HF 4165

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to agriculture; providing tax incentives to encourage the establishment
of ethanol plants powered primarily by biomass; amending Minnesota Statutes
2004, sections 272.02, by adding a subdivision; 297A.71, by adding a
subdivision; Minnesota Statutes 2005 Supplement, sections 290.01, subdivision
19b; 290.091, subdivision 2; proposing coding for new law in Minnesota
Statutes, chapter 290.

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

Section 1.

Minnesota Statutes 2004, section 272.02, is amended by adding a
subdivision to read:

new text begin Subd. 84. new text end

new text begin Biomass powered ethanol plant; real and personal property. new text end

new text begin (a)
Improvements to real property and personal property classified under section 273.13,
subdivision 24, and related to the construction or modification of an ethanol plant, as
defined in section 41A.09, that satisfy the requirements of this subdivision, are exempt
from ad valorem taxes levied under chapter 275. For newly constructed plants, the facility
must be designed to utilize biomass to meet at least 75 percent of its fuel requirements.
Improvements made to an existing plant in order to meet the 75 percent biomass
requirement are also exempt.
new text end

new text begin (b) For purposes of this exemption, "biomass" means herbaceous crops, trees,
agricultural waste, and aquatic plant matter, excluding mixed municipal solid waste.
new text end

new text begin (c) The exemption under this subdivision is limited to 20 years, beginning with the
assessment year immediately following the year during which the improvements are
put into operation.
new text end

Sec. 2.

Minnesota Statutes 2005 Supplement, section 290.01, subdivision 19b, is
amended to read:

Subd. 19b.

Subtractions from federal taxable income.

For individuals, estates,
and trusts, there shall be subtracted from federal taxable income:

(1) net interest income on obligations of any authority, commission, or
instrumentality of the United States to the extent includable in taxable income for federal
income tax purposes but exempt from state income tax under the laws of the United States;

(2) if included in federal taxable income, the amount of any overpayment of income
tax to Minnesota or to any other state, for any previous taxable year, whether the amount
is received as a refund or as a credit to another taxable year's income tax liability;

(3) the amount paid to others, less the amount used to claim the credit allowed under
section 290.0674, not to exceed $1,625 for each qualifying child in grades kindergarten
to 6 and $2,500 for each qualifying child in grades 7 to 12, for tuition, textbooks, and
transportation of each qualifying child in attending an elementary or secondary school
situated in Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, wherein a
resident of this state may legally fulfill the state's compulsory attendance laws, which
is not operated for profit, and which adheres to the provisions of the Civil Rights Act
of 1964 and chapter 363A. For the purposes of this clause, "tuition" includes fees or
tuition as defined in section 290.0674, subdivision 1, clause (1). As used in this clause,
"textbooks" includes books and other instructional materials and equipment purchased
or leased for use in elementary and secondary schools in teaching only those subjects
legally and commonly taught in public elementary and secondary schools in this state.
Equipment expenses qualifying for deduction includes expenses as defined and limited in
section 290.0674, subdivision 1, clause (3). "Textbooks" does not include instructional
books and materials used in the teaching of religious tenets, doctrines, or worship, the
purpose of which is to instill such tenets, doctrines, or worship, nor does it include books
or materials for, or transportation to, extracurricular activities including sporting events,
musical or dramatic events, speech activities, driver's education, or similar programs. For
purposes of the subtraction provided by this clause, "qualifying child" has the meaning
given in section 32(c)(3) of the Internal Revenue Code;

(4) income as provided under section 290.0802;

(5) to the extent included in federal adjusted gross income, income realized on
disposition of property exempt from tax under section 290.491;

(6) to the extent not deducted in determining federal taxable income by an individual
who does not itemize deductions for federal income tax purposes for the taxable year, an
amount equal to 50 percent of the excess of charitable contributions over $500 allowable
as a deduction for the taxable year under section 170(a) of the Internal Revenue Code and
under the provisions of Public Law 109-1;

(7) for taxable years beginning before January 1, 2008, the amount of the federal
small ethanol producer credit allowed under section 40(a)(3) of the Internal Revenue Code
which is included in gross income under section 87 of the Internal Revenue Code;

(8) for individuals who are allowed a federal foreign tax credit for taxes that do not
qualify for a credit under section 290.06, subdivision 22, an amount equal to the carryover
of subnational foreign taxes for the taxable year, but not to exceed the total subnational
foreign taxes reported in claiming the foreign tax credit. For purposes of this clause,
"federal foreign tax credit" means the credit allowed under section 27 of the Internal
Revenue Code, and "carryover of subnational foreign taxes" equals the carryover allowed
under section 904(c) of the Internal Revenue Code minus national level foreign taxes to
the extent they exceed the federal foreign tax credit;

(9) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (7), or 19c, clause (15), in the case
of a shareholder of a corporation that is an S corporation, an amount equal to one-fifth
of the delayed depreciation. For purposes of this clause, "delayed depreciation" means
the amount of the addition made by the taxpayer under subdivision 19a, clause (7), or
subdivision 19c, clause (15), in the case of a shareholder of an S corporation, minus the
positive value of any net operating loss under section 172 of the Internal Revenue Code
generated for the tax year of the addition. The resulting delayed depreciation cannot be
less than zero;

(10) job opportunity building zone income as provided under section 469.316;

(11) the amount of compensation paid to members of the Minnesota National Guard
or other reserve components of the United States military for active service performed
in Minnesota, excluding compensation for services performed under the Active Guard
Reserve (AGR) program. For purposes of this clause, "active service" means (i) state
active service as defined in section 190.05, subdivision 5a, clause (1); (ii) federally
funded state active service as defined in section 190.05, subdivision 5b; or (iii) federal
active service as defined in section 190.05, subdivision 5c, but "active service" excludes
services performed exclusively for purposes of basic combat training, advanced individual
training, annual training, and periodic inactive duty training; special training periodically
made available to reserve members; and service performed in accordance with section
190.08, subdivision 3;

(12) the amount of compensation paid to Minnesota residents who are members
of the armed forces of the United States or United Nations for active duty performed
outside Minnesota;

(13) an amount, not to exceed $10,000, equal to qualified expenses related to a
qualified donor's donation, while living, of one or more of the qualified donor's organs
to another person for human organ transplantation. For purposes of this clause, "organ"
means all or part of an individual's liver, pancreas, kidney, intestine, lung, or bone marrow;
"human organ transplantation" means the medical procedure by which transfer of a human
organ is made from the body of one person to the body of another person; "qualified
expenses" means unreimbursed expenses for both the individual and the qualified donor
for (i) travel, (ii) lodging, and (iii) lost wages net of sick pay, except that such expenses
may be subtracted under this clause only once; and "qualified donor" means the individual
or the individual's dependent, as defined in section 152 of the Internal Revenue Code. An
individual may claim the subtraction in this clause for each instance of organ donation for
transplantation during the taxable year in which the qualified expenses occur;

(14) in each of the five tax years immediately following the tax year in which an
addition is required under subdivision 19a, clause (8), or 19c, clause (16), in the case of a
shareholder of a corporation that is an S corporation, an amount equal to one-fifth of the
addition made by the taxpayer under subdivision 19a, clause (8), or 19c, clause (16), in the
case of a shareholder of a corporation that is an S corporation, minus the positive value of
any net operating loss under section 172 of the Internal Revenue Code generated for the
tax year of the addition. If the net operating loss exceeds the addition for the tax year, a
subtraction is not allowed under this clause;

(15) to the extent included in federal taxable income, compensation paid to a
nonresident who is a service member as defined in United States Code, title 10, section
101(a)(5), for military service as defined in the Service Member Civil Relief Act, Public
Law 108-189, section 101(2); deleted text begin and
deleted text end

(16) international economic development zone income as provided under section
469.325 new text begin ; and new text end

new text begin (17) income from investments in biomass ethanol plants as provided under section
290.0803 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, 2005.
new text end

Sec. 3.

new text begin [290.0803] SUBTRACTION FOR INCOME FROM INVESTMENTS IN
BIOMASS ETHANOL PLANTS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) The definitions in this subdivision apply to this
section.
new text end

new text begin (b) "Biomass" means herbaceous crops, trees, agricultural waste, and aquatic plant
matter, excluding mixed municipal solid waste.
new text end

new text begin (c) "Ethanol plant" has the meaning given in section 41A.09.
new text end

new text begin (d) "Qualified ethanol plant" means an ethanol plant that derives 75 percent of its
fuel requirements from biomass.
new text end

new text begin (e) "Qualified individual" means an individual who owns an interest in a qualified
ethanol plant.
new text end

new text begin Subd. 2. new text end

new text begin Application. new text end

new text begin A qualified individual is allowed exemption from taxes
imposed under this chapter, as provided in this section, for income derived from ownership
or investment in a qualified ethanol plant. The exemptions provided under this section
apply only to the extent that the income otherwise would be taxable in this chapter.
Subtractions under this section from federal taxable income, alternative minimum taxable
income, or any other base subject to tax are limited to the amount that otherwise would be
included in the tax base absent the exemption under this section.
new text end

new text begin Subd. 3. new text end

new text begin Subtraction. new text end

new text begin A qualified individual is exempt from the taxes imposed
under this chapter on the following types of income, if the income resulted from
investment in a qualified ethanol plant:
new text end

new text begin (1) net rents derived from real or tangible personal property used by the qualified
ethanol plant;
new text end

new text begin (2) net income from the operation of the qualified ethanol plant; and
new text end

new text begin (3) net capital gain derived on the sale or exchange of real property that is a qualified
ethanol plant or of tangible personal property used by a qualified ethanol plant.
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, 2005.
new text end

Sec. 4.

Minnesota Statutes 2005 Supplement, section 290.091, subdivision 2, is
amended to read:

Subd. 2.

Definitions.

For purposes of the tax imposed by this section, the following
terms have the meanings given:

(a) "Alternative minimum taxable income" means the sum of the following for
the taxable year:

(1) the taxpayer's federal alternative minimum taxable income as defined in section
55(b)(2) of the Internal Revenue Code;

(2) the taxpayer's itemized deductions allowed in computing federal alternative
minimum taxable income, but excluding:

(i) the charitable contribution deduction under section 170 of the Internal Revenue
Code:

(A) for taxable years beginning before January 1, 2006, to the extent that the
deduction exceeds 1.0 percent of adjusted gross income;

(B) for taxable years beginning after December 31, 2005, to the full extent of the
deduction.

For purposes of this clause, "adjusted gross income" has the meaning given in
section 62 of the Internal Revenue Code;

(ii) the medical expense deduction;

(iii) the casualty, theft, and disaster loss deduction; and

(iv) the impairment-related work expenses of a disabled person;

(3) for depletion allowances computed under section 613A(c) of the Internal
Revenue Code, with respect to each property (as defined in section 614 of the Internal
Revenue Code), to the extent not included in federal alternative minimum taxable income,
the excess of the deduction for depletion allowable under section 611 of the Internal
Revenue Code for the taxable year over the adjusted basis of the property at the end of the
taxable year (determined without regard to the depletion deduction for the taxable year);

(4) to the extent not included in federal alternative minimum taxable income, the
amount of the tax preference for intangible drilling cost under section 57(a)(2) of the
Internal Revenue Code determined without regard to subparagraph (E);

(5) to the extent not included in federal alternative minimum taxable income, the
amount of interest income as provided by section 290.01, subdivision 19a, clause (1); and

(6) the amount of addition required by section 290.01, subdivision 19a, clauses
(7), (8), and (9);

less the sum of the amounts determined under the following:

(1) interest income as defined in section 290.01, subdivision 19b, clause (1);

(2) an overpayment of state income tax as provided by section 290.01, subdivision
19b, clause (2), to the extent included in federal alternative minimum taxable income;

(3) the amount of investment interest paid or accrued within the taxable year on
indebtedness to the extent that the amount does not exceed net investment income, as
defined in section 163(d)(4) of the Internal Revenue Code. Interest does not include
amounts deducted in computing federal adjusted gross income; and

(4) amounts subtracted from federal taxable income as provided by section 290.01,
subdivision 19b, clauses (9) to deleted text begin (16) deleted text end new text begin (17) new text end .

In the case of an estate or trust, alternative minimum taxable income must be
computed as provided in section 59(c) of the Internal Revenue Code.

(b) "Investment interest" means investment interest as defined in section 163(d)(3)
of the Internal Revenue Code.

(c) "Tentative minimum tax" equals 6.4 percent of alternative minimum taxable
income after subtracting the exemption amount determined under subdivision 3.

(d) "Regular tax" means the tax that would be imposed under this chapter (without
regard to this section and section 290.032), reduced by the sum of the nonrefundable
credits allowed under this chapter.

(e) "Net minimum tax" means the minimum tax imposed by this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2005.
new text end

Sec. 5.

Minnesota Statutes 2004, section 297A.71, is amended by adding a subdivision
to read:

new text begin Subd. 37. new text end

new text begin Construction materials and equipment; ethanol plants powered
by biomass. new text end

new text begin (a) Building materials used or consumed in, and equipment incorporated
into an ethanol plant, as defined in section 41A.09, that satisfy the requirements of this
subdivision are exempt. For newly constructed plants, the resulting plant must be designed
to use biomass to meet at least 75 percent of its fuel requirements. Improvements made to
an existing plant in order to meet the 75 percent biomass requirement are also exempt.
new text end

new text begin (b) For purposes of this exemption, "biomass" means herbaceous crops, trees,
agricultural waste, and aquatic plant matter, excluding mixed municipal solid waste.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with sales and purchases
made after June 30, 2006.
new text end