HF 3696

1st Engrossment - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to taxation; delaying the final designation of the international economic
development zone and the beginning of zone duration; changing corresponding
dates relating to tax incentives; authorizing political subdivisions to apply for
foreign trade zone powers; extending the period that appropriation for funding
certain grants to qualifying business is available; amending Minnesota Statutes
2005 Supplement, sections 272.02, subdivision 83; 290.0922, subdivisions 2, 3;
297A.68, subdivision 41; 469.322; 469.323, subdivision 2; 469.327; Laws 2005,
First Special Session chapter 3, article 10, section 23; proposing coding for new
law in Minnesota Statutes, chapter 469.

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

Section 1.

Minnesota Statutes 2005 Supplement, section 272.02, subdivision 83,
is amended to read:

Subd. 83.

International economic development zone property.

(a) Improvements
to real property, and personal property, classified under section 273.13, subdivision
24, and located within the international economic development zone designated under
section 469.322, are exempt from ad valorem taxes levied under chapter 275, if the
improvements are:

(1) part of a regional distribution center as defined in section 469.321; or

(2) occupied by a qualified business as defined in section 469.321, that uses the
improvements primarily in freight forwarding operations.

(b) deleted text begin The exemption applies beginning for the first assessment year after designation of
the international economic development zone. deleted text end The exemption applies to each assessment
year that begins during the duration of the international economic development zone. To
be exempt under paragraph (a), clause (2), the property must be occupied by July 1 of the
assessment year by a qualified business that has signed the business subsidy agreement
by July 1 of the assessment year.

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2005 Supplement, section 290.0922, subdivision 2, is
amended to read:

Subd. 2.

Exemptions.

The following entities are exempt from the tax imposed
by this section:

(1) corporations exempt from tax under section 290.05;

(2) real estate investment trusts;

(3) regulated investment companies or a fund thereof; and

(4) entities having a valid election in effect under section 860D(b) of the Internal
Revenue Code;

(5) town and farmers' mutual insurance companies;

(6) cooperatives organized under chapter 308A or 308B that provide housing
exclusively to persons age 55 and over and are classified as homesteads under section
273.124, subdivision 3;

(7) an entity, if for the taxable year all of its property is located in a job opportunity
building zone designated under section 469.314 and all of its payroll is a job opportunity
building zone payroll under section 469.310; and

(8) an entity, if for the taxable year all of its property is located in an international
economic development zone designated under section 469.322, and all of its payroll is
international economic development zone payroll under section 469.321. new text begin The exemption
under this clause applies to taxable years beginning during the duration of the international
economic development zone.
new text end

Entities not specifically exempted by this subdivision are subject to tax under this
section, notwithstanding section 290.05.

new text begin EFFECTIVE DATE. new text end

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

Sec. 3.

Minnesota Statutes 2005 Supplement, section 290.0922, subdivision 3, is
amended to read:

Subd. 3.

Definitions.

(a) "Minnesota sales or receipts" means the total sales
apportioned to Minnesota pursuant to section 290.191, subdivision 5, the total receipts
attributed to Minnesota pursuant to section 290.191, subdivisions 6 to 8, and/or the
total sales or receipts apportioned or attributed to Minnesota pursuant to any other
apportionment formula applicable to the taxpayer.

(b) "Minnesota property" means total Minnesota tangible property as provided in
section 290.191, subdivisions 9 to 11, any other tangible property located in Minnesota,
but does not include new text begin : (1) new text end property located in a job opportunity building zone designated
under section 469.314, deleted text begin or deleted text end new text begin (2) new text end property of a qualified business located in a biotechnology
and health sciences industry zone designated under section 469.334, or new text begin (3) for taxable
years beginning during the duration of the zone, new text end property of a qualified business located
in the international economic development zone designated under section 469.322.
Intangible property shall not be included in Minnesota property for purposes of this
section. Taxpayers who do not utilize tangible property to apportion income shall
nevertheless include Minnesota property for purposes of this section. On a return for
a short taxable year, the amount of Minnesota property owned, as determined under
section 290.191, shall be included in Minnesota property based on a fraction in which the
numerator is the number of days in the short taxable year and the denominator is 365.

(c) "Minnesota payrolls" means total Minnesota payrolls as provided in section
290.191, subdivision 12, but does not include new text begin : (1) new text end job opportunity building zone payrolls
under section 469.310, subdivision 8, deleted text begin or deleted text end new text begin (2) new text end biotechnology and health sciences industry
zone payrolls under section 469.330, subdivision 8, or new text begin (3) for taxable years beginning
during the duration of the zone, new text end international economic development zone payrolls under
section 469.321, subdivision 9. Taxpayers who do not utilize payrolls to apportion income
shall nevertheless include Minnesota payrolls for purposes of this section.

new text begin EFFECTIVE DATE. new text end

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

Sec. 4.

Minnesota Statutes 2005 Supplement, section 297A.68, subdivision 41, is
amended to read:

Subd. 41.

International economic development zones.

(a) Purchases of tangible
personal property or taxable services by a qualified business, as defined in section 469.321,
are exempt if the property or services are primarily used or consumed in the international
economic development zone designated under section 469.322.

(b) Purchase and use of construction materials, supplies, and equipment incorporated
into the construction of improvements to real property in the international economic
development zone are exempt if the improvements after completion of construction are
to be used as a regional distribution center as defined in section 469.321 or otherwise
used in the conduct of freight forwarding activities of a qualified business as defined in
section 469.321. This exemption applies regardless of whether the purchases are made
by the business or a contractor.

(c) The exemptions under this subdivision apply to a local sales and use tax,
regardless of whether the local tax is imposed on sales taxable under this chapter or in
another law, ordinance, or charter provision.

(d) The deleted text begin exemption in paragraph (a) applies deleted text end new text begin exemptions in this section apply new text end to sales
deleted text begin during the duration of the zone and after June 30, 2007, if the purchase was made and
delivery received after the business signs the business subsidy agreement required under
chapter 469 deleted text end new text begin and purchases made after the date of final zone designation under section
469.322, paragraph (c), and before the expiration of the zone under section 469.322,
paragraph (d) new text end .

(e) For purchases made for improvements to real property to be occupied by a
business that has not signed a business subsidy agreement at the time of the purchase, the
tax must be imposed and collected as if the rate under section 297A.62, subdivision 1,
applied, and then refunded in the manner provided in section 297A.75 deleted text begin beginning in fiscal
year deleted text end deleted text begin 2008 deleted text end . The taxpayer must attach to the claim for refund information sufficient for
the commissioner to be able to determine that the improvements are being occupied by
a business that has signed a business subsidy agreement.

new text begin EFFECTIVE DATE. new text end

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

Sec. 5.

new text begin [469.193] FOREIGN TRADE ZONES.
new text end

new text begin A city, county, town, or other political subdivision may apply to the board defined in
United States Code, title 19, section 81a, for the right to use the powers provided in United
States Code, title 19, sections 81a to 81u. If the right is granted, the city, county, town, or
other political subdivision may use the powers within or outside of a port district. Any
city, county, town, or other political subdivision may apply jointly with any other city,
county, town, or other political subdivision.
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.

Minnesota Statutes 2005 Supplement, section 469.322, is amended to read:

469.322 DESIGNATION OF INTERNATIONAL ECONOMIC
DEVELOPMENT ZONE.

(a) An area designated as a foreign trade zone may be designated by the foreign
trade zone authority as an international economic development zone if within the zone
a regional distribution center is being developed pursuant to section 469.323. The zone
must consist of contiguous area of not less than 500 acres and not more than 1,000 acres.
The designation authority under this section is limited to one zone.

(b) In making the designation, the foreign trade zone authority, in consultation with
the Minnesota Department of Transportation and the Metropolitan Council, shall consider
access to major transportation routes, consistency with current state transportation and
air cargo planning, adequacy of the size of the site, access to airport facilities, present
and future capacity at the designated airport, the capability to meet integrated present
and future air cargo, security, and inspection services, and access to other infrastructure
and financial incentives. The border of the international economic development zone
must be no more than 60 miles distant or 90 minutes drive time from the border of the
Minneapolis-St. Paul International Airport.

new text begin (c) Before final designation of the zone, the foreign trade zone authority, in
consultation with the applicant, must conduct a transportation impact study based on the
regional model and utilizing traffic forecasting and assignments. The results must be used
to evaluate the effects of the proposed use on the transportation system and identify any
needed improvements. If the site is in the metropolitan area, the study must also evaluate
the effect of the transportation impacts on the metropolitan transportation system plan
as well as the comprehensive plans of the municipalities that would be affected. The
authority shall provide copies of the study to the legislature under section 3.195 and to the
chairs of the committees with jurisdiction over transportation and economic development.
The applicant must pay the cost of the study.
new text end

deleted text begin (c) deleted text end new text begin (d) new text end Final zone designation must be made by June 30, deleted text begin 2006 deleted text end new text begin 2008 new text end .

deleted text begin (d) deleted text end new text begin (e) new text end Duration of the zone is a 12-year period beginning on January 1, deleted text begin 2007 deleted text end new text begin 2010 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. 7.

Minnesota Statutes 2005 Supplement, section 469.323, subdivision 2, is
amended to read:

Subd. 2.

Business plan.

Before designation of an international economic
development zone under section 469.322, the governing body of the foreign trade zone
authority shall prepare a business plan. new text begin The findings of the business plan shall be
presented to the legislature pursuant to section 3.195. Copies of the business plan shall be
provided to the chairs of committees with jurisdiction over transportation and economic
development. new text end The plan must include an analysis of the economic feasibility of the regional
distribution center once it becomes operational and of the operations of freight forwarders
and other businesses that choose to locate within the boundaries of the zone. The analysis
must provide profitability models that:

(1) include the benefits of the incentives;

(2) estimate the amount of time needed to achieve profitability; and

(3) analyze the length of time incentives will be necessary to the economic viability
of the regional distribution center.

If the governing body of the foreign trade authority determines that the models do
not establish the economic feasibility of the project, the regional distribution center does
not meet the development requirements of this section and section 469.322.

Sec. 8.

Minnesota Statutes 2005 Supplement, section 469.327, is amended to read:

469.327 JOBS CREDIT.

Subdivision 1.

Credit allowed.

new text begin (a) new text end A qualified business is allowed a credit against
the taxes imposed under chapter 290. The credit equals seven percent of the:

(1) lesser of:

(i) zone payroll for the taxable year, less the zone payroll for the base year; or

(ii) total Minnesota payroll for the taxable year, less total Minnesota payroll for
the base year; minus

(2) $30,000 multiplied by the number of full-time equivalent employees that the
qualified business employs in the international economic development zone for the taxable
year, minus the number of full-time equivalent employees the business employed in the
zone in the base year, but not less than zero.

new text begin (b) This section applies only to tax years beginning during the duration of the
international economic development zone.
new text end

Subd. 2.

Definitions.

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

(b) "Base year" means the taxable year beginning during new text begin the calendar year
immediately preceding new text end the calendar year in which the deleted text begin zone designation was made deleted text end new text begin duration
of the zone begins new text end under section 469.322, paragraph (d).

(c) "Full-time equivalent employees" means the equivalent of annualized expected
hours of work equal to 2,080 hours.

(d) "Minnesota payroll" means the wages or salaries attributed to Minnesota under
section 290.191, subdivision 12, for the qualified business or the unitary business of which
the qualified business is a part, whichever is greater.

(e) "Zone payroll" means wages or salaries used to determine the zone payroll
factor for the qualified business, less the amount of compensation attributable to any
employee that exceeds $70,000.

Subd. 3.

Inflation adjustment.

For taxable years beginning after December 31,
deleted text begin 2006 deleted text end new text begin 2010 new text end , the dollar amounts in subdivisions 1, clause (2); and 2, paragraph (e), are
annually adjusted for inflation. The commissioner of revenue shall adjust the amounts by
the percentage determined under section 290.06, subdivision 2d, for the taxable year.

Subd. 4.

Refundable.

If the amount of the credit exceeds the liability for tax under
chapter 290, the commissioner of revenue shall refund the excess to the qualified business.

Subd. 5.

Appropriation.

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

new text begin EFFECTIVE DATE. new text end

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

Sec. 9.

Laws 2005, First Special Session chapter 3, article 10, section 23, is amended
to read:

Sec. 23. GRANTS TO QUALIFYING BUSINESSES.

$750,000 is appropriated in fiscal year 2006 from the general fund to the
commissioner of employment and economic development to be distributed to the foreign
trade zone authority to provide grants to qualified businesses as determined by the
authority, subject to Minnesota Statutes, sections 116J.993 to 116J.995, to provide
incentives for the businesses to locate their operations in an international economic
development zone. If the money is not distributed during fiscal year 2006, it remains
available for distribution under this section deleted text begin during fiscal year 2007 deleted text end new text begin until December 31,
2010 new text end .