HF 791

as introduced - 81st Legislature (1999 - 2000) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to tax expenditures; requiring preparation of 
  1.3             certain information for proposed tax expenditures; 
  1.4             regulating business subsidies; requesting a study by 
  1.5             the legislative auditor; appropriating money; amending 
  1.6             Minnesota Statutes 1998, section 270.067, subdivision 
  1.7             4; proposing coding for new law in Minnesota Statutes, 
  1.8             chapters 3; and 116J; repealing Minnesota Statutes 
  1.9             1998, section 116J.991. 
  1.10  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.11     Section 1.  [3.9831] [TAX EXPENDITURE STATEMENTS.] 
  1.12     Subdivision 1.  [PREPARATION REQUIRED.] (a) Before a 
  1.13  committee hearing on a bill that proposes to create a new or 
  1.14  expand an existing tax expenditure, the author must provide the 
  1.15  committee with the following information in writing: 
  1.16     (1) a clear and concise statement of the public purpose for 
  1.17  each proposed tax expenditure and expansion of an existing tax 
  1.18  expenditure; 
  1.19     (2) an estimate of the effect on state or local government 
  1.20  revenues; 
  1.21     (3) an estimate of the effect on compliance costs for 
  1.22  taxpayers and the administrative costs of state and local 
  1.23  governments; 
  1.24     (4) an estimate of any other economic or social costs of 
  1.25  the proposal; 
  1.26     (5) an estimate or statement of the expected economic or 
  1.27  social benefits of the proposal; 
  2.1      (6) a description or analysis of the individuals or groups 
  2.2   of individuals who will benefit and who will pay as a result of 
  2.3   the proposal by income class or other appropriate demographic 
  2.4   characteristics.  If the full cost of the proposed tax 
  2.5   expenditure is not offset by explicitly increasing taxes on 
  2.6   other taxpayers, the estimate of who will pay must name 
  2.7   particular budget expenditures that will be reduced by that 
  2.8   amount. 
  2.9      (b) The estimate of the effect on state government revenues 
  2.10  as required by paragraph (a), clause (2), must be prepared by 
  2.11  the commissioner of revenue.  An estimate of the cost of 
  2.12  administration by state government must be prepared by the 
  2.13  appropriate head of the affected state agency or agencies, as 
  2.14  coordinated by the commissioner of finance. 
  2.15     (c) As part of the estimate of the cost of compliance and 
  2.16  administration under paragraph (a), clause (3), the chair or 
  2.17  ranking member of the committee may specifically request that a 
  2.18  mock-up of the changes in tax forms that are necessary to 
  2.19  administer and comply with the tax be prepared. 
  2.20     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
  2.21  the terms in this subdivision have the meanings given. 
  2.22     (b) "Tax expenditure" means a provision of tax or other law 
  2.23  that: 
  2.24     (1) consists of a special exemption, deduction, exclusion, 
  2.25  credit, rate, or similar provision that reduces the tax 
  2.26  obligation of an individual, business organization, property, or 
  2.27  transaction; 
  2.28     (2) serves or is intended to serve an economic or social 
  2.29  goal other than raising revenue; and 
  2.30     (3) is not a fundamental element of the tax that is 
  2.31  primarily designed to achieve one or more of the following tax 
  2.32  policy goals: 
  2.33     (i) horizontal or vertical equity; 
  2.34     (ii) efficiency or minimizing the impact of the tax on 
  2.35  private decisions; 
  2.36     (iii) ease of administration of the tax; 
  3.1      (iv) ease of compliance by taxpayers; and 
  3.2      (v) simplicity or understandability of the tax. 
  3.3      (c) "Tax" means any tax of statewide application or any tax 
  3.4   authorized to be imposed by local governments generally.  It 
  3.5   does not include a local tax imposed under a special law or a 
  3.6   local tax imposed under a general law that no longer applies to 
  3.7   local governments generally. 
  3.8      Sec. 2.  [116J.993] [DEFINITIONS.] 
  3.9      Subdivision 1.  [SCOPE.] For the purposes of sections 
  3.10  116J.993 to 116J.996, the terms defined in this section have the 
  3.11  meanings given them. 
  3.12     Subd. 2.  [BENEFIT DATE.] "Benefit date" means the date 
  3.13  that the recipient receives the business subsidy.  If the 
  3.14  business subsidy involves the purchase, lease, or donation of 
  3.15  physical equipment, then the benefit date begins when the 
  3.16  recipient puts the equipment into service.  If the business 
  3.17  subsidy is for improvements to property, then the benefit date 
  3.18  refers to the earliest date of either: 
  3.19     (1) when the improvements are finished for the entire 
  3.20  project; or 
  3.21     (2) when a business occupies the property.  If a business 
  3.22  occupies the property and the subsidy grantor expects that other 
  3.23  businesses will also occupy the same property, the grantor may 
  3.24  assign a separate benefit date for each business when it first 
  3.25  occupies the property. 
  3.26     Subd. 3.  [BUSINESS SUBSIDY.] "Business subsidy" or 
  3.27  "subsidy" means a state or local government agency grant, 
  3.28  contribution of personal property, real property, 
  3.29  infrastructure, the value of a loan plus the interest on any 
  3.30  loan at rates below those commercially available to the 
  3.31  recipient, any reduction or deferral of any tax or any fee, any 
  3.32  guarantee of any payment under any loan, lease, or other 
  3.33  obligation, or any preferential use of government facilities 
  3.34  given to a business. 
  3.35     The following forms of financial assistance are not a 
  3.36  business subsidy: 
  4.1      (1) assistance that is generally available to all 
  4.2   businesses or to a general class of similar businesses, such as 
  4.3   a line of business, size, location, or similar general criteria; 
  4.4      (2) public improvements to buildings or lands owned by the 
  4.5   state or local government that serve a public purpose and do not 
  4.6   principally benefit a single business or defined group of 
  4.7   businesses at the time the improvements are made; 
  4.8      (3) redevelopment of blighted buildings or brownfields when 
  4.9   the property is sold at 80 percent or more of appraised market 
  4.10  value based on comparable property; 
  4.11     (4) assistance provided for the sole purpose of renovating 
  4.12  or bringing up to code old or decaying building stock and when 
  4.13  the assistance is matched by the business using private sources; 
  4.14     (5) assistance provided to organizations whose primary 
  4.15  mission is to provide job readiness and training services if the 
  4.16  sole purpose of the assistance is to provide those services; 
  4.17     (6) assistance for housing; 
  4.18     (7) assistance for pollution control or abatement; 
  4.19     (8) assistance for energy conservation; 
  4.20     (9) assistance awarded through direct and specific 
  4.21  legislation; 
  4.22     (10) tax reductions resulting from conformity with federal 
  4.23  tax law; 
  4.24     (11) workers' compensation and unemployment compensation; 
  4.25     (12) benefits derived from regulation; 
  4.26     (13) indirect benefits derived from assistance to 
  4.27  educational institutions; and 
  4.28     (14) a business subsidy of less than $25,000. 
  4.29     Subd. 4.  [GRANTOR.] "Grantor" means any state or local 
  4.30  government agency with the authority to grant a business subsidy.
  4.31     Subd. 5.  [LOCAL GOVERNMENT AGENCY.] "Local government 
  4.32  agency" includes, without limitation, a statutory or home rule 
  4.33  charter city, town, county, port authority, and economic 
  4.34  development authority. 
  4.35     Subd. 6.  [POVERTY LEVEL WAGE.] "Poverty level wage" means 
  4.36  compensation on an hourly basis equivalent to 110 percent of the 
  5.1   federal poverty threshold for a family of four.  Compensation 
  5.2   includes wages, scheduled bonuses, health and dental insurance, 
  5.3   child care, training programs certified by the commissioner of 
  5.4   trade and economic development, and pension benefits. 
  5.5      Subd. 7.  [RECIPIENT.] "Recipient" means any for-profit or 
  5.6   nonprofit business entity that receives a business subsidy.  
  5.7   Only nonprofit entities with a ratio of highest to lowest paid 
  5.8   employee exceeding ten to one are included in this definition. 
  5.9      Subd. 8.  [STATE GOVERNMENT AGENCY.] "State government 
  5.10  agency" means any state agency that has the authority to award 
  5.11  business subsidies or any nonprofit corporation that is created 
  5.12  by statute.  
  5.13     Sec. 3.  [116J.994] [REGULATING LOCAL AND STATE BUSINESS 
  5.14  SUBSIDIES.] 
  5.15     Subdivision 1.  [PUBLIC PURPOSE.] A business subsidy must 
  5.16  meet at least two of the following public purposes: 
  5.17     (1) enhancing economic diversity; 
  5.18     (2) creating high quality job growth; 
  5.19     (3) providing for job retention, where loss is imminent and 
  5.20  demonstrable; 
  5.21     (4) stabilizing the community; and 
  5.22     (5) increasing the tax base. 
  5.23     Subd. 2.  [DEVELOPING A SET OF CRITERIA.] A business 
  5.24  subsidy may not be granted until the grantor has adopted 
  5.25  criteria for awarding business subsidies that comply with this 
  5.26  section.  The commissioner of trade and economic development may 
  5.27  assist local government agencies in developing criteria. 
  5.28     Subd. 3.  [SUBSIDY AGREEMENT.] (a) A recipient must enter 
  5.29  into a subsidy agreement with the grantor of the subsidy that 
  5.30  includes: 
  5.31     (1) a description of the subsidy; 
  5.32     (2) a statement of the public purposes for the subsidy; 
  5.33     (3) goals for the subsidy; 
  5.34     (4) a description of the financial obligation of the 
  5.35  recipient if the goals are not met; and 
  5.36     (5) a statement of why the subsidy is needed. 
  6.1      (b) An agreement must structure grants as forgivable loans, 
  6.2   provided that if a business subsidy cannot be structured as a 
  6.3   forgivable loan, the agreement must state the fair market value 
  6.4   of the subsidy to the recipient, including the value of 
  6.5   conveying property at less than a fair market price, or other 
  6.6   in-kind benefits to the recipient. 
  6.7      (c) If a business subsidy benefits more than one recipient, 
  6.8   the grantor must assign a proportion of the business subsidy to 
  6.9   each recipient that signs a subsidy agreement.  The proportion 
  6.10  assessed to each recipient must reflect a reasonable estimate of 
  6.11  the recipient's share of the total benefits of the project. 
  6.12     (d) The state or local government agency and the recipient 
  6.13  must both sign the subsidy agreement and, if the grantor is a 
  6.14  local government agency, the agreement must be approved by the 
  6.15  local government agency's governing body. 
  6.16     Subd. 4.  [WAGE AND JOB GOALS.] The subsidy agreement, in 
  6.17  addition to any other goals, must include: 
  6.18     (1) goals for the number of jobs created, which may include 
  6.19  separate goals for the number of part-time or full-time jobs, 
  6.20  or, in cases where job loss is imminent and demonstrable, goals 
  6.21  for the number of jobs retained; and 
  6.22     (2) wage goals for the jobs created or retained.  Large 
  6.23  employers that receive business subsidies must pay at least 
  6.24  poverty level wages for at least 90 percent of all new jobs 
  6.25  created as a result of the business subsidy.  For purposes of 
  6.26  this subdivision, "large employer" has the meaning given it by 
  6.27  section 177.24, subdivision 1. 
  6.28     In addition to other specific goal time frames, the wage 
  6.29  and job goals must contain specific goals to be attained by two 
  6.30  years of the benefit date. 
  6.31     Subd. 5.  [PUBLIC NOTICE AND HEARING.] (a) Before granting 
  6.32  a business subsidy that exceeds $500,000 for a state government 
  6.33  grantor and $100,000 for a local government grantor, the grantor 
  6.34  must provide public notice and a hearing on the subsidy.  
  6.35  Hearings for local government business subsidies must be held by 
  6.36  the corresponding locally elected body.  A public hearing and 
  7.1   notice pursuant to this subdivision is not required if a hearing 
  7.2   and notice on the subsidy is otherwise required by law. 
  7.3      (b) Public notice of a proposed subsidy must be published 
  7.4   in a local newspaper of general circulation and must identify 
  7.5   the location at which information about the business subsidy, 
  7.6   including a copy of the subsidy agreement, is available.  
  7.7   Published notice should be sufficiently conspicuous in size and 
  7.8   placement to distinguish the notice from the surrounding text.  
  7.9   The grantor must make the information available in printed paper 
  7.10  copies and, if possible, on the Internet.  The government agency 
  7.11  must provide at least a 30-day notice for the public hearing. 
  7.12     (c) The public notice must include the date, time, and 
  7.13  place of the hearing. 
  7.14     Subd. 6.  [FAILURE TO MEET GOALS.] The subsidy agreement 
  7.15  must specify the recipient's obligation if the recipient does 
  7.16  not fulfill the agreement.  At a minimum, the agreement must 
  7.17  require a recipient failing to meet subsidy agreement goals to 
  7.18  pay back the assistance plus interest provided that repayment 
  7.19  may be prorated to reflect partial fulfillment of goals.  The 
  7.20  interest rate must be set at the implicit price deflator defined 
  7.21  under section 275.70, subdivision 2. 
  7.22     A recipient that fails to meet the terms of a subsidy 
  7.23  agreement may not receive a business subsidy from any grantor 
  7.24  for a period of five years from the date of failure or until a 
  7.25  recipient satisfies its repayment obligation under this 
  7.26  subdivision, whichever occurs first. 
  7.27     Subd. 7.  [REPORTS BY RECIPIENTS TO GRANTORS.] (a) A 
  7.28  business subsidy grantor must monitor the progress by the 
  7.29  recipient in achieving agreement goals. 
  7.30     (b) A recipient must provide information regarding goals 
  7.31  and results for two years after the benefit date of the subsidy 
  7.32  including, without limitation: 
  7.33     (1) the type, public purpose, and amount of subsidies; 
  7.34     (2) the jobs created by job title; 
  7.35     (3) the hours worked and hourly wage of each job created 
  7.36  within separate bands of wages; and 
  8.1      (4) a description of benefits provided for each job created.
  8.2      (c) A recipient shall file with the grantor: 
  8.3      (1) a progress report no later than February 10 of each 
  8.4   year for the previous year; and 
  8.5      (2) a progress report within 30 days after the deadline of 
  8.6   meeting agreement goals. 
  8.7      (d) If the recipient does not submit its report, the local 
  8.8   government agency must mail the recipient a warning within one 
  8.9   week of the required filing date.  If, after 14 days of the 
  8.10  postmarked day of the warning, the recipient fails to provide a 
  8.11  report, then a penalty of $100 per day applies until the report 
  8.12  is filed. 
  8.13     Subd. 8.  [GOVERNMENT REPORTS.] (a) Each subsidy grantor 
  8.14  must report the wage and job goals and the results for each 
  8.15  subsidy in achieving those goals to the department of trade and 
  8.16  economic development. 
  8.17     (b) At a minimum, the items in each report must include: 
  8.18     (1) the name of the recipient and grantor; 
  8.19     (2) the amount of subsidies by type and public purpose; 
  8.20     (3) the number of part-time and full-time jobs created by 
  8.21  separate occupational categories; 
  8.22     (4) the number of full-time and part-time jobs created 
  8.23  within separate bands of wages; 
  8.24     (5) the benefits paid, separate from wages paid, and listed 
  8.25  by separate bands of wages; 
  8.26     (6) the date when the goals will be reached; 
  8.27     (7) whether the goals have been reached; 
  8.28     (8) whether or not the financial obligation for 
  8.29  noncompliance with the business subsidy is being enforced; 
  8.30     (9) the name of the person filling out the form; and 
  8.31     (10) a contact person with a telephone number and the date 
  8.32  the form was completed. 
  8.33     (c) The commissioner of trade and economic development must 
  8.34  coordinate the production of reports so that useful comparisons 
  8.35  across time periods and across grantors can be made.  The 
  8.36  commissioner may add other information to the report as the 
  9.1   commissioner deems necessary to evaluate business subsidies. 
  9.2      (d) State and local government agencies, regardless of 
  9.3   whether they awarded any business subsidies, must file the 
  9.4   report required by this subdivision by March 1 of each year with 
  9.5   the commissioner.  If the commissioner has not received the 
  9.6   report by that date, the commissioner shall issue a warning to 
  9.7   the government agency.  If the commissioner has not received a 
  9.8   report by June 1 of the same year, then the government agency 
  9.9   may not grant any business subsidy until it files the report. 
  9.10     (e) The commissioner of trade and economic development must 
  9.11  provide information and training on reporting requirements to 
  9.12  state and local government agencies. 
  9.13     Subd. 9.  [COMPILATION AND SUMMARY REPORT.] The department 
  9.14  must publish a compilation and summary of the results of the 
  9.15  reports for the previous calendar year by July 1 of each year.  
  9.16  The reports of the government agencies to the department and the 
  9.17  compilation and summary report of the department must be made 
  9.18  available to the public. 
  9.19     Among the information in the summary and compilation 
  9.20  report, the commissioner must include: 
  9.21     (1) total amount of subsidies awarded in each development 
  9.22  region of the state; 
  9.23     (2) distribution of business subsidy amounts by size of the 
  9.24  business subsidy; 
  9.25     (3) distribution of business subsidy amounts by time 
  9.26  category, such as monthly or quarterly; 
  9.27     (4) distribution of subsidies by type and by public 
  9.28  purpose; 
  9.29     (5) percent of all business subsidies that reached their 
  9.30  goals; 
  9.31     (6) percent of business subsidies that did not reach their 
  9.32  goals by two years from the benefit date; 
  9.33     (7) total dollar amount of business subsidies that did not 
  9.34  meet their goals after two years from the benefit date; 
  9.35     (8) percent of subsidies that did not meet their goals and 
  9.36  that did not receive repayment; 
 10.1      (9) number of part-time and full-time jobs within separate 
 10.2   bands of wages; and 
 10.3      (10) benefits paid within separate bands of wages. 
 10.4      Subd. 10.  [AUTHORITY TO AUDIT REPORTS.] The commissioner 
 10.5   may audit individual recipients and government agencies to 
 10.6   verify that the reports have been filled out properly. 
 10.7      Sec. 4.  [116J.995] [ECONOMIC GRANTS.] 
 10.8      An appropriation rider in an appropriation to the 
 10.9   department of trade and economic development that specifies that 
 10.10  the appropriation be granted to a particular business or class 
 10.11  of businesses must contain a statement of the expected benefits 
 10.12  associated with the grant.  At a minimum, the statement must 
 10.13  include goals for the number of jobs created, wages paid, and 
 10.14  the tax revenue increases due to the grant. 
 10.15     Sec. 5.  [116J.996] [PENALTY FOR BIDDING BETWEEN LOCAL 
 10.16  GOVERNMENT AGENCIES.] 
 10.17     Subdivision 1.  [DEFINITIONS.] (a) The definitions in this 
 10.18  subdivision apply to this section. 
 10.19     (b) "Expected payroll" means the average payroll of the 
 10.20  business paid in the three years before the business relocates.  
 10.21  If the business was not in operation at the old site for more 
 10.22  than three years, then the expected payroll shall equal the 
 10.23  annual average payroll over the time period that the business 
 10.24  operated at the site. 
 10.25     (c) "Municipality" means a statutory or home rule charter 
 10.26  city, town, or, in the case of unincorporated territory, a 
 10.27  county. 
 10.28     (d) "Relocates" means that a local government agency has 
 10.29  offered a business subsidy, and the subsidy is the primary 
 10.30  reason a business has moved from one municipality to another. 
 10.31     Subd. 2.  [PENALTY.] Any local government agency that 
 10.32  relocates a business must pay the municipality from which the 
 10.33  business relocated.  For purposes of this section, the payment 
 10.34  obligation equals ten percent of expected payroll for a period 
 10.35  of five years.  If the business does not disclose its payroll, 
 10.36  then the municipality from which the business relocated may 
 11.1   estimate the loss in payroll with a survey. 
 11.2      Subd. 3.  [REMEDY.] If municipalities or local government 
 11.3   agencies are unable to agree on the existence of, or amount of, 
 11.4   an obligation under this section, they must submit the matter to 
 11.5   district court. 
 11.6      Sec. 6.  Minnesota Statutes 1998, section 270.067, 
 11.7   subdivision 4, is amended to read: 
 11.8      Subd. 4.  [CONTENTS.] The report shall detail for each tax 
 11.9   expenditure item the amount of tax revenue foregone, a citation 
 11.10  of the statutory or other legal authority for the expenditure, 
 11.11  and the year in which it was enacted or the tax year in which it 
 11.12  became effective.  The report may contain additional information 
 11.13  which the commissioner considers relevant to the legislature's 
 11.14  consideration and review of individual tax expenditure items.  
 11.15  This may must include, but is not limited to, statements of the 
 11.16  intended public purpose of the tax expenditure, analysis of 
 11.17  whether the expenditure is achieving that objective, and the 
 11.18  effect of the expenditure device on the distribution of the tax 
 11.19  burden and administration of the tax system.  
 11.20     Sec. 7.  [STUDY OF TAX EXPENDITURES.] 
 11.21     The legislative auditor is requested to conduct a study of 
 11.22  selected tax expenditures evaluating each program for its public 
 11.23  purpose and effectiveness. 
 11.24     Sec. 8.  [APPROPRIATION.] 
 11.25     $....... is appropriated from the general fund for the 
 11.26  biennium ending June 30, 2001, to the commissioner of trade and 
 11.27  economic development to carry out the commissioner's duties 
 11.28  under Minnesota Statutes, sections 116J.993 to 116J.995. 
 11.29     Sec. 9.  [REPEALER.] 
 11.30     Minnesota Statutes 1998, section 116J.991, is repealed. 
 11.31     Sec. 10.  [EFFECTIVE DATE.] 
 11.32     Section 1 is effective for bills heard in the first 
 11.33  legislative session that begins after the day following final 
 11.34  enactment.