Minnesota Legislature
HF 3
1st Engrossment - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am
KEY: stricken = removed, old language.
underscored = added, new language.
1.1 A bill for an act 1.2 relating to economic development; authorizing the 1.3 establishing of job opportunity building zones; 1.4 providing tax exemptions for individuals and business 1.5 entities in the zones; providing for repayment of tax 1.6 benefits under certain circumstances; providing for 1.7 the payment of state aid; appropriating money; 1.8 amending Minnesota Statutes 2002, sections 272.02, by 1.9 adding a subdivision; 272.029, by adding a 1.10 subdivision; 290.01, subdivisions 19b, 29; 290.06, 1.11 subdivision 2c, by adding a subdivision; 290.067, 1.12 subdivision 1; 290.0671, subdivision 1; 290.091, 1.13 subdivision 2; 290.0921, subdivision 3; 290.0922, 1.14 subdivision 3; 297A.68, by adding a subdivision; 1.15 297B.03; proposing coding for new law in Minnesota 1.16 Statutes, chapter 469; 477A. 1.17 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.18 Section 1. Minnesota Statutes 2002, section 272.02, is 1.19 amended by adding a subdivision to read: 1.20 Subd. 56. [JOB OPPORTUNITY BUILDING ZONE PROPERTY.] (a) 1.21 Improvements to real property, and personal property, classified 1.22 under section 273.13, subdivision 24, and located within a job 1.23 opportunity building zone are exempt from ad valorem taxes 1.24 levied under chapter 275. 1.25 (b) Improvements to real property, and tangible personal 1.26 property, of an agricultural production facility located within 1.27 an agricultural processing facility zone is exempt from ad 1.28 valorem taxes levied under chapter 275. 1.29 (c) For property to qualify for exemption under paragraph 1.30 (a), the occupant must be a qualified business, as defined in 1.31 section 469.310. 2.1 (d) The exemption applies beginning for the first 2.2 assessment year after designation of the job opportunity 2.3 2.4 building zone by the commissioner of trade and economic 2.5 development. The exemption applies to each assessment year that 2.6 begins during the duration of the job opportunity building 2.7 zone. This exemption does not apply to: 2.8 (1) the levy under section 475.61 or similar levy 2.9 provisions under any other law to pay general obligation bonds, 2.10 if the bonds were issued before the date of designation of the 2.11 job opportunity building zone; or 2.12 (2) a levy under section 126C.17, if the levy was approved 2.13 by the voters before the designation of the job opportunity 2.14 building zone. 2.15 [EFFECTIVE DATE.] This section is effective beginning for 2.16 property taxes assessed in 2004, payable in 2005. 2.17 Sec. 2. Minnesota Statutes 2002, section 272.029, is 2.18 amended by adding a subdivision to read: 2.19 Subd. 7. [EXEMPTION.] The tax imposed under this section 2.20 does not apply to electricity produced by wind energy conversion 2.21 systems located in a job opportunity building zone, designated 2.22 under section 469.314, for the period of the zone designation. 2.23 The exemption applies beginning for the first calendar year 2.24 after designation of the zone and applies to each calendar year 2.25 that begins during the designation of the zone. 2.26 [EFFECTIVE DATE.] This section is effective the day 2.27 following final enactment. 2.28 Sec. 3. Minnesota Statutes 2002, section 290.01, 2.29 subdivision 19b, is amended to read: 2.30 Subd. 19b. [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 2.31 individuals, estates, and trusts, there shall be subtracted from 2.32 federal taxable income: 2.33 (1) interest income on obligations of any authority, 2.34 commission, or instrumentality of the United States to the 2.35 extent includable in taxable income for federal income tax 2.36 purposes but exempt from state income tax under the laws of the 2.37 United States; 3.1 (2) if included in federal taxable income, the amount of 3.2 any overpayment of income tax to Minnesota or to any other 3.3 state, for any previous taxable year, whether the amount is 3.4 received as a refund or as a credit to another taxable year's 3.5 income tax liability; 3.6 (3) the amount paid to others, less the amount used to 3.7 claim the credit allowed under section 290.0674, not to exceed 3.8 $1,625 for each qualifying child in grades kindergarten to 6 and 3.9 $2,500 for each qualifying child in grades 7 to 12, for tuition, 3.10 textbooks, and transportation of each qualifying child in 3.11 attending an elementary or secondary school situated in 3.12 Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 3.13 wherein a resident of this state may legally fulfill the state's 3.14 compulsory attendance laws, which is not operated for profit, 3.15 and which adheres to the provisions of the Civil Rights Act of 3.16 1964 and chapter 363. For the purposes of this clause, 3.17 "tuition" includes fees or tuition as defined in section 3.18 290.0674, subdivision 1, clause (1). As used in this clause, 3.19 "textbooks" includes books and other instructional materials and 3.20 equipment purchased or leased for use in elementary and 3.21 secondary schools in teaching only those subjects legally and 3.22 commonly taught in public elementary and secondary schools in 3.23 this state. Equipment expenses qualifying for deduction 3.24 includes expenses as defined and limited in section 290.0674, 3.25 subdivision 1, clause (3). "Textbooks" does not include 3.26 instructional books and materials used in the teaching of 3.27 religious tenets, doctrines, or worship, the purpose of which is 3.28 to instill such tenets, doctrines, or worship, nor does it 3.29 include books or materials for, or transportation to, 3.30 extracurricular activities including sporting events, musical or 3.31 dramatic events, speech activities, driver's education, or 3.32 similar programs. For purposes of the subtraction provided by 3.33 this clause, "qualifying child" has the meaning given in section 3.34 32(c)(3) of the Internal Revenue Code; 3.35 (4) income as provided under section 290.0802; 3.36 (5) to the extent included in federal adjusted gross 4.1 income, income realized on disposition of property exempt from 4.2 tax under section 290.491; 4.3 (6) to the extent not deducted in determining federal 4.4 taxable income or used to claim the long-term care insurance 4.5 credit under section 290.0672, the amount paid for health 4.6 insurance of self-employed individuals as determined under 4.7 section 162(l) of the Internal Revenue Code, except that the 4.8 percent limit does not apply. If the individual deducted 4.9 insurance payments under section 213 of the Internal Revenue 4.10 Code of 1986, the subtraction under this clause must be reduced 4.11 by the lesser of: 4.12 (i) the total itemized deductions allowed under section 4.13 63(d) of the Internal Revenue Code, less state, local, and 4.14 foreign income taxes deductible under section 164 of the 4.15 Internal Revenue Code and the standard deduction under section 4.16 63(c) of the Internal Revenue Code; or 4.17 (ii) the lesser of (A) the amount of insurance qualifying 4.18 as "medical care" under section 213(d) of the Internal Revenue 4.19 Code to the extent not deducted under section 162(1) of the 4.20 Internal Revenue Code or excluded from income or (B) the total 4.21 amount deductible for medical care under section 213(a); 4.22 (7) the exemption amount allowed under Laws 1995, chapter 4.23 255, article 3, section 2, subdivision 3; 4.24 (8) to the extent included in federal taxable income, 4.25 postservice benefits for youth community service under section 4.26 124D.42 for volunteer service under United States Code, title 4.27 42, sections 12601 to 12604; 4.28 (9) to the extent not deducted in determining federal 4.29 taxable income by an individual who does not itemize deductions 4.30 for federal income tax purposes for the taxable year, an amount 4.31 equal to 50 percent of the excess of charitable contributions 4.32 allowable as a deduction for the taxable year under section 4.33 170(a) of the Internal Revenue Code over $500; 4.34 (10) for taxable years beginning before January 1, 2008, 4.35 the amount of the federal small ethanol producer credit allowed 4.36 under section 40(a)(3) of the Internal Revenue Code which is 5.1 included in gross income under section 87 of the Internal 5.2 Revenue Code; 5.3 (11) for individuals who are allowed a federal foreign tax 5.4 credit for taxes that do not qualify for a credit under section 5.5 290.06, subdivision 22, an amount equal to the carryover of 5.6 subnational foreign taxes for the taxable year, but not to 5.7 exceed the total subnational foreign taxes reported in claiming 5.8 the foreign tax credit. For purposes of this clause, "federal 5.9 foreign tax credit" means the credit allowed under section 27 of 5.10 the Internal Revenue Code, and "carryover of subnational foreign 5.11 taxes" equals the carryover allowed under section 904(c) of the 5.12 Internal Revenue Code minus national level foreign taxes to the 5.13 extent they exceed the federal foreign tax credit;and5.14 (12) in each of the five tax years immediately following 5.15 the tax year in which an addition is required under subdivision 5.16 19a, clause (7), an amount equal to one-fifth of the delayed 5.17 depreciation. For purposes of this clause, "delayed 5.18 depreciation" means the amount of the addition made by the 5.19 taxpayer under subdivision 19a, clause (7), minus the positive 5.20 value of any net operating loss under section 172 of the 5.21 Internal Revenue Code generated for the tax year of the 5.22 addition. The resulting delayed depreciation cannot be less 5.23 than zero; and 5.24 (13) job opportunity building zone income as provided under 5.25 section 469.316. 5.26 [EFFECTIVE DATE.] This section is effective for taxable 5.27 years beginning after December 31, 2003. 5.28 Sec. 4. Minnesota Statutes 2002, section 290.01, 5.29 subdivision 29, is amended to read: 5.30 Subd. 29. [TAXABLE INCOME.] The term "taxable income" 5.31 means: 5.32 (1) for individuals, estates, and trusts, the same as 5.33 taxable net income; 5.34 (2) for corporations, the taxable net income less 5.35 (i) the net operating loss deduction under section 290.095; 5.36and6.1 (ii) the dividends received deduction under section 290.21, 6.2 subdivision 4; and 6.3 (iii) the exemption for operating in a job opportunity 6.4 building zone under section 469.317. 6.5 [EFFECTIVE DATE.] This section is effective for taxable 6.6 years beginning after December 31, 2003. 6.7 Sec. 5. Minnesota Statutes 2002, section 290.06, 6.8 subdivision 2c, is amended to read: 6.9 Subd. 2c. [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 6.10 AND TRUSTS.] (a) The income taxes imposed by this chapter upon 6.11 married individuals filing joint returns and surviving spouses 6.12 as defined in section 2(a) of the Internal Revenue Code must be 6.13 computed by applying to their taxable net income the following 6.14 schedule of rates: 6.15 (1) On the first $25,680, 5.35 percent; 6.16 (2) On all over $25,680, but not over $102,030, 7.05 6.17 percent; 6.18 (3) On all over $102,030, 7.85 percent. 6.19 Married individuals filing separate returns, estates, and 6.20 trusts must compute their income tax by applying the above rates 6.21 to their taxable income, except that the income brackets will be 6.22 one-half of the above amounts. 6.23 (b) The income taxes imposed by this chapter upon unmarried 6.24 individuals must be computed by applying to taxable net income 6.25 the following schedule of rates: 6.26 (1) On the first $17,570, 5.35 percent; 6.27 (2) On all over $17,570, but not over $57,710, 7.05 6.28 percent; 6.29 (3) On all over $57,710, 7.85 percent. 6.30 (c) The income taxes imposed by this chapter upon unmarried 6.31 individuals qualifying as a head of household as defined in 6.32 section 2(b) of the Internal Revenue Code must be computed by 6.33 applying to taxable net income the following schedule of rates: 6.34 (1) On the first $21,630, 5.35 percent; 6.35 (2) On all over $21,630, but not over $86,910, 7.05 6.36 percent; 7.1 (3) On all over $86,910, 7.85 percent. 7.2 (d) In lieu of a tax computed according to the rates set 7.3 forth in this subdivision, the tax of any individual taxpayer 7.4 whose taxable net income for the taxable year is less than an 7.5 amount determined by the commissioner must be computed in 7.6 accordance with tables prepared and issued by the commissioner 7.7 of revenue based on income brackets of not more than $100. The 7.8 amount of tax for each bracket shall be computed at the rates 7.9 set forth in this subdivision, provided that the commissioner 7.10 may disregard a fractional part of a dollar unless it amounts to 7.11 50 cents or more, in which case it may be increased to $1. 7.12 (e) An individual who is not a Minnesota resident for the 7.13 entire year must compute the individual's Minnesota income tax 7.14 as provided in this subdivision. After the application of the 7.15 nonrefundable credits provided in this chapter, the tax 7.16 liability must then be multiplied by a fraction in which: 7.17 (1) the numerator is the individual's Minnesota source 7.18 federal adjusted gross income as defined in section 62 of the 7.19 Internal Revenue Code and increased by the additions required 7.20 under section 290.01, subdivision 19a, clauses (1) and (6), and 7.21 reduced by the subtraction under section 290.01, subdivision 7.22 19b, clause (13), and the Minnesota assignable portion of the 7.23 subtraction for United States government interest under section 7.24 290.01, subdivision 19b, clause (1), after applying the 7.25 allocation and assignability provisions of section 290.081, 7.26 clause (a), or 290.17; and 7.27 (2) the denominator is the individual's federal adjusted 7.28 gross income as defined in section 62 of the Internal Revenue 7.29 Code of 1986, increased by the amounts specified in section 7.30 290.01, subdivision 19a, clauses (1) and (6), and reduced by the 7.31 amounts specified in section 290.01, subdivision 19b,clause7.32 clauses (1) and (13). 7.33 [EFFECTIVE DATE.] This section is effective for taxable 7.34 years beginning after December 31, 2003. 7.35 Sec. 6. Minnesota Statutes 2002, section 290.06, is 7.36 amended by adding a subdivision to read: 8.1 Subd. 29. [JOB OPPORTUNITY BUILDING ZONE JOB CREDIT.] A 8.2 taxpayer that is a qualified business, as defined in section 8.3 469.310, subdivision 11, is allowed a credit as determined under 8.4 section 469.318 against the tax imposed by this chapter. 8.5 [EFFECTIVE DATE.] This section is effective the day 8.6 following final enactment. 8.7 Sec. 7. Minnesota Statutes 2002, section 290.067, 8.8 subdivision 1, is amended to read: 8.9 Subdivision 1. [AMOUNT OF CREDIT.] (a) A taxpayer may take 8.10 as a credit against the tax due from the taxpayer and a spouse, 8.11 if any, under this chapter an amount equal to the dependent care 8.12 credit for which the taxpayer is eligible pursuant to the 8.13 provisions of section 21 of the Internal Revenue Code subject to 8.14 the limitations provided in subdivision 2 except that in 8.15 determining whether the child qualified as a dependent, income 8.16 received as a Minnesota family investment program grant or 8.17 allowance to or on behalf of the child must not be taken into 8.18 account in determining whether the child received more than half 8.19 of the child's support from the taxpayer, and the provisions of 8.20 section 32(b)(1)(D) of the Internal Revenue Code do not apply. 8.21 (b) If a child who has not attained the age of six years at 8.22 the close of the taxable year is cared for at a licensed family 8.23 day care home operated by the child's parent, the taxpayer is 8.24 deemed to have paid employment-related expenses. If the child 8.25 is 16 months old or younger at the close of the taxable year, 8.26 the amount of expenses deemed to have been paid equals the 8.27 maximum limit for one qualified individual under section 21(c) 8.28 and (d) of the Internal Revenue Code. If the child is older 8.29 than 16 months of age but has not attained the age of six years 8.30 at the close of the taxable year, the amount of expenses deemed 8.31 to have been paid equals the amount the licensee would charge 8.32 for the care of a child of the same age for the same number of 8.33 hours of care. 8.34 (c) If a married couple: 8.35 (1) has a child who has not attained the age of one year at 8.36 the close of the taxable year; 9.1 (2) files a joint tax return for the taxable year; and 9.2 (3) does not participate in a dependent care assistance 9.3 program as defined in section 129 of the Internal Revenue Code, 9.4 in lieu of the actual employment related expenses paid for that 9.5 child under paragraph (a) or the deemed amount under paragraph 9.6 (b), the lesser of (i) the combined earned income of the couple 9.7 or (ii) the amount of the maximum limit for one qualified 9.8 individual under section 21(c) and (d) of the Internal Revenue 9.9 Code will be deemed to be the employment related expense paid 9.10 for that child. The earned income limitation of section 21(d) 9.11 of the Internal Revenue Code shall not apply to this deemed 9.12 amount. These deemed amounts apply regardless of whether any 9.13 employment-related expenses have been paid. 9.14 (d) If the taxpayer is not required and does not file a 9.15 federal individual income tax return for the tax year, no credit 9.16 is allowed for any amount paid to any person unless: 9.17 (1) the name, address, and taxpayer identification number 9.18 of the person are included on the return claiming the credit; or 9.19 (2) if the person is an organization described in section 9.20 501(c)(3) of the Internal Revenue Code and exempt from tax under 9.21 section 501(a) of the Internal Revenue Code, the name and 9.22 address of the person are included on the return claiming the 9.23 credit. 9.24 In the case of a failure to provide the information required 9.25 under the preceding sentence, the preceding sentence does not 9.26 apply if it is shown that the taxpayer exercised due diligence 9.27 in attempting to provide the information required. 9.28 In the case of a nonresident, part-year resident, or a 9.29 person who has earned income not subject to tax under this 9.30 chapter including earned income excluded pursuant to section 9.31 290.01, subdivision 19b, clause (13), the credit determined 9.32 under section 21 of the Internal Revenue Code must be allocated 9.33 based on the ratio by which the earned income of the claimant 9.34 and the claimant's spouse from Minnesota sources bears to the 9.35 total earned income of the claimant and the claimant's spouse. 9.36 [EFFECTIVE DATE.] This section is effective for taxable 10.1 years beginning after December 31, 2003. 10.2 Sec. 8. Minnesota Statutes 2002, section 290.0671, 10.3 subdivision 1, is amended to read: 10.4 Subdivision 1. [CREDIT ALLOWED.] (a) An individual is 10.5 allowed a credit against the tax imposed by this chapter equal 10.6 to a percentage of earned income. To receive a credit, a 10.7 taxpayer must be eligible for a credit under section 32 of the 10.8 Internal Revenue Code. 10.9 (b) For individuals with no qualifying children, the credit 10.10 equals 1.9125 percent of the first $4,620 of earned income. The 10.11 credit is reduced by 1.9125 percent of earned income or modified 10.12 adjusted gross income, whichever is greater, in excess of 10.13 $5,770, but in no case is the credit less than zero. 10.14 (c) For individuals with one qualifying child, the credit 10.15 equals 8.5 percent of the first $6,920 of earned income and 8.5 10.16 percent of earned income over $12,080 but less than $13,450. 10.17 The credit is reduced by 5.73 percent of earned income or 10.18 modified adjusted gross income, whichever is greater, in excess 10.19 of $15,080, but in no case is the credit less than zero. 10.20 (d) For individuals with two or more qualifying children, 10.21 the credit equals ten percent of the first $9,720 of earned 10.22 income and 20 percent of earned income over $14,860 but less 10.23 than $16,800. The credit is reduced by 10.3 percent of earned 10.24 income or modified adjusted gross income, whichever is greater, 10.25 in excess of $17,890, but in no case is the credit less than 10.26 zero. 10.27 (e) For a nonresident or part-year resident, the credit 10.28 must be allocated based on the percentage calculated under 10.29 section 290.06, subdivision 2c, paragraph (e). 10.30 (f) For a person who was a resident for the entire tax year 10.31 and has earned income not subject to tax under this 10.32 chapter including income excluded under section 290.01, 10.33 subdivision 19b, clause (13), the credit must be allocated based 10.34 on the ratio of federal adjusted gross income reduced by the 10.35 earned income not subject to tax under this chapter over federal 10.36 adjusted gross income. 11.1 (g) For tax years beginning after December 31, 2001, and 11.2 before December 31, 2004, the $5,770 in paragraph (b) is 11.3 increased to $6,770, the $15,080 in paragraph (c) is increased 11.4 to $16,080, and the $17,890 in paragraph (d) is increased to 11.5 $18,890 for married taxpayers filing joint returns. 11.6 (h) For tax years beginning after December 31, 2004, and 11.7 before December 31, 2007, the $5,770 in paragraph (b) is 11.8 increased to $7,770, the $15,080 in paragraph (c) is increased 11.9 to $17,080, and the $17,890 in paragraph (d) is increased to 11.10 $19,890 for married taxpayers filing joint returns. 11.11 (i) For tax years beginning after December 31, 2007, and 11.12 before December 31, 2010, the $5,770 in paragraph (b) is 11.13 increased to $8,770, the $15,080 in paragraph (c) is increased 11.14 to $18,080 and the $17,890 in paragraph (d) is increased to 11.15 $20,890 for married taxpayers filing joint returns. 11.16 (j) The commissioner shall construct tables showing the 11.17 amount of the credit at various income levels and make them 11.18 available to taxpayers. The tables shall follow the schedule 11.19 contained in this subdivision, except that the commissioner may 11.20 graduate the transition between income brackets. 11.21 [EFFECTIVE DATE.] This section is effective for taxable 11.22 years beginning after December 31, 2003. 11.23 Sec. 9. Minnesota Statutes 2002, section 290.091, 11.24 subdivision 2, is amended to read: 11.25 Subd. 2. [DEFINITIONS.] For purposes of the tax imposed by 11.26 this section, the following terms have the meanings given: 11.27 (a) "Alternative minimum taxable income" means the sum of 11.28 the following for the taxable year: 11.29 (1) the taxpayer's federal alternative minimum taxable 11.30 income as defined in section 55(b)(2) of the Internal Revenue 11.31 Code; 11.32 (2) the taxpayer's itemized deductions allowed in computing 11.33 federal alternative minimum taxable income, but excluding: 11.34 (i) the charitable contribution deduction under section 170 11.35 of the Internal Revenue Code to the extent that the deduction 11.36 exceeds 1.3 percent of adjusted gross income, as defined in 12.1 section 62 of the Internal Revenue Code; 12.2 (ii) the medical expense deduction; 12.3 (iii) the casualty, theft, and disaster loss deduction; and 12.4 (iv) the impairment-related work expenses of a disabled 12.5 person; 12.6 (3) for depletion allowances computed under section 613A(c) 12.7 of the Internal Revenue Code, with respect to each property (as 12.8 defined in section 614 of the Internal Revenue Code), to the 12.9 extent not included in federal alternative minimum taxable 12.10 income, the excess of the deduction for depletion allowable 12.11 under section 611 of the Internal Revenue Code for the taxable 12.12 year over the adjusted basis of the property at the end of the 12.13 taxable year (determined without regard to the depletion 12.14 deduction for the taxable year); 12.15 (4) to the extent not included in federal alternative 12.16 minimum taxable income, the amount of the tax preference for 12.17 intangible drilling cost under section 57(a)(2) of the Internal 12.18 Revenue Code determined without regard to subparagraph (E); 12.19 (5) to the extent not included in federal alternative 12.20 minimum taxable income, the amount of interest income as 12.21 provided by section 290.01, subdivision 19a, clause (1); and 12.22 (6) the amount of addition required by section 290.01, 12.23 subdivision 19a, clause (7); 12.24 less the sum of the amounts determined under the following: 12.25 (1) interest income as defined in section 290.01, 12.26 subdivision 19b, clause (1); 12.27 (2) an overpayment of state income tax as provided by 12.28 section 290.01, subdivision 19b, clause (2), to the extent 12.29 included in federal alternative minimum taxable income; 12.30 (3) the amount of investment interest paid or accrued 12.31 within the taxable year on indebtedness to the extent that the 12.32 amount does not exceed net investment income, as defined in 12.33 section 163(d)(4) of the Internal Revenue Code. Interest does 12.34 not include amounts deducted in computing federal adjusted gross 12.35 income; and 12.36 (4) amounts subtracted from federal taxable income as 13.1 provided by section 290.01, subdivision 19b,clauseclauses (12) 13.2 and (13). 13.3 In the case of an estate or trust, alternative minimum 13.4 taxable income must be computed as provided in section 59(c) of 13.5 the Internal Revenue Code. 13.6 (b) "Investment interest" means investment interest as 13.7 defined in section 163(d)(3) of the Internal Revenue Code. 13.8 (c) "Tentative minimum tax" equals 6.4 percent of 13.9 alternative minimum taxable income after subtracting the 13.10 exemption amount determined under subdivision 3. 13.11 (d) "Regular tax" means the tax that would be imposed under 13.12 this chapter (without regard to this section and section 13.13 290.032), reduced by the sum of the nonrefundable credits 13.14 allowed under this chapter. 13.15 (e) "Net minimum tax" means the minimum tax imposed by this 13.16 section. 13.17 [EFFECTIVE DATE.] This section is effective for taxable 13.18 years beginning after December 31, 2003. 13.19 Sec. 10. Minnesota Statutes 2002, section 290.0921, 13.20 subdivision 3, is amended to read: 13.21 Subd. 3. [ALTERNATIVE MINIMUM TAXABLE INCOME.] 13.22 "Alternative minimum taxable income" is Minnesota net income as 13.23 defined in section 290.01, subdivision 19, and includes the 13.24 adjustments and tax preference items in sections 56, 57, 58, and 13.25 59(d), (e), (f), and (h) of the Internal Revenue Code. If a 13.26 corporation files a separate company Minnesota tax return, the 13.27 minimum tax must be computed on a separate company basis. If a 13.28 corporation is part of a tax group filing a unitary return, the 13.29 minimum tax must be computed on a unitary basis. The following 13.30 adjustments must be made. 13.31 (1) For purposes of the depreciation adjustments under 13.32 section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 13.33 the basis for depreciable property placed in service in a 13.34 taxable year beginning before January 1, 1990, is the adjusted 13.35 basis for federal income tax purposes, including any 13.36 modification made in a taxable year under section 290.01, 14.1 subdivision 19e, or Minnesota Statutes 1986, section 290.09, 14.2 subdivision 7, paragraph (c). 14.3 For taxable years beginning after December 31, 2000, the 14.4 amount of any remaining modification made under section 290.01, 14.5 subdivision 19e, or Minnesota Statutes 1986, section 290.09, 14.6 subdivision 7, paragraph (c), not previously deducted is a 14.7 depreciation allowance in the first taxable year after December 14.8 31, 2000. 14.9 (2) The portion of the depreciation deduction allowed for 14.10 federal income tax purposes under section 168(k) of the Internal 14.11 Revenue Code that is required as an addition under section 14.12 290.01, subdivision 19c, clause (16), is disallowed in 14.13 determining alternative minimum taxable income. 14.14 (3) The subtraction for depreciation allowed under section 14.15 290.01, subdivision 19d, clause (19), is allowed as a 14.16 depreciation deduction in determining alternative minimum 14.17 taxable income. 14.18 (4) The alternative tax net operating loss deduction under 14.19 sections 56(a)(4) and 56(d) of the Internal Revenue Code does 14.20 not apply. 14.21 (5) The special rule for certain dividends under section 14.22 56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 14.23 (6) The special rule for dividends from section 936 14.24 companies under section 56(g)(4)(C)(iii) does not apply. 14.25 (7) The tax preference for depletion under section 57(a)(1) 14.26 of the Internal Revenue Code does not apply. 14.27 (8) The tax preference for intangible drilling costs under 14.28 section 57(a)(2) of the Internal Revenue Code must be calculated 14.29 without regard to subparagraph (E) and the subtraction under 14.30 section 290.01, subdivision 19d, clause (4). 14.31 (9) The tax preference for tax exempt interest under 14.32 section 57(a)(5) of the Internal Revenue Code does not apply. 14.33 (10) The tax preference for charitable contributions of 14.34 appreciated property under section 57(a)(6) of the Internal 14.35 Revenue Code does not apply. 14.36 (11) For purposes of calculating the tax preference for 15.1 accelerated depreciation or amortization on certain property 15.2 placed in service before January 1, 1987, under section 57(a)(7) 15.3 of the Internal Revenue Code, the deduction allowable for the 15.4 taxable year is the deduction allowed under section 290.01, 15.5 subdivision 19e. 15.6 For taxable years beginning after December 31, 2000, the 15.7 amount of any remaining modification made under section 290.01, 15.8 subdivision 19e, not previously deducted is a depreciation or 15.9 amortization allowance in the first taxable year after December 15.10 31, 2004. 15.11 (12) For purposes of calculating the adjustment for 15.12 adjusted current earnings in section 56(g) of the Internal 15.13 Revenue Code, the term "alternative minimum taxable income" as 15.14 it is used in section 56(g) of the Internal Revenue Code, means 15.15 alternative minimum taxable income as defined in this 15.16 subdivision, determined without regard to the adjustment for 15.17 adjusted current earnings in section 56(g) of the Internal 15.18 Revenue Code. 15.19 (13) For purposes of determining the amount of adjusted 15.20 current earnings under section 56(g)(3) of the Internal Revenue 15.21 Code, no adjustment shall be made under section 56(g)(4) of the 15.22 Internal Revenue Code with respect to (i) the amount of foreign 15.23 dividend gross-up subtracted as provided in section 290.01, 15.24 subdivision 19d, clause (1), (ii) the amount of refunds of 15.25 income, excise, or franchise taxes subtracted as provided in 15.26 section 290.01, subdivision 19d, clause (10), or (iii) the 15.27 amount of royalties, fees or other like income subtracted as 15.28 provided in section 290.01, subdivision 19d, clause (11). 15.29 (14) Alternative minimum taxable income excludes the income 15.30 from operating in a job opportunity building zone as provided 15.31 under section 469.317. 15.32 Items of tax preference must not be reduced below zero as a 15.33 result of the modifications in this subdivision. 15.34 [EFFECTIVE DATE.] This section is effective for taxable 15.35 years beginning after December 31, 2003. 15.36 Sec. 11. Minnesota Statutes 2002, section 290.0922, 16.1 subdivision 3, is amended to read: 16.2 Subd. 3. [DEFINITIONS.] (a) "Minnesota sales or receipts" 16.3 means the total sales apportioned to Minnesota pursuant to 16.4 section 290.191, subdivision 5, the total receipts attributed to 16.5 Minnesota pursuant to section 290.191, subdivisions 6 to 8, 16.6 and/or the total sales or receipts apportioned or attributed to 16.7 Minnesota pursuant to any other apportionment formula applicable 16.8 to the taxpayer. 16.9 (b) "Minnesota property" means total Minnesota tangible 16.10 property as provided in section 290.191, subdivisions 9 to 11, 16.11 and any other tangible property located in Minnesota, but does 16.12 not include property located in a job opportunity building zone 16.13 designated under section 469.314. Intangible property shall not 16.14 be included in Minnesota property for purposes of this section. 16.15 Taxpayers who do not utilize tangible property to apportion 16.16 income shall nevertheless include Minnesota property for 16.17 purposes of this section. On a return for a short taxable year, 16.18 the amount of Minnesota property owned, as determined under 16.19 section 290.191, shall be included in Minnesota property based 16.20 on a fraction in which the numerator is the number of days in 16.21 the short taxable year and the denominator is 365. 16.22 (c) "Minnesota payrolls" means total Minnesota payrolls as 16.23 provided in section 290.191, subdivision 12, but does not 16.24 include job opportunity building zone payrolls under section 16.25 468.310, subdivision 8. Taxpayers who do not utilize payrolls 16.26 to apportion income shall nevertheless include Minnesota 16.27 payrolls for purposes of this section. 16.28 [EFFECTIVE DATE.] This section is effective for taxable 16.29 years beginning after December 31, 2003. 16.30 Sec. 12. Minnesota Statutes 2002, section 297A.68, is 16.31 amended by adding a subdivision to read: 16.32 Subd. 37. [JOB OPPORTUNITY BUILDING ZONES.] (a) Purchases 16.33 of tangible personal property or taxable services by a qualified 16.34 business, as defined in section 469.310, are exempt if the 16.35 property or services are primarily used or consumed in a job 16.36 opportunity building zone designated under section 469.314. 17.1 (b) Purchase and use of construction materials and supplies 17.2 for construction of improvements to real property in a job 17.3 opportunity building zone are exempt if the improvements after 17.4 completion of construction are to be used in the conduct of a 17.5 qualified business, as defined in section 469.310. This 17.6 exemption applies regardless of whether the purchases are made 17.7 by the business or a contractor. 17.8 (c) The exemptions under this subdivision apply to a local 17.9 sales and use tax regardless of whether the local sales tax is 17.10 imposed on the sales taxable as defined under this chapter. 17.11 (d) This subdivision applies to sales made during the 17.12 duration of the designation of the zone. 17.13 [EFFECTIVE DATE.] This section is effective for sales made 17.14 on or after the day following final enactment. 17.15 Sec. 13. Minnesota Statutes 2002, section 297B.03, is 17.16 amended to read: 17.17 297B.03 [EXEMPTIONS.] 17.18 There is specifically exempted from the provisions of this 17.19 chapter and from computation of the amount of tax imposed by it 17.20 the following: 17.21 (1) purchase or use, including use under a lease purchase 17.22 agreement or installment sales contract made pursuant to section 17.23 465.71, of any motor vehicle by the United States and its 17.24 agencies and instrumentalities and by any person described in 17.25 and subject to the conditions provided in section 297A.67, 17.26 subdivision 11; 17.27 (2) purchase or use of any motor vehicle by any person who 17.28 was a resident of another state or country at the time of the 17.29 purchase and who subsequently becomes a resident of Minnesota, 17.30 provided the purchase occurred more than 60 days prior to the 17.31 date such person began residing in the state of Minnesota and 17.32 the motor vehicle was registered in the person's name in the 17.33 other state or country; 17.34 (3) purchase or use of any motor vehicle by any person 17.35 making a valid election to be taxed under the provisions of 17.36 section 297A.90; 18.1 (4) purchase or use of any motor vehicle previously 18.2 registered in the state of Minnesota when such transfer 18.3 constitutes a transfer within the meaning of section 118, 331, 18.4 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 18.5 1563(a) of the Internal Revenue Code of 1986, as amended through 18.6 December 31, 1999; 18.7 (5) purchase or use of any vehicle owned by a resident of 18.8 another state and leased to a Minnesota based private or for 18.9 hire carrier for regular use in the transportation of persons or 18.10 property in interstate commerce provided the vehicle is titled 18.11 in the state of the owner or secured party, and that state does 18.12 not impose a sales tax or sales tax on motor vehicles used in 18.13 interstate commerce; 18.14 (6) purchase or use of a motor vehicle by a private 18.15 nonprofit or public educational institution for use as an 18.16 instructional aid in automotive training programs operated by 18.17 the institution. "Automotive training programs" includes motor 18.18 vehicle body and mechanical repair courses but does not include 18.19 driver education programs; 18.20 (7) purchase of a motor vehicle for use as an ambulance by 18.21 an ambulance service licensed under section 144E.10; 18.22 (8) purchase of a motor vehicle by or for a public library, 18.23 as defined in section 134.001, subdivision 2, as a bookmobile or 18.24 library delivery vehicle; 18.25 (9) purchase of a ready-mixed concrete truck; 18.26 (10) purchase or use of a motor vehicle by a town for use 18.27 exclusively for road maintenance, including snowplows and dump 18.28 trucks, but not including automobiles, vans, or pickup trucks; 18.29 (11) purchase or use of a motor vehicle by a corporation, 18.30 society, association, foundation, or institution organized and 18.31 operated exclusively for charitable, religious, or educational 18.32 purposes, except a public school, university, or library, but 18.33 only if the vehicle is: 18.34 (i) a truck, as defined in section 168.011, a bus, as 18.35 defined in section 168.011, or a passenger automobile, as 18.36 defined in section 168.011, if the automobile is designed and 19.1 used for carrying more than nine persons including the driver; 19.2 and 19.3 (ii) intended to be used primarily to transport tangible 19.4 personal property or individuals, other than employees, to whom 19.5 the organization provides service in performing its charitable, 19.6 religious, or educational purpose; 19.7 (12) purchase of a motor vehicle for use by a transit 19.8 provider exclusively to provide transit service is exempt if the 19.9 transit provider is either (i) receiving financial assistance or 19.10 reimbursement under section 174.24 or 473.384, or (ii) operating 19.11 under section 174.29, 473.388, or 473.405; 19.12 (13) purchase or use of a motor vehicle by a qualified 19.13 business, as defined in section 469.310, located in a job 19.14 opportunity building zone, if the motor vehicle is principally 19.15 garaged in the job opportunity building zone and is primarily 19.16 used as part of or in direct support of the person's operations 19.17 carried on in the job opportunity building zone. The exemption 19.18 under this clause also applies to any local sales and use tax. 19.19 [EFFECTIVE DATE.] This section is effective for sales made 19.20 after December 31, 2003. 19.21 Sec. 14. [469.310] [DEFINITIONS.] 19.22 Subdivision 1. [SCOPE.] For purposes of sections 469.310 19.23 to 469.320, the following terms have the meanings given. 19.24 Subd. 2. [AGRICULTURAL PROCESSING FACILITY.] "Agricultural 19.25 processing facility" means one or more facilities or operations 19.26 that transform, package, sort, or grade livestock or livestock 19.27 products, agricultural commodities, or plants or plant products 19.28 into goods that are used for intermediate or final consumption 19.29 including goods for nonfood use, and surrounding property. 19.30 Subd. 3. [APPLICANT.] "Applicant" means a local government 19.31 unit or units applying for designation of an area as a job 19.32 opportunity building zone or a joint powers board, established 19.33 under section 471.59, acting on behalf of two or more local 19.34 government units. 19.35 Subd. 4. [COMMISSIONER.] "Commissioner" means the 19.36 commissioner of trade and economic development. 20.1 Subd. 5. [DEVELOPMENT PLAN.] "Development plan" means a 20.2 plan meeting the requirements of section 469.311. 20.3 Subd. 6. [JOB OPPORTUNITY BUILDING ZONE OR ZONE.] "Job 20.4 opportunity building zone" or "zone" means a zone designated by 20.5 the commissioner under section 469.314, and includes an 20.6 agricultural processing facility zone. 20.7 Subd. 7. [JOB OPPORTUNITY BUILDING ZONE PERCENTAGE OR ZONE 20.8 PERCENTAGE.] "Job opportunity building zone percentage" or "zone 20.9 percentage" means the following fraction reduced to a percentage: 20.10 (1) the numerator of the fraction is: 20.11 (i) the ratio of the taxpayer's property factor under 20.12 section 290.191 located in the zone for the taxable year over 20.13 the property factor numerator determined under section 290.191, 20.14 plus 20.15 (ii) the ratio of the taxpayer's job opportunity building 20.16 zone payroll factor under subdivision 8 over the payroll factor 20.17 numerator determined under section 290.191; and 20.18 (2) the denominator of the fraction is two. 20.19 When calculating the zone percentage for a business that is 20.20 part of a unitary business as defined under section 290.17, 20.21 subdivision 4, the denominator of the payroll and property 20.22 factors is the Minnesota payroll and property of the unitary 20.23 business as reported on the combined report under section 20.24 290.17, subdivision 4, paragraph (j). 20.25 Subd. 8. [JOB OPPORTUNITY BUILDING ZONE PAYROLL 20.26 FACTOR.] "Job opportunity building zone payroll factor" or "job 20.27 opportunity building zone payroll" is that portion of the 20.28 payroll factor under section 290.191 that represents: 20.29 (1) wages or salaries paid to an individual for services 20.30 performed in a job opportunity building zone; or 20.31 (2) wages or salaries paid to individuals working from 20.32 offices within a job opportunity building zone if their 20.33 employment requires them to work outside the zone and the work 20.34 is incidental to the work performed by the individual within the 20.35 zone. 20.36 Subd. 9. [LOCAL GOVERNMENT UNIT.] "Local government unit" 21.1 means a statutory or home rule charter city, county, town, or 21.2 school district. 21.3 Subd. 10. [PERSON.] "Person" includes an individual, 21.4 corporation, partnership, limited liability company, 21.5 association, or any other entity. 21.6 Subd. 11. [QUALIFIED BUSINESS.] (a) "Qualified business" 21.7 means a person carrying on a trade or business at a place of 21.8 business located within a job opportunity building zone. 21.9 (b) A person that relocates a trade or business from 21.10 outside a job opportunity building zone into a zone is not a 21.11 qualified business, unless the business: 21.12 (1)(i) increases full-time employment in the first full 21.13 year of operation within the job opportunity building zone by at 21.14 least 20 percent measured relative to the operations that were 21.15 relocated; or 21.16 (ii) makes a capital investment in the property located 21.17 within a zone equivalent to ten percent of the gross revenues of 21.18 operation that were relocated in the immediately preceding 21.19 taxable year; and 21.20 (2) enters a binding written agreement with the 21.21 commissioner that: 21.22 (i) pledges the business will meet the requirements of 21.23 clause (1); 21.24 (ii) provides for repayment of all tax benefits enumerated 21.25 under section 469.315 to the business under the procedures in 21.26 section 469.319, if the requirements of clause (1) are not met; 21.27 and 21.28 (iii) contains any other terms the commissioner determines 21.29 appropriate. 21.30 Subd. 12. [RELOCATES.] (a) "Relocates" means that the 21.31 trade or business: 21.32 (1) ceases one or more operations or functions at another 21.33 location in Minnesota and begins performing substantially the 21.34 same operations or functions at a location in a job opportunity 21.35 building zone; or 21.36 (2) reduces employment at another location in Minnesota 22.1 during a period starting one year before and ending one year 22.2 after it begins operations in a job opportunity building zone 22.3 and its employees in the job opportunity building zone are 22.4 engaged in the same line of business as the employees at the 22.5 location where it reduced employment. 22.6 (b) "Relocate" does not include an expansion by a business 22.7 that establishes a new facility that does not replace or 22.8 supplant an existing operation or employment, in whole or in 22.9 part. 22.10 [EFFECTIVE DATE.] This section is effective the day 22.11 following final enactment. 22.12 Sec. 15. [469.311] [DEVELOPMENT PLAN.] 22.13 (a) An applicant for designation of a job opportunity 22.14 building zone must adopt a written development plan for the zone 22.15 before submitting the application to the commissioner. 22.16 (b) The development plan must contain, at least, the 22.17 following: 22.18 (1) a map of the proposed zone that indicates the 22.19 geographic boundaries of the zone, the total area, and present 22.20 use and conditions generally of the land and structures within 22.21 those boundaries; 22.22 (2) evidence of community support and commitment from local 22.23 government, local workforce investment boards, school districts, 22.24 and other education institutions, business groups, and the 22.25 public; 22.26 (3) a description of the methods proposed to increase 22.27 economic opportunity and expansion, facilitate infrastructure 22.28 improvement, reduce the local regulatory burden, and identify 22.29 job-training opportunities; 22.30 (4) current social, economic, and demographic 22.31 characteristics of the proposed zone and anticipated 22.32 improvements in education, health, human services, and 22.33 employment if the zone is created; 22.34 (5) a description of anticipated activity in the zone and 22.35 each subzone, including, but not limited to, industrial use, 22.36 industrial site reuse, commercial or retail use, and residential 23.1 use; and 23.2 (6) any other information required by the commissioner. 23.3 [EFFECTIVE DATE.] This section is effective the day 23.4 following final enactment. 23.5 Sec. 16. [469.312] [JOB OPPORTUNITY BUILDING ZONES; 23.6 LIMITATIONS.] 23.7 Subdivision 1. [MAXIMUM SIZE.] A job opportunity building 23.8 zone may not exceed 5,000 acres. For a zone designated as an 23.9 agricultural processing facility zone, the zone also may not 23.10 exceed the size of a site necessary for the agricultural 23.11 processing facility, including ancillary operations and space 23.12 for expansion in the reasonably foreseeable future. 23.13 Subd. 2. [SUBZONES.] The area of a job opportunity 23.14 building zone may consist of one or more noncontiguous areas or 23.15 subzones. 23.16 Subd. 3. [OUTSIDE METROPOLITAN AREA.] The area of a job 23.17 opportunity building zone must be located outside of the 23.18 metropolitan area, as defined in section 473.121, subdivision 2. 23.19 Subd. 4. [BORDER CITY DEVELOPMENT ZONES.] (a) The area of 23.20 a job opportunity building zone may not include the area of a 23.21 border city development zone designated under section 469.1731. 23.22 The city may remove property from a border city development zone 23.23 contingent upon the area being designated as a job opportunity 23.24 building zone. Before removing a parcel of property from a 23.25 border city development zone, the city must obtain the written 23.26 consent to the removal from each recipient that is located on 23.27 the parcel and receives incentives under the border city 23.28 development zone. Consent of any other property owner or 23.29 taxpayer in the border city development zone is not required. 23.30 (b) A city may not provide tax incentives under section 23.31 469.1734 to individuals or businesses for operations or activity 23.32 in a job opportunity building zone. 23.33 Subd. 5. [DURATION LIMIT.] The maximum duration of a zone 23.34 is 12 years. The applicant may request a shorter duration. The 23.35 commissioner may specify a shorter duration, regardless of the 23.36 requested duration. 24.1 [EFFECTIVE DATE.] This section is effective the day 24.2 following final enactment. 24.3 Sec. 17. [469.313] [APPLICATION FOR DESIGNATION.] 24.4 Subdivision 1. [WHO MAY APPLY.] One or more local 24.5 government units, or a joint powers board under section 471.59, 24.6 acting on behalf of two or more units, may apply for designation 24.7 of an area as a job opportunity building zone. All or part of 24.8 the area proposed for designation as a zone must be located 24.9 within the boundaries of each of the governmental units. A 24.10 local government unit may not submit or have submitted on its 24.11 behalf more than one application for designation of a job 24.12 opportunity building zone. 24.13 Subd. 2. [APPLICATION CONTENT.] The application must 24.14 include: 24.15 (1) a development plan meeting the requirements of section 24.16 469.311; 24.17 (2) the proposed duration of the zone, not to exceed 12 24.18 years; 24.19 (3) a resolution or ordinance adopted by each of the cities 24.20 or towns and the counties in which the zone is located, agreeing 24.21 to provide all of the local tax exemptions provided under 24.22 section 469.315; 24.23 (4) if the proposed zone includes area in a border city 24.24 development zone, written consent to removal of the property 24.25 from the border city development zone to the extent required by 24.26 section 469.312, subdivision 4; and 24.27 (5) supporting evidence to allow the commissioner to 24.28 evaluate the application under the criteria in section 469.314. 24.29 [EFFECTIVE DATE.] This section is effective the day 24.30 following final enactment. 24.31 Sec. 18. [469.314] [DESIGNATION OF JOB OPPORTUNITY 24.32 BUILDING ZONES.] 24.33 Subdivision 1. [COMMISSIONER TO DESIGNATE.] (a) The 24.34 commissioner, in consultation with the commissioner of revenue 24.35 and the director of the office of strategic and long-range 24.36 planning, shall designate not more than ten job opportunity 25.1 building zones. In making the designations, the commissioner 25.2 shall consider need and likelihood of success to yield the most 25.3 economic development and revitalization of economically 25.4 distressed rural areas of Minnesota. 25.5 (b) In addition to the designations under paragraph (a), 25.6 the commissioner may, in consultation with the commissioners of 25.7 agriculture and revenue, designate up to five agricultural 25.8 processing facility zones. 25.9 (c) The commissioner may, upon designation of a zone, 25.10 modify the development plan, including the boundaries of the 25.11 zone or subzones, if in the commissioner's opinion a modified 25.12 plan would better meet the objectives of the job opportunity 25.13 building zone program. The commissioner shall notify the 25.14 applicant of the modification and provide a statement of the 25.15 reasons for the modifications. 25.16 Subd. 2. [NEED INDICATORS.] (a) In evaluating applications 25.17 to determine the need for designation of a job opportunity 25.18 building zone, the commissioner shall consider the following 25.19 factors as indicators of need: 25.20 (1) the percentage of the population that is below 200 25.21 percent of the poverty rate, compared with the state as a whole; 25.22 (2) the extent to which the area's average weekly wage is 25.23 significantly lower than the state average weekly wage; 25.24 (3) the amount of property in or near the proposed zone 25.25 that is deteriorated or underutilized; 25.26 (4) the extent to which the median sale price of housing 25.27 units in the area is below the state median; 25.28 (5) the extent to which the median household income of the 25.29 area is lower than the state median household income; 25.30 (6) the extent to which the area experienced a population 25.31 loss during the 20-year period ending the year before the 25.32 application is made; 25.33 (7) the extent to which an area has experienced sudden or 25.34 severe job loss as a result of closing of businesses or other 25.35 employers; 25.36 (8) the extent to which property in the area would remain 26.1 underdeveloped or nonperforming due to physical characteristics; 26.2 (9) the extent to which the area has substantial real 26.3 property with adequate infrastructure and energy to support new 26.4 or expanded development; and 26.5 (10) the extent to which the business startup or expansion 26.6 rates are significantly lower than the respective rate for the 26.7 state. 26.8 (b) In applying the need indicators, the best available 26.9 data should be used. If reported data are not available for the 26.10 proposed zone, data for the smallest area that is available and 26.11 includes the area of the proposed zone may be used. The 26.12 commissioner may require applicants to provide data to 26.13 demonstrate how the area meets one or more of the indicators of 26.14 need. 26.15 Subd. 3. [SUCCESS INDICATORS.] In determining the 26.16 likelihood of success of a proposed zone, the commissioner shall 26.17 consider: 26.18 (1) the strength and viability of the proposed development 26.19 goals, objectives, and strategies in the development plan; 26.20 (2) whether the development plan is creative and innovative 26.21 in comparison to other applications; 26.22 (3) local public and private commitment to development of 26.23 the proposed zone and the potential cooperation of surrounding 26.24 communities; 26.25 (4) existing resources available to the proposed zone; 26.26 (5) how the designation of the zone would relate to other 26.27 economic and community development projects and to regional 26.28 initiatives or programs; 26.29 (6) how the regulatory burden will be eased for businesses 26.30 operating in the proposed zone; 26.31 (7) proposals to establish and link job creation and job 26.32 training; and 26.33 (8) the extent to which the development is directed at 26.34 encouraging and that designation of the zone is likely to result 26.35 in the creation of high-paying jobs. 26.36 Subd. 4. [DESIGNATION SCHEDULE.] (a) The schedule in 27.1 paragraphs (b) to (e) applies to the designation of job 27.2 opportunity building zones. 27.3 (b) The commissioner shall publish the form for 27.4 applications and any procedural, form, or content requirements 27.5 for applications by no later than August 1, 2003. The 27.6 commissioner may publish these requirements on the Internet, in 27.7 the State Register, or by any other means the commissioner 27.8 determines appropriate to disseminate the information to 27.9 potential applicants for designation. 27.10 (c) Applications must be submitted by October 15, 2003. 27.11 (d) The commissioner shall designate the zones by no later 27.12 than December 31, 2003. 27.13 (e) The designation of the zones takes effect January 1, 27.14 2004. 27.15 [EFFECTIVE DATE.] This section is effective the day 27.16 following final enactment. 27.17 Sec. 19. [469.315] [TAX INCENTIVES AVAILABLE IN ZONES.] 27.18 Qualified businesses that operate in a job opportunity 27.19 building zone, individuals who invest in a qualified business 27.20 that operates in a job opportunity building zone, and property 27.21 located in a job opportunity building zone qualify for: 27.22 (1) exemption from individual income taxes as provided 27.23 under section 469.316; 27.24 (2) exemption from corporate franchise taxes as provided 27.25 under section 469.317; 27.26 (3) exemption from the state sales and use tax and any 27.27 local sales and use taxes on qualifying purchases as provided in 27.28 section 297A.68, subdivision 37; 27.29 (4) exemption from the state sales tax on motor vehicles 27.30 and any local sales tax on motor vehicles as provided under 27.31 section 297B.03; 27.32 (5) exemption from the property tax as provided in section 27.33 272.02, subdivision 56; 27.34 (6) exemption from the wind energy production tax under 27.35 section 272.029, subdivision 7; and 27.36 (7) the jobs credit allowed under section 469.318. 28.1 [EFFECTIVE DATE.] This section is effective the day 28.2 following final enactment. 28.3 Sec. 20. [469.316] [INDIVIDUAL INCOME TAX EXEMPTION.] 28.4 Subdivision 1. [APPLICATION.] An individual operating a 28.5 trade or business in a job opportunity building zone, and an 28.6 individual making a qualifying investment in a qualified 28.7 business operating in a job opportunity building zone qualifies 28.8 for the exemptions from taxes imposed under chapter 290, as 28.9 provided in this section. The exemptions provided under this 28.10 section apply only to the extent that the income otherwise would 28.11 be taxable under chapter 290. Subtractions under this section 28.12 from federal taxable income, alternative minimum taxable income, 28.13 or any other base subject to tax are limited to the amount that 28.14 otherwise would be included in the tax base absent the exemption 28.15 under this section. 28.16 Subd. 2. [RENTS.] An individual is exempt from the taxes 28.17 imposed under chapter 290 on net rents derived from real or 28.18 tangible personal property located in a zone for a taxable year 28.19 in which the zone was designated a job opportunity building 28.20 zone. If tangible personal property was used both within and 28.21 outside of the zone, the exemption amount for the net rental 28.22 income must be multiplied by a fraction, the numerator of which 28.23 is the number of days the property was used in the zone and the 28.24 denominator of which is the total days. 28.25 Subd. 3. [BUSINESS INCOME.] An individual is exempt from 28.26 the taxes imposed under chapter 290 on net income from the 28.27 operation of a qualified business in a job opportunity building 28.28 zone. If the trade or business is carried on within and without 28.29 the zone and the individual is not a resident of Minnesota, the 28.30 exemption must be apportioned based on the zone percentage for 28.31 the taxable year. If the trade or business is carried on within 28.32 and without the zone and the individual is a resident of 28.33 Minnesota, the exemption must be apportioned based on the zone 28.34 percentage for the taxable year, except the ratios under section 28.35 469.310, subdivision 7, clause (1), items (i) and (ii), must use 28.36 the denominators of the property and payroll factors determined 29.1 under section 290.191. No subtraction is allowed under this 29.2 section in excess of 20 percent of the sum of the job 29.3 opportunity building zone payroll and the adjusted basis of the 29.4 property at the time that the property is first used in the job 29.5 opportunity building zone by the business. 29.6 Subd. 4. [CAPITAL GAINS.] (a) An individual is exempt from 29.7 the taxes imposed under chapter 290 on: 29.8 (1) net gain derived on a sale or exchange of real property 29.9 located in the zone. If the property was held by the individual 29.10 during a period when the zone was not designated, the gain must 29.11 be prorated based on the percentage of time, measured in 29.12 calendar days, that the real property was held by the individual 29.13 during the period the zone designation was in effect to the 29.14 total period of time the real property was held by the 29.15 individual; 29.16 (2) net gain derived on a sale or exchange of tangible 29.17 personal property used by a qualified business in the zone. If 29.18 the property was held by the individual during a period when the 29.19 zone was not designated, the gain must be prorated based on the 29.20 percentage of time, measured in calendar days, that the property 29.21 was held by the individual during the period the zone 29.22 designation was in effect to the total period of time the 29.23 property was held by the individual. If the tangible personal 29.24 property was used outside of the zone during the period of the 29.25 zone's designation, the exemption must be multiplied by a 29.26 fraction, the numerator of which is the number of days the 29.27 property was used in the zone during the time of the designation 29.28 and the denominator of which is the total days the property was 29.29 held during the time of the designation; and 29.30 (3) net gain derived on a sale of an ownership interest in 29.31 a qualified business operating in the job opportunity building 29.32 zone, meeting the requirements of paragraph (b). The exemption 29.33 on the gain must be multiplied by the zone percentage of the 29.34 business for the taxable year prior to the sale. 29.35 (b) A qualified business meets the requirements of 29.36 paragraph (a), clause (3), if it is a corporation, an S 30.1 corporation, or a partnership, and for the taxable year its job 30.2 opportunity building zone percentage exceeds 25 percent. For 30.3 purposes of paragraph (a), clause (3), the zone percentage must 30.4 be calculated by modifying the ratios under section 469.310, 30.5 subdivision 7, clause (1), items (i) and (ii), to use the 30.6 denominators of the property and payroll factors determined 30.7 under section 290.191. Upon the request of an individual 30.8 holding an ownership interest in the entity, the entity must 30.9 certify to the owner, in writing, the job opportunity building 30.10 zone percentage needed to determine the exemption. 30.11 [EFFECTIVE DATE.] This section is effective for taxable 30.12 years beginning after December 31, 2003. 30.13 Sec. 21. [469.317] [CORPORATE FRANCHISE TAX EXEMPTION.] 30.14 (a) A qualified business is exempt from taxation under 30.15 section 290.02, the alternative minimum tax under section 30.16 290.0921, and the minimum fee under section 290.0922, on the 30.17 portion of its income attributable to operations within the 30.18 zone. This exemption is determined as follows: 30.19 (1) for purposes of the tax imposed under section 290.02, 30.20 by multiplying its taxable net income by its zone percentage and 30.21 subtracting the result in determining taxable income; 30.22 (2) for purposes of the alternative minimum tax under 30.23 section 290.0921, by multiplying its alternative minimum taxable 30.24 income by its zone percentage and reducing alternative minimum 30.25 taxable income by this amount; and 30.26 (3) for purposes of the minimum fee under section 290.0922, 30.27 by excluding property and payroll in the zone from the 30.28 computations of the fee. 30.29 (b) No subtraction is allowed under this section in excess 30.30 of 20 percent of the sum of the corporation's job opportunity 30.31 building zone payroll and the adjusted basis of the property at 30.32 the time that the property is first used in the job opportunity 30.33 building zone by the corporation. 30.34 [EFFECTIVE DATE.] This section is effective for taxable 30.35 years beginning after December 31, 2003. 30.36 Sec. 22. [469.318] [JOBS CREDIT.] 31.1 Subdivision 1. [CREDIT ALLOWED.] A qualified business is 31.2 allowed a credit against the taxes imposed under chapter 290. 31.3 The credit equals seven percent of the: 31.4 (1) lesser of: 31.5 (i) zone payroll for the taxable year, less the zone 31.6 payroll for the base year; or 31.7 (ii) total Minnesota payroll for the taxable year, less 31.8 total Minnesota payroll for the base year; minus 31.9 (2) $30,000 multiplied by (the number of full-time 31.10 equivalent employee positions that the qualified business 31.11 employs in the job opportunity building zone for the taxable 31.12 year, minus the number of full-time equivalent employees the 31.13 business employed in the zone in the base year, but not less 31.14 than zero). 31.15 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 31.16 the following terms have the meanings given. 31.17 (b) "Base year" means the taxable year beginning during the 31.18 calendar year in which the commissioner designated the zone. 31.19 (c) "Full-time equivalent employee position" means the 31.20 equivalent of annualized expected hours of work equal to 2,080 31.21 hours. 31.22 (d) "Minnesota payroll" means the wages or salaries 31.23 attributed to Minnesota under section 290.191, subdivision 12, 31.24 for the qualified business or the unitary business of which the 31.25 qualified business is a part, whichever is greater. 31.26 (e) "Zone payroll" means wages or salaries used to 31.27 determine the zone payroll factor for the qualified business. 31.28 Subd. 3. [INFLATION ADJUSTMENT.] For taxable years 31.29 beginning after December 31, 2004, the dollar amount in 31.30 subdivision 1, clause (2), is annually adjusted for inflation. 31.31 The commissioner of revenue shall adjust the amount by the 31.32 percentage determined under section 290.06, subdivision 2d, for 31.33 the taxable year. 31.34 Subd. 4. [REFUNDABLE.] If the amount of the credit exceeds 31.35 the liability for tax under chapter 290, the commissioner of 31.36 revenue shall refund the excess to the qualified business. 32.1 Subd. 5. [APPROPRIATION.] An amount sufficient to pay the 32.2 refunds authorized by this section is appropriated to the 32.3 commissioner of revenue from the general fund. 32.4 [EFFECTIVE DATE.] This section is effective the day 32.5 following final enactment. 32.6 Sec. 23. [469.319] [REPAYMENT OF TAX BENEFITS.] 32.7 Subdivision 1. [REPAYMENT OBLIGATION.] A business must 32.8 repay the amount of the tax reduction received during the two 32.9 years immediately before it ceased to operate in the zone, if 32.10 the business: 32.11 (1) received tax reductions authorized by section 469.315; 32.12 (2) relocated into a job opportunity building zone after 32.13 designation of the zone; and 32.14 (3) ceased to operate its facility located within the job 32.15 opportunity building zone or otherwise ceases to be or is not a 32.16 qualified business. 32.17 Subd. 2. [DEFINITIONS.] (a) For purposes of this section, 32.18 the following terms have the meanings given. 32.19 (b) "Business" means any person who received tax benefits 32.20 enumerated in section 469.315. 32.21 (c) "Commissioner" means the commissioner of revenue. 32.22 Subd. 3. [DISPOSITION OR REPAYMENT.] The repayment must be 32.23 paid to the state to the extent it represents a state tax 32.24 reduction and to the county to the extent it represents a 32.25 property tax reduction. Any amount repaid to the state must be 32.26 deposited in the general fund. Any amount repaid to the county 32.27 for the property tax exemption must be distributed to the local 32.28 governments with authority to levy taxes in the zone in the same 32.29 manner provided for distribution of payment of delinquent 32.30 property taxes. Any repayment of local sales taxes must be 32.31 repaid to the city or county imposing the local sales tax. 32.32 Subd. 4. [REPAYMENT PROCEDURES.] (a) For the repayment of 32.33 taxes imposed under chapter 290 or 297A or local taxes collected 32.34 pursuant to section 297A.99, a business must file an amended 32.35 return with the commissioner of revenue and pay any taxes 32.36 required to be repaid within 30 days after ceasing to do 33.1 business in the zone. The amount required to be repaid is 33.2 determined by calculating the tax for the period or periods for 33.3 which repayment is required without regard to the exemptions and 33.4 credits allowed under section 469.315. 33.5 (b) For the repayment of taxes imposed under chapter 297B, 33.6 a business must pay any taxes required to be repaid to the motor 33.7 vehicle registrar, as agent for the commissioner of revenue, 33.8 within 30 days after ceasing to do business in the zone. 33.9 (c) For the repayment of property taxes, the county auditor 33.10 shall prepare a tax statement for the business, applying the 33.11 applicable tax extension rates for each payable year and provide 33.12 a copy to the business. The business must pay the taxes to the 33.13 county treasurer within 30 days after receipt of the tax 33.14 statement. 33.15 (d) The provisions of chapters 270 and 289A relating to the 33.16 commissioner's authority to audit, assess, and collect the tax 33.17 and to hear appeals are applicable to the repayment required 33.18 under paragraphs (a) and (b). The commissioner may impose civil 33.19 penalties as provided in chapter 289A, and the additional tax 33.20 and penalties are subject to interest at the rate provided in 33.21 section 270.75, from 30 days after ceasing to do business in the 33.22 job opportunity building zone until the date the tax is paid. 33.23 (e) If a property tax is not repaid under paragraph (c), 33.24 the county treasurer shall add the amount required to be repaid 33.25 to the property taxes assessed against the property for payment 33.26 in the year following the year in which the treasurer discovers 33.27 that the business ceased to operate in the job opportunity 33.28 building zone. 33.29 (f) For determining the tax required to be repaid, a tax 33.30 reduction is deemed to have been received on the date that the 33.31 tax would have been due if the taxpayer had not been entitled to 33.32 the exemption. 33.33 (g) The commissioner may assess the repayment of taxes 33.34 under paragraph (d) any time within two years after the business 33.35 ceases to operate in the job opportunity building zone, or 33.36 within any period of limitations for the assessment of tax under 34.1 section 289A.38, whichever period is later. 34.2 Subd. 5. [WAIVER AUTHORITY.] The commissioner may waive 34.3 all or part of a repayment, if the commissioner, in consultation 34.4 with the commissioner of trade and economic development and 34.5 appropriate officials from the local government units in which 34.6 the qualified business is located, determines that requiring 34.7 repayment of the tax is not in the best interest of the state or 34.8 the local government units and the business ceased operating as 34.9 a result of circumstances beyond its control including, but not 34.10 limited to: 34.11 (1) a natural disaster; 34.12 (2) unforeseen industry trends; or 34.13 (3) loss of a major supplier or customer. 34.14 [EFFECTIVE DATE.] This section is effective the day 34.15 following final enactment. 34.16 Sec. 24. [469.320] [ZONE PERFORMANCE; REMEDIES.] 34.17 Subdivision 1. [REPORTING REQUIREMENT.] An applicant 34.18 receiving designation of a job opportunity building zone under 34.19 section 469.314 must annually report to the commissioner on its 34.20 progress in meeting the zone performance goals under the 34.21 development plan for the zone. 34.22 Subd. 2. [PROCEDURES.] For reports required by subdivision 34.23 1, the commissioner may prescribe: 34.24 (1) the required time or times by which the reports must be 34.25 filed; 34.26 (2) the form of the report; and 34.27 (3) the information required to be included in the report. 34.28 Subd. 3. [REMEDIES.] If the commissioner determines, based 34.29 on a report filed under subdivision 1 or other available 34.30 information, that a zone or subzone is failing to meet its 34.31 performance goals, the commissioner may take any actions the 34.32 commissioner determines appropriate, including modification of 34.33 the boundaries of the zone or a subzone or termination of the 34.34 zone or a subzone. Before taking any action, the commissioner 34.35 shall consult with the applicant and the affected local 34.36 government units, including notifying them of the proposed 35.1 actions to be taken. The commissioner shall publish any order 35.2 modifying a zone in the State Register and on the Internet. The 35.3 applicant may appeal the commissioner's order under the 35.4 contested case procedures of chapter 14. 35.5 Subd. 4. [EXISTING BUSINESSES.] An action to remove area 35.6 from a zone or to terminate a zone under this section does not 35.7 apply to: 35.8 (1) the property tax on improvements constructed before the 35.9 first January 2 following publication of the commissioner's 35.10 order; 35.11 (2) sales tax on purchases made before the first day of the 35.12 next calendar month beginning at least 30 days after publication 35.13 of the commissioner's order; and 35.14 (3) individual income tax or corporate franchise tax 35.15 attributable to a facility that was in operation before the 35.16 publication of the commissioner's order. 35.17 Sec. 25. [477A.08] [JOB OPPORTUNITY BUILDING ZONE AID.] 35.18 Subdivision 1. [ELIGIBILITY.] (a) For each assessment year 35.19 that the exemption for job opportunity building zone property is 35.20 in effect under section 272.02, subdivision 56, the assessor 35.21 shall determine the difference between the actual net tax 35.22 capacity and the net tax capacity that would be determined for 35.23 the job opportunity building zone if the exemption were not in 35.24 effect. 35.25 (b) Each city and county is eligible for aid equal to 35.26 one-half of: 35.27 (1) the amount by which the sum of the differences 35.28 determined in paragraph (a) for the corresponding assessment 35.29 year exceeds three percent of the city's or county's total 35.30 taxable net tax capacity for taxes payable in 2003, multiplied 35.31 by 35.32 (2) the city's or the county's, as applicable, average 35.33 local tax rate for taxes payable in 2003. 35.34 Subd. 2. [CERTIFICATION.] The county assessor shall notify 35.35 the commissioner of revenue of the amount determined under 35.36 subdivision 1, paragraph (b), clause (1), for any city or county 36.1 that qualifies for aid under this section by June 30 of the 36.2 assessment year, in a form prescribed by the commissioner. The 36.3 commissioner shall notify each city and county of its qualifying 36.4 aid amount by August 15 of the assessment year. 36.5 Subd. 3. [APPROPRIATION; PAYMENT.] The commissioner shall 36.6 pay each city and county its qualifying aid amount by July 20 of 36.7 the following year. An amount sufficient to pay the aid under 36.8 this section is appropriated to the commissioner of revenue from 36.9 the general fund. 36.10 [EFFECTIVE DATE.] This section is effective beginning for 36.11 aid based on property taxes assessed in 2004, payable in 2005. 36.12 Sec. 26. [APPROPRIATION; COST OF ADMINISTRATION.] 36.13 $100,000 in fiscal year 2004 and $30,000 in fiscal year 36.14 2005 are appropriated to the commissioner of trade and economic 36.15 development for the cost of designating job opportunity building 36.16 zones. 36.17 $53,000 in fiscal year 2004 and $29,000 in fiscal year 2005 36.18 are appropriated to the commissioner of revenue for the cost of 36.19 administering the tax provisions of this act. 36.20 [EFFECTIVE DATE.] This section is effective the day 36.21 following final enactment.