1.1 	A bill for an act
1.2 	relating to economic development; providing for an
1.3 	international economic development zone; providing tax
1.4 	incentives; requiring a report; appropriating money;
1.5 	amending Minnesota Statutes 2004, sections 272.02, by
1.6 	adding a subdivision; 290.01, subdivisions 19b, 29;
1.7 	290.06, subdivision 2c, by adding a subdivision;
1.8 	290.067, subdivision 1; 290.0671, subdivision 1;
1.9 	290.091, subdivision 2; 290.0921, subdivision 3;
1.10 	290.0922, subdivisions 2, 3; 297A.68, by adding a
1.11 	subdivision; proposing coding for new law in Minnesota
1.12 	Statutes, chapter 469.
1.13 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.14 	Section 1. Minnesota Statutes 2004, section 272.02, is
1.15 	amended by adding a subdivision to read:
1.16 		Subd. 68.International economic development zone
1.17 	property. (a) Improvements to real property, and personal
1.18 	property, classified under section 273.13, subdivision 24, and
1.19 	located within an international economic development zone
1.20 	designated under section 469.322, are exempt from ad valorem
1.21 	taxes levied under chapter 275, if the occupant of the property
1.22 	is a qualified business, as defined in section 469.321.
1.23 	(b) The exemption applies beginning for the first
1.24 	assessment year after designation of the international economic
1.25 	development zone.  The exemption applies to each assessment year
1.26 	that begins during the duration of the international economic
1.27 	development zone and to property occupied by July 1 of the
1.28 	assessment year by a qualified business.  This exemption does
1.29 	not apply to:
2.1 	(1) the levy under section 475.61 or similar levy
2.2 	provisions under any other law to pay general obligation bonds;
2.3 	or 
2.4 	(2) a levy under section 126C.17, if the levy was approved
2.5 	by the voters before the designation of the zone.
2.6 	
EFFECTIVE DATE. This section is effective beginning for
2.7 	property taxes assessed in 2006, payable in 2007.

2.8 	Sec. 2. Minnesota Statutes 2004, section 290.01,
2.9 	subdivision 19b, is amended to read:
2.10 		Subd. 19b.Subtractions from federal taxable income.  For
2.11 	individuals, estates, and trusts, there shall be subtracted from
2.12 	federal taxable income:
2.13 	(1) interest income on obligations of any authority,
2.14 	commission, or instrumentality of the United States to the
2.15 	extent includable in taxable income for federal income tax
2.16 	purposes but exempt from state income tax under the laws of the
2.17 	United States;
2.18 	(2) if included in federal taxable income, the amount of
2.19 	any overpayment of income tax to Minnesota or to any other
2.20 	state, for any previous taxable year, whether the amount is
2.21 	received as a refund or as a credit to another taxable year's
2.22 	income tax liability;
2.23 	(3) the amount paid to others, less the amount used to
2.24 	claim the credit allowed under section 290.0674, not to exceed
2.25 	$1,625 for each qualifying child in grades kindergarten to 6 and
2.26 	$2,500 for each qualifying child in grades 7 to 12, for tuition,
2.27 	textbooks, and transportation of each qualifying child in
2.28 	attending an elementary or secondary school situated in
2.29 	Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin,
2.30 	wherein a resident of this state may legally fulfill the state's
2.31 	compulsory attendance laws, which is not operated for profit,
2.32 	and which adheres to the provisions of the Civil Rights Act of
2.33 	1964 and chapter 363A.  For the purposes of this clause,
2.34 	"tuition" includes fees or tuition as defined in section
2.35 	290.0674, subdivision 1, clause (1).  As used in this clause,
2.36 	"textbooks" includes books and other instructional materials and
3.1 	equipment purchased or leased for use in elementary and
3.2 	secondary schools in teaching only those subjects legally and
3.3 	commonly taught in public elementary and secondary schools in
3.4 	this state.  Equipment expenses qualifying for deduction
3.5 	includes expenses as defined and limited in section 290.0674,
3.6 	subdivision 1, clause (3).  "Textbooks" does not include
3.7 	instructional books and materials used in the teaching of
3.8 	religious tenets, doctrines, or worship, the purpose of which is
3.9 	to instill such tenets, doctrines, or worship, nor does it
3.10 	include books or materials for, or transportation to,
3.11 	extracurricular activities including sporting events, musical or
3.12 	dramatic events, speech activities, driver's education, or
3.13 	similar programs.  For purposes of the subtraction provided by
3.14 	this clause, "qualifying child" has the meaning given in section
3.15 	32(c)(3) of the Internal Revenue Code;
3.16 	(4) income as provided under section 290.0802;
3.17 	(5) to the extent included in federal adjusted gross
3.18 	income, income realized on disposition of property exempt from
3.19 	tax under section 290.491;
3.20 	(6) to the extent included in federal taxable income,
3.21 	postservice benefits for youth community service under section
3.22 	124D.42 for volunteer service under United States Code, title
3.23 	42, sections 12601 to 12604;
3.24 	(7) to the extent not deducted in determining federal
3.25 	taxable income by an individual who does not itemize deductions
3.26 	for federal income tax purposes for the taxable year, an amount
3.27 	equal to 50 percent of the excess of charitable contributions
3.28 	allowable as a deduction for the taxable year under section
3.29 	170(a) of the Internal Revenue Code over $500;
3.30 	(8) for taxable years beginning before January 1, 2008, the
3.31 	amount of the federal small ethanol producer credit allowed
3.32 	under section 40(a)(3) of the Internal Revenue Code which is
3.33 	included in gross income under section 87 of the Internal
3.34 	Revenue Code;
3.35 	(9) for individuals who are allowed a federal foreign tax
3.36 	credit for taxes that do not qualify for a credit under section
4.1 	290.06, subdivision 22, an amount equal to the carryover of
4.2 	subnational foreign taxes for the taxable year, but not to
4.3 	exceed the total subnational foreign taxes reported in claiming
4.4 	the foreign tax credit.  For purposes of this clause, "federal
4.5 	foreign tax credit" means the credit allowed under section 27 of
4.6 	the Internal Revenue Code, and "carryover of subnational foreign
4.7 	taxes" equals the carryover allowed under section 904(c) of the
4.8 	Internal Revenue Code minus national level foreign taxes to the
4.9 	extent they exceed the federal foreign tax credit;
4.10 	(10) in each of the five tax years immediately following
4.11 	the tax year in which an addition is required under subdivision
4.12 	19a, clause (7), an amount equal to one-fifth of the delayed
4.13 	depreciation.  For purposes of this clause, "delayed
4.14 	depreciation" means the amount of the addition made by the
4.15 	taxpayer under subdivision 19a, clause (7), minus the positive
4.16 	value of any net operating loss under section 172 of the
4.17 	Internal Revenue Code generated for the tax year of the
4.18 	addition.  The resulting delayed depreciation cannot be less
4.19 	than zero; and 
4.20 	(11) job opportunity building zone income as provided under
4.21 	section 469.316; and 
4.22 	(12) international economic development zone income as
4.23 	provided under section 469.325.
4.24 	
EFFECTIVE DATE. This section is effective for taxable
4.25 	years beginning after December 31, 2005.

4.26 	Sec. 3. Minnesota Statutes 2004, section 290.01,
4.27 	subdivision 29, is amended to read:
4.28 		Subd. 29.Taxable income.  The term "taxable income"
4.29 	means:
4.30 	(1) for individuals, estates, and trusts, the same as
4.31 	taxable net income;
4.32 	(2) for corporations, the taxable net income less
4.33 	(i) the net operating loss deduction under section 290.095;
4.34 	(ii) the dividends received deduction under section 290.21,
4.35 	subdivision 4;
4.36 	(iii) the exemption for operating in a job opportunity
5.1 	building zone under section 469.317; and 
5.2 	(iv) the exemption for operating in a biotechnology and
5.3 	health sciences industry zone under section 469.337; and 
5.4 	(v) the exemption for operating in an international
5.5 	economic development zone under section 469.326.
5.6 	
EFFECTIVE DATE. This section is effective for taxable
5.7 	years beginning after December 31, 2005.

5.8 	Sec. 4. Minnesota Statutes 2004, section 290.06,
5.9 	subdivision 2c, is amended to read:
5.10 		Subd. 2c.Schedules of rates for individuals, estates,
5.11 	and trusts.  (a) The income taxes imposed by this chapter upon
5.12 	married individuals filing joint returns and surviving spouses
5.13 	as defined in section 2(a) of the Internal Revenue Code must be
5.14 	computed by applying to their taxable net income the following
5.15 	schedule of rates:
5.16 	(1) On the first $25,680, 5.35 percent;
5.17 	(2) On all over $25,680, but not over $102,030, 7.05
5.18 	percent;
5.19 	(3) On all over $102,030, 7.85 percent.
5.20 	Married individuals filing separate returns, estates, and
5.21 	trusts must compute their income tax by applying the above rates
5.22 	to their taxable income, except that the income brackets will be
5.23 	one-half of the above amounts.
5.24 	(b) The income taxes imposed by this chapter upon unmarried
5.25 	individuals must be computed by applying to taxable net income
5.26 	the following schedule of rates:
5.27 	(1) On the first $17,570, 5.35 percent;
5.28 	(2) On all over $17,570, but not over $57,710, 7.05
5.29 	percent;
5.30 	(3) On all over $57,710, 7.85 percent.
5.31 	(c) The income taxes imposed by this chapter upon unmarried
5.32 	individuals qualifying as a head of household as defined in
5.33 	section 2(b) of the Internal Revenue Code must be computed by
5.34 	applying to taxable net income the following schedule of rates:
5.35 	(1) On the first $21,630, 5.35 percent;
5.36 	(2) On all over $21,630, but not over $86,910, 7.05
6.1 	percent;
6.2 	(3) On all over $86,910, 7.85 percent.
6.3 	(d) In lieu of a tax computed according to the rates set
6.4 	forth in this subdivision, the tax of any individual taxpayer
6.5 	whose taxable net income for the taxable year is less than an
6.6 	amount determined by the commissioner must be computed in
6.7 	accordance with tables prepared and issued by the commissioner
6.8 	of revenue based on income brackets of not more than $100.  The
6.9 	amount of tax for each bracket shall be computed at the rates
6.10 	set forth in this subdivision, provided that the commissioner
6.11 	may disregard a fractional part of a dollar unless it amounts to
6.12 	50 cents or more, in which case it may be increased to $1.
6.13 	(e) An individual who is not a Minnesota resident for the
6.14 	entire year must compute the individual's Minnesota income tax
6.15 	as provided in this subdivision.  After the application of the
6.16 	nonrefundable credits provided in this chapter, the tax
6.17 	liability must then be multiplied by a fraction in which:
6.18 	(1) the numerator is the individual's Minnesota source
6.19 	federal adjusted gross income as defined in section 62 of the
6.20 	Internal Revenue Code and increased by the additions required
6.21 	under section 290.01, subdivision 19a, clauses (1), (5), and
6.22 	(6), and reduced by the subtraction under section 290.01,
6.23 	subdivision 19b, clause clauses (11) and (12), and the Minnesota
6.24 	assignable portion of the subtraction for United States
6.25 	government interest under section 290.01, subdivision 19b,
6.26 	clause (1), after applying the allocation and assignability
6.27 	provisions of section 290.081, clause (a), or 290.17; and
6.28 	(2) the denominator is the individual's federal adjusted
6.29 	gross income as defined in section 62 of the Internal Revenue
6.30 	Code of 1986, increased by the amounts specified in section
6.31 	290.01, subdivision 19a, clauses (1), (5), and (6), and reduced
6.32 	by the amounts specified in section 290.01, subdivision 19b,
6.33 	clauses (1) and ,(11), and (12).
6.34 	
EFFECTIVE DATE. This section is effective for taxable
6.35 	years beginning after December 31, 2005.

6.36 	Sec. 5. Minnesota Statutes 2004, section 290.06, is
7.1 	amended by adding a subdivision to read:
7.2 		Subd. 32.International economic development zone job
7.3 	credit. A taxpayer that is a qualified business, as defined in
7.4 	section 469.321, subdivision 6, is allowed a credit as
7.5 	determined under section 469.327 against the tax imposed by this
7.6 	chapter.
7.7 	
EFFECTIVE DATE. This section is effective the day
7.8 	following final enactment.

7.9 	Sec. 6. Minnesota Statutes 2004, section 290.067,
7.10 	subdivision 1, is amended to read:
7.11 		Subdivision 1.Amount of credit.  (a) A taxpayer may take
7.12 	as a credit against the tax due from the taxpayer and a spouse,
7.13 	if any, under this chapter an amount equal to the dependent care
7.14 	credit for which the taxpayer is eligible pursuant to the
7.15 	provisions of section 21 of the Internal Revenue Code subject to
7.16 	the limitations provided in subdivision 2 except that in
7.17 	determining whether the child qualified as a dependent, income
7.18 	received as a Minnesota family investment program grant or
7.19 	allowance to or on behalf of the child must not be taken into
7.20 	account in determining whether the child received more than half
7.21 	of the child's support from the taxpayer, and the provisions of
7.22 	section 32(b)(1)(D) of the Internal Revenue Code do not apply.
7.23 	(b) If a child who has not attained the age of six years at
7.24 	the close of the taxable year is cared for at a licensed family
7.25 	day care home operated by the child's parent, the taxpayer is
7.26 	deemed to have paid employment-related expenses.  If the child
7.27 	is 16 months old or younger at the close of the taxable year,
7.28 	the amount of expenses deemed to have been paid equals the
7.29 	maximum limit for one qualified individual under section 21(c)
7.30 	and (d) of the Internal Revenue Code.  If the child is older
7.31 	than 16 months of age but has not attained the age of six years
7.32 	at the close of the taxable year, the amount of expenses deemed
7.33 	to have been paid equals the amount the licensee would charge
7.34 	for the care of a child of the same age for the same number of
7.35 	hours of care.
7.36 	(c) If a married couple:
8.1 	(1) has a child who has not attained the age of one year at
8.2 	the close of the taxable year;
8.3 	(2) files a joint tax return for the taxable year; and
8.4 	(3) does not participate in a dependent care assistance
8.5 	program as defined in section 129 of the Internal Revenue Code,
8.6 	in lieu of the actual employment related expenses paid for that
8.7 	child under paragraph (a) or the deemed amount under paragraph
8.8 	(b), the lesser of (i) the combined earned income of the couple
8.9 	or (ii) the amount of the maximum limit for one qualified
8.10 	individual under section 21(c) and (d) of the Internal Revenue
8.11 	Code will be deemed to be the employment related expense paid
8.12 	for that child.  The earned income limitation of section 21(d)
8.13 	of the Internal Revenue Code shall not apply to this deemed
8.14 	amount.  These deemed amounts apply regardless of whether any
8.15 	employment-related expenses have been paid.
8.16 	(d) If the taxpayer is not required and does not file a
8.17 	federal individual income tax return for the tax year, no credit
8.18 	is allowed for any amount paid to any person unless:
8.19 	(1) the name, address, and taxpayer identification number
8.20 	of the person are included on the return claiming the credit; or
8.21 	(2) if the person is an organization described in section
8.22 	501(c)(3) of the Internal Revenue Code and exempt from tax under
8.23 	section 501(a) of the Internal Revenue Code, the name and
8.24 	address of the person are included on the return claiming the
8.25 	credit.
8.26 	In the case of a failure to provide the information required
8.27 	under the preceding sentence, the preceding sentence does not
8.28 	apply if it is shown that the taxpayer exercised due diligence
8.29 	in attempting to provide the information required.
8.30 	In the case of a nonresident, part-year resident, or a
8.31 	person who has earned income not subject to tax under this
8.32 	chapter including earned income excluded pursuant to section
8.33 	290.01, subdivision 19b, clause clauses (11) and (12), the
8.34 	credit determined under section 21 of the Internal Revenue Code
8.35 	must be allocated based on the ratio by which the earned income
8.36 	of the claimant and the claimant's spouse from Minnesota sources
9.1 	bears to the total earned income of the claimant and the
9.2 	claimant's spouse.
9.3 	
EFFECTIVE DATE. This section is effective for taxable
9.4 	years beginning after December 31, 2005.

9.5 	Sec. 7. Minnesota Statutes 2004, section 290.0671,
9.6 	subdivision 1, is amended to read:
9.7 		Subdivision 1.Credit allowed.  (a) An individual is
9.8 	allowed a credit against the tax imposed by this chapter equal
9.9 	to a percentage of earned income.  To receive a credit, a
9.10 	taxpayer must be eligible for a credit under section 32 of the
9.11 	Internal Revenue Code.
9.12 	(b) For individuals with no qualifying children, the credit
9.13 	equals 1.9125 percent of the first $4,620 of earned income.  The
9.14 	credit is reduced by 1.9125 percent of earned income or modified
9.15 	adjusted gross income, whichever is greater, in excess of
9.16 	$5,770, but in no case is the credit less than zero.
9.17 	(c) For individuals with one qualifying child, the credit
9.18 	equals 8.5 percent of the first $6,920 of earned income and 8.5
9.19 	percent of earned income over $12,080 but less than $13,450.
9.20 	The credit is reduced by 5.73 percent of earned income or
9.21 	modified adjusted gross income, whichever is greater, in excess
9.22 	of $15,080, but in no case is the credit less than zero.
9.23 	(d) For individuals with two or more qualifying children,
9.24 	the credit equals ten percent of the first $9,720 of earned
9.25 	income and 20 percent of earned income over $14,860 but less
9.26 	than $16,800.  The credit is reduced by 10.3 percent of earned
9.27 	income or modified adjusted gross income, whichever is greater,
9.28 	in excess of $17,890, but in no case is the credit less than
9.29 	zero.
9.30 	(e) For a nonresident or part-year resident, the credit
9.31 	must be allocated based on the percentage calculated under
9.32 	section 290.06, subdivision 2c, paragraph (e).
9.33 	(f) For a person who was a resident for the entire tax year
9.34 	and has earned income not subject to tax under this chapter,
9.35 	including income excluded under section 290.01, subdivision 19b,
9.36 	clause (11) or (12), the credit must be allocated based on the
10.1 	ratio of federal adjusted gross income reduced by the earned
10.2 	income not subject to tax under this chapter over federal
10.3 	adjusted gross income.
10.4 	(g) For tax years beginning after December 31, 2001, and
10.5 	before December 31, 2004, the $5,770 in paragraph (b), the
10.6 	$15,080 in paragraph (c), and the $17,890 in paragraph (d),
10.7 	after being adjusted for inflation under subdivision 7, are each
10.8 	increased by $1,000 for married taxpayers filing joint returns.
10.9 	(h) For tax years beginning after December 31, 2004, and
10.10 	before December 31, 2007, the $5,770 in paragraph (b), the
10.11 	$15,080 in paragraph (c), and the $17,890 in paragraph (d),
10.12 	after being adjusted for inflation under subdivision 7, are each
10.13 	increased by $2,000 for married taxpayers filing joint returns.
10.14 	(i) For tax years beginning after December 31, 2007, and
10.15 	before December 31, 2010, the $5,770 in paragraph (b), the
10.16 	$15,080 in paragraph (c), and the $17,890 in paragraph (d),
10.17 	after being adjusted for inflation under subdivision 7, are each
10.18 	increased by $3,000 for married taxpayers filing joint returns.
10.19 	For tax years beginning after December 31, 2008, the $3,000 is
10.20 	adjusted annually for inflation under subdivision 7.
10.21 	(j) The commissioner shall construct tables showing the
10.22 	amount of the credit at various income levels and make them
10.23 	available to taxpayers.  The tables shall follow the schedule
10.24 	contained in this subdivision, except that the commissioner may
10.25 	graduate the transition between income brackets.
10.26 	
EFFECTIVE DATE. This section is effective for taxable
10.27 	years beginning after December 31, 2005.

10.28 	Sec. 8. Minnesota Statutes 2004, section 290.091,
10.29 	subdivision 2, is amended to read:
10.30 		Subd. 2.Definitions.  For purposes of the tax imposed by
10.31 	this section, the following terms have the meanings given:
10.32 	(a) "Alternative minimum taxable income" means the sum of
10.33 	the following for the taxable year:
10.34 	(1) the taxpayer's federal alternative minimum taxable
10.35 	income as defined in section 55(b)(2) of the Internal Revenue
10.36 	Code;
11.1 	(2) the taxpayer's itemized deductions allowed in computing
11.2 	federal alternative minimum taxable income, but excluding:
11.3 	(i) the charitable contribution deduction under section 170
11.4 	of the Internal Revenue Code to the extent that the deduction
11.5 	exceeds 1.0 percent of adjusted gross income, as defined in
11.6 	section 62 of the Internal Revenue Code;
11.7 	(ii) the medical expense deduction;
11.8 	(iii) the casualty, theft, and disaster loss deduction; and
11.9 	(iv) the impairment-related work expenses of a disabled
11.10 	person;
11.11 	(3) for depletion allowances computed under section 613A(c)
11.12 	of the Internal Revenue Code, with respect to each property (as
11.13 	defined in section 614 of the Internal Revenue Code), to the
11.14 	extent not included in federal alternative minimum taxable
11.15 	income, the excess of the deduction for depletion allowable
11.16 	under section 611 of the Internal Revenue Code for the taxable
11.17 	year over the adjusted basis of the property at the end of the
11.18 	taxable year (determined without regard to the depletion
11.19 	deduction for the taxable year);
11.20 	(4) to the extent not included in federal alternative
11.21 	minimum taxable income, the amount of the tax preference for
11.22 	intangible drilling cost under section 57(a)(2) of the Internal
11.23 	Revenue Code determined without regard to subparagraph (E);
11.24 	(5) to the extent not included in federal alternative
11.25 	minimum taxable income, the amount of interest income as
11.26 	provided by section 290.01, subdivision 19a, clause (1); and
11.27 	(6) the amount of addition required by section 290.01,
11.28 	subdivision 19a, clause (7);
11.29 	less the sum of the amounts determined under the following:
11.30 	(1) interest income as defined in section 290.01,
11.31 	subdivision 19b, clause (1);
11.32 	(2) an overpayment of state income tax as provided by
11.33 	section 290.01, subdivision 19b, clause (2), to the extent
11.34 	included in federal alternative minimum taxable income;
11.35 	(3) the amount of investment interest paid or accrued
11.36 	within the taxable year on indebtedness to the extent that the
12.1 	amount does not exceed net investment income, as defined in
12.2 	section 163(d)(4) of the Internal Revenue Code.  Interest does
12.3 	not include amounts deducted in computing federal adjusted gross
12.4 	income; and
12.5 	(4) amounts subtracted from federal taxable income as
12.6 	provided by section 290.01, subdivision 19b, clauses (10) and ,
12.7 	(11), and (12).
12.8 	In the case of an estate or trust, alternative minimum
12.9 	taxable income must be computed as provided in section 59(c) of
12.10 	the Internal Revenue Code.
12.11 	(b) "Investment interest" means investment interest as
12.12 	defined in section 163(d)(3) of the Internal Revenue Code.
12.13 	(c) "Tentative minimum tax" equals 6.4 percent of
12.14 	alternative minimum taxable income after subtracting the
12.15 	exemption amount determined under subdivision 3.
12.16 	(d) "Regular tax" means the tax that would be imposed under
12.17 	this chapter (without regard to this section and section
12.18 	290.032), reduced by the sum of the nonrefundable credits
12.19 	allowed under this chapter.
12.20 	(e) "Net minimum tax" means the minimum tax imposed by this
12.21 	section.
12.22 	
EFFECTIVE DATE. This section is effective for taxable
12.23 	years beginning after December 31, 2005.

12.24 	Sec. 9. Minnesota Statutes 2004, section 290.0921,
12.25 	subdivision 3, is amended to read:
12.26 		Subd. 3.Alternative minimum taxable income.
 12.27 	"Alternative minimum taxable income" is Minnesota net income as
12.28 	defined in section 290.01, subdivision 19, and includes the
12.29 	adjustments and tax preference items in sections 56, 57, 58, and
12.30 	59(d), (e), (f), and (h) of the Internal Revenue Code.  If a
12.31 	corporation files a separate company Minnesota tax return, the
12.32 	minimum tax must be computed on a separate company basis.  If a
12.33 	corporation is part of a tax group filing a unitary return, the
12.34 	minimum tax must be computed on a unitary basis.  The following
12.35 	adjustments must be made.
12.36 	(1) For purposes of the depreciation adjustments under
13.1 	section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code,
13.2 	the basis for depreciable property placed in service in a
13.3 	taxable year beginning before January 1, 1990, is the adjusted
13.4 	basis for federal income tax purposes, including any
13.5 	modification made in a taxable year under section 290.01,
13.6 	subdivision 19e, or Minnesota Statutes 1986, section 290.09,
13.7 	subdivision 7, paragraph (c).
13.8 	For taxable years beginning after December 31, 2000, the
13.9 	amount of any remaining modification made under section 290.01,
13.10 	subdivision 19e, or Minnesota Statutes 1986, section 290.09,
13.11 	subdivision 7, paragraph (c), not previously deducted is a
13.12 	depreciation allowance in the first taxable year after December
13.13 	31, 2000.
13.14 	(2) The portion of the depreciation deduction allowed for
13.15 	federal income tax purposes under section 168(k) of the Internal
13.16 	Revenue Code that is required as an addition under section
13.17 	290.01, subdivision 19c, clause (16), is disallowed in
13.18 	determining alternative minimum taxable income.
13.19 	(3) The subtraction for depreciation allowed under section
13.20 	290.01, subdivision 19d, clause (19), is allowed as a
13.21 	depreciation deduction in determining alternative minimum
13.22 	taxable income.
13.23 	(4) The alternative tax net operating loss deduction under
13.24 	sections 56(a)(4) and 56(d) of the Internal Revenue Code does
13.25 	not apply.
13.26 	(5) The special rule for certain dividends under section
13.27 	56(g)(4)(C)(ii) of the Internal Revenue Code does not apply.
13.28 	(6) The special rule for dividends from section 936
13.29 	companies under section 56(g)(4)(C)(iii) does not apply.
13.30 	(7) The tax preference for depletion under section 57(a)(1)
13.31 	of the Internal Revenue Code does not apply.
13.32 	(8) The tax preference for intangible drilling costs under
13.33 	section 57(a)(2) of the Internal Revenue Code must be calculated
13.34 	without regard to subparagraph (E) and the subtraction under
13.35 	section 290.01, subdivision 19d, clause (4).
13.36 	(9) The tax preference for tax exempt interest under
14.1 	section 57(a)(5) of the Internal Revenue Code does not apply.
14.2 	(10) The tax preference for charitable contributions of
14.3 	appreciated property under section 57(a)(6) of the Internal
14.4 	Revenue Code does not apply.
14.5 	(11) For purposes of calculating the tax preference for
14.6 	accelerated depreciation or amortization on certain property
14.7 	placed in service before January 1, 1987, under section 57(a)(7)
14.8 	of the Internal Revenue Code, the deduction allowable for the
14.9 	taxable year is the deduction allowed under section 290.01,
14.10 	subdivision 19e.
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, not previously deducted is a depreciation or
14.14 	amortization allowance in the first taxable year after December
14.15 	31, 2004.
14.16 	(12) For purposes of calculating the adjustment for
14.17 	adjusted current earnings in section 56(g) of the Internal
14.18 	Revenue Code, the term "alternative minimum taxable income" as
14.19 	it is used in section 56(g) of the Internal Revenue Code, means
14.20 	alternative minimum taxable income as defined in this
14.21 	subdivision, determined without regard to the adjustment for
14.22 	adjusted current earnings in section 56(g) of the Internal
14.23 	Revenue Code.
14.24 	(13) For purposes of determining the amount of adjusted
14.25 	current earnings under section 56(g)(3) of the Internal Revenue
14.26 	Code, no adjustment shall be made under section 56(g)(4) of the
14.27 	Internal Revenue Code with respect to (i) the amount of foreign
14.28 	dividend gross-up subtracted as provided in section 290.01,
14.29 	subdivision 19d, clause (1), (ii) the amount of refunds of
14.30 	income, excise, or franchise taxes subtracted as provided in
14.31 	section 290.01, subdivision 19d, clause (10), or (iii) the
14.32 	amount of royalties, fees or other like income subtracted as
14.33 	provided in section 290.01, subdivision 19d, clause (11).
14.34 	(14) Alternative minimum taxable income excludes the income
14.35 	from operating in a job opportunity building zone as provided
14.36 	under section 469.317.
15.1 	(15) Alternative minimum taxable income excludes the income
15.2 	from operating in a biotechnology and health sciences industry
15.3 	zone as provided under section 469.337.
15.4 	(16) Alternative minimum taxable income excludes the income
15.5 	from operating in an international economic development zone as
15.6 	provided under section 469.326.
15.7 	Items of tax preference must not be reduced below zero as a
15.8 	result of the modifications in this subdivision.
15.9 	
EFFECTIVE DATE. This section is effective for taxable
15.10 	years beginning after December 31, 2005.

15.11 	Sec. 10. Minnesota Statutes 2004, section 290.0922,
15.12 	subdivision 2, is amended to read:
15.13 		Subd. 2.Exemptions.  The following entities are exempt
15.14 	from the tax imposed by this section:
15.15 	(1) corporations exempt from tax under section 290.05;
15.16 	(2) real estate investment trusts;
15.17 	(3) regulated investment companies or a fund thereof; and
15.18 	(4) entities having a valid election in effect under
15.19 	section 860D(b) of the Internal Revenue Code;
15.20 	(5) town and farmers' mutual insurance companies;
15.21 	(6) cooperatives organized under chapter 308A that provide
15.22 	housing exclusively to persons age 55 and over and are
15.23 	classified as homesteads under section 273.124, subdivision 3;
15.24 	and 
15.25 	(7) an entity, if for the taxable year all of its property
15.26 	is located in a job opportunity building zone designated under
15.27 	section 469.314 and all of its payroll is a job opportunity
15.28 	building zone payroll under section 469.310; and 
15.29 	(8) an entity, if for the taxable year all of its property
15.30 	is located in an international economic development zone
15.31 	designated under section 469.322, and all of its payroll is an
15.32 	international economic development zone payroll under section
15.33 	469.321.
15.34 	Entities not specifically exempted by this subdivision are
15.35 	subject to tax under this section, notwithstanding section
15.36 	290.05.
16.1 	
EFFECTIVE DATE. This section is effective for taxable
16.2 	years beginning after December 31, 2005.

16.3 	Sec. 11. Minnesota Statutes 2004, section 290.0922,
16.4 	subdivision 3, is amended to read:
16.5 		Subd. 3.Definitions.  (a) "Minnesota sales or receipts"
16.6 	means the total sales apportioned to Minnesota pursuant to
16.7 	section 290.191, subdivision 5, the total receipts attributed to
16.8 	Minnesota pursuant to section 290.191, subdivisions 6 to 8,
16.9 	and/or the total sales or receipts apportioned or attributed to
16.10 	Minnesota pursuant to any other apportionment formula applicable
16.11 	to the taxpayer.
16.12 	(b) "Minnesota property" means total Minnesota tangible
16.13 	property as provided in section 290.191, subdivisions 9 to 11,
16.14 	any other tangible property located in Minnesota, but does not
16.15 	include property located in a job opportunity building zone
16.16 	designated under section 469.314,or property of a qualified
16.17 	business located in a biotechnology and health sciences industry
16.18 	zone designated under section 469.334, or property located in an
16.19 	international economic development zone designated under section
16.20 	469.322.  Intangible property shall not be included in Minnesota
16.21 	property for purposes of this section.  Taxpayers who do not
16.22 	utilize tangible property to apportion income shall nevertheless
16.23 	include Minnesota property for purposes of this section.  On a
16.24 	return for a short taxable year, the amount of Minnesota
16.25 	property owned, as determined under section 290.191, shall be
16.26 	included in Minnesota property based on a fraction in which the
16.27 	numerator is the number of days in the short taxable year and
16.28 	the denominator is 365.
16.29 	(c) "Minnesota payrolls" means total Minnesota payrolls as
16.30 	provided in section 290.191, subdivision 12, but does not
16.31 	include job opportunity building zone payrolls under section
16.32 	469.310, subdivision 8, or biotechnology and health sciences
16.33 	industry zone payroll payrolls under section 469.330,
16.34 	subdivision 8, or international economic development zone
16.35 	payrolls under section 469.321, subdivision 10.  Taxpayers who
16.36 	do not utilize payrolls to apportion income shall nevertheless
17.1 	include Minnesota payrolls for purposes of this section.
17.2 	
EFFECTIVE DATE. This section is effective for taxable
17.3 	years beginning after December 31, 2005.

17.4 	Sec. 12. Minnesota Statutes 2004, section 297A.68, is
17.5 	amended by adding a subdivision to read:
17.6 		Subd. 40.International economic development zones. (a)
17.7 	Purchases of tangible personal property or taxable services by a
17.8 	qualified business, as defined in section 469.321, are exempt if
17.9 	the property or services are primarily used or consumed in an
17.10 	international economic development zone designated under section
17.11 	469.322.
17.12 	(b) Purchase and use of construction materials and supplies
17.13 	for construction of improvements to real property in an
17.14 	international economic development zone are exempt if the
17.15 	improvements after completion of construction are to be used in
17.16 	the conduct of a qualified business, as defined in section
17.17 	469.321.  This exemption applies regardless of whether the
17.18 	purchases are made by the business or a contractor.
17.19 	(c) The exemptions under this subdivision apply to a local
17.20 	sales and use tax, regardless of whether the local tax is
17.21 	imposed on sales taxable under this chapter or in another law,
17.22 	ordinance, or charter provision.
17.23 	(d) This subdivision applies to sales, if the purchase was
17.24 	made and delivery received during the duration of the zone.
17.25 	
EFFECTIVE DATE. This section is effective for sales made
17.26 	on or after the day following final enactment.

17.27 	Sec. 13. [469.321] DEFINITIONS.
17.28 		Subdivision 1.Scope. For purposes of sections 469.321
17.29 	to 469.328, the following terms have the meanings given.
17.30 		Subd. 2.Foreign trade zone. "Foreign trade zone" means
17.31 	a foreign trade zone designated pursuant to United States Code,
17.32 	title 19, section 81a, for the right to use the powers provided
17.33 	in United States Code, title 19, sections 81a to 81u, or a
17.34 	subzone authorized by the foreign trade zone.
17.35 		Subd. 3.Foreign trade zone authority. "Foreign trade
17.36 	zone authority" means the Greater Metropolitan Area Foreign
18.1 	Trade Zone Commission number 119, a joint powers authority
18.2 	created by the county of Hennepin, the cities of Minneapolis,
18.3 	Bloomington, Rosemount, and the Metropolitan Airports
18.4 	Commission, under the authority of section 469.059, 469.101, or
18.5 	471.59, and which may, notwithstanding section 471.59, include
18.6 	as members any political subdivisions of public corporations
18.7 	that are or become members of the Greater Metropolitan Area
18.8 	Foreign Trade Zone Commission, regardless of whether the
18.9 	subdivisions or corporations have the power or authority
18.10 	individually to establish or operate a foreign trade zone.
18.11 		Subd. 4.International economic development zone. An
18.12 	"international economic development zone" or "zone" is a zone so
18.13 	designated under section 469.322.
18.14 		Subd. 5.Person. "Person" includes an individual,
18.15 	corporation, partnership, limited liability company,
18.16 	association, or any other entity.
18.17 		Subd. 6.Qualified business. (a) "Qualified business"
18.18 	means a person carrying on a trade or business at a place of
18.19 	business located within an international economic development
18.20 	zone that is:
18.21 	(1) engaged in the furtherance of international export or
18.22 	import of goods; and 
18.23 	(2) certified by the foreign trade zone authority as a
18.24 	trade or business that furthers the purpose of developing
18.25 	international distribution capacity and capability.
18.26 	(b) A person that relocates a trade or business from within
18.27 	Minnesota but outside an international economic development zone
18.28 	into an international economic development zone is not a
18.29 	qualified business, unless the business:
18.30 	(1)(i) increases full-time employment in the first full
18.31 	year of operation within the international economic development
18.32 	zone by at least 20 percent measured relative to the operations
18.33 	that were relocated; or 
18.34 	(ii) makes a capital investment in the property located
18.35 	within a zone equal to at least ten percent of the gross
18.36 	revenues of the operations that were relocated in the
19.1 	immediately proceeding taxable year; and 
19.2 	(2) enters a binding written agreement with the foreign
19.3 	trade zone authority that:
19.4 	(i) pledges that the business will meet the requirements of
19.5 	clause (1);
19.6 	(ii) provides for repayment of all tax benefits enumerated
19.7 	under section 469.324 to the business under the procedures in
19.8 	section 469.328, if the requirements of clause (1) are not met;
19.9 	and 
19.10 	(iii) contains any other terms the foreign trade zone
19.11 	authority determines appropriate.
19.12 	Clause (1) of this paragraph does not apply to a freight
19.13 	forwarder.
19.14 	(c) A qualified business must pay each employee total
19.15 	compensation, including benefits not mandated by law, that on an
19.16 	annualized basis is equal to at least 110 percent of the federal
19.17 	poverty guidelines for a family of four.
19.18 	(d) A qualified business must enter into an agreement with
19.19 	the authority that provides that, as a condition of qualifying
19.20 	for the tax incentives described in section 469.324, the
19.21 	business will, at the site of its operation within the zone,
19.22 	remain neutral to labor union organizing activity, provide union
19.23 	representatives access to employees during nonwork hours, and
19.24 	recognize a labor union as a bargaining agent under the National
19.25 	Labor Relations Act upon presentation of representation cards
19.26 	signed by a majority of the employees of the qualified business
19.27 	within the zone.
19.28 		Subd. 7.Regional distribution center. A "regional
19.29 	distribution center" is a distribution center developed within a
19.30 	foreign trade zone.  The regional distribution center must have
19.31 	as its primary purpose to facilitate gathering of freight for
19.32 	the purpose of centralizing the functions necessary for the
19.33 	shipment of freight in international commerce, including, but
19.34 	not limited to, security and customs functions.
19.35 		Subd. 8.Relocate. (a) "Relocate" means that a trade or
19.36 	business:
20.1 	(1) ceases one or more operations or functions at another
20.2 	location in an international economic development zone; or 
20.3 	(2) reduces employment at another location in Minnesota
20.4 	during a period starting one year before and ending one year
20.5 	after it begins operations in an international economic
20.6 	development zone and its employees in the international economic
20.7 	development zone are engaged in the same line of business as the
20.8 	employees at the location where it reduced employment.
20.9 	(b) "Relocate" does not include an expansion by a business
20.10 	that establishes a new facility that does not replace or
20.11 	supplant an existing operation or employment, in whole or in
20.12 	part.
20.13 		Subd. 9.International economic development zone
20.14 	percentage or zone percentage. "International economic
20.15 	development zone percentage" or "zone percentage" means the
20.16 	following fraction reduced to a percentage:
20.17 	(1) the numerator of the fraction is:
20.18 	(i) the ratio of the taxpayer's property factor under
20.19 	section 290.191 located in the zone for the taxable year over
20.20 	the property factor numerator determined under section 290.191,
20.21 	plus 
20.22 	(ii) the ratio of the taxpayer's international economic
20.23 	development zone payroll factor under subdivision 10 over the
20.24 	payroll factor numerator determined under section 290.191; and 
20.25 	(2) the denominator of the fraction is two.
20.26 	When calculating the zone percentage for a business that is
20.27 	part of a unitary business as defined under section 290.17,
20.28 	subdivision 4, the denominator of the payroll and property
20.29 	factors is the Minnesota payroll and property of the unitary
20.30 	business as reported on the combined report under section
20.31 	290.17, subdivision 4, paragraph (j).
20.32 		Subd. 10.International economic development zone payroll
20.33 	factor. "International economic development zone payroll
20.34 	factor" or "international economic development zone payroll" is
20.35 	that portion of the payroll factor under section 290.191 that
20.36 	represents:
21.1 	(1) wages or salaries paid to an individual for services
21.2 	performed in an international economic development zone; or 
21.3 	(2) wages or salaries paid to individuals working from
21.4 	offices within an international economic development zone, if
21.5 	their employment requires them to work outside the zone and the
21.6 	work is incidental to the work performed by the individual
21.7 	within the zone.
21.8 		Subd. 11.Freight forwarder. "Freight forwarder" is a
21.9 	business that, for compensation, ensures that goods produced or
21.10 	sold by another business move from point of origin to point of
21.11 	destination.
21.12 	
EFFECTIVE DATE. This section is effective the day
21.13 	following final enactment.

21.14 	Sec. 14. [469.322] DESIGNATION OF INTERNATIONAL ECONOMIC
21.15 	DEVELOPMENT ZONE.
21.16 	(a) An area designated as a foreign trade zone may be
21.17 	designated by the foreign trade zone authority as an
21.18 	international economic development zone if within the zone a
21.19 	regional distribution center is being developed pursuant to
21.20 	section 469.323.  The zone must be not less than 500 acres and
21.21 	not more than 1,000 acres in size.
21.22 	(b) In making the designation, the foreign trade zone
21.23 	authority, in consultation with the Minnesota Department of
21.24 	Transportation and the Metropolitan Council, shall consider
21.25 	access to major transportation routes, consistency with current
21.26 	state transportation and air cargo planning, adequacy of the
21.27 	size of the site, access to airport facilities, present and
21.28 	future capacity at the designated airport, the capability to
21.29 	meet integrated present and future air cargo, security, and
21.30 	inspection services, and access to other infrastructure and
21.31 	financial incentives.  The border of the international economic
21.32 	development zone must be no more than 60 miles distant or 90
21.33 	minutes drive time from the border of the Minneapolis-St. Paul
21.34 	International Airport.
21.35 	(c) Prior to a final site designation, the foreign trade
21.36 	zone authority, in consultation with the applicant, must conduct
22.1 	a transportation impact study based on the regional model and
22.2 	utilizing traffic forecasting and assignments.  The results must
22.3 	be used to evaluate the effects of the proposed use on the
22.4 	transportation system and identify any needed improvements.  If
22.5 	the site is in the metropolitan area the study must also
22.6 	evaluate the effect of the transportation impacts on the
22.7 	Metropolitan Transportation System plan as well as the
22.8 	comprehensive plans of the municipalities that would be
22.9 	affected.  The cost of the study must be paid by the applicant.
22.10 	(d) Final zone designation must be made by January 1, 2007.
22.11 	(e) Duration of the zone is a 12-year period beginning on
22.12 	June 30, 2007.

22.13 	EFFECTIVE DATE. This section is effective the day
22.14 	following final enactment.

22.15 	Sec. 15. [469.323] FOREIGN TRADE ZONE AUTHORITY POWERS.
22.16 		Subdivision 1.Development of regional distribution
22.17 	center. The foreign trade zone authority shall be responsible
22.18 	for creating a development plan for the regional distribution
22.19 	center.  The regional distribution center must be developed with
22.20 	the purpose of expanding, on a regional basis, international
22.21 	distribution capacity and capability.  The foreign trade zone
22.22 	authority shall consult with municipalities that have indicated
22.23 	to the authority an interest in locating the international
22.24 	economic development zone within their boundaries and a
22.25 	willingness to establish a tax increment financing district
22.26 	coterminous with the boundaries of the zone, as well as
22.27 	interested businesses, potential financiers, and appropriate
22.28 	state and federal agencies.
22.29 		Subd. 2.Business plan. Before designation of an
22.30 	international economic development zone under section 469.322,
22.31 	the governing body of the foreign trade zone authority shall
22.32 	prepare a business plan.  The plan must include an analysis of
22.33 	the economic feasibility of the regional distribution center
22.34 	once it becomes operational and of the operations of freight
22.35 	forwarders and other businesses that choose to locate within the
22.36 	boundaries of the zone.  The analysis must provide profitability
23.1 	models that:
23.2 	(1) include the benefits of the incentives;
23.3 	(2) estimate the amount of time needed to achieve
23.4 	profitability; and 
23.5 	(3) analyze the length of time incentives will be necessary
23.6 	to the economic viability of the regional distribution center.
23.7 	If the governing body of the foreign trade authority
23.8 	determines that the models do not establish the economic
23.9 	feasibility of the project, the regional distribution center
23.10 	does not meet the development requirements of this section and
23.11 	section 469.322.
23.12 		Subd. 3.Port authority powers. The governing body of
23.13 	the foreign trade zone authority may establish a port authority
23.14 	that has the same powers as a port authority established under
23.15 	section 469.049.  If the foreign trade zone authority
23.16 	establishes a port authority, the governing body of the foreign
23.17 	trade zone authority shall exercise all powers granted to a city
23.18 	by sections 469.048 to 469.068 or other law.
23.19 		Subd. 4.Business subsidy law. Tax exemptions, job
23.20 	credits, and tax increment financing provided under this section
23.21 	are business subsidies for the purpose of sections 116J.993 to
23.22 	116J.995.
23.23 	
EFFECTIVE DATE. This section is effective the day
23.24 	following final enactment.

23.25 	Sec. 16. [469.324] TAX INCENTIVES IN INTERNATIONAL
23.26 	ECONOMIC DEVELOPMENT ZONE.
23.27 		Subdivision 1.Availability. Qualified businesses that
23.28 	operate in an international economic development zone,
23.29 	individuals who invest in a regional distribution center or
23.30 	qualified businesses that operate in an international economic
23.31 	development zone, and property located in an international
23.32 	economic development zone qualify for:
23.33 	(1) exemption from individual income taxes as provided
23.34 	under section 469.325;
23.35 	(2) exemption from corporate franchise taxes as provided
23.36 	under section 469.326;
24.1 	(3) exemption from the state sales and use tax and any
24.2 	local sales and use taxes on qualifying purchases as provided in
24.3 	section 297A.68, subdivision 40;
24.4 	(4) exemption from the property tax as provided in section
24.5 	272.02, subdivision 68;
24.6 	(5) the jobs credit allowed under section 469.327; and 
24.7 	(6) tax increment financing as provided in this chapter.
24.8 		Subd. 2.Duration. (a) Except as provided in paragraph
24.9 	(b), the tax incentives described in subdivision 1, clauses (1),
24.10 	(2), and (5), are available for no more than 12 consecutive
24.11 	taxable years for any taxpayer that claims them.  The tax
24.12 	incentives described in subdivision 1, clause (3), are available
24.13 	for each taxpayer that claims them for taxes otherwise payable
24.14 	on transactions during a period of 12 years from the date when
24.15 	the first exemption is claimed by that taxpayer under each
24.16 	exemption.  The property tax exemption described under
24.17 	subdivision 1, clause (4), is available for any parcel of
24.18 	property for 12 consecutive taxes payable years.  No exemptions
24.19 	described in subdivision 1, clauses (1) to (5), are available
24.20 	after December 31, 2021.
24.21 	(b) For taxpayers that are freight forwarders, the
24.22 	durations provided under paragraph (a) are reduced to six years.

24.23 	Sec. 17. [469.325] INDIVIDUAL INCOME TAX EXEMPTION.
24.24 		Subdivision 1.Application. An individual operating a
24.25 	trade or business in an international economic development zone,
24.26 	and an individual making a qualifying investment in a qualified
24.27 	business operating in an international economic development zone
24.28 	qualifies for the exemptions from taxes imposed under chapter
24.29 	290, as provided in this section.  The exemptions provided under
24.30 	this section apply only to the extent that the income otherwise
24.31 	would be taxable under chapter 290.  Subtractions under this
24.32 	section from federal taxable income, alternative minimum taxable
24.33 	income, or any other base subject to tax are limited to the
24.34 	amount that otherwise would be included in the tax base absent
24.35 	the exemption under this section.  This section applies only to
24.36 	taxable years beginning during the duration of the zone.
25.1 		Subd. 2.Rents. An individual is exempt from the taxes
25.2 	imposed under chapter 290 on net rents derived from real or
25.3 	tangible personal property located in a zone for a taxable year
25.4 	in which the zone was designated an international economic
25.5 	development zone.  If tangible personal property was used both
25.6 	within and outside of the zone, the exemption amount for the net
25.7 	rental income must be multiplied by a fraction, the numerator of
25.8 	which is the number of days the property was used in the zone
25.9 	and the denominator of which is the total days.
25.10 		Subd. 3.Business income. An individual is exempt from
25.11 	the taxes imposed under chapter 290 on net income from the
25.12 	operation of a qualified business in an international economic
25.13 	development zone.  If the trade or business is carried on within
25.14 	and without the zone and the individual is not a resident of
25.15 	Minnesota, the exemption must be apportioned based on the zone
25.16 	percentage for the taxable year.  If the trade or business is
25.17 	carried on within and without the zone and the individual is a
25.18 	resident of Minnesota, the exemption must be apportioned based
25.19 	on the zone percentage for the taxable year, except the ratios
25.20 	under section 469.321, subdivision 9, clause (1), items (i) and
25.21 	(ii), must use the denominators of the property and payroll
25.22 	factors determined under section 290.191.  No subtraction is
25.23 	allowed under this section in excess of 20 percent of the sum of
25.24 	the international economic development zone payroll and the
25.25 	adjusted basis of the property at the time that the property is
25.26 	first used in the international economic development zone by the
25.27 	business.
25.28 		Subd. 4.Capital gains. (a) An individual is exempt from
25.29 	the taxes imposed under chapter 290 on:
25.30 	(1) net gain derived on a sale or exchange of real property
25.31 	located in the international economic development zone and used
25.32 	by a qualified business.  If the property was held by the
25.33 	individual during a period when the zone was not designated, the
25.34 	gain must be prorated based on the percentage of time, measured
25.35 	in calendar days, that the real property was held by the
25.36 	individual during the period the zone designation was in effect
26.1 	to the total period of time the real property was held by the
26.2 	individual;
26.3 	(2) net gain derived on a sale or exchange of tangible
26.4 	personal property used by a qualified business in the
26.5 	international economic development zone.  If the property was
26.6 	held by the individual during a period when the zone was not
26.7 	designated, the gain must be prorated based on the percentage of
26.8 	time, measured in calendar days, that the property was held by
26.9 	the individual during the period the zone designation was in
26.10 	effect to the total period of time the property was held by the
26.11 	individual.  If the tangible personal property was used outside
26.12 	of the zone during the period of the zone's designation, the
26.13 	exemption must be multiplied by a fraction, the numerator of
26.14 	which is the number of days the property was used in the zone
26.15 	during the time of the designation and the denominator of which
26.16 	is the total days the property was held during the time of the
26.17 	designation; and 
26.18 	(3) net gain derived on a sale of an ownership interest in
26.19 	a qualified business operating in the international economic
26.20 	development zone, meeting the requirements of paragraph (b).
26.21 	The exemption on the gain must be multiplied by the zone
26.22 	percentage of the business for the taxable year prior to the
26.23 	sale.
26.24 	(b) A qualified business meets the requirements of
26.25 	paragraph (a), clause (3), if it is a corporation, an S
26.26 	corporation, or a partnership, and for the taxable year its
26.27 	international economic development zone percentage exceeds 25
26.28 	percent.  For purposes of paragraph (a), clause (3), the zone
26.29 	percentage must be calculated by modifying the ratios under
26.30 	section 469.321, subdivision 9, clause (1), items (i) and (ii),
26.31 	to use the denominators of the property and payroll factors
26.32 	determined under section 290.191.  Upon the request of an
26.33 	individual holding an ownership interest in the entity, the
26.34 	entity must certify to the owner, in writing, the international
26.35 	economic development zone percentage needed to determine the
26.36 	exemption.
27.1 	
EFFECTIVE DATE. This section is effective for taxable
27.2 	years beginning after December 31, 2005.

27.3 	Sec. 18. [469.326] CORPORATE FRANCHISE TAX EXEMPTION.
27.4 	(a) A qualified business is exempt from taxation under
27.5 	section 290.02, the alternative minimum tax under section
27.6 	290.0921, and the minimum fee under section 290.0922, on the
27.7 	portion of its income attributable to operations within the
27.8 	international economic development zone.  This exemption is
27.9 	determined as follows:
27.10 	(1) for purposes of the tax imposed under section 290.02,
27.11 	by multiplying its taxable net income by its zone percentage and
27.12 	subtracting the result in determining taxable income;
27.13 	(2) for purposes of the alternative minimum tax under
27.14 	section 290.0921, by multiplying its alternative minimum taxable
27.15 	income by its zone percentage and reducing alternative minimum
27.16 	taxable income by this amount; and 
27.17 	(3) for purposes of the minimum fee under section 290.0922,
27.18 	by excluding property and payroll in the zone from the
27.19 	computations of the fee or by exempting the entity under section
27.20 	290.0922, subdivision 2, clause (8).
27.21 	(b) No subtraction is allowed under this section in excess
27.22 	of 20 percent of the sum of the corporation's international
27.23 	economic development zone payroll and the adjusted basis of the
27.24 	property at the time that the property is first used in the
27.25 	international economic development zone by the corporation.
27.26 	(c) This section applies only to taxable years beginning
27.27 	during the duration of the international economic development
27.28 	zone.

27.29 	EFFECTIVE DATE. This section is effective for taxable
27.30 	years beginning after December 31, 2005.

27.31 	Sec. 19. [469.327] JOBS CREDIT.
27.32 		Subdivision 1.Credit allowed. A qualified business is
27.33 	allowed a credit against the taxes imposed under chapter 290.
27.34 	The credit equals seven percent of the:
27.35 	(1) lesser of:
27.36 	(i) zone payroll for the taxable year, less the zone
28.1 	payroll for the base year; or 
28.2 	(ii) total Minnesota payroll for the taxable year, less
28.3 	total Minnesota payroll for the base year; minus 
28.4 	(2) $30,000 multiplied by the number of full-time
28.5 	equivalent employees that the qualified business employs in the
28.6 	international economic development zone for the taxable year,
28.7 	minus the number of full-time equivalent employees the business
28.8 	employed in the zone in the base year, but not less than zero.
28.9 		Subd. 2.Definitions. (a) For purposes of this section,
28.10 	the following terms have the meanings given.
28.11 	(b) "Base year" means the taxable year beginning during the
28.12 	calendar year prior to the calendar year in which the zone
28.13 	designation took effect.
28.14 	(c) "Full-time equivalent employees" means the equivalent
28.15 	of annualized expected hours of work equal to 2,080 hours.
28.16 	(d) "Minnesota payroll" means the wages or salaries
28.17 	attributed to Minnesota under section 290.191, subdivision 12,
28.18 	for the qualified business or the unitary business of which the
28.19 	qualified business is a part, whichever is greater.
28.20 	(e) "Zone payroll" means wages or salaries used to
28.21 	determine the zone payroll factor for the qualified business,
28.22 	less the amount of compensation attributable to any employee
28.23 	that exceeds $100,000.
28.24 		Subd. 3.Inflation adjustment. For taxable years
28.25 	beginning after December 31, 2006, the dollar amounts in
28.26 	subdivision 1, clause (2), and subdivision 2, paragraph (e), are
28.27 	annually adjusted for inflation.  The commissioner of revenue
28.28 	shall adjust the amounts by the percentage determined under
28.29 	section 290.06, subdivision 2d, for the taxable year.
28.30 		Subd. 4.Refundable. If the amount of the credit exceeds
28.31 	the liability for tax under chapter 290, the commissioner of
28.32 	revenue shall refund the excess to the qualified business.
28.33 		Subd. 5.Appropriation. An amount sufficient to pay the
28.34 	refunds authorized by this section is appropriated to the
28.35 	commissioner of revenue from the general fund.
28.36 	
EFFECTIVE DATE. This section is effective for taxable
29.1 	years beginning after December 31, 2005.

29.2 	Sec. 20. [469.328] REPAYMENT OF TAX BENEFITS.
29.3 		Subdivision 1.Repayment obligation. A person must repay
29.4 	the amount of the tax reduction received under section 469.324,
29.5 	subdivision 1, clauses (1) to (5), or refund received under
29.6 	section 469.327, during the two years immediately before it
29.7 	ceased to operate in the zone, if the person ceased to operate
29.8 	its facility located within the zone or otherwise ceases to be
29.9 	or is not a qualified business.
29.10 		Subd. 2.Disposition of repayment. The repayment must be
29.11 	paid to the state to the extent it represents a state tax
29.12 	reduction and to the county to the extent it represents a
29.13 	property tax reduction.  Any amount repaid to the state must be
29.14 	deposited in the general fund.  Any amount repaid to the county
29.15 	for the property tax exemption must be distributed to the local
29.16 	governments with authority to levy taxes in the zone in the same
29.17 	manner provided for distribution of payment of delinquent
29.18 	property taxes.  Any repayment of local sales or use taxes must
29.19 	be repaid to the jurisdiction imposing the local sales or use
29.20 	tax.
29.21 		Subd. 3.Repayment procedures. (a) For the repayment of
29.22 	taxes imposed under chapter 290 or 297A or local taxes collected
29.23 	pursuant to section 297A.99, a person must file an amended
29.24 	return with the commissioner of revenue and pay any taxes
29.25 	required to be repaid within 30 days after ceasing to be a
29.26 	qualified business.  The amount required to be repaid is
29.27 	determined by calculating the tax for the period for which
29.28 	repayment is required without regard to the tax reductions
29.29 	allowed under section 469.324.
29.30 	(b) For the repayment of property taxes, the county auditor
29.31 	shall prepare a tax statement for the person, applying the
29.32 	applicable tax extension rates for each payable year and provide
29.33 	a copy to the business.  The person must pay the taxes to the
29.34 	county treasurer within 30 days after receipt of the tax
29.35 	statement.  The taxpayer may appeal the valuation and
29.36 	determination of the property tax to the tax court within 30
30.1 	days after receipt of the tax statement.
30.2 	(c) The provisions of chapters 270 and 289A relating to the
30.3 	commissioner of revenue's authority to audit, assess, and
30.4 	collect the tax and to hear appeals are applicable to the
30.5 	repayment required under paragraph (a).  The commissioner may
30.6 	impose civil penalties as provided in chapter 289A, and the
30.7 	additional tax and penalties are subject to interest at the rate
30.8 	provided in section 270.75, from 30 days after ceasing to do
30.9 	business in the zone until the date the tax is paid.
30.10 	(d) If a property tax is not repaid under paragraph (b),
30.11 	the county treasurer shall add the amount required to be repaid
30.12 	to the property taxes assessed against the property for payment
30.13 	in the year following the year in which the treasurer discovers
30.14 	that the person ceased to operate in the international economic
30.15 	development zone.
30.16 	(e) For determining the tax required to be repaid, a tax
30.17 	reduction is deemed to have been received on the date that the
30.18 	tax would have been due if the person had not been entitled to
30.19 	the tax reduction.
30.20 	(f) The commissioner of revenue may assess the repayment of
30.21 	taxes under paragraph (c) at any time within two years after the
30.22 	person ceases to be a qualified business, or within any period
30.23 	of limitations for the assessment of tax under section 289A.38,
30.24 	whichever is later.
30.25 	
EFFECTIVE DATE. This section is effective the day
30.26 	following final enactment.

30.27 	Sec. 21. DEPARTMENT OF EMPLOYMENT AND ECONOMIC
30.28 	DEVELOPMENT STUDY; INTERNATIONAL AIR FREIGHT.
 30.29 	The commissioner of employment and economic development
30.30 	must study and analyze the issue of whether the state would
30.31 	benefit from more than one international economic development
30.32 	zone as defined in Minnesota Statutes, section 469.321.  The
30.33 	commissioner shall solicit input on the issue from businesses,
30.34 	communities, and economic development organizations.  The
30.35 	commissioner must report the results of the study and analysis
30.36 	to the committees of the legislature having jurisdiction over
31.1 	economic development issues by December 1, 2005, along with any
31.2 	legislative recommendations.