HF 422

1st Engrossment - 89th Legislature (2015 - 2016) Posted on 03/10/2015 07:55am

A bill for an act
relating to taxation; economic development; providing for a workforce housing
grant program; appropriating money; amending Minnesota Statutes 2014, section
290.01, subdivisions 19a, 19c; proposing coding for new law in Minnesota
Statutes, chapters 116J; 290.

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

Section 1.

new text begin [116J.549] WORKFORCE HOUSING GRANT PROGRAM.
new text end

new text begin Subdivision 1. new text end

new text begin Establishment. new text end

new text begin The commissioner of employment and economic
development shall establish a workforce housing grant program to award grants to
qualified cities to be used for qualified expenditures.
new text end

new text begin Subd. 2. new text end

new text begin Definitions. new text end

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

new text begin (b) "Eligible project area" means a consolidated population center within a greater
Minnesota city having a median number of full-time private sector jobs of 500 or more for
the last five years, or an area served by a joint county-city economic development agency.
new text end

new text begin (c) "Joint county-city economic development agency" means an economic
development agency, formed under special law, as a joint partnership between a city and
county and excluding those established by the county only.
new text end

new text begin (d) "Market rate residential rental properties" means properties that are rented at
market value and excludes:
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new text begin (1) properties constructed with financial assistance requiring the property to be
occupied by residents that meet income limits under federal or state law of initial
occupancy; and
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new text begin (2) properties constructed with federal, state, or local flood recovery assistance,
regardless of whether that assistance imposed income limits as a condition of receiving
assistance.
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new text begin (e) "Qualified city" means a home rule charter or statutory city with a population
exceeding 500 or a joint county-city economic development authority.
new text end

new text begin (f) "Qualified expenditure" means expenditures for market rate residential rental
properties including acquisition of property; construction of improvements; provisions
of loans or subsidies, grants, interest rate subsidies, public infrastructure, and related
financing costs.
new text end

new text begin Subd. 3. new text end

new text begin Application. new text end

new text begin The commissioner shall develop forms and procedures to
solicit and review applications for grants under this section. A qualified city must include
in its application information sufficient to verify that it meets the program requirements
under this section and any additional evidence of the scarcity of workforce housing in the
qualified city that it considers appropriate or that the commissioner requires.
new text end

new text begin Subd. 4. new text end

new text begin Program requirements. new text end

new text begin The commissioner must not award a grant to a
qualified city under this section until the following determinations are made:
new text end

new text begin (1) the average vacancy rate for rental housing located in the city where the market
rate residential rental property is proposed to be located, and in any other city located
within 60 miles or less of the boundaries of the city, has been five percent or less for at
least the prior two-year period;
new text end

new text begin (2) one or more businesses located in the city, or within 60 miles of the city, that
employs a minimum of 20 full-time equivalent employees in aggregate have provided
a written statement to the city indicating that the lack of available rental housing has
impeded their ability to recruit and hire employees;
new text end

new text begin (3) the city where the market rate residential rental property is proposed to be located
has a population exceeding 500;
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new text begin (4) fewer than five market rate residential rental units per 1,000 residents were
constructed in the city where the market rate residential rental property is proposed to be
located in each of the last ten years; and
new text end

new text begin (5) the qualified city has certified that the grants will be used for qualified
expenditures for the development of rental housing to serve employees of businesses
located in the city or surrounding area.
new text end

new text begin Subd. 5. new text end

new text begin Allocation. new text end

new text begin The amount of a grant under this section may not exceed the
lesser of $20,000 per unit or 20 percent of the qualified expenditures for the project.
new text end

new text begin Subd. 6. new text end

new text begin Report. new text end

new text begin By January 15 of the year following the year in which the grant
was issued, each qualified city receiving a grant under this section must submit a report
to the chairs and ranking minority members of the senate and house of representatives
committees having jurisdiction over taxes and workforce development specifying the
projects that received grants under this section and the specific purposes for which the
grant funds were used.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2015.
new text end

Sec. 2.

Minnesota Statutes 2014, section 290.01, subdivision 19a, is amended to read:

Subd. 19a.

Additions to federal taxable income.

For individuals, estates, and
trusts, there shall be added to federal taxable income:

(1)(i) interest income on obligations of any state other than Minnesota or a political
or governmental subdivision, municipality, or governmental agency or instrumentality
of any state other than Minnesota exempt from federal income taxes under the Internal
Revenue Code or any other federal statute; and

(ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue
Code, except:

(A) the portion of the exempt-interest dividends exempt from state taxation under
the laws of the United States; and

(B) the portion of the exempt-interest dividends derived from interest income
on obligations of the state of Minnesota or its political or governmental subdivisions,
municipalities, governmental agencies or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to all shareholders represents
95 percent or more of the exempt-interest dividends, including any dividends exempt
under subitem (A), that are paid by the regulated investment company as defined in section
851(a) of the Internal Revenue Code, or the fund of the regulated investment company as
defined in section 851(g) of the Internal Revenue Code, making the payment; and

(iii) for the purposes of items (i) and (ii), interest on obligations of an Indian tribal
government described in section 7871(c) of the Internal Revenue Code shall be treated as
interest income on obligations of the state in which the tribe is located;

(2) the amount of income, sales and use, motor vehicle sales, or excise taxes paid or
accrued within the taxable year under this chapter and the amount of taxes based on net
income paid, sales and use, motor vehicle sales, or excise taxes paid to any other state or
to any province or territory of Canada, to the extent allowed as a deduction under section
63(d) of the Internal Revenue Code, but the addition may not be more than the amount
by which the state itemized deduction exceeds the amount of the standard deduction as
defined in section 63(c) of the Internal Revenue Code, minus any addition that would have
been required under clause (17) if the taxpayer had claimed the standard deduction. For
the purpose of this clause, income, sales and use, motor vehicle sales, or excise taxes are
the last itemized deductions disallowed under clause (15);

(3) the capital gain amount of a lump-sum distribution to which the special tax under
section 1122(h)(3)(B)(ii) of the Tax Reform Act of 1986, Public Law 99-514, applies;

(4) the amount of income taxes paid or accrued within the taxable year under this
chapter and taxes based on net income paid to any other state or any province or territory
of Canada, to the extent allowed as a deduction in determining federal adjusted gross
income. For the purpose of this paragraph, income taxes do not include the taxes imposed
by sections 290.0922, subdivision 1, paragraph (b), 290.9727, 290.9728, and 290.9729;

(5) the amount of expense, interest, or taxes disallowed pursuant to section 290.10
other than expenses or interest used in computing net interest income for the subtraction
allowed under subdivision 19b, clause (1);

(6) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

(7) 80 percent of the depreciation deduction allowed under section 168(k) of the
Internal Revenue Code. For purposes of this clause, if the taxpayer has an activity that
in the taxable year generates a deduction for depreciation under section 168(k) and the
activity generates a loss for the taxable year that the taxpayer is not allowed to claim for
the taxable year, "the depreciation allowed under section 168(k)" for the taxable year is
limited to excess of the depreciation claimed by the activity under section 168(k) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k) is allowed;

(8) 80 percent of the amount by which the deduction allowed by section 179 of the
Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
Revenue Code of 1986, as amended through December 31, 2003;

(9) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code;

(10) the amount of expenses disallowed under section 290.10, subdivision 2;

(11) for taxable years beginning before January 1, 2010, the amount deducted for
qualified tuition and related expenses under section 222 of the Internal Revenue Code, to
the extent deducted from gross income;

(12) for taxable years beginning before January 1, 2010, the amount deducted for
certain expenses of elementary and secondary school teachers under section 62(a)(2)(D)
of the Internal Revenue Code, to the extent deducted from gross income;

(13) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code;

(14) changes to federal taxable income attributable to a net operating loss that the
taxpayer elected to carry back for more than two years for federal purposes but for which
the losses can be carried back for only two years under section 290.095, subdivision
11, paragraph (c);

(15) the amount of disallowed itemized deductions, but the amount of disallowed
itemized deductions plus the addition required under clause (2) may not be more than the
amount by which the itemized deductions as allowed under section 63(d) of the Internal
Revenue Code exceeds the amount of the standard deduction as defined in section 63(c) of
the Internal Revenue Code, and reduced by any addition that would have been required
under clause (17) if the taxpayer had claimed the standard deduction:

(i) the amount of disallowed itemized deductions is equal to the lesser of:

(A) three percent of the excess of the taxpayer's federal adjusted gross income
over the applicable amount; or

(B) 80 percent of the amount of the itemized deductions otherwise allowable to the
taxpayer under the Internal Revenue Code for the taxable year;

(ii) the term "applicable amount" means $100,000, or $50,000 in the case of a
married individual filing a separate return. Each dollar amount shall be increased by
an amount equal to:

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
Revenue Code for the calendar year in which the taxable year begins, by substituting
"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof;

(iii) the term "itemized deductions" does not include:

(A) the deduction for medical expenses under section 213 of the Internal Revenue
Code;

(B) any deduction for investment interest as defined in section 163(d) of the Internal
Revenue Code; and

(C) the deduction under section 165(a) of the Internal Revenue Code for casualty or
theft losses described in paragraph (2) or (3) of section 165(c) of the Internal Revenue
Code or for losses described in section 165(d) of the Internal Revenue Code;

(16) the amount of disallowed personal exemptions for taxpayers with federal
adjusted gross income over the threshold amount:

(i) the disallowed personal exemption amount is equal to the number of personal
exemptions allowed under section 151(b) and (c) of the Internal Revenue Code multiplied
by the dollar amount for personal exemptions under section 151(d)(1) and (2) of the
Internal Revenue Code, as adjusted for inflation by section 151(d)(4) of the Internal
Revenue Code, and by the applicable percentage;

(ii) "applicable percentage" means two percentage points for each $2,500 (or
fraction thereof) by which the taxpayer's federal adjusted gross income for the taxable
year exceeds the threshold amount. In the case of a married individual filing a separate
return, the preceding sentence shall be applied by substituting "$1,250" for "$2,500." In
no event shall the applicable percentage exceed 100 percent;

(iii) the term "threshold amount" means:

(A) $150,000 in the case of a joint return or a surviving spouse;

(B) $125,000 in the case of a head of a household;

(C) $100,000 in the case of an individual who is not married and who is not a
surviving spouse or head of a household; and

(D) $75,000 in the case of a married individual filing a separate return; and

(iv) the thresholds shall be increased by an amount equal to:

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) of the Internal
Revenue Code for the calendar year in which the taxable year begins, by substituting
"calendar year 1990" for "calendar year 1992" in subparagraph (B) thereof; deleted text begin and
deleted text end

(17) to the extent deducted in the computation of federal taxable income, for taxable
years beginning after December 31, 2010, and before January 1, 2014, the difference
between the standard deduction allowed under section 63(c) of the Internal Revenue Code
and the standard deduction allowed for 2011, 2012, and 2013 under the Internal Revenue
Code as amended through December 1, 2010 new text begin ; and
new text end

new text begin (18) to the extent deducted in the computation of federal taxable income,
contributions for which the taxpayer claims a credit under section 290.0682 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2014.
new text end

Sec. 3.

Minnesota Statutes 2014, section 290.01, subdivision 19c, is amended to read:

Subd. 19c.

Corporations; additions to federal taxable income.

For corporations,
there shall be added to federal taxable income:

(1) the amount of any deduction taken for federal income tax purposes for income,
excise, or franchise taxes based on net income or related minimum taxes, including but not
limited to the tax imposed under section 290.0922, paid by the corporation to Minnesota,
another state, a political subdivision of another state, the District of Columbia, or any
foreign country or possession of the United States;

(2) interest not subject to federal tax upon obligations of: the United States, its
possessions, its agencies, or its instrumentalities; the state of Minnesota or any other
state, any of its political or governmental subdivisions, any of its municipalities, or any
of its governmental agencies or instrumentalities; the District of Columbia; or Indian
tribal governments;

(3) exempt-interest dividends received as defined in section 852(b)(5) of the Internal
Revenue Code;

(4) the amount of any net operating loss deduction taken for federal income tax
purposes under section 172 or 832(c)(10) of the Internal Revenue Code or operations loss
deduction under section 810 of the Internal Revenue Code;

(5) the amount of any special deductions taken for federal income tax purposes
under sections 241 to 247 and 965 of the Internal Revenue Code;

(6) losses from the business of mining, as defined in section 290.05, subdivision 1,
clause (a), that are not subject to Minnesota income tax;

(7) the amount of any capital losses deducted for federal income tax purposes under
sections 1211 and 1212 of the Internal Revenue Code;

(8) the amount of percentage depletion deducted under sections 611 through 614 and
291 of the Internal Revenue Code;

(9) for certified pollution control facilities placed in service in a taxable year
beginning before December 31, 1986, and for which amortization deductions were elected
under section 169 of the Internal Revenue Code of 1954, as amended through December
31, 1985, the amount of the amortization deduction allowed in computing federal taxable
income for those facilities;

(10) the amount of a partner's pro rata share of net income which does not flow
through to the partner because the partnership elected to pay the tax on the income under
section 6242(a)(2) of the Internal Revenue Code;

(11) any increase in subpart F income, as defined in section 952(a) of the Internal
Revenue Code, for the taxable year when subpart F income is calculated without regard to
the provisions of Division C, title III, section 303(b) of Public Law 110-343;

(12) 80 percent of the depreciation deduction allowed under section 168(k)(1)(A)
and (k)(4)(A) of the Internal Revenue Code. For purposes of this clause, if the taxpayer
has an activity that in the taxable year generates a deduction for depreciation under
section 168(k)(1)(A) and (k)(4)(A) and the activity generates a loss for the taxable year
that the taxpayer is not allowed to claim for the taxable year, "the depreciation allowed
under section 168(k)(1)(A) and (k)(4)(A)" for the taxable year is limited to excess of the
depreciation claimed by the activity under section 168(k)(1)(A) and (k)(4)(A) over the
amount of the loss from the activity that is not allowed in the taxable year. In succeeding
taxable years when the losses not allowed in the taxable year are allowed, the depreciation
under section 168(k)(1)(A) and (k)(4)(A) is allowed;

(13) 80 percent of the amount by which the deduction allowed by section 179 of the
Internal Revenue Code exceeds the deduction allowable by section 179 of the Internal
Revenue Code of 1986, as amended through December 31, 2003;

(14) to the extent deducted in computing federal taxable income, the amount of the
deduction allowable under section 199 of the Internal Revenue Code;

(15) the amount of expenses disallowed under section 290.10, subdivision 2; deleted text begin and
deleted text end

(16) discharge of indebtedness income resulting from reacquisition of business
indebtedness and deferred under section 108(i) of the Internal Revenue Code new text begin ; and
new text end

new text begin (17) to the extent deducted in the computation of federal taxable income,
contributions for which the taxpayer claims a credit under section 290.0682 new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2014.
new text end

Sec. 4.

new text begin [290.0682] CREDIT FOR CONTRIBUTIONS TO LAND TRUSTS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section the following terms
have the meanings given.
new text end

new text begin (b) "Land trust" means a community land trust as defined in section 462A.30,
subdivision 8, and as used in section 462A.31.
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new text begin (c) "Qualified city" means a city in Minnesota in which:
new text end

new text begin (1) the average vacancy rate for rental housing located in the city, and in any other
city located within 30 miles or less of the boundaries of the city, has been five percent or
less for at least the prior two-year period;
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new text begin (2) fewer than five residential units per 1,000 residents were constructed in the city
in each of the last ten years; and
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new text begin (3) the population exceeds 1,500.
new text end

new text begin (d) "Qualified employee" means a person employed by a qualified taxpayer at a
location within 30 miles of the boundaries of the qualified city in which the land trust
owns land.
new text end

new text begin (e) "Qualified housing" means newly constructed owner-occupied housing built on
land owned by a land trust and offered for sale at a price at or below 250 percent of the
median sale price for owner-occupied housing in the county.
new text end

new text begin (f) "Qualified taxpayer" means a taxpayer with at least 25 employees.
new text end

new text begin Subd. 2. new text end

new text begin Credit allowed. new text end

new text begin A qualified taxpayer is allowed a credit against the
tax imposed under this chapter for contributions to land trusts used to buy land and
develop qualified housing in qualified cities. The credit equals five percent of the amount
contributed. A qualified taxpayer may claim the credit in each of the 20 years following
the year of the contribution, but may not claim the credit in any year in which the number
of qualified employees is less than the number employed in the year of the contribution.
new text end

new text begin Subd. 3. new text end

new text begin Proportional credits. new text end

new text begin A qualified taxpayer that is a pass-through entity
must provide each investor a statement indicating the investor's share of the credit amount
allowed to the pass-through entity based on its share of the pass-through entity's capital
assets at the time of the contribution.
new text end

new text begin Subd. 4. new text end

new text begin Credit refundable. new text end

new text begin If the amount of the credit under this section for
any taxable year exceeds the qualified taxpayer's liability for tax under this chapter, the
commissioner shall refund the excess to the taxpayer. An amount sufficient to pay the
refunds required by this section is appropriated to the commissioner from the general fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2014.
new text end

Sec. 5. new text begin PROMOTION OF CREATION OF LAND TRUSTS.
new text end

new text begin By January 1, 2016, the commissioner of the Minnesota Housing Finance Agency
shall develop and implement a plan for promoting and facilitating the creation of land
trusts, focusing on areas of the state with shortages of workforce housing, demonstrated by
either low rental vacancy rates or low rates of new construction of owner-occupied housing.
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. 6. new text begin APPROPRIATION.
new text end

new text begin $5,000,000 in fiscal year 2016 is appropriated from the general fund to the
commissioner of employment and economic development to make grants under the
workforce housing grants pilot program in Minnesota Statutes, section 116J.549. Any
unused amounts carryover and remain available through fiscal year 2018. The base
for fiscal year 2018 is zero. Of these amounts, the commissioner of employment and
economic development may use up to five percent for administrative expenses.
new text end