HF 3304

Introduction - 94th Legislature (2025 - 2026)

Posted on 05/07/2025 10:14 a.m.

A bill for an act
relating to taxation; repealing the sustainable aviation fuel income tax credit and
the exemptions from sales and use tax for data centers and for construction of
sustainable aviation fuel facilities; reallocating increased general fund amounts
from repealed tax provisions to increase the renter's credit; making corresponding
technical changes; amending Minnesota Statutes 2024, sections 290.0693, by
adding a subdivision; 297A.75, subdivisions 1, 2, 3; repealing Minnesota Statutes
2024, sections 41A.30; 239.761, subdivision 10a; 290.0688; 297A.68, subdivision
42; 297A.71, subdivision 54.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2024, section 290.0693, is amended by adding a subdivision
to read:

new text begin Subd. 3a. new text end

new text begin Modification to credit amounts. new text end

new text begin (a) No later than December 31, 2025, the
commissioner of revenue must certify to the commissioner of management and budget an
estimate of the increase in general fund revenues in fiscal year 2027, 2028, and 2029 resulting
from the repeal of the exemptions and credits in section 5 of this act.
new text end

new text begin (b) For credits based on property taxes payable in 2026, 2027, and 2028, the commissioner
of revenue must adjust the credit parameters under subdivision 3 in a manner that increases
credits in each fiscal year by the amount certified in paragraph (a) for that fiscal year. The
commissioner of revenue may increase the credit by reducing the percent of income, reducing
the percent paid by claimant, or by increasing the maximum credit. Any changes under this
subdivision to the percent of income or percent paid by claimant for credits based on property
taxes payable in 2028 must remain in effect for refunds based on property taxes payable in
2029 and later.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2024, section 297A.75, subdivision 1, is amended to read:

Subdivision 1.

Tax collected.

The tax on the gross receipts from the sale of the following
exempt items must be imposed and collected as if the sale were taxable and the rate under
section 297A.62, subdivision 1, applied. The exempt items include:

(1) building materials for an agricultural processing facility exempt under section
297A.71, subdivision 13;

(2) building materials for mineral production facilities exempt under section 297A.71,
subdivision 14;

(3) building materials for correctional facilities under section 297A.71, subdivision 3;

(4) building materials used in a residence for veterans with a disability exempt under
section 297A.71, subdivision 11;

(5) elevators and building materials exempt under section 297A.71, subdivision 12;

(6) materials and supplies for qualified low-income housing under section 297A.71,
subdivision 23;

(7) materials, supplies, and equipment for municipal electric utility facilities under
section 297A.71, subdivision 35;

(8) equipment and materials used for the generation, transmission, and distribution of
electrical energy and an aerial camera package exempt under section 297A.68, subdivision
37;

(9) commuter rail vehicle and repair parts under section 297A.70, subdivision 3, paragraph
(a), clause (10);

(10) materials, supplies, and equipment for construction or improvement of projects and
facilities under section 297A.71, subdivision 40;

deleted text begin (11) enterprise information technology equipment and computer software for use in a
qualified data center exempt under section 297A.68, subdivision 42;
deleted text end

deleted text begin (12) deleted text end new text begin (11) new text end materials, supplies, and equipment for qualifying capital projects under section
297A.71, subdivision 44, paragraph (a), clause (1), and paragraph (b);

deleted text begin (13) deleted text end new text begin (12) new text end items purchased for use in providing critical access dental services exempt
under section 297A.70, subdivision 7, paragraph (c);

deleted text begin (14) deleted text end new text begin (13) new text end items and services purchased under a business subsidy agreement for use or
consumption primarily in greater Minnesota exempt under section 297A.68, subdivision
44;

deleted text begin (15) deleted text end new text begin (14) new text end building materials, equipment, and supplies for constructing or replacing real
property exempt under section 297A.71, subdivisions 49; 50, paragraph (b); and 51;

deleted text begin (16) deleted text end new text begin (15) new text end building materials, equipment, and supplies for qualifying capital projects
under section 297A.71, subdivision 52; and

deleted text begin (17) deleted text end new text begin (16) new text end building materials, equipment, and supplies for constructing, remodeling,
expanding, or improving a fire station, police station, or related facilities exempt under
section 297A.71, subdivision 53.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2025.
new text end

Sec. 3.

Minnesota Statutes 2024, section 297A.75, subdivision 2, is amended to read:

Subd. 2.

Refund; eligible persons.

Upon application on forms prescribed by the
commissioner, a refund equal to the tax paid on the gross receipts of the exempt items must
be paid to the applicant. Only the following persons may apply for the refund:

(1) for subdivision 1, clauses (1), (2), and (13), the applicant must be the purchaser;

(2) for subdivision 1, clause (3), the applicant must be the governmental subdivision;

(3) for subdivision 1, clause (4), the applicant must be the recipient of the benefits
provided in United States Code, title 38, chapter 21;

(4) for subdivision 1, clause (5), the applicant must be the owner of the homestead
property;

(5) for subdivision 1, clause (6), the owner of the qualified low-income housing project;

(6) for subdivision 1, clause (7), the applicant must be a municipal electric utility or a
joint venture of municipal electric utilities;

(7) for subdivision 1, clauses (8) deleted text begin , (11), deleted text end and deleted text begin (14) deleted text end new text begin (13) new text end , the owner of the qualifying business;

(8) for subdivision 1, clauses (9), (10), deleted text begin (12), (16), and (17) deleted text end new text begin (11), (15), and (16) new text end , the
applicant must be the governmental entity that owns or contracts for the project or facility;
and

(9) for subdivision 1, clause deleted text begin (15) deleted text end new text begin (14) new text end , the applicant must be the owner or developer of
the building or project.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2025.
new text end

Sec. 4.

Minnesota Statutes 2024, section 297A.75, subdivision 3, is amended to read:

Subd. 3.

Application.

(a) The application must include sufficient information to permit
the commissioner to verify the tax paid. If the tax was paid by a contractor, subcontractor,
or builder, under subdivision 1, clauses (3) to deleted text begin (12) deleted text end new text begin (11) new text end or deleted text begin (14) to (17) deleted text end new text begin (13) to (16) new text end , the
contractor, subcontractor, or builder must furnish to the refund applicant a statement including
the cost of the exempt items and the taxes paid on the items unless otherwise specifically
provided by this subdivision. The provisions of sections 289A.40 and 289A.50 apply to
refunds under this section.

(b) An applicant may not file more than two applications per calendar year for refunds
for taxes paid on capital equipment exempt under section 297A.68, subdivision 5.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2025.
new text end

Sec. 5. new text begin REPEALER.
new text end

new text begin (a) new text end new text begin Minnesota Statutes 2024, sections 41A.30; 239.761, subdivision 10a; and 290.0688, new text end new text begin
are repealed.
new text end

new text begin (b) new text end new text begin Minnesota Statutes 2024, sections 297A.68, subdivision 42; and 297A.71, subdivision
54, new text end new text begin are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin Paragraph (a) is effective July 1, 2025. Paragraph (b) is effective
for sales and purchases made after June 30, 2025.
new text end

APPENDIX

Repealed Minnesota Statutes: 25-05566

41A.30 SUSTAINABLE AVIATION FUEL; TAX CREDITS.

Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms have the meanings given.

(b) "Aircraft" has the meaning given in section 296A.01, subdivision 3.

(c) "Aviation gasoline" has the meaning given in section 296A.01, subdivision 7.

(d) "Commissioner" means the commissioner of agriculture.

(e) "Jet fuel" has the meaning given in section 296A.01, subdivision 8.

(f) "Qualifying taxpayer" means a taxpayer, as defined in section 290.01, subdivision 6, that is engaged in the business of:

(1) producing sustainable aviation fuel; or

(2) blending sustainable aviation fuel with aviation gasoline or jet fuel.

(g) "Sustainable aviation fuel" means liquid fuel that:

(1) is derived from biomass, as defined in section 41A.15, subdivision 2e;

(2) is not derived from palm fatty acid distillates; and

(3) achieves at least a 50 percent life cycle greenhouse gas emissions reduction in comparison with petroleum-based aviation gasoline, aviation turbine fuel, and jet fuel as determined by a test that shows:

(i) that the fuel production pathway achieves at least a 50 percent life cycle greenhouse gas emissions reduction in comparison with petroleum-based aviation gasoline, aviation turbine fuel, and jet fuel utilizing the most recent version of Argonne National Laboratory's Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (GREET) model that accounts for reduced emissions throughout the fuel production process; or

(ii) that the fuel production pathway achieves at least a 50 percent reduction of the aggregate attributional core life cycle emissions and the positive induced land use change values under the life cycle methodology for sustainable aviation fuels adopted by the International Civil Aviation Organization with the agreement of the United States.

Subd. 2.

Tax credit establishment.

(a) A qualifying taxpayer may claim a tax credit against the tax due under chapter 290 equal to $1.50 for each gallon of sustainable aviation fuel that is:

(1) produced in Minnesota or blended with aviation or gasoline or jet fuel in Minnesota; and

(2) sold in Minnesota to a purchaser who certifies that the sustainable aviation fuel is for use as fuel in an aircraft departing from an airport in Minnesota.

(b) The credit may be claimed only after approval and certification by the commissioner and is limited to the amount stated on the credit certificate issued under subdivision 3. A qualifying taxpayer must apply to the commissioner for certification and allocation of a credit in a form and manner prescribed by the commissioner.

(c) A qualifying taxpayer may claim a credit for blending or producing sustainable aviation fuel, but not both. If sustainable aviation fuel is blended with aviation gasoline or jet fuel, the credit is allowed only for the portion of sustainable aviation fuel that is included in the blended fuel.

(d) If the amount of credit that the taxpayer is eligible to receive under this section exceeds the liability for tax under chapter 290, the commissioner of revenue must refund the excess to the taxpayer.

Subd. 3.

Credit certificates.

(a) A business must apply to the commissioner to be eligible for a credit certificate as a qualifying taxpayer within two months after the close of its taxable year for all sustainable aviation fuel sold under subdivision 2, paragraph (a), in the taxable year. The application must be in the form and be made under the procedures specified by the commissioner and must include:

(1) evidence of production or blending in Minnesota required under subdivision 2, paragraph (a), clause (1); and

(2) a purchaser's certification that the sustainable aviation fuel is for use as fuel in an aircraft departing from an airport in Minnesota, as required under subdivision 2, paragraph (a), clause (2).

(b) Within 30 days of receiving an application for certification under this subdivision, the commissioner must:

(1) issue a credit certificate under paragraph (c);

(2) request additional information from the business; or

(3) reject the application for certification.

If the commissioner requests additional information from the business, the commissioner must either issue a credit certificate or reject the application within 30 days of receiving the additional information. If a business fails to submit the additional information within 30 days or if the commissioner neither issues a credit certificate within 30 days of receiving the original application or within 30 days of receiving the additional information requested, whichever is later, the application is deemed rejected.

(c) A credit certificate must state:

(1) the fiscal year for which the credit certificate is issued;

(2) the amount of the tax credit; and

(3) the taxable year for which the taxpayer may claim the tax credit under section 290.0688.

Subd. 4.

Duties.

(a) The commissioner must certify qualifying taxpayers as eligible for the tax credit under subdivision 2 and issue credit certificates under subdivision 3 subject to the allocation limits under subdivision 5.

(b) Notwithstanding any other law to the contrary, the commissioner must share information with the commissioner of revenue to the extent necessary to administer the provisions under this section and section 290.0688. For credit certificates issued under subdivision 3, the commissioner must notify the commissioner of revenue of the issuance within 30 days.

(c) Applications for credit certificates must be made available on the department's website by July 1 of each year identified under subdivision 5.

(d) The commissioner must allocate credit certificates on a first-come, first-served basis beginning on August 1 of each year listed under subdivision 5.

Subd. 5.

Allocation limits.

(a) For tax credits allowed under subdivision 2, the commissioner must not issue credit certificates for more than:

(1) $7,400,000 for fiscal year 2025; and

(2) $2,100,000 for each of fiscal years 2026 and 2027.

(b) If the entire amount authorized under paragraph (a) is not allocated in fiscal year 2025 or 2026, any remaining amount is available for allocation through fiscal year 2030 until the entire allocation has been made. The commissioner must not issue any credit certificates for fiscal years beginning after June 30, 2030, and any unallocated amounts cancel on that date.

Subd. 6.

Appeals.

(a) Any decision of the commissioner under this section may be challenged as a contested case under chapter 14. The contested case proceeding must be initiated within 60 days of the date of written notification by the commissioner.

(b) If a taxpayer challenges a decision of the commissioner under this subdivision, upon perfection of the appeal, the commissioner must notify the commissioner of revenue of the challenge within five days.

(c) Nothing in this subdivision affects the commissioner of revenue's authority to audit, review, correct, or adjust returns claiming the credit.

(d) The commissioner may not hold credit amounts in reserve pending any contested case hearing under this subdivision.

Subd. 7.

Expiration.

This section expires for taxable years beginning after December 31, 2030.

239.761 PETROLEUM PRODUCT SPECIFICATIONS.

Subd. 10a.

Sustainable aviation fuel.

Sustainable aviation fuel, as defined in section 41A.30, subdivision 1, paragraph (g), must comply with either:

(1) ASTM International Standard Specification D7566; or

(2) the Fischer-Tropsch provisions of ASTM International Standard Specification D1655, Annex A1.

290.0688 CREDIT FOR SUSTAINABLE AVIATION FUEL.

Subdivision 1.

Definitions.

For purposes of this section, the terms defined in section 41A.30, subdivision 1, have the meanings given, except that "commissioner" means the commissioner of revenue.

Subd. 2.

Credit allowed.

A qualifying taxpayer is allowed a credit against the tax imposed by this chapter for sustainable aviation fuel sold for use as fuel in an aircraft departing from an airport in Minnesota. The credit equals up to the amount and applies to the taxable year indicated on the credit certificate issued to the qualifying taxpayer under section 41A.30.

Subd. 3.

Partnerships; multiple owners.

Credits granted to a partnership, a limited liability company taxed as a partnership, an S corporation, or multiple owners of property are passed through to the partners, members, shareholders, or owners, respectively, pro rata to each partner, member, shareholder, or owner based on their share of the entity's assets or as specially allocated in their organizational documents or any other executed agreement, as of the last day of the taxable year.

Subd. 4.

Credit refundable.

If the amount of credit that a qualifying taxpayer is allowed under this section exceeds the claimant's tax liability under this chapter, the commissioner must refund the excess to the claimant.

Subd. 5.

Audit.

Notwithstanding the credit certificate issued by the commissioner of agriculture under section 41A.30, the commissioner may utilize any audit and examination powers under chapter 270C or 289A to the extent necessary to verify that the taxpayer is eligible for the credit and to assess for the amount of any improperly claimed credit.

Subd. 6.

Appropriation.

An amount sufficient to pay the refunds required by this section is appropriated to the commissioner from the general fund.

Subd. 7.

Expiration.

This section expires at the same time and on the same terms as section 41A.30, subdivision 7, except that the expiration of this section does not affect the commissioner of revenue's authority to audit or power of examination and assessment for credits claimed under this section.

297A.68 BUSINESS EXEMPTIONS.

Subd. 42.

Qualified data centers.

(a) Purchases of enterprise information technology equipment and computer software for use in a qualified data center, or a qualified refurbished data center, are exempt, except that computer software maintenance agreements are exempt for purchases made after June 30, 2013. The tax on purchases exempt under this paragraph must be imposed and collected as if the rate under section 297A.62, subdivision 1, applied, and then refunded after June 30, 2013, in the manner provided in section 297A.75. This exemption includes enterprise information technology equipment and computer software purchased to replace or upgrade enterprise information technology equipment and computer software in a qualified data center, or a qualified refurbished data center.

(b) Electricity used or consumed in the operation of a qualified data center or qualified refurbished data center is exempt.

(c) For purposes of this subdivision, "qualified data center" means a facility in Minnesota:

(1) that is comprised of one or more buildings that consist in the aggregate of at least 25,000 square feet, and that are located on a single parcel or on contiguous parcels, where the total cost of construction or refurbishment, investment in enterprise information technology equipment, and computer software is at least $30,000,000 within a 48-month period. The 48-month period begins no sooner than July 1, 2012, except that costs for computer software maintenance agreements purchased before July 1, 2013, are not included in determining if the $30,000,000 threshold has been met;

(2) that is constructed or substantially refurbished after June 30, 2012, where "substantially refurbished" means that at least 25,000 square feet have been rebuilt or modified, including:

(i) installation of enterprise information technology equipment; environmental control, computer software, and energy efficiency improvements; and

(ii) building improvements; and

(3) that is used to house enterprise information technology equipment, where the facility has the following characteristics:

(i) uninterruptible power supplies, generator backup power, or both;

(ii) sophisticated fire suppression and prevention systems; and

(iii) enhanced security. A facility will be considered to have enhanced security if it has restricted access to the facility to selected personnel; permanent security guards; video camera surveillance; an electronic system requiring pass codes, keycards, or biometric scans, such as hand scans and retinal or fingerprint recognition; or similar security features.

In determining whether the facility has the required square footage, the square footage of the following spaces shall be included if the spaces support the operation of enterprise information technology equipment: office space, meeting space, and mechanical and other support facilities. For purposes of this subdivision, "computer software" includes, but is not limited to, software utilized or loaded at a qualified data center or qualified refurbished data center, including maintenance, licensing, and software customization.

(d) For purposes of this subdivision, a "qualified refurbished data center" means an existing facility that qualifies as a data center under paragraph (c), clauses (2) and (3), but that is comprised of one or more buildings that consist in the aggregate of at least 25,000 square feet, and that are located on a single parcel or contiguous parcels, where the total cost of construction or refurbishment, investment in enterprise information technology equipment, and computer software is at least $50,000,000 within a 24-month period.

(e) For purposes of this subdivision, "enterprise information technology equipment" means computers and equipment supporting computing, networking, or data storage, including servers and routers. It includes, but is not limited to: cooling systems, cooling towers, and other temperature control infrastructure; power infrastructure for transformation, distribution, or management of electricity used for the maintenance and operation of a qualified data center or qualified refurbished data center, including but not limited to exterior dedicated business-owned substations, backup power generation systems, battery systems, and related infrastructure; and racking systems, cabling, and trays, which are necessary for the maintenance and operation of the qualified data center or qualified refurbished data center.

(f) A qualified data center or qualified refurbished data center may claim the exemptions in this subdivision for purchases made either within 20 years of the date of its first purchase qualifying for the exemption under paragraph (a), or by June 30, 2042, whichever is earlier.

(g) The purpose of this exemption is to create jobs in the construction and data center industries.

(h) This subdivision is effective for sales and purchases made before July 1, 2042.

(i) The commissioner of employment and economic development must certify to the commissioner of revenue, in a format approved by the commissioner of revenue, when a qualified data center has met the requirements under paragraph (c) or a qualified refurbished data center has met the requirements under paragraph (d). The certification must provide the following information regarding each qualified data center or qualified refurbished data center:

(1) the total square footage amount;

(2) the total amount of construction or refurbishment costs and the total amount of qualifying investments in enterprise information technology equipment and computer software;

(3) the beginning and ending of the applicable period under either paragraph (c) or (d) in which the qualifying expenditures and purchases under clause (2) were made, but in no case shall the period begin before July 1, 2012; and

(4) the date upon which the qualified data center first met the requirements under paragraph (c) or a qualified refurbished data center first met the requirements under paragraph (d).

(j) Any refund for sales tax paid on qualifying purchases under this subdivision must not be issued unless the commissioner of revenue has received the certification required under paragraph (i) issued by the commissioner of employment and economic development.

(k) The commissioner of employment and economic development must annually notify the commissioner of revenue of the qualified data centers that are projected to meet the requirements under paragraph (c) and the qualified refurbished data centers that are projected to meet the requirements under paragraph (d) in each of the next four years. The notification must provide the information required under paragraph (i), clauses (1) to (4), for each qualified data center or qualified refurbished data center.

297A.71 CONSTRUCTION EXEMPTIONS.

Subd. 54.

Sustainable aviation fuel facilities.

(a) Materials and supplies used or consumed in and equipment incorporated into the construction, reconstruction, or improvement of a facility located in Minnesota that produces or blends sustainable aviation fuel, as defined in section 41A.30, subdivision 1, is exempt.

(b) The tax must be imposed and collected as if the rate under section 297A.62, subdivision 1, applied and then refunded in the manner as provided for projects under section 297A.75, subdivision 1, clause (1).

(c) For a project, a portion of which is not used to produce or blend sustainable aviation fuel, the amount of purchases that are exempt under this subdivision must be determined by multiplying the total purchases, as specified in paragraph (a), by the ratio of:

(1) the capacity to generate sustainable aviation fuel either through production or blending; and

(2) the capacity to generate all fuels.

(d) This subdivision expires July 1, 2034. The expiration does not affect refunds due for sales and purchases made prior to July 1, 2034.