SF 1564

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

A bill for an act
relating to economic development; modifying provisions
relating to job opportunity building zones and
biotechnology and health sciences industry zone;
amending Minnesota Statutes 2004, sections 272.02,
subdivision 64; 289A.56, by adding a subdivision;
297A.68, subdivisions 37, 38; 469.310, subdivision 11,
by adding a subdivision; 469.316; 469.317; 469.319,
subdivision 1, by adding a subdivision; 469.320,
subdivision 3; 469.330, subdivision 11; 469.337;
469.340, subdivision 1; repealing Minnesota Statutes
2004, sections 272.02, subdivision 65; 477A.08.

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

Section 1.

Minnesota Statutes 2004, section 272.02,
subdivision 64, is amended to read:

Subd. 64.

Job opportunity building zone property.

(a)
Improvements to real property, and personal property, classified
under section 273.13, subdivision 24, and located within a job
opportunity building zone, designated under section 469.314, are
exempt from ad valorem taxes levied under chapter 275.

(b) Improvements to real property, and tangible personal
property, of an agricultural production facility located within
an agricultural processing facility zone, designated under
section 469.314, is exempt from ad valorem taxes levied under
chapter 275.

(c) For property to qualify for exemption under paragraph
(a), the occupant must be a qualified business, as defined in
section 469.310.

(d) The exemption applies beginning for the first
assessment year after designation of the job opportunity
building zone by the commissioner of employment and economic
development. The exemption applies to each assessment year that
begins during the duration of the job opportunity building zone
deleted text begin and to property deleted text end new text begin . To be exempt, the property must be new text end occupied by
July 1 of the assessment year by a qualified business new text begin that has
signed the business subsidy agreement and relocation agreement,
if required, by July 1 of the assessment year new text end . This exemption
does not apply to:

(1) the levy under section 475.61 or similar levy
provisions under any other law to pay general obligation bonds;
or

(2) a levy under section 126C.17, if the levy was approved
by the voters before the designation of the job opportunity
building zone.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxes
payable in 2006 and thereafter.
new text end

Sec. 2.

Minnesota Statutes 2004, section 289A.56, is
amended by adding a subdivision to read:

new text begin Subd. 7. new text end

new text begin Biotechnology and health sciences industry zone
refunds. new text end

new text begin Notwithstanding subdivision 3, for refunds payable
under section 297A.68, subdivision 38, interest is computed from
90 days after the refund claim is filed with the commissioner.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for refund
claims filed on or after July 1, 2005.
new text end

Sec. 3.

Minnesota Statutes 2004, section 297A.68,
subdivision 37, is amended to read:

Subd. 37.

Job opportunity building zones.

(a) Purchases
of tangible personal property or taxable services by a qualified
business, as defined in section 469.310, are exempt if the
property or services are primarily used or consumed in a job
opportunity building zone designated under section 469.314.

(b) Purchase and use of construction materials deleted text begin and deleted text end new text begin ,
new text end supplies deleted text begin for deleted text end new text begin , or equipment used or consumed in the new text end construction
of improvements to real property in a job opportunity building
zone are exempt if the improvements after completion of
construction are to be used in the conduct of a qualified
business, as defined in section 469.310. 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 sales tax is
imposed on the sales taxable as defined under this chapter.

(d) This subdivision applies to sales, if the purchase was
made and delivery received during the duration of the zone.

new text begin (e) The lease of a motor vehicle by a qualified business,
as defined in section 469.310, is exempt if the motor vehicle is
principally garaged in the job opportunity building zone and is
primarily used as part of or in direct support of the business's
operations carried on in the job opportunity building zone.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for leases
entered into or sales made after December 31, 2003.
new text end

Sec. 4.

Minnesota Statutes 2004, section 297A.68,
subdivision 38, is amended to read:

Subd. 38.

Biotechnology and health sciences industry
zone.

(a) Purchases of tangible personal property or taxable
services by a qualified business, as defined in section 469.330,
are exempt if the property or services are primarily used or
consumed in a biotechnology and health sciences industry zone
designated under section 469.334.

(b) Purchase and use of construction materials deleted text begin and deleted text end new text begin ,
new text end supplies deleted text begin for deleted text end new text begin , or equipment used or consumed in the new text end construction
of improvements to real property in a biotechnology and health
sciences industry zone are exempt if the improvements after
completion of construction are to be used in the conduct of a
qualified business, as defined in section 469.330. 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 sales tax is
imposed on the sales taxable as defined under this chapter.

(d)(1) The tax on sales of goods or services exempted under
this subdivision are imposed and collected as if the applicable
rate under section 297A.62 applied. Upon application by the
purchaser, on forms prescribed by the commissioner, a refund
equal to the tax paid must be paid to the purchaser. The
application must include sufficient information to permit the
commissioner to verify the sales tax paid and the eligibility of
the claimant to receive the credit. No more than two
applications for refunds may be filed under this subdivision in
a calendar year. The provisions of section 289A.40 apply to the
refunds payable under this subdivision.

(2) The amount required to make the refunds is annually
appropriated to the commissioner of revenue.

(3) The aggregate amount refunded to a qualified business
must not exceed the amount allocated to the qualified business
under section 469.335.

(e) This subdivision applies only to sales made during the
duration of the designation of the zone.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales made
after December 31, 2003.
new text end

Sec. 5.

Minnesota Statutes 2004, section 469.310,
subdivision 11, is amended to read:

Subd. 11.

Qualified business.

(a) deleted text begin "Qualified business"
means deleted text end A person carrying on a trade or business at a place of
business located within a job opportunity building zone new text begin is a
qualified business for the purposes of sections 469.310 to
469.320 according to the criteria in paragraphs (b) to (f) new text end .

new text begin (b) A person is a qualified business only on those parcels
of land for which the person has entered into a business subsidy
agreement, as required under section 469.313, with the
appropriate local government unit in which the parcels are
located.
new text end

new text begin (c) Prior to execution of the business subsidy agreement,
the local government unit must consider the following factors:
new text end

new text begin (1) how wages compare to the regional industry average;
new text end

new text begin (2) the number of jobs that will be provided relative to
overall employment in the community;
new text end

new text begin (3) the economic outlook for the industry the business will
engage in;
new text end

new text begin (4) sales that will be generated from outside the state of
Minnesota;
new text end

new text begin (5) how the business will build on existing regional
strengths or diversify the regional economy;
new text end

new text begin (6) how the business will increase capital investment in
the zone; and
new text end

new text begin (7) any other criteria the commissioner deems necessary.
new text end

deleted text begin (b) deleted text end new text begin (d) new text end A person that relocates a trade or business from
outside a job opportunity building zone into a zone is not a
qualified business deleted text begin , deleted text end unless the business new text begin meets all of the
requirements of paragraphs (b) and (c) and new text end :

(1) deleted text begin (i) deleted text end increases full-time employment in the first full
year of operation within the job opportunity building zone by deleted text begin at
least deleted text end new text begin a minimum of five jobs or new text end 20 percent new text begin , whichever is
greater, new text end measured relative to the operations that were relocated
and maintains the required level of employment for each year the
zone designation applies; deleted text begin or
deleted text end

deleted text begin (ii) makes a capital investment in the property located
within a zone equivalent to ten percent of the gross revenues of
operation that were relocated in the immediately preceding
taxable year; deleted text end and

(2) enters a binding written agreement with the
commissioner that:

(i) pledges the business will meet the requirements of
clause (1);

(ii) provides for repayment of all tax benefits enumerated
under section 469.315 to the business under the procedures in
section 469.319, if the requirements of clause (1) are not met
for the taxable year or for taxes payable during the year in
which the requirements were not met; and

(iii) contains any other terms the commissioner determines
appropriate.

new text begin (e) The commissioner may waive the requirements under
paragraph (d), clause (1), if the commissioner determines that
the qualified business will substantially achieve the factors
under this subdivision.
new text end

new text begin (f) A business is not a qualified business if, at its
location or locations in the zone, the business is primarily
engaged in making retail sales to purchasers who are physically
present at the business's zone location.
new text end

new text begin (g) A qualifying business must pay each employee
compensation, including benefits not mandated by law, that on an
annualized basis is equal to at least 110 percent of the federal
poverty level for a family of four.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment and applies to any business entering a
business subsidy agreement for a job opportunity development
zone after that date, except that paragraph (b) is effective
retroactively from June 9, 2003.
new text end

Sec. 6.

Minnesota Statutes 2004, section 469.310, is
amended by adding a subdivision to read:

new text begin Subd. 13. new text end

new text begin Relocation payroll percentage. new text end

new text begin "Relocation
payroll percentage" is a fraction, the numerator of which is the
zone payroll of the business for the tax year minus the payroll
from the relocated operations in the last full year of
operations prior to the relocation, and the denominator of which
is the zone payroll of the business for the tax year. The
relocation payroll percentage of a business that is not a
relocating business is 100 percent.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment but applies only to qualified
businesses with business subsidy agreements that are fully
executed after June 30, 2005.
new text end

Sec. 7.

Minnesota Statutes 2004, section 469.316, is
amended to read:

469.316 INDIVIDUAL INCOME TAX EXEMPTION.

Subdivision 1.

Application.

An individual new text begin , estate, or
trust new text end operating a trade or business in a job opportunity
building zone, and an individual new text begin , estate, or trust new text end making a
qualifying investment in a qualified business operating in a job
opportunity building zone qualifies for the exemptions from
taxes imposed under chapter 290, as provided in this section.
The exemptions provided under this section apply only to the
extent that the income otherwise would be taxable under chapter
290. 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. This section applies only to taxable years beginning
during the duration of the job opportunity building zone.

Subd. 2.

Rents.

An individual new text begin , estate, or trust new text end is
exempt from the taxes imposed under chapter 290 on net rents
derived from real or tangible personal property new text begin used by a
qualified business and new text end located in a zone for a taxable year in
which the zone was designated a job opportunity building zone.
If tangible personal property was used both within and outside
of the zone new text begin by the qualified business new text end , the exemption amount for
the net rental income must be multiplied by a fraction, the
numerator of which is the number of days the property was used
in the zone and the denominator of which is the total days new text begin the
property is rented by the qualified business new text end .

Subd. 3.

Business income.

An individual new text begin , estate, or
trust new text end is exempt from the taxes imposed under chapter 290 on net
income from the operation of a qualified business in a job
opportunity building zone. If the trade or business is carried
on within and without the zone and the individual is not a
resident of Minnesota, new text begin or the taxpayer is an estate or trust,
new text end the exemption must be apportioned based on the zone percentage
new text begin and the relocation payroll percentage new text end for the taxable year. If
the trade or business is carried on within and without the zone
and the individual is a resident of Minnesota, the exemption
must be apportioned based on the zone percentage new text begin and the
relocation payroll percentage new text end for the taxable year, except the
ratios under section 469.310, subdivision 7, clause (1), items
(i) and (ii), must use the denominators of the property and
payroll factors determined under section 290.191. No
subtraction is allowed under this section in excess of 20
percent of the sum of the job opportunity building zone payroll
and the adjusted basis of the property at the time that the
property is first used in the job opportunity building zone by
the business.

Subd. 4.

Capital gains.

(a) An individual new text begin , estate, or
trust new text end is exempt from the taxes imposed under chapter 290 on:

(1) net gain derived on a sale or exchange of real property
located in the zone and used by a qualified business. If the
property was held by the individual new text begin , estate, or trust new text end during a
period when the zone was not designated, the gain must be
prorated based on the percentage of time, measured in calendar
days, that the real property was held by the individual new text begin , estate,
or trust new text end during the period the zone designation was in effect to
the total period of time the real property was held by the
individual;

(2) net gain derived on a sale or exchange of tangible
personal property used by a qualified business in the zone. If
the property was held by the individual new text begin , estate, or trust new text end during
a period when the zone was not designated, the gain must be
prorated based on the percentage of time, measured in calendar
days, that the property was held by the individual new text begin , estate, or
trust new text end during the period the zone designation was in effect to
the total period of time the property was held by the
individual. If the tangible personal property was used outside
of the zone during the period of the zone's designation, the
exemption must be multiplied by a fraction, the numerator of
which is the number of days the property was used in the zone
during the time of the designation and the denominator of which
is the total days the property was held during the time of the
designation; and

(3) net gain derived on a sale of an ownership interest in
a qualified business operating in the job opportunity building
zone, meeting the requirements of paragraph (b). The exemption
on the gain must be multiplied by the zone percentage of the
business for the taxable year prior to the sale.

(b) A qualified business meets the requirements of
paragraph (a), clause (3), if it is a corporation, an S
corporation, or a partnership, and for the taxable year its job
opportunity building zone percentage exceeds 25 percent. For
purposes of paragraph (a), clause (3), the zone percentage must
be calculated by modifying the ratios under section 469.310,
subdivision 7, clause (1), items (i) and (ii), to use the
denominators of the property and payroll factors determined
under section 290.191. Upon the request of an individual new text begin ,
estate, or trust new text end holding an ownership interest in the entity,
the entity must certify to the owner, in writing, the job
opportunity building zone percentage needed to determine the
exemption.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2003, except that changes in
subdivision 3 relating to the relocation payroll percentage are
effective the day following final enactment and apply only to
qualified businesses with business subsidy agreements that are
fully executed after June 30, 2005.
new text end

Sec. 8.

Minnesota Statutes 2004, section 469.317, is
amended to read:

469.317 CORPORATE FRANCHISE TAX EXEMPTION.

(a) A qualified business is exempt from taxation under
section 290.02, the alternative minimum tax under section
290.0921, and the minimum fee under section 290.0922, on the
portion of its income attributable to operations within the
zone. This exemption is determined as follows:

(1) for purposes of the tax imposed under section 290.02,
by multiplying its taxable net income by its zone percentage and
new text begin by its relocation payroll percentage and new text end subtracting the result
in determining taxable income;

(2) for purposes of the alternative minimum tax under
section 290.0921, by multiplying its alternative minimum taxable
income by its zone percentage and new text begin by its relocation payroll
percentage and new text end reducing alternative minimum taxable income by
this amount; and

(3) for purposes of the minimum fee under section 290.0922,
by excluding property and payroll in the zone from the
computations of the fee or by exempting the entity under section
290.0922, subdivision 2, clause (7).

(b) No subtraction is allowed under this section in excess
of 20 percent of the sum of the corporation's job opportunity
building zone payroll and the adjusted basis of the property at
the time that the property is first used in the job opportunity
building zone by the corporation.

(c) This section applies only to taxable years beginning
during the duration of the job opportunity building zone.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day
following final enactment but applies only to qualified
businesses with business subsidy agreements that are fully
executed after June 30, 2005.
new text end

Sec. 9.

Minnesota Statutes 2004, section 469.319,
subdivision 1, is amended to read:

Subdivision 1.

Repayment obligation.

A business must
repay the amount of the total tax reduction listed in section
469.315 and any refund under section 469.318 in excess of tax
liability, received during the two years immediately before it
ceased to operate in the zone, if the business:

(1) received tax reductions authorized by section 469.315;
and

(2)(i) did not meet the goals specified in an agreement
entered into with the applicant that states any obligation the
qualified business must fulfill in order to be eligible for tax
benefits. The commissioner new text begin of employment and economic
development new text end may extend for up to one year the period for meeting
any goals provided in an agreement. The applicant may extend
the period for meeting other goals by documenting in writing the
reason for the extension and attaching a copy of the document to
its next annual report to the commissioner new text begin of employment and
economic development new text end ; or

(ii) ceased to operate its facility located within the job
opportunity building zone or otherwise ceases to be or is not a
qualified business.

new text begin EFFECTIVE DATE. new text end

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

Sec. 10.

Minnesota Statutes 2004, section 469.319, is
amended by adding a subdivision to read:

new text begin Subd. 6. new text end

new text begin Reconciliation. new text end

new text begin Where this section is
inconsistent with section 116J.994, subdivision 3, paragraph
(e), or 6, or any other provisions of sections 116J.993 to
116J.995, this section prevails.
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. 11.

Minnesota Statutes 2004, section 469.320,
subdivision 3, is amended to read:

Subd. 3.

Remedies.

If the commissioner determines, based
on a report filed under subdivision 1 or other available
information, that a zone or subzone is failing to meet its
performance goals, the commissioner may take any actions the
commissioner determines appropriate, including modification of
the boundaries of the zone or a subzone or termination of the
zone or a subzone. Before taking any action, the commissioner
shall consult with the applicant and the affected local
government units, including notifying them of the proposed
actions to be taken. deleted text begin The commissioner shall publish any order
modifying a zone in the State Register and on the Internet. deleted text end The
applicant may appeal the commissioner's order under the
contested case procedures of chapter 14.

new text begin EFFECTIVE DATE. new text end

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

Sec. 12.

Minnesota Statutes 2004, section 469.330,
subdivision 11, is amended to read:

Subd. 11.

Qualified business.

(a) "Qualified business"
means a person carrying on a trade or business at a
biotechnology and health sciences industry facility located
within a biotechnology and health sciences industry zone. new text begin A
person is a qualified business only on those parcels of land for
which it has entered into a business subsidy agreement, as
required under section 469.333, with the appropriate local
government unit in which the parcels are located.
new text end

(b) A person that relocates a biotechnology and health
sciences industry facility from outside a biotechnology and
health sciences industry zone into a zone is not a qualified
business, unless the business:

(1)(i) increases full-time employment in the first full
year of operation within the biotechnology and health sciences
industry zone by at least 20 percent measured relative to the
operations that were relocated and maintains the required level
of employment for each year the zone designation applies; or

(ii) makes a capital investment in the property located
within a zone equivalent to ten percent of the gross revenues of
operation that were relocated in the immediately preceding
taxable year; and

(2) enters a binding written agreement with the
commissioner that:

(i) pledges the business will meet the requirements of
clause (1);

(ii) provides for repayment of all tax benefits enumerated
under section 469.336 to the business under the procedures in
section 469.340, if the requirements of clause (1) are not met;
and

(iii) contains any other terms the commissioner determines
appropriate.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively
from June 9, 2003.
new text end

Sec. 13.

Minnesota Statutes 2004, section 469.337, is
amended to read:

469.337 CORPORATE FRANCHISE TAX EXEMPTION.

(a) A qualified business is exempt from taxation under
section 290.02, the alternative minimum tax under section
290.0921, and the minimum fee under section 290.0922, on the
portion of its income attributable to operations of a qualified
business within the biotechnology and health sciences industry
zone. This exemption is determined as follows:

(1) for purposes of the tax imposed under section 290.02,
by multiplying its taxable net income by its zone percentage and
subtracting the result in determining taxable income;

(2) for purposes of the alternative minimum tax under
section 290.0921, by multiplying its alternative minimum taxable
income by its zone percentage and reducing alternative minimum
taxable income by this amount; and

(3) for purposes of the minimum fee under section 290.0922,
by excluding new text begin zone new text end property and payroll deleted text begin in the zone deleted text end from the
computations of the fee. new text begin The qualified business is exempt from
the minimum fee if all of its property is located in the zone
and all of its payroll is zone payroll.
new text end

(b) No subtraction is allowed under this section in excess
of 20 percent of the sum of the corporation's biotechnology and
health sciences industry zone payroll and the adjusted basis of
the property at the time that the property is first used in the
biotechnology and health sciences industry zone by the
corporation.

(c) No reduction in tax is allowed in excess of the amount
allocated under section 469.335.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for tax years
beginning after December 31, 2003.
new text end

Sec. 14.

Minnesota Statutes 2004, section 469.340,
subdivision 1, is amended to read:

Subdivision 1.

Repayment obligation.

A business must
repay the amount of the tax reduction listed in section 469.336
and any refunds under sections 469.338 and 469.339 in excess of
tax liability, received during the two years immediately before
it ceased to operate in the zone, if the business:

(1) received tax reductions authorized by section 469.336;
and

(2)(i) did not meet the goals specified in an agreement
entered into with the applicant that states any obligation the
qualified business must fulfill in order to be eligible for tax
benefits. The commissioner new text begin of employment and economic
development new text end may extend for up to one year the period for meeting
any goals provided in an agreement. The applicant may extend
the period for meeting other goals by documenting in writing the
reason for the extension and attaching a copy of the document to
its next annual report to the commissioner new text begin of employment and
economic development new text end ; or

(ii) ceased to operate its facility located within the
biotechnology and health sciences industry zone or otherwise
ceases to be or is not a qualified business.

new text begin EFFECTIVE DATE. new text end

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

Sec. 15. new text begin REVISOR'S INSTRUCTION.
new text end

new text begin The revisor shall renumber Minnesota Statutes, section
469.310, subdivision 11, as section 469.3135, and insert the
following definition of "qualified business" in Minnesota
Statutes, section 469.310: "'Qualified business' means the
entity described in section 469.3135."
new text end

Sec. 16. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2004, sections 272.02, subdivision 65;
and 477A.08, are repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin The repeal of section 272.02, subdivision
65, is effective for taxes payable in 2006 and thereafter. The
repeal of section 477A.08 is effective for aid payable in 2005
and thereafter.
new text end