1.1 	A bill for an act
1.2 	relating to taxation; providing a tax-free renaissance zone for the site of the 
1.3 	Fergus Falls regional treatment center campus; amending Minnesota Statutes 
1.4 	2006, sections 272.02, by adding a subdivision; 290.01, subdivisions 19b, as 
1.5 	amended, 29; 290.06, by adding subdivisions; 290.091, subdivision 2; 290.0921, 
1.6 	subdivision 3; 290.0922, subdivision 2; proposing coding for new law in 
1.7 	Minnesota Statutes, chapter 469.
1.8 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.9 	Section 1. Minnesota Statutes 2006, section 272.02, is amended by adding a 
1.10 	subdivision to read:
1.11 		Subd. 85.Tax-free renaissance zones. (a) Property located in a tax-free renaissance 
1.12 	zone designated under section 469.342 is exempt from ad valorem taxes levied under 
1.13 	chapter 275.
1.14 	(b) The exemption applies to each assessment year beginning during the duration 
1.15 	of the zone or subzone. For the final three assessment years of the zone or subzone 
1.16 	duration limit, the exemption applies to the following percentages of estimated market 
1.17 	value of the property:
1.18 	(1) for the third to the last assessment year of the duration, 75 percent;
1.19 	(2) for the second to the last assessment year of the duration, 50 percent; and
1.20 	(3) for the last assessment  year of the duration, 25 percent.

1.21 	EFFECTIVE DATE. This section is effective for property taxes levied in 2007, 
1.22 	payable in 2008, and thereafter.

1.23 	Sec. 2. Minnesota Statutes 2006, section 290.01, subdivision 19b, as amended by Laws 
1.24 	2007, chapter 1, section 2, is amended to read:
2.1 		Subd. 19b.Subtractions from federal taxable income. For individuals, estates, 
2.2 	and trusts, there shall be subtracted from federal taxable income:
2.3 	(1) net interest income on obligations of any authority, commission, or 
2.4 	instrumentality of the United States to the extent includable in taxable income for federal 
2.5 	income tax purposes but exempt from state income tax under the laws of the United States;
2.6 	(2) if included in federal taxable income, the amount of any overpayment of income 
2.7 	tax to Minnesota or to any other state, for any previous taxable year, whether the amount 
2.8 	is received as a refund or as a credit to another taxable year's income tax liability;
2.9 	(3) the amount paid to others, less the amount used to claim the credit allowed under 
2.10 	section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten 
2.11 	to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and 
2.12 	transportation of each qualifying child in attending an elementary or secondary school 
2.13 	situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a 
2.14 	resident of this state may legally fulfill the state's compulsory attendance laws, which 
2.15 	is not operated for profit, and which adheres to the provisions of the Civil Rights Act 
2.16 	of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or 
2.17 	tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause, 
2.18 	"textbooks" includes books and other instructional materials and equipment purchased 
2.19 	or leased for use in elementary and secondary schools in teaching only those subjects 
2.20 	legally and commonly taught in public elementary and secondary schools in this state. 
2.21 	Equipment expenses qualifying for deduction includes expenses as defined and limited in 
2.22 	section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional 
2.23 	books and materials used in the teaching of religious tenets, doctrines, or worship, the 
2.24 	purpose of which is to instill such tenets, doctrines, or worship, nor does it include books 
2.25 	or materials for, or transportation to, extracurricular activities including sporting events, 
2.26 	musical or dramatic events, speech activities, driver's education, or similar programs. For 
2.27 	purposes of the subtraction provided by this clause, "qualifying child" has the meaning 
2.28 	given in section 32(c)(3) of the Internal Revenue Code;
2.29 	(4) income as provided under section 290.0802;
2.30 	(5) to the extent included in federal adjusted gross income, income realized on 
2.31 	disposition of property exempt from tax under section 290.491;
2.32 	(6) to the extent not deducted or not deductible pursuant to section 408(d)(8)(E) 
2.33 	of the Internal Revenue Code in determining federal taxable income by an individual 
2.34 	who does not itemize deductions for federal income tax purposes for the taxable year, an 
2.35 	amount equal to 50 percent of the excess of charitable contributions over $500 allowable 
3.1 	as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and 
3.2 	under the provisions of Public Law 109-1;
3.3 	(7) for taxable years beginning before January 1, 2008, the amount of the federal 
3.4 	small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code 
3.5 	which is included in gross income under section 87 of the Internal Revenue Code;
3.6 	(8) for individuals who are allowed a federal foreign tax credit for taxes that do not 
3.7 	qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover 
3.8 	of subnational foreign taxes for the taxable year, but not to exceed the total subnational 
3.9 	foreign taxes reported in claiming the foreign tax credit. For purposes of this clause, 
3.10 	"federal foreign tax credit" means the credit allowed under section 27 of the Internal 
3.11 	Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed 
3.12 	under section 904(c) of the Internal Revenue Code minus national level foreign taxes to 
3.13 	the extent they exceed the federal foreign tax credit;
3.14 	(9) in each of the five tax years immediately following the tax year in which an 
3.15 	addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case 
3.16 	of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth 
3.17 	of the delayed depreciation. For purposes of this clause, "delayed depreciation" means 
3.18 	the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or 
3.19 	subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the 
3.20 	positive value of any net operating loss under section 172 of the Internal Revenue Code 
3.21 	generated for the tax year of the addition. The resulting delayed depreciation cannot be 
3.22 	less than zero;
3.23 	(10) job opportunity building zone income as provided under section 469.316;
3.24 	(11) the amount of compensation paid to members of the Minnesota National Guard 
3.25 	or other reserve components of the United States military for active service performed 
3.26 	in Minnesota, excluding compensation for services performed under the Active Guard 
3.27 	Reserve (AGR) program. For purposes of this clause, "active service" means (i) state 
3.28 	active service as defined in section 190.05, subdivision 5a, clause (1); (ii) federally 
3.29 	funded state active service as defined in section 190.05, subdivision 5b; or (iii) federal 
3.30 	active service as defined in section 190.05, subdivision 5c, but "active service" excludes 
3.31 	services performed exclusively for purposes of basic combat training, advanced individual 
3.32 	training, annual training, and periodic inactive duty training; special training periodically 
3.33 	made available to reserve members; and service performed in accordance with section 
3.34 	190.08, subdivision 3;
4.1 	(12) the amount of compensation paid to Minnesota residents who are members 
4.2 	of the armed forces of the United States or United Nations for active duty performed 
4.3 	outside Minnesota;
4.4 	(13) an amount, not to exceed $10,000, equal to qualified expenses related to a 
4.5 	qualified donor's donation, while living, of one or more of the qualified donor's organs 
4.6 	to another person for human organ transplantation. For purposes of this clause, "organ" 
4.7 	means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow; 
4.8 	"human organ transplantation" means the medical procedure by which transfer of a human 
4.9 	organ is made from the body of one person to the body of another person; "qualified 
4.10 	expenses" means unreimbursed expenses for both the individual and the qualified donor 
4.11 	for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses 
4.12 	may be subtracted under this clause only once; and "qualified donor" means the individual 
4.13 	or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An 
4.14 	individual may claim the subtraction in this clause for each instance of organ donation for 
4.15 	transplantation during the taxable year in which the qualified expenses occur;
4.16 	(14) in each of the five tax years immediately following the tax year in which an 
4.17 	addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a 
4.18 	shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the 
4.19 	addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the 
4.20 	case of a shareholder of a corporation that is an S corporation, minus the positive value of 
4.21 	any net operating loss under section 172 of the Internal Revenue Code generated for the 
4.22 	tax year of the addition. If the net operating loss exceeds the addition for the tax year, a 
4.23 	subtraction is not allowed under this clause;
4.24 	(15) to the extent included in federal taxable income, compensation paid to a 
4.25 	nonresident who is a service member as defined in United States Code, title 10, section 
4.26 	101(a)(5), for military service as defined in the Service Member Civil Relief Act, Public 
4.27 	Law 108-189, section 101(2); and
4.28 	(16) international economic development zone income as provided under section 
4.29 	469.325.; and
4.30 	(17) income of a qualified business derived from operations in a tax-free renaissance 
4.31 	zone as provided under section 469.343.

4.32 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
4.33 	December 31, 2007.

4.34 	Sec. 3. Minnesota Statutes 2006, section 290.01, subdivision 29, is amended to read:
4.35 		Subd. 29.Taxable income. The term "taxable income" means:
5.1 	(1) for individuals, estates, and trusts, the same as taxable net income;
5.2 	(2) for corporations, the taxable net income less
5.3 	(i) the net operating loss deduction under section 290.095;
5.4 	(ii) the dividends received deduction under section 290.21, subdivision 4;
5.5 	(iii) the exemption for operating in a job opportunity building zone under section 
5.6 	469.317;
5.7 	(iv) the exemption for operating in a biotechnology and health sciences industry 
5.8 	zone under section 469.337; and
5.9 	(v) the exemption for operating in an international economic development zone 
5.10 	under section 469.326.; and
5.11 	(vi) the exemption for operating in a tax-free renaissance zone under section 469.343.

5.12 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
5.13 	December 31, 2007.

5.14 	Sec. 4. Minnesota Statutes 2006, section 290.06, is amended by adding a subdivision 
5.15 	to read:
5.16 		Subd. 34.Tax-free renaissance zone; historic rehabilitation credit. (a) A 
5.17 	taxpayer who incurs costs that are eligible for a credit under section 47 of the Internal 
5.18 	Revenue Code for the rehabilitation of a property in a tax-free renaissance zone, 
5.19 	designated under section 469.342, is allowed a credit against the tax imposed under this 
5.20 	chapter, including the taxes under sections 290.091 and 290.0922, equal to 25 percent 
5.21 	of the federal credit for the taxable year.
5.22 	(b) If the amount of the credit under this subdivision exceeds the tax liability under 
5.23 	this chapter for the year in which the cost is incurred, the amount that exceeds the tax 
5.24 	liability may be carried back to any of the three preceding taxable years or carried forward 
5.25 	to each of the ten taxable years succeeding the taxable year in which the expense was 
5.26 	incurred. The entire amount of the credit must be carried to the earliest taxable year to 
5.27 	which the amount may be carried. The unused portion of the credit must be carried to 
5.28 	the following taxable year.

5.29 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
5.30 	December 31, 2007.

5.31 	Sec. 5. Minnesota Statutes 2006, section 290.06, is amended by adding a subdivision 
5.32 	to read:
6.1 		Subd. 35.Tax-free renaissance zone; residents' credit. Each individual who is a 
6.2 	resident of the tax-free renaissance zone designated under section 469.342 on the last day 
6.3 	of the taxable year is allowed a credit against the tax imposed by this chapter, including 
6.4 	the tax imposed under section 290.091, for the taxable year equal to $10,000. The credit 
6.5 	applies to each taxable year beginning during the duration of the zone or subzone. For the 
6.6 	final three years of the duration of the zone or subzone, the following credit amounts apply:
6.7 	(1) for taxable years beginning during the third to the last calendar year of the 
6.8 	duration, the credit equals $7,500;
6.9 	(2) for taxable years beginning during  the second to the last calendar year of the 
6.10 	duration, the credit equals $5,000; and 
6.11 	(3) for taxable years beginning during  the last calendar year of the duration, the 
6.12 	credit equals $2,500.

6.13 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
6.14 	December 31, 2007.

6.15 	Sec. 6. Minnesota Statutes 2006, section 290.091, subdivision 2, is amended to read:
6.16 		Subd. 2.Definitions. For purposes of the tax imposed by this section, the following 
6.17 	terms have the meanings given:
6.18 	(a) "Alternative minimum taxable income" means the sum of the following for 
6.19 	the taxable year:
6.20 	(1) the taxpayer's federal alternative minimum taxable income as defined in section 
6.21 	55(b)(2) of the Internal Revenue Code;
6.22 	(2) the taxpayer's itemized deductions allowed in computing federal alternative 
6.23 	minimum taxable income, but excluding:
6.24 	(i) the charitable contribution deduction under section 170 of the Internal Revenue 
6.25 	Code:
6.26 	(A) for taxable years beginning before January 1, 2006, to the extent that the 
6.27 	deduction exceeds 1.0 percent of adjusted gross income;
6.28 	(B) for taxable years beginning after December 31, 2005, to the full extent of the 
6.29 	deduction.
6.30 	For purposes of this clause, "adjusted gross income" has the meaning given in 
6.31 	section 62 of the Internal Revenue Code;
6.32 	(ii) the medical expense deduction;
6.33 	(iii) the casualty, theft, and disaster loss deduction; and
6.34 	(iv) the impairment-related work expenses of a disabled person;
7.1 	(3) for depletion allowances computed under section 613A(c) of the Internal 
7.2 	Revenue Code, with respect to each property (as defined in section 614 of the Internal 
7.3 	Revenue Code), to the extent not included in federal alternative minimum taxable income, 
7.4 	the excess of the deduction for depletion allowable under section 611 of the Internal 
7.5 	Revenue Code for the taxable year over the adjusted basis of the property at the end of the 
7.6 	taxable year (determined without regard to the depletion deduction for the taxable year);
7.7 	(4) to the extent not included in federal alternative minimum taxable income, the 
7.8 	amount of the tax preference for intangible drilling cost under section 57(a)(2) of the 
7.9 	Internal Revenue Code determined without regard to subparagraph (E);
7.10 	(5) to the extent not included in federal alternative minimum taxable income, the 
7.11 	amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and
7.12 	(6) the amount of addition required by section 290.01, subdivision 19a, clauses 
7.13 	(7), (8), and (9);
7.14 	less the sum of the amounts determined under the following:
7.15 	(1) interest income as defined in section 290.01, subdivision 19b, clause (1);
7.16 	(2) an overpayment of state income tax as provided by section 290.01, subdivision 
7.17 	19b, clause (2), to the extent included in federal alternative minimum taxable income;
7.18 	(3) the amount of investment interest paid or accrued within the taxable year on 
7.19 	indebtedness to the extent that the amount does not exceed net investment income, as 
7.20 	defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include 
7.21 	amounts deducted in computing federal adjusted gross income; and
7.22 	(4) amounts subtracted from federal taxable income as provided by section 290.01, 
7.23 	subdivision 19b, clauses (9) to (16) (17).
7.24 	In the case of an estate or trust, alternative minimum taxable income must be 
7.25 	computed as provided in section 59(c) of the Internal Revenue Code.
7.26 	(b) "Investment interest" means investment interest as defined in section 163(d)(3) 
7.27 	of the Internal Revenue Code.
7.28 	(c) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable 
7.29 	income after subtracting the exemption amount determined under subdivision 3.
7.30 	(d) "Regular tax" means the tax that would be imposed under this chapter (without 
7.31 	regard to this section and section 290.032), reduced by the sum of the nonrefundable 
7.32 	credits allowed under this chapter.
7.33 	(e) "Net minimum tax" means the minimum tax imposed by this section.

7.34 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
7.35 	December 31, 2007.

8.1 	Sec. 7. Minnesota Statutes 2006, section 290.0921, subdivision 3, is amended to read:
8.2 		Subd. 3.Alternative minimum taxable income. "Alternative minimum taxable 
8.3 	income" is Minnesota net income as defined in section 290.01, subdivision 19, and 
8.4 	includes the adjustments and tax preference items in sections 56, 57, 58, and 59(d), (e), 
8.5 	(f), and (h) of the Internal Revenue Code. If a corporation files a separate company 
8.6 	Minnesota tax return, the minimum tax must be computed on a separate company basis. 
8.7 	If a corporation is part of a tax group filing a unitary return, the minimum tax must be 
8.8 	computed on a unitary basis. The following adjustments must be made.
8.9 	(1) For purposes of the depreciation adjustments under section 56(a)(1) and 
8.10 	56(g)(4)(A) of the Internal Revenue Code, the basis for depreciable property placed in 
8.11 	service in a taxable year beginning before January 1, 1990, is the adjusted basis for federal 
8.12 	income tax purposes, including any modification made in a taxable year under section 
8.13 	290.01, subdivision 19e, or Minnesota Statutes 1986, section 290.09, subdivision 7, 
8.14 	paragraph (c).
8.15 	For taxable years beginning after December 31, 2000, the amount of any remaining 
8.16 	modification made under section 290.01, subdivision 19e, or Minnesota Statutes 1986, 
8.17 	section 290.09, subdivision 7, paragraph (c), not previously deducted is a depreciation 
8.18 	allowance in the first taxable year after December 31, 2000.
8.19 	(2) The portion of the depreciation deduction allowed for federal income tax 
8.20 	purposes under section 168(k) of the Internal Revenue Code that is required as an 
8.21 	addition under section 290.01, subdivision 19c, clause (16), is disallowed in determining 
8.22 	alternative minimum taxable income.
8.23 	(3) The subtraction for depreciation allowed under section 290.01, subdivision 19d, 
8.24 	clause (19), is allowed as a depreciation deduction in determining alternative minimum 
8.25 	taxable income.
8.26 	(4) The alternative tax net operating loss deduction under sections 56(a)(4) and 56(d) 
8.27 	of the Internal Revenue Code does not apply.
8.28 	(5) The special rule for certain dividends under section 56(g)(4)(C)(ii) of the Internal 
8.29 	Revenue Code does not apply.
8.30 	(6) The special rule for dividends from section 936 companies under section 
8.31 	56(g)(4)(C)(iii) does not apply.
8.32 	(7) The tax preference for depletion under section 57(a)(1) of the Internal Revenue 
8.33 	Code does not apply.
8.34 	(8) The tax preference for intangible drilling costs under section 57(a)(2) of the 
8.35 	Internal Revenue Code must be calculated without regard to subparagraph (E) and the 
8.36 	subtraction under section 290.01, subdivision 19d, clause (4).
9.1 	(9) The tax preference for tax exempt interest under section 57(a)(5) of the Internal 
9.2 	Revenue Code does not apply.
9.3 	(10) The tax preference for charitable contributions of appreciated property under 
9.4 	section 57(a)(6) of the Internal Revenue Code does not apply.
9.5 	(11) For purposes of calculating the tax preference for accelerated depreciation or 
9.6 	amortization on certain property placed in service before January 1, 1987, under section 
9.7 	57(a)(7) of the Internal Revenue Code, the deduction allowable for the taxable year is the 
9.8 	deduction allowed under section 290.01, subdivision 19e.
9.9 	For taxable years beginning after December 31, 2000, the amount of any remaining 
9.10 	modification made under section 290.01, subdivision 19e, not previously deducted is a 
9.11 	depreciation or amortization allowance in the first taxable year after December 31, 2004.
9.12 	(12) For purposes of calculating the adjustment for adjusted current earnings in 
9.13 	section 56(g) of the Internal Revenue Code, the term "alternative minimum taxable 
9.14 	income" as it is used in section 56(g) of the Internal Revenue Code, means alternative 
9.15 	minimum taxable income as defined in this subdivision, determined without regard to the 
9.16 	adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code.
9.17 	(13) For purposes of determining the amount of adjusted current earnings under 
9.18 	section 56(g)(3) of the Internal Revenue Code, no adjustment shall be made under section 
9.19 	56(g)(4) of the Internal Revenue Code with respect to (i) the amount of foreign dividend 
9.20 	gross-up subtracted as provided in section 290.01, subdivision 19d, clause (1), (ii) the 
9.21 	amount of refunds of income, excise, or franchise taxes subtracted as provided in section 
9.22 	290.01, subdivision 19d, clause (10), or (iii) the amount of royalties, fees or other like 
9.23 	income subtracted as provided in section 290.01, subdivision 19d, clause (11).
9.24 	(14) Alternative minimum taxable income excludes the income from operating in a 
9.25 	job opportunity building zone as provided under section 469.317.
9.26 	(15) Alternative minimum taxable income excludes the income from operating in a 
9.27 	biotechnology and health sciences industry zone as provided under section 469.337.
9.28 	(16) Alternative minimum taxable income excludes the income from operating in an 
9.29 	international economic development zone as provided under section 469.326.
9.30 	(17) Alternative minimum taxable income excludes the income from operating in a 
9.31 	tax-free renaissance zone as provided under section 469.343.
9.32 	Items of tax preference must not be reduced below zero as a result of the 
9.33 	modifications in this subdivision.

9.34 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
9.35 	December 31, 2007.

10.1 	Sec. 8. Minnesota Statutes 2006, section 290.0922, subdivision 2, is amended to read:
10.2 		Subd. 2.Exemptions. The following entities are exempt from the tax imposed 
10.3 	by this section:
10.4 	(1) corporations exempt from tax under section 290.05;
10.5 	(2) real estate investment trusts;
10.6 	(3) regulated investment companies or a fund thereof; and
10.7 	(4) entities having a valid election in effect under section 860D(b) of the Internal 
10.8 	Revenue Code;
10.9 	(5) town and farmers' mutual insurance companies;
10.10 	(6) cooperatives organized under chapter 308A or 308B that provide housing 
10.11 	exclusively to persons age 55 and over and are classified as homesteads under section 
10.12 	273.124, subdivision 3;
10.13 	(7) an entity, if for the taxable year all of its property is located in a job opportunity 
10.14 	building zone designated under section 469.314 and all of its payroll is a job opportunity 
10.15 	building zone payroll under section 469.310; and
10.16 	(8) an entity, if for the taxable year all of its property is located in an international 
10.17 	economic development zone designated under section 469.322, and all of its payroll is 
10.18 	international economic development zone payroll under section 469.321. The exemption 
10.19 	under this clause applies to taxable years beginning during the duration of the international 
10.20 	economic development zone.; and
10.21 	(9) an entity, if for the taxable year all of its property is located in a tax-free 
10.22 	renaissance zone designated under section 479.342 and all of its payroll and its zone 
10.23 	payroll as defined under section 469.343.
10.24 	Entities not specifically exempted by this subdivision are subject to tax under this 
10.25 	section, notwithstanding section 290.05.

10.26 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
10.27 	December 31, 2007.

10.28 	Sec. 9. [469.342] TAX-FREE RENAISSANCE ZONE; FERGUS FALLS.
10.29 		Subdivision 1.Designation of zone. The area of the campus of the former state 
10.30 	regional treatment center in the city of Fergus Falls is designated a tax-free renaissance 
10.31 	zone. The zone includes the five buildings and associated land that were acquired by 
10.32 	the city prior to January 1, 2007.
10.33 		Subd. 2.Duration limit. Designation of the zone is effective for 15 calendar years 
10.34 	beginning on the date specified, by resolution, by the governing body of the city of Fergus 
10.35 	Falls. The city may divide the area of the zone into subzones. If the city divides the 
11.1 	zone into separate subzones, the duration of each subzone begins on the date specified 
11.2 	by the resolution establishing the subzone. Each subzone has a duration of 15 calendar 
11.3 	years, unless the authorizing resolution specifies a shorter limit. No subzone duration may 
11.4 	begin later than January 1, 2013.
11.5 		Subd. 3.Tax incentives available in the zone. Individuals that reside in the zone, 
11.6 	qualified businesses that operate in the zone, and property located in the zone qualify for 
11.7 	the following tax exemptions and incentives:
11.8 	(1) an individual income tax credit under section 290.06, subdivision 35;
11.9 	(2) exemption for business income from the individual income and corporate 
11.10 	franchise taxes as provided under section 469.343;
11.11 	(3) exemption from the property tax as provided in section 272.02, subdivision 
11.12 	85; and
11.13 	(4) the historic preservation tax credit under section 290.06, subdivision 34.

11.14 	EFFECTIVE DATE. This section is effective upon compliance by the governing 
11.15 	body of the city of Fergus Falls with Minnesota Statutes, section 645.021.

11.16 	Sec. 10. [469.343] BUSINESS INCOME TAX EXEMPTION.
11.17 		Subdivision 1.Definitions. (a) For purposes of this section and section 469.342, the 
11.18 	following terms have the meanings given them.
11.19 	(b) A "qualified business" is a person carrying on a trade or business at a place of 
11.20 	business located within the zone that has entered into a business subsidy agreement, as 
11.21 	defined in section 116J.994, with the city of Fergus Falls before the first day of the taxable 
11.22 	year or the taxes payable year for purposes of the property tax exemption. 
11.23 	(c) "Zone" is the tax-free renaissance zone designated under section 469.342.
11.24 	(d) "Zone payroll" is that portion of the payroll factor under section 290.191 that 
11.25 	represents:
11.26 	(1) wages or salaries paid to an individual for services performed in the zone; or 
11.27 	(2) wages or salaries paid to individuals working from offices within a zone if their 
11.28 	employment requires them to work outside the zone and the work is incidental to the work 
11.29 	performed by the individual within the zone.
11.30 	(e) "Zone percentage" means the following fraction reduced to a percentage:
11.31 	(1) the numerator of the fraction is: (i) the ratio of the taxpayer's property factor 
11.32 	under section 290.191 located in the zone for the taxable year over the property factor 
11.33 	numerator determined under section 290.191, plus (ii) the ratio of the taxpayer's zone 
11.34 	payroll factor over the payroll factor numerator determined under section 290.191; and
11.35 	(2) the denominator of the fraction is two.
12.1 	When calculating the zone percentage for a business that is part of a unitary business 
12.2 	as  defined under section 290.17, subdivision 4, the denominator of the payroll and 
12.3 	property factors is  the Minnesota payroll and property of the unitary business as reported 
12.4 	on the combined report  under section 290.17, subdivision 4, paragraph (j).
12.5 		Subd. 2.Tax exemption. (a) A qualified business is exempt from taxation under 
12.6 	sections 290.01, 290.02, the alternative  minimum tax under section 290.0921, and 
12.7 	the minimum fee under section 290.0922, on the portion  of its income attributable to 
12.8 	operations within the zone, designated under section 469.342.
12.9 	(b) This exemption is determined as follows:
12.10 	(1) for purposes of the individual income tax imposed under sections 290.01 and 
12.11 	290.091, the taxpayer may subtract an amount equal to the total income included in 
12.12 	federal taxable income attributable to operation of a trade or business, multiplied by 
12.13 	the zone percentage;
12.14 	(2) for purposes of the tax imposed under section 290.02, by multiplying its taxable 
12.15 	net  income by its zone percentage and subtracting the result in determining taxable income;
12.16 	(3) for purposes of the alternative minimum tax under section 290.0921, by 
12.17 	multiplying  its alternative minimum taxable income by its zone percentage and reducing 
12.18 	alternative minimum taxable income by this amount; and
12.19 	 (4) for purposes of the minimum fee under section 290.0922, by excluding property 
12.20 	and  payroll in the zone from the computations of the fee or by exempting the entity under 
12.21 	section  290.0922, subdivision 2, clause (9).
12.22 		Subd. 3.Application period. (a) This section applies only to taxable years 
12.23 	beginning during the duration of the tax-free renaissance zone or subzone.
12.24 	(b) For the final three years of the duration of the zone or subzone, the deductions or 
12.25 	exemptions under this section must be multiplied by the following percentages:
12.26 	(1) for taxable years beginning during the third to the last calendar year of the 
12.27 	duration, 75 percent;
12.28 	(2) for taxable years beginning during the second to the last calendar year of the 
12.29 	duration, 50 percent; and 
12.30 	(3) for taxable years beginning the last calendar year of the duration limit, 25 percent.

12.31 	EFFECTIVE DATE. This section is effective for taxable years beginning after 
12.32 	December 31, 2007.