1.1 	A bill for an act
1.2 	relating to economic development; creating a workforce housing grant program; 
1.3 	creating tax credits for workforce housing; requiring reports; appropriating 
1.4 	money;amending Minnesota Statutes 2014, section 290.06, by adding a 
1.5 	subdivision; proposing coding for new law in Minnesota Statutes, chapter 116J.
1.6 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.7 	Section 1. [116J.549] WORKFORCE HOUSING FUND.
1.8 		Subdivision 1.Definitions. (a) For the purposes of this section, the following terms 
1.9 	have the meanings given in this subdivision.
1.10 	(b) "City" means any statutory or home rule charter city.
1.11 	(c) "Eligible project area" means a census block with a population density over 200 
1.12 	persons per square mile according to the most recent United States census data available 
1.13 	that is within a greater Minnesota city having a median number of full-time private sector 
1.14 	jobs of at least 500 for the last five years.
1.15 	(d) "Family" means a family member within the meaning of the Internal Revenue 
1.16 	Code, section 267(c)(4).
1.17 	(e) "Fund" means the workforce housing fund created under subdivision 3.
1.18 	(f) "Greater Minnesota" means the area of Minnesota located outside the 
1.19 	metropolitan area as defined in section 473.121, subdivision 2.
1.20 	(g) "Market rate residential rental properties" means properties that are rented at 
1.21 	market value and excludes: (1) properties constructed with financial assistance requiring 
1.22 	the property to be occupied by residents that meet income limits under federal or state 
1.23 	law of initial occupancy; and (2) properties constructed with federal, state, or local flood 
1.24 	recovery assistance, regardless of whether that assistance imposed income limits as a 
1.25 	condition of receiving assistance.
2.1 	(h) "Nonstate funding" means funding that is not part of a state-funded grant 
2.2 	program, including any funds from the workforce housing fund created under this section.
2.3 	(i) "Officer" means a person elected or appointed by the board of directors to manage 
2.4 	the daily operations of a business.
2.5 	(j) "Principal" means a person having authority to act on behalf of a business.
2.6 	(k) "Qualified investment" means a cash investment or the fair market value 
2.7 	equivalent for common stock, land, a partnership or membership interest, preferred 
2.8 	stock, debt with mandatory conversion to equity, or an equivalent ownership interest as 
2.9 	determined by the commissioner that is made in a qualified workforce housing project.
2.10 	(l) "Qualified project investor" means an investor who has been certified by the 
2.11 	commissioner under subdivision 5.
2.12 	(m) "Qualifying workforce housing project" means a project:
2.13 	(1) for market rate residential rental properties with a minimum of three dwelling 
2.14 	units;
2.15 	(2) with a cost per unit of no more than $250,000 and no less than $75,000;
2.16 	(3) located in an eligible project area with a rental vacancy rate lower than five percent 
2.17 	for more than two years based on the most recently available data in a city housing analysis;
2.18 	(4) that has more than 50 percent nonstate funding proposed to fund the project;
2.19 	(5) located in a city that has a jobs-to-population ratio of greater than 40 percent as 
2.20 	measured by the median number of jobs in a city for the last five years compared with the 
2.21 	median population of the city for the last five years; and
2.22 	(6) that has been designated by the commissioner as a qualifying workforce housing 
2.23 	project.
2.24 		Subd. 2.Purpose. The commissioner of the Department of Employment and 
2.25 	Economic Development shall:
2.26 	(1) encourage, foster, develop, and improve workforce housing within the state in 
2.27 	order to promote job creation and to provide a high quality workforce for Minnesota 
2.28 	businesses by increasing the supply of workforce housing in greater Minnesota;
2.29 	(2) administer the workforce housing fund for the state of Minnesota;
2.30 	(3) coordinate with state, regional, local, and private entities to develop workforce 
2.31 	housing;
2.32 	(4) provide consultation services to local units of government or other project 
2.33 	sponsors in connection with the financing, planning, acquisition, improvement, 
2.34 	construction, or development of any workforce housing project;
2.35 	(5) consult with the Housing Finance Agency and community housing organizations 
2.36 	to organize workforce housing projects and programs;
3.1 	(6) serve as an information clearinghouse for other programs that provide assistance 
3.2 	and funding to developers or others seeking to build workforce housing;
3.3 	(7) provide grants and certify investor tax credits for eligible projects in workforce 
3.4 	housing;
3.5 	(8) provide an annual report as required by subdivision 7;
3.6 	(9) set and collect reasonable application fees for grant programs and tax credit 
3.7 	applications available under this section; and
3.8 	(10) perform any other activities consistent with achieving the goals in this section.
3.9 		Subd. 3.Workforce housing fund. (a) The workforce housing fund is created to 
3.10 	provide grants for the purpose of construction, acquisition, rehabilitation, demolition, 
3.11 	removal, and development, including the cost of infrastructure and materials necessary for 
3.12 	the creation and production of workforce housing in greater Minnesota.
3.13 	(b) The fund shall consist of:
3.14 	(1) state appropriations;
3.15 	(2) investment earnings on money in the fund; and
3.16 	(3) application fees paid pursuant to programs in this section.
3.17 	(c) The commissioner may expend the money in the workforce housing fund to the 
3.18 	extent necessary to carry out the objectives of this section, including the cost of personnel 
3.19 	required to administer programs.
3.20 		Subd. 4.Grants; project eligibility and preferences. (a) The commissioner shall 
3.21 	award grants through a competitive grants program for the purposes defined in this section 
3.22 	using the eligibility and preferences provided in this subdivision. If a project meets the 
3.23 	qualifications in paragraph (b), the commissioner may certify the project as a qualifying 
3.24 	workforce housing project based on the eligibility of the program and the preference in 
3.25 	paragraph (c). The total grant to a qualified workforce housing project must not exceed 
3.26 	$1,000,000. The total grants given to projects in a county cannot exceed 40 percent of 
3.27 	total funding in the workforce housing fund. Eligible applicants for grants awarded under 
3.28 	this section include an incorporated business or partnership, political subdivision, Indian 
3.29 	tribe, nonprofit organization, cooperative association organized under chapter 308A or 
3.30 	308B, or a limited liability corporation.
3.31 	(b) To be eligible for a grant, the project must:
3.32 	(1) be for market rate residential rental properties with a minimum of three dwelling 
3.33 	units;
3.34 	(2) have an average cost per unit of no more than $250,000 and no less than $75,000;
4.1 	(3) be located in an eligible project area with a rental vacancy rate lower than five 
4.2 	percent for more than two years based on the most recently available data in a city housing 
4.3 	analysis; 
4.4 	(4) have more than 50 percent nonstate funding proposed to fund the project;
4.5 	(5) be located in a city that has a jobs-to-population ratio of greater than 40 percent 
4.6 	as measured by the median number of jobs in a city for the last five years compared with 
4.7 	the median population of the city for the last five years; and
4.8 	(6) have been designated by the commissioner as a qualifying workforce housing 
4.9 	project.
4.10 	(c) Preferences for grants from the workforce housing fund must be given to projects:
4.11 	(1) that have the largest total private investment in a project per total project cost;
4.12 	(2) that can demonstrate that jobs near the workforce housing project are currently 
4.13 	unfilled partly due to a lack of workforce housing, and that the workforce housing project 
4.14 	would help a local employer fill those unfilled jobs; or
4.15 	(3) that can demonstrate that there are a significant number of employees that 
4.16 	currently live more than 30 miles from an employer, and that the workforce housing 
4.17 	project targets those particular employees.
4.18 		Subd. 5.Qualified project investor tax credits. (a) A taxpayer who makes a 
4.19 	qualified investment in a qualified workforce housing project is allowed a tax credit 
4.20 	for 50 percent of the amount of the qualified investment, up to $1,000,000, to reduce 
4.21 	the taxpayer's income or corporate franchise tax under chapter 290 in the year that the 
4.22 	qualified workforce housing project has housing units that are certified for occupancy by 
4.23 	the Department of Labor and Industry or a city inspector. The commissioner must not 
4.24 	allocate more than $30,000,000 in credits to qualified project investors for a taxable year. 
4.25 	The commissioner cannot allocate more than 40 percent of qualified project investor tax 
4.26 	credits to the same qualified workforce housing project.
4.27 	(b) The commissioner shall not allocate a credit if the investor is an officer or 
4.28 	principal of a business or sole proprietorship, or a family member of an officer or principal 
4.29 	of a business or sole proprietorship, that is competing for a grant through the workforce 
4.30 	housing fund in the year the tax credit would be awarded.
4.31 	(c) Applications for tax credits for a taxable year must be made available by the 
4.32 	commissioner by November 1 of the prior year. The commissioner must make every 
4.33 	effort to provide applications and relevant data to applicants in a simple, concise manner 
4.34 	using plain language. Tax credits must be allocated to qualified project investors in the 
4.35 	order that the tax credit request applications are filed with the office, except where the 
4.36 	commissioner determines the investment to be circumventing the spirit of the law or 
5.1 	where little or no local economic growth would occur as a result of the investment. The 
5.2 	commissioner must approve or reject tax credit request applications within 15 days of 
5.3 	receiving the application. The investment specified in the application must be made within 
5.4 	60 days of the allocation of the credit. If the investment is not made within 60 days, the 
5.5 	credit allocation is canceled. A qualified project investor who fails to invest as specified in 
5.6 	the application must notify the commissioner immediately and no later than five business 
5.7 	days after the expiration of the 60-day investment period. The commissioner may require 
5.8 	an application fee for the applications submitted under this subdivision.
5.9 	(d) All tax credit request applications filed with the office on the same day must be 
5.10 	treated as having been filed contemporaneously. If two or more qualified project investors 
5.11 	file tax credit request applications on the same day, and the aggregate amount of credit 
5.12 	allocation claims exceeds the aggregate limit of credits under this section or the lesser 
5.13 	amount of credits that remain unallocated on that day, then the credits must be allocated 
5.14 	among the qualified project investors who filed on that day on a pro rata basis with respect 
5.15 	to the amounts claimed. The pro rata allocation for any one qualified project investor is the 
5.16 	product obtained by multiplying a fraction, the numerator of which is the amount of the 
5.17 	credit allocation claim filed on behalf of a qualified project investor and the denominator 
5.18 	of which is the total of all credit allocation claims filed on behalf of all applicants on that 
5.19 	day, by the amount of credits that remain unallocated on that day for the taxable year.
5.20 	(e) The commissioner must notify the commissioner of revenue of credit certificates 
5.21 	issued under this subdivision.
5.22 		Subd. 6.Transfer and revocation of credits. (a) A tax credit under this section 
5.23 	is not transferable to any other taxpayer.
5.24 	(b) If the commissioner discovers that a qualified local investor or qualified project 
5.25 	investor did not meet the eligibility requirements for the tax credits under this section after 
5.26 	the credits have been allocated, the commissioner may determine that credit allocated 
5.27 	is revoked and must be repaid by the investor. The commissioner must notify the 
5.28 	commissioner of revenue of every credit revoked and subject to full or partial repayment 
5.29 	under this section.
5.30 		Subd. 7.Reporting. Beginning in 2016, the commissioner must annually report 
5.31 	by March 15 to the chairs and ranking minority members of the legislative committees 
5.32 	with jurisdiction over taxes and economic development in the senate and house of 
5.33 	representatives, in compliance with sections 3.195 and 3.197, on tax credits issued under 
5.34 	this section and the workforce housing projects funded by the workforce housing fund. 
5.35 	The report must include:
5.36 	(1) information about the availability of workforce housing in greater Minnesota;
6.1 	(2) information from employers and communities in greater Minnesota about 
6.2 	whether or not workforce housing needs are being met;
6.3 	(3) which projects have been funded by the workforce housing fund and whether 
6.4 	previously funded projects have created economic growth;
6.5 	(4) a summary of agency activities to coordinate workforce housing for the state;
6.6 	(5) any suggested legislation to accelerate construction of workforce housing;
6.7 	(6) the number and amount of tax credits issued and the identity of the recipients;
6.8 	(7) the amount of investments made to the fund and whether or not those funds 
6.9 	were for a preferred project;
6.10 	(8) the number and amount of tax credits revoked under subdivision 6; and
6.11 	(9) any other relevant information needed to evaluate the effect of the grants and tax 
6.12 	credits available through the Department of Employment and Economic Development.
6.13 		Subd. 8.Appropriations. Amounts in the workforce housing fund are appropriated 
6.14 	to the commissioner of employment and economic development for costs associated with 
6.15 	the administration of applications and for the personnel and administrative expenses related 
6.16 	to administering the workforce housing grant program and investor tax credit programs.

6.17 	EFFECTIVE DATE. The tax credits in this section are effective for taxable years 
6.18 	beginning after December 31, 2014.

6.19 	Sec. 2. Minnesota Statutes 2014, section 290.06, is amended by adding a subdivision 
6.20 	to read:
6.21 		Subd. 37.Workforce housing tax credit. (a) A taxpayer is allowed a credit against 
6.22 	the tax under subdivision 1 or 2c equal to the amount certified by the commissioner of 
6.23 	the Department of Employment and Economic Development under section 116J.549, to 
6.24 	the  taxpayer for the taxable year.
6.25 	(b) Credits allowed to a partnership, limited liability company taxed as a partnership, 
6.26 	corporation, or multiple owners of property are passed through to the partners, members, 
6.27 	shareholders, or owners, respectively, pro rata to each partner, member, shareholder, or 
6.28 	owner based on that person's share of the entity's income for the taxable year.
6.29 	(c)(1) The credit is limited to the liability for tax. "Liability for tax" for purposes of 
6.30 	this subdivision means the tax imposed under subdivision 1 or 2c, as applicable, for the 
6.31 	taxable year reduced by the sum of the nonrefundable credits allowed under this chapter.
6.32 	(2) For a corporation that is a partner in a partnership, the credit allowed for the 
6.33 	taxable year is limited to the lesser of the amount determined under clause (1) for the 
6.34 	taxable year or an amount, separately computed with respect to the corporation's interest 
6.35 	in the trade, business, or entity, equal to the amount of tax attributable to that portion of  
7.1 	taxable income that is allocable or apportionable to the corporation's interest in the trade, 
7.2 	business, or entity.
7.3 	(3) If the amount of the credit determined under this subdivision for any taxable year 
7.4 	exceeds the limitation under clause (1), the excess is a credit carryover to each of the ten 
7.5 	succeeding taxable years. The entire amount of the excess unused credit for the taxable 
7.6 	year is carried first to the earliest of the taxable years to which the credit may be carried 
7.7 	and then to each successive year to which the credit may be carried. The amount of the 
7.8 	unused credit that may be added under this clause is limited to the taxpayer's liability 
7.9 	for tax, less the credit for the taxable year.

7.10 	EFFECTIVE DATE. The tax credits in this section are effective for taxable years 
7.11 	beginning after December 31, 2014.

7.12 	Sec. 3. APPROPRIATION; OFFICE OF WORKFORCE HOUSING.
 7.13 	$20,000,000 in fiscal year 2016 and $20,000,000 in fiscal year 2017 are appropriated 
7.14 	from the general fund to the commissioner of employment and economic development 
7.15 	for grants under Minnesota Statutes, section 116J.549, subdivision 4. Up to five percent 
7.16 	of the appropriation in each year is available to the commissioner for the administration 
7.17 	of Minnesota Statutes, section 116J.549.