HF 1249

1st Engrossment - 90th Legislature (2017 - 2018) Posted on 02/27/2018 11:54am

A bill for an act
relating to taxation; income; allowing a housing tax credit; requiring reports;
amending Minnesota Statutes 2016, section 297I.20, by adding a subdivision;
proposing coding for new law in Minnesota Statutes, chapters 290; 462A.

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

Section 1.

new text begin [290.0682] MINNESOTA HOUSING TAX CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin For purposes of this section:
new text end

new text begin (1) "entity" means a partnership, limited liability company taxed as a partnership, S
corporation, or property with multiple owners;
new text end

new text begin (2) "entity member" means a partner, member, shareholder, or owner;
new text end

new text begin (3) "taxpayer" means a taxpayer as defined in section 290.01, subdivision 6, or a taxpayer
as defined in section 297I.01, subdivision 16; and
new text end

new text begin (4) terms defined in section 462A.39 have the meanings given in that section.
new text end

new text begin Subd. 2. new text end

new text begin Credit allowed. new text end

new text begin (a) A taxpayer is allowed a credit against the taxes imposed
under this chapter and chapter 297I. The credit equals the amount allocated to the taxpayer
and indicated on the eligibility statement issued to the taxpayer under section 462A.39,
subdivision 3. The taxpayer may claim the amount allocated in the year in which the credit
is allocated and in each of the five following taxable years.
new text end

new text begin (b) A taxpayer eligible for the credit must submit to the commissioner a copy of the
eligibility statement issued by the agency or suballocator with respect to the qualified
Minnesota project, a copy of the project owner's tax return that must be filed as required
under chapter 289A, and any other information required by the commissioner.
new text end

new text begin (c) Credits granted to an entity are passed through to the entity members based on each
entity member's share of the entity's assets or as specially allocated in the organizational
documents as of the last day of the taxable year in which the eligibility statement was issued.
If a Minnesota housing tax credit is allowed to an entity with multiple tiers of ownership,
the credit is passed through to entity members pro rata or as specially allocated in the
organizational documents as of the last day of the taxable year in which the eligibility
statement was issued at each ownership tier.
new text end

new text begin Subd. 3. new text end

new text begin Limitations; carryover. new text end

new text begin (a) A credit allowed under this section may not exceed
liability for tax under this chapter and chapter 297I.
new text end

new text begin (b) If the amount of the credit under this section exceeds the limitation under paragraph
(a), the excess is a credit carryover to each of the 11 succeeding taxable years. The entire
amount of the excess unused credit for the taxable year must be carried first to the earliest
of the taxable years to which the credit may be carried and then to each successive year to
which the credit may be carried.
new text end

new text begin (c) Credits under this subdivision apply against liability after any net operating loss
carryover incorporated in the calculation of federal taxable income.
new text end

new text begin Subd. 4. new text end

new text begin Audit powers. new text end

new text begin Notwithstanding the eligibility statement issued by the agency
or a suballocator under section 462A.38, 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 and that the owner is in compliance with the compliance agreement.
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, 2016.
new text end

Sec. 2.

Minnesota Statutes 2016, section 297I.20, is amended by adding a subdivision to
read:

new text begin Subd. 4. new text end

new text begin Minnesota housing tax credit. new text end

new text begin An insurance company may claim a credit
against the premiums tax imposed under this chapter equal to the amount indicated on the
eligibility statement issued to the company under section 462A.39, subdivision 3. If the
amount of the credit exceeds the liability for tax under this chapter, the excess is a credit
carryover to each of the 11 succeeding taxable years. The entire amount of the excess unused
credit for the taxable year must be carried first to the earliest of the taxable years to which
the credit may be carried and then to each successive year to which the credit may be carried.
This credit does not affect the calculation of police and fire aid under section 69.021.
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, 2016.
new text end

Sec. 3.

new text begin [462A.39] MINNESOTA HOUSING TAX CREDIT.
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 unless the context clearly requires otherwise.
new text end

new text begin (b) "Compliance agreement" means an agreement:
new text end

new text begin (1) between the owner of a qualified Minnesota project and the agency or suballocator;
new text end

new text begin (2) that is recorded as an affordable housing restriction on the real property on which
the qualified Minnesota project is located; and
new text end

new text begin (3) that requires the project to be operated under the requirements of this section for the
compliance period.
new text end

new text begin The agreement may be subordinated to the lien of a bank or other institutional lender
providing financing to the qualified Minnesota project upon the request of the bank or
lender.
new text end

new text begin (c) "Compliance period" means the 15-year period beginning with the first taxable year
a credit is allowed under this section.
new text end

new text begin (d) "Eligibility statement" means a statement issued by the agency or suballocator to the
owner certifying that a project is a qualified Minnesota project and documenting allocation
of the Minnesota housing tax credit. The eligibility statement must specify the annual amount
of the credit allocated to the project for the taxable year and for the five following taxable
years and be in a form prescribed by the commissioner of the agency, in consultation with
the commissioner of revenue.
new text end

new text begin (e) "Federal low-income housing tax credit" means the federal tax credit provided in
section 42 of the Internal Revenue Code.
new text end

new text begin (f) "Greater Minnesota" means the area of Minnesota located outside of the metropolitan
area as defined in section 473.121, subdivision 2.
new text end

new text begin (g) "Internal Revenue Code" has the meaning given in section 290.01, subdivision 31.
new text end

new text begin (h) "Minnesota credit period" means the six taxable years beginning in the taxable year
in which a credit is allocated under subdivision 2.
new text end

new text begin (i) "Owner" means the owner of a qualified Minnesota project.
new text end

new text begin (j) "Qualified Minnesota project" means a low-income housing project that is:
new text end

new text begin (1) located in Minnesota;
new text end

new text begin (2) financed with tax-exempt bonds pursuant to section 42(i)(2) of the Internal Revenue
Code;
new text end

new text begin (3) determined by the agency to be eligible for a federal low-income housing tax credit
without regard to whether or not a federal low-income housing credit is allocated to the
project; and
new text end

new text begin (4) a project for which the owner has entered into a compliance agreement with the
agency or the suballocator that is enforceable by state and local agencies.
new text end

new text begin (k) "Suballocator" means an allocating agency, other than the agency, of low-income
federal housing credits and credits under this section as provided in section 462A.222.
new text end

new text begin (l) "Taxpayer" has the meaning given in section 290.0682, subdivision 1.
new text end

new text begin (m) Terms not otherwise defined in this subdivision have the meanings given in section
42 of the Internal Revenue Code.
new text end

new text begin Subd. 2. new text end

new text begin Minnesota housing tax credit; allocation. new text end

new text begin (a) The agency and all suballocators
may annually allocate credits during a six-year period beginning January 1, 2017, and ending
December 31, 2022. The amount of credits that may be allocated each year is the sum of:
new text end

new text begin (1) $7,000,000;
new text end

new text begin (2) any unused tax credits, if any, for the preceding calendar years; and
new text end

new text begin (3) any tax credits recaptured and repaid to the agency or a suballocator by the owner
of a qualified Minnesota project and available for reallocation under subdivision 5, paragraph
(b).
new text end

new text begin (b) The agency shall allocate credits only to qualified Minnesota projects that the agency
determines:
new text end

new text begin (1) are eligible for the federal low-income housing tax credit; and
new text end

new text begin (2) are not financially feasible without the credit.
new text end

new text begin (c) The agency must allocate 50 percent of the total amount allocated to qualified
Minnesota projects in greater Minnesota.
new text end

new text begin (d) The agency may not allocate more than one credit to any one qualified Minnesota
project.
new text end

new text begin (e) The allocation to any one qualified Minnesota project equals one-sixth of the total
federal low-income housing tax credit allowable over the ten-year federal credit period.
new text end

new text begin Subd. 3. new text end

new text begin Credit allowed. new text end

new text begin When the agency or a suballocator allocates a credit amount
to the owner of a project, the agency or suballocator must issue an eligibility statement to
the owner. The owner may claim the amount allocated in each year of the Minnesota credit
period.
new text end

new text begin Subd. 4. new text end

new text begin Credit duration. new text end

new text begin Except for unused credits carried forward under section
290.0682, the agency may allocate a credit and issue an eligibility statement to a taxpayer
for a Minnesota housing tax credit for a project one time, with the credit allowed in each
year of the Minnesota credit period.
new text end

new text begin Subd. 5. new text end

new text begin Recapture; repayment. new text end

new text begin (a) If within the Minnesota credit period the agency
or suballocator finds that a qualified project issued an eligibility statement is not meeting
the terms of the compliance agreement, the owner must repay the following percentage of
the credit awarded to the project by the agency or the suballocator:
new text end

new text begin Year of the new text end		new text begin Percentage of credit required new text end
new text begin Minnesota credit period: new text end		new text begin to be repaid: new text end
	new text begin First new text end	new text begin 100 percent new text end
	new text begin Second new text end	new text begin 83 percent new text end
	new text begin Third new text end	new text begin 66 percent new text end
	new text begin Fourth new text end	new text begin 49 percent new text end
	new text begin Fifth new text end	new text begin 32 percent new text end
	new text begin Sixth and later new text end	new text begin 16 percent new text end

new text begin (b) No holder of the credit other than the owner is responsible for repayment of the
credit.
new text end

new text begin (c) Amounts repaid under this subdivision are credited to the general fund.
new text end

new text begin Subd. 6. new text end

new text begin Report. new text end

new text begin (a) By January 15 of each year following a year in which the agency
allocates a credit under this section, the agency shall submit a written report to the chairs
and ranking minority members of the legislative committees with jurisdiction over housing
and taxes, in compliance with sections 3.195 and 3.197, on the success and efficiency of
the Minnesota housing tax credit program.
new text end

new text begin (b) The report must:
new text end

new text begin (1) specify the number of qualified Minnesota projects that were allocated tax credits
in the year and the total number of housing units supported in each project;
new text end

new text begin (2) provide descriptive information about each qualified Minnesota housing project that
was allocated credits, including:
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new text begin (i) the geographic location of the project; and
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new text begin (ii) demographic information about residents intended to be served by the project,
including household type, income levels, and rents or set-asides; and
new text end

new text begin (3) provide housing market and demographic information that demonstrates how the
qualified Minnesota projects that were allocated tax credits address the need for affordable
housing in the communities they serve as well as information about any remaining disparities
in affordability of housing in those communities.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment with
credit allocations allowed for taxable years beginning after December 31, 2016.
new text end

Sec. 4. new text begin PURPOSE STATEMENT; TAX EXPENDITURES.
new text end

new text begin Subdivision 1. new text end

new text begin Authority. new text end

new text begin This section is intended to fulfill the requirement under
Minnesota Statutes, section 3.192, that a bill creating, renewing, or continuing a tax
expenditure must include a statement of intent that clearly provides the purpose for the tax
expenditure and a standard or goal against which its effectiveness may be measured.
new text end

new text begin Subd. 2. new text end

new text begin Minnesota housing tax credit. new text end

new text begin The provisions of sections 1 and 2 allowing a
Minnesota housing tax credit are intended to increase development and availability of
low-income housing in Minnesota. The standards against which the effectiveness of the
credit is to be measured are the number of new residential units that became available to
low-income households in projects that are allocated Minnesota housing credits, compared
with the number of new residential units that became available to low-income households
in calendar year 2016, and also the increase in the number of residential units in high-shortage
areas separately for the seven-county metropolitan area and greater Minnesota.
new text end