1.1                          A bill for an act 
  1.2             providing for designation of an international economic 
  1.3             development zone; providing tax incentives; 
  1.4             appropriating money; amending Minnesota Statutes 2002, 
  1.5             sections 272.02, by adding a subdivision; 290.06, by 
  1.6             adding a subdivision; 290.191, by adding a 
  1.7             subdivision; 297A.68, by adding a subdivision; 
  1.8             proposing coding for new law in Minnesota Statutes, 
  1.9             chapter 469. 
  1.10  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.11     Section 1.  Minnesota Statutes 2002, section 272.02, is 
  1.12  amended by adding a subdivision to read:  
  1.13     Subd. 73.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE 
  1.14  PROPERTY.] (a) Improvements to real property, and personal 
  1.15  property, classified under section 273.13, subdivision 24, and 
  1.16  located within an international economic development zone 
  1.17  designated under section 469.322, are exempt from ad valorem 
  1.18  taxes levied under chapter 275, if the occupant of the property 
  1.19  is a qualified business, as defined in section 469.321. 
  1.20     (b) The exemption applies beginning for the first 
  1.21  assessment year after designation of the international economic 
  1.22  development zone.  The exemption applies to each assessment year 
  1.23  that begins during the duration of the international economic 
  1.24  development zone and to property occupied by July 1 of the 
  1.25  assessment year by a qualified business for the duration 
  1.26  permitted under section 469.324, subdivision 2. 
  1.27     Sec. 2.  Minnesota Statutes 2002, section 290.06, is 
  2.1   amended by adding a subdivision to read: 
  2.2      Subd. 32.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE JOB 
  2.3   CREDIT.] A taxpayer that is a qualified business, as defined in 
  2.4   section 469.321, subdivision 6, is allowed a credit as 
  2.5   determined under section 469.325 against the tax imposed by this 
  2.6   chapter. 
  2.7      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  2.8   following final enactment. 
  2.9      Sec. 3.  Minnesota Statutes 2002, section 290.191, is 
  2.10  amended by adding a subdivision to read: 
  2.11     Subd. 13.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONES.] (a) 
  2.12  A qualified business as defined under section 469.321 may 
  2.13  exclude from: 
  2.14     (1) the numerator of its payroll factor the amount of its 
  2.15  international economic development zone payroll; and 
  2.16     (2) the numerator of its property factor the amount of its 
  2.17  property with a situs in the international economic development 
  2.18  zone. 
  2.19     (b) The provisions of this subdivision apply to a qualified 
  2.20  business for the duration provided under section 469.324. 
  2.21     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  2.22  following final enactment. 
  2.23     Sec. 4.  Minnesota Statutes 2002, section 297A.68, is 
  2.24  amended by adding a subdivision to read: 
  2.25     Subd. 41.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONES.] (a) 
  2.26  Purchases of tangible personal property or taxable services by a 
  2.27  qualified business, as defined in section 469.321, are exempt if 
  2.28  the property or services are primarily used or consumed in an 
  2.29  international economic development zone designated under section 
  2.30  469.322. 
  2.31     (b) Purchase and use of construction materials and supplies 
  2.32  for construction of improvements to real property in an 
  2.33  international economic development zone are exempt if the 
  2.34  improvements after completion of construction are to be used in 
  2.35  the conduct of a qualified business, as defined in section 
  2.36  469.321.  This exemption applies regardless of whether the 
  3.1   purchases are made by the business or a contractor. 
  3.2      (c) The exemptions under this subdivision apply to a local 
  3.3   sales and use tax, regardless of whether the local tax is 
  3.4   imposed on sales taxable under this chapter or in another law, 
  3.5   ordinance, or charter provision. 
  3.6      (d) This subdivision applies to sales, if the purchase was 
  3.7   made and delivery received during the period provided under 
  3.8   section 469.324, subdivision 2. 
  3.9      <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
  3.10  on or after the day following final enactment. 
  3.11     Sec. 5.  [469.321] [DEFINITIONS.] 
  3.12     Subdivision 1.  [SCOPE.] For purposes of sections 469.321 
  3.13  to 469.327, the following terms have the meanings given. 
  3.14     Subd. 2.  [FOREIGN TRADE ZONE.] "Foreign trade zone" means 
  3.15  a foreign trade zone designated pursuant to United States Code, 
  3.16  title 19, section 81b, for the right to use the powers provided 
  3.17  in United States Code, title 19, sections 81a to 81u, or a 
  3.18  subzone authorized by the foreign trade zone. 
  3.19     Subd. 3.  [FOREIGN TRADE ZONE AUTHORITY.] "Foreign trade 
  3.20  zone authority" means the Greater Metropolitan Foreign Trade 
  3.21  Zone Commission number 119, a joint powers authority created by 
  3.22  the county of Hennepin, the cities of Minneapolis and 
  3.23  Bloomington, and the Metropolitan Airports Commission, under the 
  3.24  authority of section 469.059 or 469.101, which includes any 
  3.25  other political subdivisions that enter into the authority after 
  3.26  its creation. 
  3.27     Subd. 4.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE.] An 
  3.28  "international economic development zone" or "zone" is a zone so 
  3.29  designated under section 469.322. 
  3.30     Subd. 5.  [PERSON.] "Person" includes an individual, 
  3.31  corporation, partnership, limited liability company, 
  3.32  association, or any other entity. 
  3.33     Subd. 6.  [QUALIFIED BUSINESS.] (a) "Qualified business" 
  3.34  means a person carrying on a trade or business at a place of 
  3.35  business located within an international economic development 
  3.36  zone that is: 
  4.1      (1) engaged in the furtherance of international export or 
  4.2   import of goods; and 
  4.3      (2) certified by the foreign trade zone authority as a 
  4.4   trade or business that furthers the purpose of developing 
  4.5   international distribution capacity and capability. 
  4.6      (b) A person that relocates a trade or business from within 
  4.7   Minnesota but outside an international economic development zone 
  4.8   into an international economic development zone is not a 
  4.9   qualified business, unless the business: 
  4.10     (1)(i) increases full-time employment in the first full 
  4.11  year of operation within the international economic development 
  4.12  zone by at least 20 percent measured relative to the operations 
  4.13  that were relocated and maintains the required level of 
  4.14  employment for each year that tax incentives under section 
  4.15  469.324 are claimed; or 
  4.16     (ii) makes a capital investment in the property located 
  4.17  within a zone equal to at least ten percent of the gross 
  4.18  revenues of the operations that were relocated in the 
  4.19  immediately proceeding taxable year; and 
  4.20     (2) enters a binding written agreement with the foreign 
  4.21  trade zone authority that: 
  4.22     (i) pledges that the business will meet the requirements of 
  4.23  clause (1); 
  4.24     (ii) provides for repayment of all tax benefits enumerated 
  4.25  under section 469.324 to the business under the procedures in 
  4.26  section 469.326, if the requirements of clause (1) are not met 
  4.27  for the taxable year or for taxes payable during a year in which 
  4.28  the requirements were not met; and 
  4.29     (iii) contains any other terms the foreign trade zone 
  4.30  authority determines appropriate. 
  4.31     Clause (1) of this paragraph does not apply to a freight 
  4.32  forwarder. 
  4.33     Subd. 7.  [REGIONAL DISTRIBUTION CENTER.] A "regional 
  4.34  distribution center" is a distribution center developed within a 
  4.35  foreign trade zone.  The regional distribution center must have 
  4.36  as its primary purpose to facilitate gathering of freight for 
  5.1   the purpose of centralizing the functions necessary for the 
  5.2   shipment of freight in international commerce, including, but 
  5.3   not limited to, security and customs functions. 
  5.4      Subd. 8.  [RELOCATE.] (a) "Relocate" means that a trade or 
  5.5   business: 
  5.6      (1) ceases one or more operations or functions at another 
  5.7   location in Minnesota and begins performing substantially the 
  5.8   same operations or functions at a location in an international 
  5.9   economic development zone; or 
  5.10     (2) reduces employment at another location in Minnesota 
  5.11  during a period starting one year before and ending one year 
  5.12  after it begins operations in an international economic 
  5.13  development zone and its employees in the international economic 
  5.14  development zone are engaged in the same line of business as the 
  5.15  employees at the location where it reduced employment. 
  5.16     (b) "Relocate" does not include an expansion by a business 
  5.17  that establishes a new facility that does not replace or 
  5.18  supplant an existing operation or employment, in whole or in 
  5.19  part. 
  5.20     (c) "Trade or business" includes any business entity that 
  5.21  is substantially similar in operation or ownership to the 
  5.22  business entity seeking to be a qualified business. 
  5.23     Subd. 9.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE PAYROLL 
  5.24  FACTOR.] "International economic development zone payroll 
  5.25  factor" or "international economic development zone payroll" is 
  5.26  that portion of the payroll factor under section 290.191 that 
  5.27  represents: 
  5.28     (1) wages or salaries paid to an individual for services 
  5.29  performed in an international economic development zone; or 
  5.30     (2) wages or salaries paid to individuals working from 
  5.31  offices within an international economic development zone, if 
  5.32  their employment requires them to work outside the zone and the 
  5.33  work is incidental to the work performed by the individual 
  5.34  within the zone. 
  5.35     Subd. 10.  [FREIGHT FORWARDER.] "Freight forwarder" is a 
  5.36  business that, for compensation, ensures that goods produced or 
  6.1   sold by another business move from point of origin to point of 
  6.2   destination. 
  6.3      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  6.4   following final enactment. 
  6.5      Sec. 6.  [469.322] [DESIGNATION OF INTERNATIONAL ECONOMIC 
  6.6   DEVELOPMENT ZONE.] 
  6.7      (a) An area designated as a foreign trade zone may be 
  6.8   designated by the foreign trade zone authority as an 
  6.9   international economic development zone if within the zone a 
  6.10  regional distribution center is being developed pursuant to 
  6.11  section 469.323.  The zone must consist of contiguous area of 
  6.12  not less than 500 acres and not more than 1,000 acres.  The 
  6.13  designation authority under this section is limited to one zone. 
  6.14     (b) In making the designation, the foreign trade zone 
  6.15  authority, in consultation with the Minnesota Department of 
  6.16  Transportation and the Metropolitan Council, shall consider 
  6.17  access to major transportation routes, consistency with current 
  6.18  state transportation and air cargo planning, adequacy of the 
  6.19  size of the site, access to airport facilities, present and 
  6.20  future capacity at the designated airport, the capability to 
  6.21  meet integrated present and future air cargo, security, and 
  6.22  inspection services, and access to other infrastructure and 
  6.23  financial incentives.  The border of the international economic 
  6.24  development zone must be no more than 60 miles distant or 90 
  6.25  minutes drive time from the border of the Minneapolis-St. Paul 
  6.26  International Airport.  The county in which the zone is located 
  6.27  must be a member of the foreign trade zone authority. 
  6.28     (c) Prior to a final site designation, a transportation 
  6.29  impact study based on the regional model and utilizing traffic 
  6.30  forecasting and assignments must be conducted.  The results must 
  6.31  be used to evaluate the effects of the proposed use on the 
  6.32  transportation system and identify any needed improvements.  If 
  6.33  the site is in the metropolitan area the study must also 
  6.34  evaluate the effect of the transportation impacts on the 
  6.35  Metropolitan Transportation System plan as well as the 
  6.36  comprehensive plans of the municipalities that would be affected.
  7.1      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  7.2   following final enactment. 
  7.3      Sec. 7.  [469.323] [FOREIGN TRADE ZONE AUTHORITY POWERS.] 
  7.4      Subdivision 1.  [DEVELOPMENT OF REGIONAL DISTRIBUTION 
  7.5   CENTER.] The foreign trade zone authority is responsible for 
  7.6   creating a development plan for the regional distribution 
  7.7   center.  The regional distribution center must be developed with 
  7.8   the purpose of expanding, on a regional basis, international 
  7.9   distribution capacity and capability.  The foreign trade zone 
  7.10  authority shall consult with municipalities that have indicated 
  7.11  to the authority an interest in locating the international 
  7.12  economic development zone within their boundaries, as well as 
  7.13  interested businesses, potential financiers, and appropriate 
  7.14  state and federal agencies. 
  7.15     Subd. 2.  [PORT AUTHORITY POWERS.] The governing body of 
  7.16  the foreign trade zone authority may establish a port authority 
  7.17  that has the same powers as a port authority established under 
  7.18  section 469.049.  If the foreign trade zone authority 
  7.19  establishes a port authority, the governing body of the foreign 
  7.20  trade zone authority may exercise all powers granted to a city 
  7.21  by sections 469.048 to 469.068, except it may not impose or 
  7.22  request imposition of a property tax levy under section 469.053 
  7.23  by any city. 
  7.24     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
  7.25  following final enactment. 
  7.26     Sec. 8.  [469.324] [TAX INCENTIVES IN INTERNATIONAL 
  7.27  ECONOMIC DEVELOPMENT ZONE.] 
  7.28     Subdivision 1.  [AVAILABILITY.] Qualified businesses that 
  7.29  operate in an international economic development zone, 
  7.30  individuals who invest in a regional distribution center or 
  7.31  qualified businesses that operate in an international economic 
  7.32  development zone, and property located in an international 
  7.33  economic development zone qualify for: 
  7.34     (1) exemption from the state sales and use tax and any 
  7.35  local sales and use taxes on qualifying purchases as provided in 
  7.36  section 297A.68, subdivision 41; 
  8.1      (2) exemption from the property tax as provided in section 
  8.2   272.02, subdivision 73; 
  8.3      (3) the jobs credit allowed under section 469.325; 
  8.4      (4) the corporate franchise tax exemption under section 
  8.5   290.191, subdivision 13. 
  8.6      Subd. 2.  [DURATION.] (a) Except as provided in paragraph 
  8.7   (b), the jobs credit described in subdivision 1, clause (3), and 
  8.8   the corporate franchise exemption under subdivision 1, clause 
  8.9   (4), is available for no more than eight consecutive taxable 
  8.10  years for any taxpayer.  The sales and use tax exemption 
  8.11  described in subdivision 1, clause (1), is available for each 
  8.12  taxpayer that claims it for taxes otherwise payable on 
  8.13  transactions during a period of eight years from the date when 
  8.14  the first exemption is claimed by that taxpayer.  The property 
  8.15  tax exemption described under subdivision 1, clause (2), is 
  8.16  available for any parcel of property for eight consecutive taxes 
  8.17  payable years.  No incentives described in subdivision 1, 
  8.18  clauses (1) to (4), are available after December 31, 2020. 
  8.19     (b) For taxpayers that are freight forwarders, the 
  8.20  durations provided under paragraph (a) are reduced to four years.
  8.21     Sec. 9.  [469.325] [JOBS CREDIT.] 
  8.22     Subdivision 1.  [CREDIT ALLOWED.] A qualified business is 
  8.23  allowed a credit against the taxes imposed under chapter 290.  
  8.24  The credit equals seven percent of the: 
  8.25     (1) lesser of: 
  8.26     (i) zone payroll for the taxable year, less the zone 
  8.27  payroll for the base year; or 
  8.28     (ii) total Minnesota payroll for the taxable year, less 
  8.29  total Minnesota payroll for the base year; minus 
  8.30     (2) $30,000 multiplied by the number of full-time 
  8.31  equivalent employees that the qualified business employs in the 
  8.32  international economic development zone for the taxable year, 
  8.33  minus the number of full-time equivalent employees the business 
  8.34  employed in the zone in the base year, but not less than zero. 
  8.35     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
  8.36  the following terms have the meanings given. 
  9.1      (b) "Base year" means the taxable year beginning during the 
  9.2   calendar year prior to the calendar year in which the zone 
  9.3   designation took effect. 
  9.4      (c) "Full-time equivalent employees" means the equivalent 
  9.5   of annualized expected hours of work equal to 2,080 hours. 
  9.6      (d) "Minnesota payroll" means the wages or salaries 
  9.7   attributed to Minnesota under section 290.191, subdivision 12, 
  9.8   for the qualified business or the unitary business of which the 
  9.9   qualified business is a part, whichever is greater. 
  9.10     (e) "Zone payroll" means wages or salaries used to 
  9.11  determine the zone payroll factor for the qualified business, 
  9.12  less the amount of compensation attributable to any employee 
  9.13  that exceeds $100,000. 
  9.14     Subd. 3.  [INFLATION ADJUSTMENT.] For taxable years 
  9.15  beginning after December 31, 2005, the dollar amounts in 
  9.16  subdivision 1, clause (2), and subdivision 2, paragraph (e), are 
  9.17  annually adjusted for inflation.  The commissioner of revenue 
  9.18  shall adjust the amounts by the percentage determined under 
  9.19  section 290.06, subdivision 2d, for the taxable year. 
  9.20     Subd. 4.  [REFUNDABLE.] If the amount of the credit exceeds 
  9.21  the liability for tax under chapter 290, the commissioner of 
  9.22  revenue shall refund the excess to the qualified business. 
  9.23     Subd. 5.  [APPROPRIATION.] An amount sufficient to pay the 
  9.24  refunds authorized by this section is appropriated to the 
  9.25  commissioner of revenue from the general fund. 
  9.26     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
  9.27  years beginning after December 31, 2004. 
  9.28     Sec. 10.  [469.326] [REPAYMENT OF TAX BENEFITS.] 
  9.29     Subdivision 1.  [REPAYMENT OBLIGATION.] A person must repay 
  9.30  the amount of the tax reduction received under section 469.324, 
  9.31  subdivision 1, clauses (1) and (2), or a refund received under 
  9.32  section 469.325, during the two years immediately before it 
  9.33  ceased to operate in the zone, if the person ceased to operate 
  9.34  its facility located within the zone or otherwise ceases to be 
  9.35  or is not a qualified business. 
  9.36     Subd. 2.  [DISPOSITION OF REPAYMENT.] The repayment must be 
 10.1   paid to the state to the extent it represents a state tax 
 10.2   reduction and to the county to the extent it represents a 
 10.3   property tax reduction.  Any amount repaid to the state must be 
 10.4   deposited in the general fund.  Any amount repaid to the county 
 10.5   for the property tax exemption must be distributed to the local 
 10.6   governments with authority to levy taxes in the zone in the same 
 10.7   manner provided for distribution of payment of delinquent 
 10.8   property taxes.  Any repayment of local sales or use taxes must 
 10.9   be repaid to the jurisdiction imposing the local sales or use 
 10.10  tax. 
 10.11     Subd. 3.  [REPAYMENT PROCEDURES.] (a) For the repayment of 
 10.12  taxes imposed under chapter 290 or 297A or local taxes collected 
 10.13  under section 297A.99, a person must file an amended return with 
 10.14  the commissioner of revenue and pay any taxes required to be 
 10.15  repaid within 30 days after ceasing to be a qualified business.  
 10.16  The amount required to be repaid is determined by calculating 
 10.17  the tax for the period for which repayment is required without 
 10.18  regard to the tax reductions allowed under section 469.324. 
 10.19     (b) For the repayment of property taxes, the county auditor 
 10.20  shall prepare a tax statement for the person, applying the 
 10.21  applicable tax extension rates for each payable year and provide 
 10.22  a copy to the business.  The person must pay the taxes to the 
 10.23  county treasurer within 30 days after receipt of the tax 
 10.24  statement.  The taxpayer may appeal the valuation and 
 10.25  determination of the property tax to the tax court within 30 
 10.26  days after receipt of the tax statement. 
 10.27     (c) The provisions of chapters 270 and 289A relating to the 
 10.28  commissioner of revenue's authority to audit, assess, and 
 10.29  collect the tax and to hear appeals apply to the repayment 
 10.30  required under paragraph (a).  The commissioner may impose civil 
 10.31  penalties as provided in chapter 289A, and the additional tax 
 10.32  and penalties are subject to interest at the rate provided in 
 10.33  section 270.75, from 30 days after ceasing to do business in the 
 10.34  zone until the date the tax is paid. 
 10.35     (d) If a property tax is not repaid under paragraph (b), 
 10.36  the county treasurer shall add the amount required to be repaid 
 11.1   to the property taxes assessed against the property for payment 
 11.2   in the year following the year in which the treasurer discovers 
 11.3   that the person ceased to operate in the international economic 
 11.4   development zone. 
 11.5      (e) For determining the tax required to be repaid, a tax 
 11.6   reduction is deemed to have been received on the date that the 
 11.7   tax would have been due if the person had not been entitled to 
 11.8   the tax reduction. 
 11.9      (f) The commissioner of revenue may assess the repayment of 
 11.10  taxes under paragraph (c) at any time within two years after the 
 11.11  person ceases to be a qualified business, or within any period 
 11.12  of limitations for the assessment of tax under section 289A.38, 
 11.13  whichever is later. 
 11.14     Subd. 4.  [WAIVER AUTHORITY.] The commissioner may waive 
 11.15  all or part of a repayment, if the commissioner of revenue, in 
 11.16  consultation with the foreign trade zone authority and 
 11.17  appropriate officials from the state and local government units, 
 11.18  determines that requiring repayment of the tax is not in the 
 11.19  best interest of the state or local government and the business 
 11.20  ceased operating as a result of circumstances beyond its 
 11.21  control, including, but not limited to: 
 11.22     (1) a natural disaster; 
 11.23     (2) unforeseen industry trends; or 
 11.24     (3) loss of a major supplier or customer. 
 11.25     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 11.26  following final enactment. 
 11.27     Sec. 11.  [469.327] [REPORTING REQUIREMENTS.] 
 11.28     Before designation of an international economic development 
 11.29  zone under section 469.322, the foreign trade zone authority 
 11.30  shall establish performance goals for the zone.  These goals 
 11.31  must set out, at a minimum, the amount of investment, the number 
 11.32  of jobs, and the amount of freight handled expected to be 
 11.33  attained at the end of three, five, and 10 year periods by the 
 11.34  zone.  The authority must annually report to the commissioner of 
 11.35  the Department of Employment and Economic Development on its 
 11.36  progress in attaining these goals. 
 12.1      <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 12.2   following final enactment.