under chapter 297E must agree to pay all 
 69.1   taxes under chapter 297E on lawful gambling conducted by the 
 69.2   organization as a condition of receiving or renewing a license 
 69.3   or premises permit. 
 69.4                              ARTICLE 4
 69.5                      LOCAL ECONOMIC DEVELOPMENT
 69.6      Section 1.  Minnesota Statutes 2002, section 469.174, 
 69.7   subdivision 10, is amended to read: 
 69.8      Subd. 10.  [REDEVELOPMENT DISTRICT.] (a) "Redevelopment 
 69.9   district" means a type of tax increment financing district 
 69.10  consisting of a project, or portions of a project, within which 
 69.11  the authority finds by resolution that one or more of the 
 69.12  following conditions, reasonably distributed throughout the 
 69.13  district, exists: 
 69.14     (1) parcels consisting of 70 percent of the area of the 
 69.15  district are occupied by buildings, streets, utilities, paved or 
 69.16  gravel parking lots, or other similar structures and more than 
 69.17  50 percent of the buildings, not including outbuildings, are 
 69.18  structurally substandard to a degree requiring substantial 
 69.19  renovation or clearance; or 
 69.20     (2) the property consists of vacant, unused, underused, 
 69.21  inappropriately used, or infrequently used railyards, rail 
 69.22  storage facilities, or excessive or vacated railroad 
 69.23  rights-of-way; or 
 69.24     (3) tank facilities, or property whose immediately previous 
 69.25  use was for tank facilities, as defined in section 115C.02, 
 69.26  subdivision 15, if the tank facilities: 
 69.27     (i) have or had a capacity of more than 1,000,000 gallons; 
 69.28     (ii) are located adjacent to rail facilities; and 
 69.29     (iii) have been removed or are unused, underused, 
 69.30  inappropriately used, or infrequently used; or 
 69.31     (4) a qualifying disaster area, as defined in subdivision 
 69.32  10b. 
 69.33     (b) For purposes of this subdivision, "structurally 
 69.34  substandard" shall mean containing defects in structural 
 69.35  elements or a combination of deficiencies in essential utilities 
 69.36  and facilities, light and ventilation, fire protection including 
 70.1   adequate egress, layout and condition of interior partitions, or 
 70.2   similar factors, which defects or deficiencies are of sufficient 
 70.3   total significance to justify substantial renovation or 
 70.4   clearance. 
 70.5      (c) A building is not structurally substandard if it is in 
 70.6   compliance with the building code applicable to new buildings or 
 70.7   could be modified to satisfy the building code at a cost of less 
 70.8   than 15 percent of the cost of constructing a new structure of 
 70.9   the same square footage and type on the site.  The municipality 
 70.10  may find that a building is not disqualified as structurally 
 70.11  substandard under the preceding sentence on the basis of 
 70.12  reasonably available evidence, such as the size, type, and age 
 70.13  of the building, the average cost of plumbing, electrical, or 
 70.14  structural repairs, or other similar reliable evidence.  The 
 70.15  municipality may not make such a determination without an 
 70.16  interior inspection of the property, but need not have an 
 70.17  independent, expert appraisal prepared of the cost of repair and 
 70.18  rehabilitation of the building.  An interior inspection of the 
 70.19  property is not required, if the municipality finds that (1) the 
 70.20  municipality or authority is unable to gain access to the 
 70.21  property after using its best efforts to obtain permission from 
 70.22  the party that owns or controls the property; and (2) the 
 70.23  evidence otherwise supports a reasonable conclusion that the 
 70.24  building is structurally substandard.  Items of evidence that 
 70.25  support such a conclusion include recent fire or police 
 70.26  inspections, on-site property tax appraisals or housing 
 70.27  inspections, exterior evidence of deterioration, or other 
 70.28  similar reliable evidence.  Written documentation of the 
 70.29  findings and reasons why an interior inspection was not 
 70.30  conducted must be made and retained under section 469.175, 
 70.31  subdivision 3, clause (1). 
 70.32     (d) A parcel is deemed to be occupied by a structurally 
 70.33  substandard building for purposes of the finding under paragraph 
 70.34  (a) if all of the following conditions are met: 
 70.35     (1) the parcel was occupied by a substandard building 
 70.36  within three years of the filing of the request for 
 71.1   certification of the parcel as part of the district with the 
 71.2   county auditor; 
 71.3      (2) the substandard building was demolished or removed by 
 71.4   the authority or the demolition or removal was financed by the 
 71.5   authority or was done by a developer under a development 
 71.6   agreement with the authority; 
 71.7      (3) the authority found by resolution before the demolition 
 71.8   or removal that the parcel was occupied by a structurally 
 71.9   substandard building and that after demolition and clearance the 
 71.10  authority intended to include the parcel within a district; and 
 71.11     (4) upon filing the request for certification of the tax 
 71.12  capacity of the parcel as part of a district, the authority 
 71.13  notifies the county auditor that the original tax capacity of 
 71.14  the parcel must be adjusted as provided by section 469.177, 
 71.15  subdivision 1, paragraph (h). 
 71.16     (e) For purposes of this subdivision, a parcel is not 
 71.17  occupied by buildings, streets, utilities, paved or gravel 
 71.18  parking lots, or other similar structures unless 15 percent of 
 71.19  the area of the parcel contains buildings, streets, utilities, 
 71.20  paved or gravel parking lots, or other similar structures. 
 71.21     (f) For districts consisting of two or more noncontiguous 
 71.22  areas, each area must qualify as a redevelopment district under 
 71.23  paragraph (a) to be included in the district, and the entire 
 71.24  area of the district must satisfy paragraph (a). 
 71.25     <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
 71.26  for which the request for certification is made after the day 
 71.27  following final enactment. 
 71.28     Sec. 2.  Minnesota Statutes 2002, section 469.174, is 
 71.29  amended by adding a subdivision to read: 
 71.30     Subd. 10b.  [QUALIFIED DISASTER AREA.] A "qualified 
 71.31  disaster area" is an area that meets the following requirements: 
 71.32     (1) parcels consisting of 70 percent of the area of the 
 71.33  district were occupied by buildings, streets, utilities, paved 
 71.34  or gravel parking lots, or other similar structures immediately 
 71.35  before the disaster or emergency; 
 71.36     (2) the area of the district was subject to a disaster or 
 72.1   emergency, as defined in section 273.123, subdivision 1, within 
 72.2   the 18-month period ending on the day the request for 
 72.3   certification of the district is made; and 
 72.4      (3) 50 percent or more of the buildings in the area have 
 72.5   suffered substantial damage as a result of the disaster or 
 72.6   emergency. 
 72.7      <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
 72.8   for which the request for certification is made after the day 
 72.9   following final enactment.  
 72.10     Sec. 3.  Minnesota Statutes 2002, section 469.1763, 
 72.11  subdivision 2, is amended to read: 
 72.12     Subd. 2.  [EXPENDITURES OUTSIDE DISTRICT.] (a) For each tax 
 72.13  increment financing district, an amount equal to at least 75 
 72.14  percent of the total revenue derived from tax increments paid by 
 72.15  properties in the district must be expended on activities in the 
 72.16  district or to pay bonds, to the extent that the proceeds of the 
 72.17  bonds were used to finance activities in the district or to pay, 
 72.18  or secure payment of, debt service on credit enhanced bonds.  
 72.19  For districts, other than redevelopment districts for which the 
 72.20  request for certification was made after June 30, 1995, the 
 72.21  in-district percentage for purposes of the preceding sentence is 
 72.22  80 percent.  Not more than 25 percent of the total revenue 
 72.23  derived from tax increments paid by properties in the district 
 72.24  may be expended, through a development fund or otherwise, on 
 72.25  activities outside of the district but within the defined 
 72.26  geographic area of the project except to pay, or secure payment 
 72.27  of, debt service on credit enhanced bonds.  For districts, other 
 72.28  than redevelopment districts for which the request for 
 72.29  certification was made after June 30, 1995, the pooling 
 72.30  percentage for purposes of the preceding sentence is 20 
 72.31  percent.  The revenue derived from tax increments for the 
 72.32  district that are expended on costs under section 469.176, 
 72.33  subdivision 4h, paragraph (b), may be deducted first before 
 72.34  calculating the percentages that must be expended within and 
 72.35  without the district.  
 72.36     (b) In the case of a housing district, a housing project, 
 73.1   as defined in section 469.174, subdivision 11, is an activity in 
 73.2   the district.  
 73.3      (c) All administrative expenses are for activities outside 
 73.4   of the district, except that if the only expenses for activities 
 73.5   outside of the district under this subdivision are for the 
 73.6   purposes described in paragraph (d), administrative expenses 
 73.7   will be considered as expenditures for activities in the 
 73.8   district. 
 73.9      (d) The authority may elect, in the tax increment financing 
 73.10  plan for the district, to increase by up to ten percentage 
 73.11  points the permitted amount of expenditures for activities 
 73.12  located outside the geographic area of the district under 
 73.13  paragraph (a).  As permitted by section 469.176, subdivision 4k, 
 73.14  the expenditures, including the permitted expenditures under 
 73.15  paragraph (a), need not be made within the geographic area of 
 73.16  the project.  Expenditures that meet the requirements of this 
 73.17  paragraph are legally permitted expenditures of the district, 
 73.18  notwithstanding section 469.176, subdivisions 4b, 4c, and 4j.  
 73.19  To qualify for the increase under this paragraph, the 
 73.20  expenditures must: 
 73.21     (1) be used exclusively to assist housing that meets the 
 73.22  requirement for a qualified low-income building, as that term is 
 73.23  used in section 42 of the Internal Revenue Code; 
 73.24     (2) not exceed the qualified basis of the housing, as 
 73.25  defined under section 42(c) of the Internal Revenue Code, less 
 73.26  the amount of any credit allowed under section 42 of the 
 73.27  Internal Revenue Code; and 
 73.28     (3) be used to: 
 73.29     (i) acquire and prepare the site of the housing; 
 73.30     (ii) acquire, construct, or rehabilitate the housing; or 
 73.31     (iii) make public improvements directly related to the 
 73.32  housing. 
 73.33     <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
 73.34  for which the request for certification was made after April 30, 
 73.35  1990. 
 73.36     Sec. 4.  Minnesota Statutes 2002, section 469.1763, 
 74.1   subdivision 4, is amended to read: 
 74.2      Subd. 4.  [USE OF REVENUES FOR DECERTIFICATION.] (a) In 
 74.3   each year beginning with the sixth year following certification 
 74.4   of the district, if the applicable in-district percent of the 
 74.5   revenues derived from tax increments paid by properties in the 
 74.6   district that remain after exceeds the amount of expenditures 
 74.7   that have been made for costs permitted under subdivision 3, an 
 74.8   amount equal to the difference between the in-district percent 
 74.9   of the revenues derived from tax increments paid by properties 
 74.10  in the district and the amount of expenditures that have been 
 74.11  made for costs permitted under subdivision 3 must be used and 
 74.12  only used to pay or defease the following or be set aside to pay 
 74.13  the following: 
 74.14     (1) outstanding bonds, as defined in subdivision 3, 
 74.15  paragraphs (a), clause (2), and (b); 
 74.16     (2) contracts, as defined in subdivision 3, paragraph (a), 
 74.17  clauses (3) and (4); or 
 74.18     (3) credit enhanced bonds to which the revenues derived 
 74.19  from tax increments are pledged, but only to the extent that 
 74.20  revenues of the district for which the credit enhanced bonds 
 74.21  were issued are insufficient to pay the bonds and to the extent 
 74.22  that the increments from the applicable pooling percent share 
 74.23  for the district are insufficient. 
 74.24     (b) When the outstanding bonds have been defeased and when 
 74.25  sufficient money has been set aside to pay contractual 
 74.26  obligations as defined in subdivision 3, paragraph (a), clauses 
 74.27  (3) and (4), the district must be decertified and the pledge of 
 74.28  tax increment discharged. 
 74.29     Sec. 5.  Minnesota Statutes 2002, section 469.177, 
 74.30  subdivision 1, is amended to read: 
 74.31     Subdivision 1.  [ORIGINAL NET TAX CAPACITY.] (a) Upon or 
 74.32  after adoption of a tax increment financing plan, the auditor of 
 74.33  any county in which the district is situated shall, upon request 
 74.34  of the authority, certify the original net tax capacity of the 
 74.35  tax increment financing district and that portion of the 
 74.36  district overlying any subdistrict as described in the tax 
 75.1   increment financing plan and shall certify in each year 
 75.2   thereafter the amount by which the original net tax capacity has 
 75.3   increased or decreased as a result of a change in tax exempt 
 75.4   status of property within the district and any subdistrict, 
 75.5   reduction or enlargement of the district or changes pursuant to 
 75.6   subdivision 4.  
 75.7      (b) For districts approved under section 469.175, 
 75.8   subdivision 3, or parcels added to existing districts after May 
 75.9   1, 1988, if the classification under section 273.13 of property 
 75.10  located in a district changes to a classification that has a 
 75.11  different assessment ratio, the original net tax capacity of 
 75.12  that property must be redetermined at the time when its use is 
 75.13  changed as if the property had originally been classified in the 
 75.14  same class in which it is classified after its use is changed. 
 75.15     (c) The amount to be added to the original net tax capacity 
 75.16  of the district as a result of previously tax exempt real 
 75.17  property within the district becoming taxable equals the net tax 
 75.18  capacity of the real property as most recently assessed pursuant 
 75.19  to section 273.18 or, if that assessment was made more than one 
 75.20  year prior to the date of title transfer rendering the property 
 75.21  taxable, the net tax capacity assessed by the assessor at the 
 75.22  time of the transfer.  If improvements are made to tax exempt 
 75.23  property after certification of the district and before the 
 75.24  parcel becomes taxable, the assessor shall, at the request of 
 75.25  the authority, separately assess the estimated market value of 
 75.26  the improvements.  If the property becomes taxable, the county 
 75.27  auditor shall add to original net tax capacity, the net tax 
 75.28  capacity of the parcel, excluding the separately assessed 
 75.29  improvements.  If substantial taxable improvements were made to 
 75.30  a parcel after certification of the district and if the property 
 75.31  later becomes tax exempt, in whole or part, as a result of the 
 75.32  authority acquiring the property through foreclosure or exercise 
 75.33  of remedies under a lease or other revenue agreement or as a 
 75.34  result of tax forfeiture, the amount to be added to the original 
 75.35  net tax capacity of the district as a result of the property 
 75.36  again becoming taxable is the amount of the parcel's value that 
 76.1   was included in original net tax capacity when the parcel was 
 76.2   first certified.  The amount to be added to the original net tax 
 76.3   capacity of the district as a result of enlargements equals the 
 76.4   net tax capacity of the added real property as most recently 
 76.5   certified by the commissioner of revenue as of the date of 
 76.6   modification of the tax increment financing plan pursuant to 
 76.7   section 469.175, subdivision 4. 
 76.8      (d) For districts approved under section 469.175, 
 76.9   subdivision 3, or parcels added to existing districts after May 
 76.10  1, 1988, if the net tax capacity of a property increases because 
 76.11  the property no longer qualifies under the Minnesota 
 76.12  Agricultural Property Tax Law, section 273.111; the Minnesota 
 76.13  Open Space Property Tax Law, section 273.112; or the 
 76.14  Metropolitan Agricultural Preserves Act, chapter 473H, or 
 76.15  because platted, unimproved property is improved or three years 
 76.16  pass after approval of the plat under section 273.11, 
 76.17  subdivision 1, the increase in net tax capacity must be added to 
 76.18  the original net tax capacity.  
 76.19     (e) The amount to be subtracted from the original net tax 
 76.20  capacity of the district as a result of previously taxable real 
 76.21  property within the district becoming tax exempt, or a reduction 
 76.22  in the geographic area of the district, shall be the amount of 
 76.23  original net tax capacity initially attributed to the property 
 76.24  becoming tax exempt or being removed from the district.  If the 
 76.25  net tax capacity of property located within the tax increment 
 76.26  financing district is reduced by reason of a court-ordered 
 76.27  abatement, stipulation agreement, voluntary abatement made by 
 76.28  the assessor or auditor or by order of the commissioner of 
 76.29  revenue, the reduction shall be applied to the original net tax 
 76.30  capacity of the district when the property upon which the 
 76.31  abatement is made has not been improved since the date of 
 76.32  certification of the district and to the captured net tax 
 76.33  capacity of the district in each year thereafter when the 
 76.34  abatement relates to improvements made after the date of 
 76.35  certification.  The county auditor may specify reasonable form 
 76.36  and content of the request for certification of the authority 
 77.1   and any modification thereof pursuant to section 469.175, 
 77.2   subdivision 4.  
 77.3      (f) If a parcel of property contained a substandard 
 77.4   building that was demolished or removed and if the authority 
 77.5   elects to treat the parcel as occupied by a substandard building 
 77.6   under section 469.174, subdivision 10, paragraph (b), the 
 77.7   auditor shall certify the original net tax capacity of the 
 77.8   parcel using the greater of (1) the current net tax capacity of 
 77.9   the parcel, or (2) the estimated market value of the parcel for 
 77.10  the year in which the building was demolished or removed, but 
 77.11  applying the class rates for the current year. 
 77.12     (g) For a redevelopment district qualifying under section 
 77.13  469.174, subdivision 10, paragraph (a), clause (4), as a 
 77.14  qualified disaster area, the auditor shall certify the value of 
 77.15  the land as the original tax capacity for any parcel in the 
 77.16  district that contains a building that suffered substantial 
 77.17  damage as a result of the disaster or emergency. 
 77.18     <b>[EFFECTIVE DATE.]</b> This section is effective for districts 
 77.19  for which the request for certification is made after the day 
 77.20  following final enactment. 
 77.21     Sec. 6.  [469.1794] [DURATION EXTENSION TO OFFSET 
 77.22  DEFICITS.] 
 77.23     Subdivision 1.  [AUTHORITY.] Subject to the conditions and 
 77.24  limitations imposed by this section, an authority may, by 
 77.25  resolution, extend the duration limit under section 469.176, 
 77.26  subdivision 1b, 1c, 1e, or 1g, that applies to a preexisting 
 77.27  district by up to the maximum number of years permitted under 
 77.28  subdivision 5, plus any amount authorized by the commissioner of 
 77.29  revenue under subdivision 6. 
 77.30     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 77.31  the following terms have the meanings given. 
 77.32     (b) "Extended district" means a tax increment financing 
 77.33  district whose duration limit is extended under this section. 
 77.34     (c) "Preexisting district" has the meaning given in section 
 77.35  469.1792, subdivision 2. 
 77.36     (d) "Preexisting obligation" has the meaning given in 
 78.1   section 469.1792, subdivision 2. 
 78.2      (e) "Qualifying obligation" means: 
 78.3      (1) a preexisting obligation that is: 
 78.4      (i) a general obligation bond of the municipality; 
 78.5      (ii) a general obligation bond of the authority; 
 78.6      (iii) a revenue bond of the authority to which other 
 78.7   revenues or money of the authority in addition to tax increments 
 78.8   are pledged to pay; or 
 78.9      (iv) an interfund loan, including an advance or payment 
 78.10  made by the municipality or authority after June 1, 2002, to pay 
 78.11  an obligation listed in items (i) to (iii); or 
 78.12     (2) a bond issued to refinance a preexisting obligation 
 78.13  under clause (1). 
 78.14     Subd. 3.  [PRECONDITIONS.] Before an authority may extend 
 78.15  the duration of district under this section, the following 
 78.16  conditions must be met with regard to the district: 
 78.17     (1) the original local tax rate under section 469.177, 
 78.18  subdivision 1a, does not apply under an election made under 
 78.19  section 469.1792, subdivision 3, or under other operation of 
 78.20  law; 
 78.21     (2) for a district in the metropolitan area or taconite tax 
 78.22  relief area, the fiscal disparities contribution is computed 
 78.23  under section 469.177, subdivision 3, paragraph (a); 
 78.24     (3) the municipality has transferred any available 
 78.25  increments in other districts to pay qualified obligations of 
 78.26  the district or other districts in the municipality under 
 78.27  section 469.1763, subdivision 6; and 
 78.28     (4) the authority finds that, taking into account all of 
 78.29  the increments that are available to pay qualifying obligations 
 78.30  for the district, the increments from the district will be 
 78.31  insufficient to pay the amount of qualifying obligations and 
 78.32  that the insufficiency is a result of (i) the changes in the 
 78.33  class rates and (ii) elimination of the state-determined general 
 78.34  education property tax levy under Laws 2001, First Special 
 78.35  Session chapter 5. 
 78.36     Subd. 4.  [NOTICE; HEARING; AND APPROVALS.] The authority 
 79.1   may extend the duration of a district under this section only 
 79.2   after the municipality has approved the extension after 
 79.3   providing public notice and holding a hearing in the manner 
 79.4   provided under section 469.175, subdivision 3. 
 79.5      Subd. 5.  [MAXIMUM EXTENSION.] (a) The maximum extension 
 79.6   for a district under this subdivision equals the lesser of: 
 79.7      (1) four years; or 
 79.8      (2) the tax reform percentage for the district, determined 
 79.9   under paragraph (b), multiplied by the remaining duration of the 
 79.10  district rounded to the nearest whole number.  Fractions in 
 79.11  excess of one-third are rounded up. 
 79.12     (b) The tax reform percentage for the district, as 
 79.13  estimated by the county auditor, equals: 
 79.14     (1)(i) the total taxes paid by the original tax capacity 
 79.15  for the district for taxes payable in 2001, minus 
 79.16     (ii) the average of the total taxes paid by the original 
 79.17  tax capacity for the district for taxes payable in 2002 and in 
 79.18  2003, divided by 
 79.19     (2) the total taxes paid by the original tax capacity for 
 79.20  the district for taxes payable in 2001. 
 79.21     (c) In the resolution approving the extension, the 
 79.22  municipality may elect to treat all preexisting obligations as 
 79.23  qualified obligations for purposes of this section.  If the 
 79.24  municipality makes an election under this paragraph, the maximum 
 79.25  duration is reduced by one-half of the amount otherwise 
 79.26  permitted under paragraph (a).  
 79.27     (d) The remaining duration of a district is the number of 
 79.28  calendar years, beginning after December 31, 2001, in which the 
 79.29  district may collect increment under its duration limit under 
 79.30  section 469.176, subdivision 1b, 1c, 1e, or 1g, or a special law 
 79.31  approved before January 1, 2002, as applicable. 
 79.32     (e) For purposes of this subdivision, "taxes" exclude taxes 
 79.33  levied against market value, rather than tax capacity, and the 
 79.34  state general tax under section 275.025. 
 79.35     Subd. 6.  [COMMISSIONER AUTHORITY.] (a) If the municipality 
 79.36  determines that the extension permitted under subdivision 5 will 
 80.1   not provide sufficient revenue to pay in full the amount of 
 80.2   qualifying obligations, the municipality may apply to the 
 80.3   commissioner of revenue for an additional duration extension.  
 80.4   The commissioner may authorize an extension of the duration of 
 80.5   the district of up to two years after determining that: 
 80.6      (1) the insufficiency of revenues to pay the qualifying 
 80.7   obligations, which will be offset by the additional extension of 
 80.8   the duration limit, result from (i) the changes in the class 
 80.9   rates and (ii) elimination of the state-determined general 
 80.10  education property tax levy under Laws 2001, First Special 
 80.11  Session chapter 5; 
 80.12     (2) the municipality has or is transferring all available 
 80.13  increments from other preexisting districts and after August 1, 
 80.14  2001, has not entered into new obligations or authorized new 
 80.15  spending that reduced the amount of those increments that are 
 80.16  available for transfer to pay qualifying obligations; and 
 80.17     (3) increases in increments over the term of the district 
 80.18  are unlikely to eliminate the insufficiency. 
 80.19     (b) The commissioner may: 
 80.20     (1) establish the form of and time for applications under 
 80.21  this subdivision; and 
 80.22     (2) require the municipality to provide the information 
 80.23  that the commissioner determines is necessary or useful in 
 80.24  evaluating the application. 
 80.25     (c) This subdivision does not apply to a district if the 
 80.26  authority has made an election under subdivision 5, paragraph 
 80.27  (c).  
 80.28     Subd. 7.  [LIMITS ON USE OF INCREMENTS.] (a) Tax increments 
 80.29  of an extended district may only be used to pay preexisting 
 80.30  obligations of the district and administrative expenses, 
 80.31  effective upon the final required approval of the extension 
 80.32  under this section.  All tax increments that are attributable to 
 80.33  an extension of the duration of a district under this section 
 80.34  must be used only to pay qualified obligations of the district.  
 80.35  If increments from a district subject to this subdivision are 
 80.36  pledged to pay preexisting obligations that are not qualified 
 81.1   obligations, increments received under the duration limit, 
 81.2   determined without regard to this section, must be used to pay 
 81.3   qualified obligations and preexisting obligations that are not 
 81.4   qualified obligations in proportion to their relative shares of 
 81.5   all payments due on all preexisting obligations. 
 81.6      (b) If the authority elects to extend the duration of a 
 81.7   district under this section and if increments from one or more 
 81.8   other districts are pledged to pay preexisting obligations of 
 81.9   the extended district, increments from all of the districts may 
 81.10  only be used to pay preexisting obligations and administrative 
 81.11  expenses. 
 81.12     Subd. 8.  [DECERTIFICATION.] An extended district must be 
 81.13  decertified at the end of the first calendar year when 
 81.14  sufficient increments have been received to pay the qualified 
 81.15  obligations of the extended district.  Any remaining unspent 
 81.16  increments must be distributed as excess increments under 
 81.17  section 469.176, subdivision 2, clause (4). 
 81.18     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 81.19  following final enactment and applies to districts for which the 
 81.20  request for certification was made on, before, or after August 
 81.21  1, 1979, and before August 1, 2001.