SF 1801

2nd Engrossment - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             providing for designation of an international economic 
  1.3             development zone; providing tax incentives; requiring 
  1.4             a report; appropriating money; amending Minnesota 
  1.5             Statutes 2002, sections 272.02, by adding a 
  1.6             subdivision; 290.06, by adding a subdivision; 297A.68, 
  1.7             by adding a subdivision; Minnesota Statutes 2003 
  1.8             Supplement, sections 290.01, subdivisions 19b, 29; 
  1.9             290.06, subdivision 2c; 290.067, subdivision 1; 
  1.10            290.0671, subdivision 1; 290.091, subdivision 2; 
  1.11            290.0921, subdivision 3; 290.0922, subdivisions 2, 3; 
  1.12            297B.03; proposing coding for new law in Minnesota 
  1.13            Statutes, chapter 469. 
  1.14  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.15     Section 1.  Minnesota Statutes 2002, section 272.02, is 
  1.16  amended by adding a subdivision to read: 
  1.17     Subd. 68.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE 
  1.18  PROPERTY.] (a) Improvements to real property, and personal 
  1.19  property, classified under section 273.13, subdivision 24, and 
  1.20  located within an international economic development zone 
  1.21  designated under section 469.322, are exempt from ad valorem 
  1.22  taxes levied under chapter 275, if the occupant of the property 
  1.23  is a qualified business, as defined in section 469.321. 
  1.24     (b) The exemption applies beginning for the first 
  1.25  assessment year after designation of the international economic 
  1.26  development zone.  The exemption applies to each assessment year 
  1.27  that begins during the duration of the international economic 
  1.28  development zone and to property occupied by July 1 of the 
  1.29  assessment year by a qualified business.  This exemption does 
  2.1   not apply to: 
  2.2      (1) the levy under section 475.61 or similar levy 
  2.3   provisions under any other law to pay general obligation bonds; 
  2.4   or 
  2.5      (2) a levy under section 126C.17, if the levy was approved 
  2.6   by the voters before the designation of the zone. 
  2.7      [EFFECTIVE DATE.] This section is effective beginning for 
  2.8   property taxes assessed in 2005, payable in 2006. 
  2.9      Sec. 2.  Minnesota Statutes 2003 Supplement, section 
  2.10  290.01, subdivision 19b, is amended to read: 
  2.11     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  2.12  individuals, estates, and trusts, there shall be subtracted from 
  2.13  federal taxable income: 
  2.14     (1) interest income on obligations of any authority, 
  2.15  commission, or instrumentality of the United States to the 
  2.16  extent includable in taxable income for federal income tax 
  2.17  purposes but exempt from state income tax under the laws of the 
  2.18  United States; 
  2.19     (2) if included in federal taxable income, the amount of 
  2.20  any overpayment of income tax to Minnesota or to any other 
  2.21  state, for any previous taxable year, whether the amount is 
  2.22  received as a refund or as a credit to another taxable year's 
  2.23  income tax liability; 
  2.24     (3) the amount paid to others, less the amount used to 
  2.25  claim the credit allowed under section 290.0674, not to exceed 
  2.26  $1,625 for each qualifying child in grades kindergarten to 6 and 
  2.27  $2,500 for each qualifying child in grades 7 to 12, for tuition, 
  2.28  textbooks, and transportation of each qualifying child in 
  2.29  attending an elementary or secondary school situated in 
  2.30  Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
  2.31  wherein a resident of this state may legally fulfill the state's 
  2.32  compulsory attendance laws, which is not operated for profit, 
  2.33  and which adheres to the provisions of the Civil Rights Act of 
  2.34  1964 and chapter 363A.  For the purposes of this clause, 
  2.35  "tuition" includes fees or tuition as defined in section 
  2.36  290.0674, subdivision 1, clause (1).  As used in this clause, 
  3.1   "textbooks" includes books and other instructional materials and 
  3.2   equipment purchased or leased for use in elementary and 
  3.3   secondary schools in teaching only those subjects legally and 
  3.4   commonly taught in public elementary and secondary schools in 
  3.5   this state.  Equipment expenses qualifying for deduction 
  3.6   includes expenses as defined and limited in section 290.0674, 
  3.7   subdivision 1, clause (3).  "Textbooks" does not include 
  3.8   instructional books and materials used in the teaching of 
  3.9   religious tenets, doctrines, or worship, the purpose of which is 
  3.10  to instill such tenets, doctrines, or worship, nor does it 
  3.11  include books or materials for, or transportation to, 
  3.12  extracurricular activities including sporting events, musical or 
  3.13  dramatic events, speech activities, driver's education, or 
  3.14  similar programs.  For purposes of the subtraction provided by 
  3.15  this clause, "qualifying child" has the meaning given in section 
  3.16  32(c)(3) of the Internal Revenue Code; 
  3.17     (4) income as provided under section 290.0802; 
  3.18     (5) to the extent included in federal adjusted gross 
  3.19  income, income realized on disposition of property exempt from 
  3.20  tax under section 290.491; 
  3.21     (6) to the extent included in federal taxable income, 
  3.22  postservice benefits for youth community service under section 
  3.23  124D.42 for volunteer service under United States Code, title 
  3.24  42, sections 12601 to 12604; 
  3.25     (7) to the extent not deducted in determining federal 
  3.26  taxable income by an individual who does not itemize deductions 
  3.27  for federal income tax purposes for the taxable year, an amount 
  3.28  equal to 50 percent of the excess of charitable contributions 
  3.29  allowable as a deduction for the taxable year under section 
  3.30  170(a) of the Internal Revenue Code over $500; 
  3.31     (8) for taxable years beginning before January 1, 2008, the 
  3.32  amount of the federal small ethanol producer credit allowed 
  3.33  under section 40(a)(3) of the Internal Revenue Code which is 
  3.34  included in gross income under section 87 of the Internal 
  3.35  Revenue Code; 
  3.36     (9) for individuals who are allowed a federal foreign tax 
  4.1   credit for taxes that do not qualify for a credit under section 
  4.2   290.06, subdivision 22, an amount equal to the carryover of 
  4.3   subnational foreign taxes for the taxable year, but not to 
  4.4   exceed the total subnational foreign taxes reported in claiming 
  4.5   the foreign tax credit.  For purposes of this clause, "federal 
  4.6   foreign tax credit" means the credit allowed under section 27 of 
  4.7   the Internal Revenue Code, and "carryover of subnational foreign 
  4.8   taxes" equals the carryover allowed under section 904(c) of the 
  4.9   Internal Revenue Code minus national level foreign taxes to the 
  4.10  extent they exceed the federal foreign tax credit; 
  4.11     (10) in each of the five tax years immediately following 
  4.12  the tax year in which an addition is required under subdivision 
  4.13  19a, clause (7), an amount equal to one-fifth of the delayed 
  4.14  depreciation.  For purposes of this clause, "delayed 
  4.15  depreciation" means the amount of the addition made by the 
  4.16  taxpayer under subdivision 19a, clause (7), minus the positive 
  4.17  value of any net operating loss under section 172 of the 
  4.18  Internal Revenue Code generated for the tax year of the 
  4.19  addition.  The resulting delayed depreciation cannot be less 
  4.20  than zero; and 
  4.21     (11) job opportunity building zone income as provided under 
  4.22  section 469.316; and 
  4.23     (12) international economic development zone income as 
  4.24  provided under section 469.325. 
  4.25     [EFFECTIVE DATE.] This section is effective for taxable 
  4.26  years beginning after December 31, 2004. 
  4.27     Sec. 3.  Minnesota Statutes 2003 Supplement, section 
  4.28  290.01, subdivision 29, is amended to read: 
  4.29     Subd. 29.  [TAXABLE INCOME.] The term "taxable income" 
  4.30  means:  
  4.31     (1) for individuals, estates, and trusts, the same as 
  4.32  taxable net income; 
  4.33     (2) for corporations, the taxable net income less 
  4.34     (i) the net operating loss deduction under section 290.095; 
  4.35     (ii) the dividends received deduction under section 290.21, 
  4.36  subdivision 4; 
  5.1      (iii) the exemption for operating in a job opportunity 
  5.2   building zone under section 469.317; and 
  5.3      (iv) the exemption for operating in a biotechnology and 
  5.4   health sciences industry zone under section 469.337; and 
  5.5      (v) the exemption for operating in an international 
  5.6   economic development zone under section 469.326. 
  5.7      [EFFECTIVE DATE.] This section is effective for taxable 
  5.8   years beginning after December 31, 2004. 
  5.9      Sec. 4.  Minnesota Statutes 2003 Supplement, section 
  5.10  290.06, subdivision 2c, is amended to read: 
  5.11     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
  5.12  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
  5.13  married individuals filing joint returns and surviving spouses 
  5.14  as defined in section 2(a) of the Internal Revenue Code must be 
  5.15  computed by applying to their taxable net income the following 
  5.16  schedule of rates: 
  5.17     (1) On the first $25,680, 5.35 percent; 
  5.18     (2) On all over $25,680, but not over $102,030, 7.05 
  5.19  percent; 
  5.20     (3) On all over $102,030, 7.85 percent. 
  5.21     Married individuals filing separate returns, estates, and 
  5.22  trusts must compute their income tax by applying the above rates 
  5.23  to their taxable income, except that the income brackets will be 
  5.24  one-half of the above amounts.  
  5.25     (b) The income taxes imposed by this chapter upon unmarried 
  5.26  individuals must be computed by applying to taxable net income 
  5.27  the following schedule of rates: 
  5.28     (1) On the first $17,570, 5.35 percent; 
  5.29     (2) On all over $17,570, but not over $57,710, 7.05 
  5.30  percent; 
  5.31     (3) On all over $57,710, 7.85 percent. 
  5.32     (c) The income taxes imposed by this chapter upon unmarried 
  5.33  individuals qualifying as a head of household as defined in 
  5.34  section 2(b) of the Internal Revenue Code must be computed by 
  5.35  applying to taxable net income the following schedule of rates: 
  5.36     (1) On the first $21,630, 5.35 percent; 
  6.1      (2) On all over $21,630, but not over $86,910, 7.05 
  6.2   percent; 
  6.3      (3) On all over $86,910, 7.85 percent. 
  6.4      (d) In lieu of a tax computed according to the rates set 
  6.5   forth in this subdivision, the tax of any individual taxpayer 
  6.6   whose taxable net income for the taxable year is less than an 
  6.7   amount determined by the commissioner must be computed in 
  6.8   accordance with tables prepared and issued by the commissioner 
  6.9   of revenue based on income brackets of not more than $100.  The 
  6.10  amount of tax for each bracket shall be computed at the rates 
  6.11  set forth in this subdivision, provided that the commissioner 
  6.12  may disregard a fractional part of a dollar unless it amounts to 
  6.13  50 cents or more, in which case it may be increased to $1. 
  6.14     (e) An individual who is not a Minnesota resident for the 
  6.15  entire year must compute the individual's Minnesota income tax 
  6.16  as provided in this subdivision.  After the application of the 
  6.17  nonrefundable credits provided in this chapter, the tax 
  6.18  liability must then be multiplied by a fraction in which:  
  6.19     (1) the numerator is the individual's Minnesota source 
  6.20  federal adjusted gross income as defined in section 62 of the 
  6.21  Internal Revenue Code and increased by the additions required 
  6.22  under section 290.01, subdivision 19a, clauses (1), (5), and 
  6.23  (6), and reduced by the subtraction under section 290.01, 
  6.24  subdivision 19b, clause clauses (11) and (12), and the Minnesota 
  6.25  assignable portion of the subtraction for United States 
  6.26  government interest under section 290.01, subdivision 19b, 
  6.27  clause (1), after applying the allocation and assignability 
  6.28  provisions of section 290.081, clause (a), or 290.17; and 
  6.29     (2) the denominator is the individual's federal adjusted 
  6.30  gross income as defined in section 62 of the Internal Revenue 
  6.31  Code of 1986, increased by the amounts specified in section 
  6.32  290.01, subdivision 19a, clauses (1), (5), and (6), and reduced 
  6.33  by the amounts specified in section 290.01, subdivision 19b, 
  6.34  clauses (1) and, (11), and (12). 
  6.35     [EFFECTIVE DATE.] This section is effective for taxable 
  6.36  years beginning after December 31, 2004. 
  7.1      Sec. 5.  Minnesota Statutes 2002, section 290.06, is 
  7.2   amended by adding a subdivision to read: 
  7.3      Subd. 32.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE JOB 
  7.4   CREDIT.] A taxpayer that is a qualified business, as defined in 
  7.5   section 469.321, subdivision 6, is allowed a credit as 
  7.6   determined under section 469.327 against the tax imposed by this 
  7.7   chapter. 
  7.8      [EFFECTIVE DATE.] This section is effective the day 
  7.9   following final enactment. 
  7.10     Sec. 6.  Minnesota Statutes 2003 Supplement, section 
  7.11  290.067, subdivision 1, is amended to read: 
  7.12     Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
  7.13  as a credit against the tax due from the taxpayer and a spouse, 
  7.14  if any, under this chapter an amount equal to the dependent care 
  7.15  credit for which the taxpayer is eligible pursuant to the 
  7.16  provisions of section 21 of the Internal Revenue Code subject to 
  7.17  the limitations provided in subdivision 2 except that in 
  7.18  determining whether the child qualified as a dependent, income 
  7.19  received as a Minnesota family investment program grant or 
  7.20  allowance to or on behalf of the child must not be taken into 
  7.21  account in determining whether the child received more than half 
  7.22  of the child's support from the taxpayer, and the provisions of 
  7.23  section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
  7.24     (b) If a child who has not attained the age of six years at 
  7.25  the close of the taxable year is cared for at a licensed family 
  7.26  day care home operated by the child's parent, the taxpayer is 
  7.27  deemed to have paid employment-related expenses.  If the child 
  7.28  is 16 months old or younger at the close of the taxable year, 
  7.29  the amount of expenses deemed to have been paid equals the 
  7.30  maximum limit for one qualified individual under section 21(c) 
  7.31  and (d) of the Internal Revenue Code.  If the child is older 
  7.32  than 16 months of age but has not attained the age of six years 
  7.33  at the close of the taxable year, the amount of expenses deemed 
  7.34  to have been paid equals the amount the licensee would charge 
  7.35  for the care of a child of the same age for the same number of 
  7.36  hours of care.  
  8.1      (c) If a married couple: 
  8.2      (1) has a child who has not attained the age of one year at 
  8.3   the close of the taxable year; 
  8.4      (2) files a joint tax return for the taxable year; and 
  8.5      (3) does not participate in a dependent care assistance 
  8.6   program as defined in section 129 of the Internal Revenue Code, 
  8.7   in lieu of the actual employment related expenses paid for that 
  8.8   child under paragraph (a) or the deemed amount under paragraph 
  8.9   (b), the lesser of (i) the combined earned income of the couple 
  8.10  or (ii) the amount of the maximum limit for one qualified 
  8.11  individual under section 21(c) and (d) of the Internal Revenue 
  8.12  Code will be deemed to be the employment related expense paid 
  8.13  for that child.  The earned income limitation of section 21(d) 
  8.14  of the Internal Revenue Code shall not apply to this deemed 
  8.15  amount.  These deemed amounts apply regardless of whether any 
  8.16  employment-related expenses have been paid.  
  8.17     (d) If the taxpayer is not required and does not file a 
  8.18  federal individual income tax return for the tax year, no credit 
  8.19  is allowed for any amount paid to any person unless: 
  8.20     (1) the name, address, and taxpayer identification number 
  8.21  of the person are included on the return claiming the credit; or 
  8.22     (2) if the person is an organization described in section 
  8.23  501(c)(3) of the Internal Revenue Code and exempt from tax under 
  8.24  section 501(a) of the Internal Revenue Code, the name and 
  8.25  address of the person are included on the return claiming the 
  8.26  credit.  
  8.27  In the case of a failure to provide the information required 
  8.28  under the preceding sentence, the preceding sentence does not 
  8.29  apply if it is shown that the taxpayer exercised due diligence 
  8.30  in attempting to provide the information required. 
  8.31     In the case of a nonresident, part-year resident, or a 
  8.32  person who has earned income not subject to tax under this 
  8.33  chapter including earned income excluded pursuant to section 
  8.34  290.01, subdivision 19b, clause clauses (11) and (12), the 
  8.35  credit determined under section 21 of the Internal Revenue Code 
  8.36  must be allocated based on the ratio by which the earned income 
  9.1   of the claimant and the claimant's spouse from Minnesota sources 
  9.2   bears to the total earned income of the claimant and the 
  9.3   claimant's spouse. 
  9.4      [EFFECTIVE DATE.] This section is effective for taxable 
  9.5   years beginning after December 31, 2004. 
  9.6      Sec. 7.  Minnesota Statutes 2003 Supplement, section 
  9.7   290.0671, subdivision 1, is amended to read: 
  9.8      Subdivision 1.  [CREDIT ALLOWED.] (a) An individual is 
  9.9   allowed a credit against the tax imposed by this chapter equal 
  9.10  to a percentage of earned income.  To receive a credit, a 
  9.11  taxpayer must be eligible for a credit under section 32 of the 
  9.12  Internal Revenue Code.  
  9.13     (b) For individuals with no qualifying children, the credit 
  9.14  equals 1.9125 percent of the first $4,620 of earned income.  The 
  9.15  credit is reduced by 1.9125 percent of earned income or modified 
  9.16  adjusted gross income, whichever is greater, in excess of 
  9.17  $5,770, but in no case is the credit less than zero. 
  9.18     (c) For individuals with one qualifying child, the credit 
  9.19  equals 8.5 percent of the first $6,920 of earned income and 8.5 
  9.20  percent of earned income over $12,080 but less than $13,450.  
  9.21  The credit is reduced by 5.73 percent of earned income or 
  9.22  modified adjusted gross income, whichever is greater, in excess 
  9.23  of $15,080, but in no case is the credit less than zero. 
  9.24     (d) For individuals with two or more qualifying children, 
  9.25  the credit equals ten percent of the first $9,720 of earned 
  9.26  income and 20 percent of earned income over $14,860 but less 
  9.27  than $16,800.  The credit is reduced by 10.3 percent of earned 
  9.28  income or modified adjusted gross income, whichever is greater, 
  9.29  in excess of $17,890, but in no case is the credit less than 
  9.30  zero. 
  9.31     (e) For a nonresident or part-year resident, the credit 
  9.32  must be allocated based on the percentage calculated under 
  9.33  section 290.06, subdivision 2c, paragraph (e). 
  9.34     (f) For a person who was a resident for the entire tax year 
  9.35  and has earned income not subject to tax under this chapter, 
  9.36  including income excluded under section 290.01, subdivision 19b, 
 10.1   clause (11) or (12), the credit must be allocated based on the 
 10.2   ratio of federal adjusted gross income reduced by the earned 
 10.3   income not subject to tax under this chapter over federal 
 10.4   adjusted gross income. 
 10.5      (g) For tax years beginning after December 31, 2001, and 
 10.6   before December 31, 2004, the $5,770 in paragraph (b), the 
 10.7   $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
 10.8   after being adjusted for inflation under subdivision 7, are each 
 10.9   increased by $1,000 for married taxpayers filing joint returns. 
 10.10     (h) For tax years beginning after December 31, 2004, and 
 10.11  before December 31, 2007, the $5,770 in paragraph (b), the 
 10.12  $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
 10.13  after being adjusted for inflation under subdivision 7, are each 
 10.14  increased by $2,000 for married taxpayers filing joint returns. 
 10.15     (i) For tax years beginning after December 31, 2007, and 
 10.16  before December 31, 2010, the $5,770 in paragraph (b), the 
 10.17  $15,080 in paragraph (c), and the $17,890 in paragraph (d), 
 10.18  after being adjusted for inflation under subdivision 7, are each 
 10.19  increased by $3,000 for married taxpayers filing joint returns.  
 10.20  For tax years beginning after December 31, 2008, the $3,000 is 
 10.21  adjusted annually for inflation under subdivision 7. 
 10.22     (j) The commissioner shall construct tables showing the 
 10.23  amount of the credit at various income levels and make them 
 10.24  available to taxpayers.  The tables shall follow the schedule 
 10.25  contained in this subdivision, except that the commissioner may 
 10.26  graduate the transition between income brackets. 
 10.27     [EFFECTIVE DATE.] This section is effective for taxable 
 10.28  years beginning after December 31, 2004. 
 10.29     Sec. 8.  Minnesota Statutes 2003 Supplement, section 
 10.30  290.091, subdivision 2, is amended to read: 
 10.31     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
 10.32  this section, the following terms have the meanings given: 
 10.33     (a) "Alternative minimum taxable income" means the sum of 
 10.34  the following for the taxable year: 
 10.35     (1) the taxpayer's federal alternative minimum taxable 
 10.36  income as defined in section 55(b)(2) of the Internal Revenue 
 11.1   Code; 
 11.2      (2) the taxpayer's itemized deductions allowed in computing 
 11.3   federal alternative minimum taxable income, but excluding: 
 11.4      (i) the charitable contribution deduction under section 170 
 11.5   of the Internal Revenue Code to the extent that the deduction 
 11.6   exceeds 1.0 percent of adjusted gross income, as defined in 
 11.7   section 62 of the Internal Revenue Code; 
 11.8      (ii) the medical expense deduction; 
 11.9      (iii) the casualty, theft, and disaster loss deduction; and 
 11.10     (iv) the impairment-related work expenses of a disabled 
 11.11  person; 
 11.12     (3) for depletion allowances computed under section 613A(c) 
 11.13  of the Internal Revenue Code, with respect to each property (as 
 11.14  defined in section 614 of the Internal Revenue Code), to the 
 11.15  extent not included in federal alternative minimum taxable 
 11.16  income, the excess of the deduction for depletion allowable 
 11.17  under section 611 of the Internal Revenue Code for the taxable 
 11.18  year over the adjusted basis of the property at the end of the 
 11.19  taxable year (determined without regard to the depletion 
 11.20  deduction for the taxable year); 
 11.21     (4) to the extent not included in federal alternative 
 11.22  minimum taxable income, the amount of the tax preference for 
 11.23  intangible drilling cost under section 57(a)(2) of the Internal 
 11.24  Revenue Code determined without regard to subparagraph (E); 
 11.25     (5) to the extent not included in federal alternative 
 11.26  minimum taxable income, the amount of interest income as 
 11.27  provided by section 290.01, subdivision 19a, clause (1); and 
 11.28     (6) the amount of addition required by section 290.01, 
 11.29  subdivision 19a, clause (7); 
 11.30     less the sum of the amounts determined under the following: 
 11.31     (1) interest income as defined in section 290.01, 
 11.32  subdivision 19b, clause (1); 
 11.33     (2) an overpayment of state income tax as provided by 
 11.34  section 290.01, subdivision 19b, clause (2), to the extent 
 11.35  included in federal alternative minimum taxable income; 
 11.36     (3) the amount of investment interest paid or accrued 
 12.1   within the taxable year on indebtedness to the extent that the 
 12.2   amount does not exceed net investment income, as defined in 
 12.3   section 163(d)(4) of the Internal Revenue Code.  Interest does 
 12.4   not include amounts deducted in computing federal adjusted gross 
 12.5   income; and 
 12.6      (4) amounts subtracted from federal taxable income as 
 12.7   provided by section 290.01, subdivision 19b, clauses (10) and, 
 12.8   (11), and (12). 
 12.9      In the case of an estate or trust, alternative minimum 
 12.10  taxable income must be computed as provided in section 59(c) of 
 12.11  the Internal Revenue Code. 
 12.12     (b) "Investment interest" means investment interest as 
 12.13  defined in section 163(d)(3) of the Internal Revenue Code. 
 12.14     (c) "Tentative minimum tax" equals 6.4 percent of 
 12.15  alternative minimum taxable income after subtracting the 
 12.16  exemption amount determined under subdivision 3. 
 12.17     (d) "Regular tax" means the tax that would be imposed under 
 12.18  this chapter (without regard to this section and section 
 12.19  290.032), reduced by the sum of the nonrefundable credits 
 12.20  allowed under this chapter.  
 12.21     (e) "Net minimum tax" means the minimum tax imposed by this 
 12.22  section. 
 12.23     [EFFECTIVE DATE.] This section is effective for taxable 
 12.24  years beginning after December 31, 2004. 
 12.25     Sec. 9.  Minnesota Statutes 2003 Supplement, section 
 12.26  290.0921, subdivision 3, is amended to read: 
 12.27     Subd. 3.  [ALTERNATIVE MINIMUM TAXABLE INCOME.] 
 12.28  "Alternative minimum taxable income" is Minnesota net income as 
 12.29  defined in section 290.01, subdivision 19, and includes the 
 12.30  adjustments and tax preference items in sections 56, 57, 58, and 
 12.31  59(d), (e), (f), and (h) of the Internal Revenue Code.  If a 
 12.32  corporation files a separate company Minnesota tax return, the 
 12.33  minimum tax must be computed on a separate company basis.  If a 
 12.34  corporation is part of a tax group filing a unitary return, the 
 12.35  minimum tax must be computed on a unitary basis.  The following 
 12.36  adjustments must be made. 
 13.1      (1) For purposes of the depreciation adjustments under 
 13.2   section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 
 13.3   the basis for depreciable property placed in service in a 
 13.4   taxable year beginning before January 1, 1990, is the adjusted 
 13.5   basis for federal income tax purposes, including any 
 13.6   modification made in a taxable year under section 290.01, 
 13.7   subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 13.8   subdivision 7, paragraph (c). 
 13.9      For taxable years beginning after December 31, 2000, the 
 13.10  amount of any remaining modification made under section 290.01, 
 13.11  subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 13.12  subdivision 7, paragraph (c), not previously deducted is a 
 13.13  depreciation allowance in the first taxable year after December 
 13.14  31, 2000. 
 13.15     (2) The portion of the depreciation deduction allowed for 
 13.16  federal income tax purposes under section 168(k) of the Internal 
 13.17  Revenue Code that is required as an addition under section 
 13.18  290.01, subdivision 19c, clause (16), is disallowed in 
 13.19  determining alternative minimum taxable income. 
 13.20     (3) The subtraction for depreciation allowed under section 
 13.21  290.01, subdivision 19d, clause (19), is allowed as a 
 13.22  depreciation deduction in determining alternative minimum 
 13.23  taxable income. 
 13.24     (4) The alternative tax net operating loss deduction under 
 13.25  sections 56(a)(4) and 56(d) of the Internal Revenue Code does 
 13.26  not apply. 
 13.27     (5) The special rule for certain dividends under section 
 13.28  56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 
 13.29     (6) The special rule for dividends from section 936 
 13.30  companies under section 56(g)(4)(C)(iii) does not apply. 
 13.31     (7) The tax preference for depletion under section 57(a)(1) 
 13.32  of the Internal Revenue Code does not apply. 
 13.33     (8) The tax preference for intangible drilling costs under 
 13.34  section 57(a)(2) of the Internal Revenue Code must be calculated 
 13.35  without regard to subparagraph (E) and the subtraction under 
 13.36  section 290.01, subdivision 19d, clause (4). 
 14.1      (9) The tax preference for tax exempt interest under 
 14.2   section 57(a)(5) of the Internal Revenue Code does not apply.  
 14.3      (10) The tax preference for charitable contributions of 
 14.4   appreciated property under section 57(a)(6) of the Internal 
 14.5   Revenue Code does not apply. 
 14.6      (11) For purposes of calculating the tax preference for 
 14.7   accelerated depreciation or amortization on certain property 
 14.8   placed in service before January 1, 1987, under section 57(a)(7) 
 14.9   of the Internal Revenue Code, the deduction allowable for the 
 14.10  taxable year is the deduction allowed under section 290.01, 
 14.11  subdivision 19e. 
 14.12     For taxable years beginning after December 31, 2000, the 
 14.13  amount of any remaining modification made under section 290.01, 
 14.14  subdivision 19e, not previously deducted is a depreciation or 
 14.15  amortization allowance in the first taxable year after December 
 14.16  31, 2004. 
 14.17     (12) For purposes of calculating the adjustment for 
 14.18  adjusted current earnings in section 56(g) of the Internal 
 14.19  Revenue Code, the term "alternative minimum taxable income" as 
 14.20  it is used in section 56(g) of the Internal Revenue Code, means 
 14.21  alternative minimum taxable income as defined in this 
 14.22  subdivision, determined without regard to the adjustment for 
 14.23  adjusted current earnings in section 56(g) of the Internal 
 14.24  Revenue Code. 
 14.25     (13) For purposes of determining the amount of adjusted 
 14.26  current earnings under section 56(g)(3) of the Internal Revenue 
 14.27  Code, no adjustment shall be made under section 56(g)(4) of the 
 14.28  Internal Revenue Code with respect to (i) the amount of foreign 
 14.29  dividend gross-up subtracted as provided in section 290.01, 
 14.30  subdivision 19d, clause (1), (ii) the amount of refunds of 
 14.31  income, excise, or franchise taxes subtracted as provided in 
 14.32  section 290.01, subdivision 19d, clause (10), or (iii) the 
 14.33  amount of royalties, fees or other like income subtracted as 
 14.34  provided in section 290.01, subdivision 19d, clause (11). 
 14.35     (14) Alternative minimum taxable income excludes the income 
 14.36  from operating in a job opportunity building zone as provided 
 15.1   under section 469.317. 
 15.2      (15) Alternative minimum taxable income excludes the income 
 15.3   from operating in a biotechnology and health sciences industry 
 15.4   zone as provided under section 469.337. 
 15.5      (16) Alternative minimum taxable income excludes the income 
 15.6   from operating in an international economic development zone as 
 15.7   provided under section 469.326. 
 15.8      Items of tax preference must not be reduced below zero as a 
 15.9   result of the modifications in this subdivision. 
 15.10     [EFFECTIVE DATE.] This section is effective for taxable 
 15.11  years beginning after December 31, 2004. 
 15.12     Sec. 10.  Minnesota Statutes 2003 Supplement, section 
 15.13  290.0922, subdivision 2, is amended to read: 
 15.14     Subd. 2.  [EXEMPTIONS.] The following entities are exempt 
 15.15  from the tax imposed by this section: 
 15.16     (1) corporations exempt from tax under section 290.05; 
 15.17     (2) real estate investment trusts; 
 15.18     (3) regulated investment companies or a fund thereof; and 
 15.19     (4) entities having a valid election in effect under 
 15.20  section 860D(b) of the Internal Revenue Code; 
 15.21     (5) town and farmers' mutual insurance companies; 
 15.22     (6) cooperatives organized under chapter 308A that provide 
 15.23  housing exclusively to persons age 55 and over and are 
 15.24  classified as homesteads under section 273.124, subdivision 3; 
 15.25  and 
 15.26     (7) an entity, if for the taxable year all of its property 
 15.27  is located in a job opportunity building zone designated under 
 15.28  section 469.314 and all of its payroll is a job opportunity 
 15.29  building zone payroll under section 469.310; and 
 15.30     (8) an entity, if for the taxable year all of its property 
 15.31  is located in an international economic development zone 
 15.32  designated under section 469.322, and all of its payroll is an 
 15.33  international economic development zone payroll under section 
 15.34  469.321. 
 15.35     Entities not specifically exempted by this subdivision are 
 15.36  subject to tax under this section, notwithstanding section 
 16.1   290.05. 
 16.2      [EFFECTIVE DATE.] This section is effective for taxable 
 16.3   years beginning after December 31, 2004. 
 16.4      Sec. 11.  Minnesota Statutes 2003 Supplement, section 
 16.5   290.0922, subdivision 3, is amended to read: 
 16.6      Subd. 3.  [DEFINITIONS.] (a) "Minnesota sales or receipts" 
 16.7   means the total sales apportioned to Minnesota pursuant to 
 16.8   section 290.191, subdivision 5, the total receipts attributed to 
 16.9   Minnesota pursuant to section 290.191, subdivisions 6 to 8, 
 16.10  and/or the total sales or receipts apportioned or attributed to 
 16.11  Minnesota pursuant to any other apportionment formula applicable 
 16.12  to the taxpayer. 
 16.13     (b) "Minnesota property" means total Minnesota tangible 
 16.14  property as provided in section 290.191, subdivisions 9 to 11, 
 16.15  any other tangible property located in Minnesota, but does not 
 16.16  include property located in a job opportunity building zone 
 16.17  designated under section 469.314, or property of a qualified 
 16.18  business located in a biotechnology and health sciences industry 
 16.19  zone designated under section 469.334, or property located in an 
 16.20  international economic development zone designated under section 
 16.21  469.322.  Intangible property shall not be included in Minnesota 
 16.22  property for purposes of this section.  Taxpayers who do not 
 16.23  utilize tangible property to apportion income shall nevertheless 
 16.24  include Minnesota property for purposes of this section.  On a 
 16.25  return for a short taxable year, the amount of Minnesota 
 16.26  property owned, as determined under section 290.191, shall be 
 16.27  included in Minnesota property based on a fraction in which the 
 16.28  numerator is the number of days in the short taxable year and 
 16.29  the denominator is 365.  
 16.30     (c) "Minnesota payrolls" means total Minnesota payrolls as 
 16.31  provided in section 290.191, subdivision 12, but does not 
 16.32  include job opportunity building zone payrolls under section 
 16.33  469.310, subdivision 8, or biotechnology and health sciences 
 16.34  industry zone payroll payrolls under section 469.330, 
 16.35  subdivision 8, or international economic development zone 
 16.36  payrolls under section 469.321, subdivision 10.  Taxpayers who 
 17.1   do not utilize payrolls to apportion income shall nevertheless 
 17.2   include Minnesota payrolls for purposes of this section. 
 17.3      [EFFECTIVE DATE.] This section is effective for taxable 
 17.4   years beginning after December 31, 2004. 
 17.5      Sec. 12.  Minnesota Statutes 2002, section 297A.68, is 
 17.6   amended by adding a subdivision to read: 
 17.7      Subd. 40.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONES.] (a) 
 17.8   Purchases of tangible personal property or taxable services by a 
 17.9   qualified business, as defined in section 469.321, are exempt if 
 17.10  the property or services are primarily used or consumed in an 
 17.11  international economic development zone designated under section 
 17.12  469.322. 
 17.13     (b) Purchase and use of construction materials and supplies 
 17.14  for construction of improvements to real property in an 
 17.15  international economic development zone are exempt if the 
 17.16  improvements after completion of construction are to be used in 
 17.17  the conduct of a qualified business, as defined in section 
 17.18  469.321.  This exemption applies regardless of whether the 
 17.19  purchases are made by the business or a contractor. 
 17.20     (c) The exemptions under this subdivision apply to a local 
 17.21  sales and use tax, regardless of whether the local tax is 
 17.22  imposed on sales taxable under this chapter or in another law, 
 17.23  ordinance, or charter provision. 
 17.24     (d) This subdivision applies to sales, if the purchase was 
 17.25  made and delivery received during the duration of the zone. 
 17.26     [EFFECTIVE DATE.] This section is effective for sales made 
 17.27  on or after the day following final enactment. 
 17.28     Sec. 13.  Minnesota Statutes 2003 Supplement, section 
 17.29  297B.03, is amended to read: 
 17.30     297B.03 [EXEMPTIONS.] 
 17.31     There is specifically exempted from the provisions of this 
 17.32  chapter and from computation of the amount of tax imposed by it 
 17.33  the following:  
 17.34     (1) purchase or use, including use under a lease purchase 
 17.35  agreement or installment sales contract made pursuant to section 
 17.36  465.71, of any motor vehicle by the United States and its 
 18.1   agencies and instrumentalities and by any person described in 
 18.2   and subject to the conditions provided in section 297A.67, 
 18.3   subdivision 11; 
 18.4      (2) purchase or use of any motor vehicle by any person who 
 18.5   was a resident of another state or country at the time of the 
 18.6   purchase and who subsequently becomes a resident of Minnesota, 
 18.7   provided the purchase occurred more than 60 days prior to the 
 18.8   date such person began residing in the state of Minnesota and 
 18.9   the motor vehicle was registered in the person's name in the 
 18.10  other state or country; 
 18.11     (3) purchase or use of any motor vehicle by any person 
 18.12  making a valid election to be taxed under the provisions of 
 18.13  section 297A.90; 
 18.14     (4) purchase or use of any motor vehicle previously 
 18.15  registered in the state of Minnesota when such transfer 
 18.16  constitutes a transfer within the meaning of section 118, 331, 
 18.17  332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 
 18.18  1563(a) of the Internal Revenue Code of 1986, as amended through 
 18.19  December 31, 1999; 
 18.20     (5) purchase or use of any vehicle owned by a resident of 
 18.21  another state and leased to a Minnesota based private or for 
 18.22  hire carrier for regular use in the transportation of persons or 
 18.23  property in interstate commerce provided the vehicle is titled 
 18.24  in the state of the owner or secured party, and that state does 
 18.25  not impose a sales tax or sales tax on motor vehicles used in 
 18.26  interstate commerce; 
 18.27     (6) purchase or use of a motor vehicle by a private 
 18.28  nonprofit or public educational institution for use as an 
 18.29  instructional aid in automotive training programs operated by 
 18.30  the institution.  "Automotive training programs" includes motor 
 18.31  vehicle body and mechanical repair courses but does not include 
 18.32  driver education programs; 
 18.33     (7) purchase of a motor vehicle for use as an ambulance by 
 18.34  an ambulance service licensed under section 144E.10; 
 18.35     (8) purchase of a motor vehicle by or for a public library, 
 18.36  as defined in section 134.001, subdivision 2, as a bookmobile or 
 19.1   library delivery vehicle; 
 19.2      (9) purchase of a ready-mixed concrete truck; 
 19.3      (10) purchase or use of a motor vehicle by a town for use 
 19.4   exclusively for road maintenance, including snowplows and dump 
 19.5   trucks, but not including automobiles, vans, or pickup trucks; 
 19.6      (11) purchase or use of a motor vehicle by a corporation, 
 19.7   society, association, foundation, or institution organized and 
 19.8   operated exclusively for charitable, religious, or educational 
 19.9   purposes, except a public school, university, or library, but 
 19.10  only if the vehicle is: 
 19.11     (i) a truck, as defined in section 168.011, a bus, as 
 19.12  defined in section 168.011, or a passenger automobile, as 
 19.13  defined in section 168.011, if the automobile is designed and 
 19.14  used for carrying more than nine persons including the driver; 
 19.15  and 
 19.16     (ii) intended to be used primarily to transport tangible 
 19.17  personal property or individuals, other than employees, to whom 
 19.18  the organization provides service in performing its charitable, 
 19.19  religious, or educational purpose; 
 19.20     (12) purchase of a motor vehicle for use by a transit 
 19.21  provider exclusively to provide transit service is exempt if the 
 19.22  transit provider is either (i) receiving financial assistance or 
 19.23  reimbursement under section 174.24 or 473.384, or (ii) operating 
 19.24  under section 174.29, 473.388, or 473.405; 
 19.25     (13) purchase or use of a motor vehicle by a qualified 
 19.26  business, as defined in section 469.310, located in a job 
 19.27  opportunity building zone, if the motor vehicle is principally 
 19.28  garaged in the job opportunity building zone and is primarily 
 19.29  used as part of or in direct support of the person's operations 
 19.30  carried on in the job opportunity building zone.  The exemption 
 19.31  under this clause applies to sales, if the purchase was made and 
 19.32  delivery received during the duration of the job opportunity 
 19.33  building zone.  The exemption under this clause also applies to 
 19.34  any local sales and use tax; and 
 19.35     (14) purchase or use of a motor vehicle by a qualified 
 19.36  business, as defined in section 469.321, located in an 
 20.1   international economic development zone, if the motor vehicle is 
 20.2   principally garaged in the international economic development 
 20.3   zone and is primarily used as part of or in direct support of 
 20.4   the person's operations carried on in the international economic 
 20.5   development zone.  The exemption under this clause applies to 
 20.6   sales, if the purchase was made and delivery received during the 
 20.7   duration of the international economic development zone.  The 
 20.8   exemption under this clause also applies to any local sales and 
 20.9   use tax. 
 20.10     [EFFECTIVE DATE.] This section is effective for sales made 
 20.11  after December 31, 2004. 
 20.12     Sec. 14.  [469.321] [DEFINITIONS.] 
 20.13     Subdivision 1.  [SCOPE.] For purposes of sections 469.321 
 20.14  to 469.328, the following terms have the meanings given. 
 20.15     Subd. 2.  [FOREIGN TRADE ZONE.] "Foreign trade zone" means 
 20.16  a foreign trade zone designated pursuant to United States Code, 
 20.17  title 19, section 81a, for the right to use the powers provided 
 20.18  in United States Code, title 19, sections 81a to 81u, or a 
 20.19  subzone authorized by the foreign trade zone. 
 20.20     Subd. 3.  [FOREIGN TRADE ZONE AUTHORITY.] "Foreign trade 
 20.21  zone authority" means the Greater Metropolitan Foreign Trade 
 20.22  Zone Commission number 119, a joint powers authority created by 
 20.23  the county of Hennepin, the cities of Minneapolis and 
 20.24  Bloomington, and the Metropolitan Airports Commission, under the 
 20.25  authority of section 469.059, 469.101, or 471.59, which includes 
 20.26  any other political subdivisions that enter into the authority 
 20.27  after its creation. 
 20.28     Subd. 4.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE.] An 
 20.29  "international economic development zone" or "zone" is a zone so 
 20.30  designated under section 469.322. 
 20.31     Subd. 5.  [PERSON.] "Person" includes an individual, 
 20.32  corporation, partnership, limited liability company, 
 20.33  association, or any other entity. 
 20.34     Subd. 6.  [QUALIFIED BUSINESS.] (a) "Qualified business" 
 20.35  means a person carrying on a trade or business at a place of 
 20.36  business located within an international economic development 
 21.1   zone that is: 
 21.2      (1) engaged in the furtherance of international export or 
 21.3   import of goods; and 
 21.4      (2) certified by the foreign trade zone authority as a 
 21.5   trade or business that furthers the purpose of developing 
 21.6   international distribution capacity and capability. 
 21.7      (b) A person that relocates a trade or business from within 
 21.8   Minnesota but outside an international economic development zone 
 21.9   into an international economic development zone is not a 
 21.10  qualified business, unless the business: 
 21.11     (1)(i) increases full-time employment in the first full 
 21.12  year of operation within the international economic development 
 21.13  zone by at least 20 percent measured relative to the operations 
 21.14  that were relocated; or 
 21.15     (ii) makes a capital investment in the property located 
 21.16  within a zone equal to at least ten percent of the gross 
 21.17  revenues of the operations that were relocated in the 
 21.18  immediately proceeding taxable year; and 
 21.19     (2) enters a binding written agreement with the foreign 
 21.20  trade zone authority that: 
 21.21     (i) pledges that the business will meet the requirements of 
 21.22  clause (1); 
 21.23     (ii) provides for repayment of all tax benefits enumerated 
 21.24  under section 469.324 to the business under the procedures in 
 21.25  section 469.328, if the requirements of clause (1) are not met; 
 21.26  and 
 21.27     (iii) contains any other terms the foreign trade zone 
 21.28  authority determines appropriate. 
 21.29     Clause (1) of this paragraph does not apply to a freight 
 21.30  forwarder. 
 21.31     (c) A qualified business must pay each employee total 
 21.32  compensation, including benefits not mandated by law, that on an 
 21.33  annualized basis is equal to at least 110 percent of the federal 
 21.34  poverty guidelines for a family of four. 
 21.35     Subd. 7.  [REGIONAL DISTRIBUTION CENTER.] A "regional 
 21.36  distribution center" is a distribution center developed within a 
 22.1   foreign trade zone.  The regional distribution center must have 
 22.2   as its primary purpose to facilitate gathering of freight for 
 22.3   the purpose of centralizing the functions necessary for the 
 22.4   shipment of freight in international commerce, including, but 
 22.5   not limited to, security and customs functions. 
 22.6      Subd. 8.  [RELOCATE.] (a) "Relocate" means that a trade or 
 22.7   business: 
 22.8      (1) ceases one or more operations or functions at another 
 22.9   location in an international economic development zone; or 
 22.10     (2) reduces employment at another location in Minnesota 
 22.11  during a period starting one year before and ending one year 
 22.12  after it begins operations in an international economic 
 22.13  development zone and its employees in the international economic 
 22.14  development zone are engaged in the same line of business as the 
 22.15  employees at the location where it reduced employment. 
 22.16     (b) "Relocate" does not include an expansion by a business 
 22.17  that establishes a new facility that does not replace or 
 22.18  supplant an existing operation or employment, in whole or in 
 22.19  part. 
 22.20     Subd. 9.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE 
 22.21  PERCENTAGE OR ZONE PERCENTAGE.] "International economic 
 22.22  development zone percentage" or "zone percentage" means the 
 22.23  following fraction reduced to a percentage: 
 22.24     (1) the numerator of the fraction is: 
 22.25     (i) the ratio of the taxpayer's property factor under 
 22.26  section 290.191 located in the zone for the taxable year over 
 22.27  the property factor numerator determined under section 290.191, 
 22.28  plus 
 22.29     (ii) the ratio of the taxpayer's international economic 
 22.30  development zone payroll factor under subdivision 10 over the 
 22.31  payroll factor numerator determined under section 290.191; and 
 22.32     (2) the denominator of the fraction is two. 
 22.33     When calculating the zone percentage for a business that is 
 22.34  part of a unitary business as defined under section 290.17, 
 22.35  subdivision 4, the denominator of the payroll and property 
 22.36  factors is the Minnesota payroll and property of the unitary 
 23.1   business as reported on the combined report under section 
 23.2   290.17, subdivision 4, paragraph (j). 
 23.3      Subd. 10.  [INTERNATIONAL ECONOMIC DEVELOPMENT ZONE PAYROLL 
 23.4   FACTOR.] "International economic development zone payroll 
 23.5   factor" or "international economic development zone payroll" is 
 23.6   that portion of the payroll factor under section 290.191 that 
 23.7   represents: 
 23.8      (1) wages or salaries paid to an individual for services 
 23.9   performed in an international economic development zone; or 
 23.10     (2) wages or salaries paid to individuals working from 
 23.11  offices within an international economic development zone, if 
 23.12  their employment requires them to work outside the zone and the 
 23.13  work is incidental to the work performed by the individual 
 23.14  within the zone. 
 23.15     Subd. 11.  [FREIGHT FORWARDER.] "Freight forwarder" is a 
 23.16  business that, for compensation, ensures that goods produced or 
 23.17  sold by another business move from point of origin to point of 
 23.18  destination. 
 23.19     [EFFECTIVE DATE.] This section is effective the day 
 23.20  following final enactment. 
 23.21     Sec. 15.  [469.322] [DESIGNATION OF INTERNATIONAL ECONOMIC 
 23.22  DEVELOPMENT ZONE.] 
 23.23     (a) An area designated as a foreign trade zone may be 
 23.24  designated by the foreign trade zone authority as an 
 23.25  international economic development zone if within the zone a 
 23.26  regional distribution center is being developed pursuant to 
 23.27  section 469.323.  The zone must be not less than 500 acres and 
 23.28  not more than 1,000 acres in size. 
 23.29     (b) In making the designation, the foreign trade zone 
 23.30  authority shall consider access to major transportation routes, 
 23.31  adequacy of the size of the site, access to airport facilities, 
 23.32  and access to other infrastructure and financial incentives.  
 23.33  The border of the international economic development zone must 
 23.34  be no more than 60 miles distant or 90 minutes drive time from 
 23.35  the border of the Minneapolis-St. Paul International Airport. 
 23.36     [EFFECTIVE DATE.] This section is effective the day 
 24.1   following final enactment. 
 24.2      Sec. 16.  [469.323] [FOREIGN TRADE ZONE AUTHORITY POWERS.] 
 24.3      Subdivision 1.  [DEVELOPMENT OF REGIONAL DISTRIBUTION 
 24.4   CENTER.] The foreign trade zone authority shall be responsible 
 24.5   for creating a development plan for the regional distribution 
 24.6   center.  The regional distribution center must be developed with 
 24.7   the purpose of expanding, on a regional basis, international 
 24.8   distribution capacity and capability.  The foreign trade zone 
 24.9   authority shall consult with municipalities that have indicated 
 24.10  to the authority an interest in locating the international 
 24.11  economic development zone within their boundaries and a 
 24.12  willingness to establish a tax increment financing district 
 24.13  coterminous with the boundaries of the zone, as well as 
 24.14  interested businesses, potential financiers, and appropriate 
 24.15  state and federal agencies. 
 24.16     Subd. 2.  [BUSINESS PLAN.] Before designation of an 
 24.17  international economic development zone under section 469.322, 
 24.18  the governing body of the foreign trade zone authority shall 
 24.19  prepare a business plan.  The plan must include an analysis of 
 24.20  the economic feasibility of the regional distribution center 
 24.21  once it becomes operational and of the operations of freight 
 24.22  forwarders and other businesses that choose to locate within the 
 24.23  boundaries of the zone.  The analysis must provide profitability 
 24.24  models that: 
 24.25     (1) include the benefits of the incentives; 
 24.26     (2) estimate the amount of time needed to achieve 
 24.27  profitability; and 
 24.28     (3) analyze the length of time incentives will be necessary 
 24.29  to the economic viability of the regional distribution center. 
 24.30     If the governing body of the foreign trade authority 
 24.31  determines that the models do not establish the economic 
 24.32  feasibility of the project, the regional distribution center 
 24.33  does not meet the development requirements of this section and 
 24.34  section 469.322. 
 24.35     Subd. 3.  [PORT AUTHORITY POWERS.] The governing body of 
 24.36  the foreign trade zone authority may establish a port authority 
 25.1   that has the same powers as a port authority established under 
 25.2   section 469.049.  If the foreign trade zone authority 
 25.3   establishes a port authority, the governing body of the foreign 
 25.4   trade zone authority shall exercise all powers granted to a city 
 25.5   by sections 469.048 to 469.068 or other law. 
 25.6      Subd. 4.  [BUSINESS SUBSIDY LAW.] Tax exemptions, job 
 25.7   credits, and tax increment financing provided under this section 
 25.8   are business subsidies for the purpose of sections 116J.993 to 
 25.9   116J.995. 
 25.10     [EFFECTIVE DATE.] This section is effective the day 
 25.11  following final enactment. 
 25.12     Sec. 17.  [469.324] [TAX INCENTIVES IN INTERNATIONAL 
 25.13  ECONOMIC DEVELOPMENT ZONE.] 
 25.14     Subdivision 1.  [AVAILABILITY.] Qualified businesses that 
 25.15  operate in an international economic development zone, 
 25.16  individuals who invest in a regional distribution center or 
 25.17  qualified businesses that operate in an international economic 
 25.18  development zone, and property located in an international 
 25.19  economic development zone qualify for: 
 25.20     (1) exemption from individual income taxes as provided 
 25.21  under section 469.325; 
 25.22     (2) exemption from corporate franchise taxes as provided 
 25.23  under section 469.326; 
 25.24     (3) exemption from the state sales and use tax and any 
 25.25  local sales and use taxes on qualifying purchases as provided in 
 25.26  section 297A.68, subdivision 40; 
 25.27     (4) exemption from the state sales tax on motor vehicles 
 25.28  and any local sales tax on motor vehicles as provided under 
 25.29  section 297B.03; 
 25.30     (5) exemption from the property tax as provided in section 
 25.31  272.02, subdivision 68; 
 25.32     (6) the jobs credit allowed under section 469.327; and 
 25.33     (7) tax increment financing as provided in chapter 469. 
 25.34     Subd. 2.  [DURATION.] The tax incentives described in 
 25.35  subdivision 1, clauses (1), (2), and (6), are available for no 
 25.36  more than 12 consecutive taxable years for any taxpayer that 
 26.1   claims them.  The tax incentives described in subdivision 1, 
 26.2   clauses (3) and (4), are available for each taxpayer that claims 
 26.3   them for taxes otherwise payable on transactions during a period 
 26.4   of 12 years from the date when the first exemption is claimed by 
 26.5   that taxpayer under each exemption.  The property tax exemption 
 26.6   described under subdivision 1, clause (5), is available for any 
 26.7   parcel of property for 12 consecutive taxes payable years.  No 
 26.8   exemptions described in subdivision 1, clauses (1) to (6), are 
 26.9   available after December 31, 2020. 
 26.10     Sec. 18.  [469.325] [INDIVIDUAL INCOME TAX EXEMPTION.] 
 26.11     Subdivision 1.  [APPLICATION.] An individual operating a 
 26.12  trade or business in an international economic development zone, 
 26.13  and an individual making a qualifying investment in a qualified 
 26.14  business operating in an international economic development zone 
 26.15  qualifies for the exemptions from taxes imposed under chapter 
 26.16  290, as provided in this section.  The exemptions provided under 
 26.17  this section apply only to the extent that the income otherwise 
 26.18  would be taxable under chapter 290.  Subtractions under this 
 26.19  section from federal taxable income, alternative minimum taxable 
 26.20  income, or any other base subject to tax are limited to the 
 26.21  amount that otherwise would be included in the tax base absent 
 26.22  the exemption under this section.  This section applies only to 
 26.23  taxable years beginning during the duration of the zone. 
 26.24     Subd. 2.  [RENTS.] An individual is exempt from the taxes 
 26.25  imposed under chapter 290 on net rents derived from real or 
 26.26  tangible personal property located in a zone for a taxable year 
 26.27  in which the zone was designated an international economic 
 26.28  development zone.  If tangible personal property was used both 
 26.29  within and outside of the zone, the exemption amount for the net 
 26.30  rental income must be multiplied by a fraction, the numerator of 
 26.31  which is the number of days the property was used in the zone 
 26.32  and the denominator of which is the total days. 
 26.33     Subd. 3.  [BUSINESS INCOME.] An individual is exempt from 
 26.34  the taxes imposed under chapter 290 on net income from the 
 26.35  operation of a qualified business in an international economic 
 26.36  development zone.  If the trade or business is carried on within 
 27.1   and without the zone and the individual is not a resident of 
 27.2   Minnesota, the exemption must be apportioned based on the zone 
 27.3   percentage for the taxable year.  If the trade or business is 
 27.4   carried on within and without the zone and the individual is a 
 27.5   resident of Minnesota, the exemption must be apportioned based 
 27.6   on the zone percentage for the taxable year, except the ratios 
 27.7   under section 469.321, subdivision 9, clause (1), items (i) and 
 27.8   (ii), must use the denominators of the property and payroll 
 27.9   factors determined under section 290.191.  No subtraction is 
 27.10  allowed under this section in excess of 20 percent of the sum of 
 27.11  the international economic development zone payroll and the 
 27.12  adjusted basis of the property at the time that the property is 
 27.13  first used in the international economic development zone by the 
 27.14  business. 
 27.15     Subd. 4.  [CAPITAL GAINS.] (a) An individual is exempt from 
 27.16  the taxes imposed under chapter 290 on: 
 27.17     (1) net gain derived on a sale or exchange of real property 
 27.18  located in the international economic development zone and used 
 27.19  by a qualified business.  If the property was held by the 
 27.20  individual during a period when the zone was not designated, the 
 27.21  gain must be prorated based on the percentage of time, measured 
 27.22  in calendar days, that the real property was held by the 
 27.23  individual during the period the zone designation was in effect 
 27.24  to the total period of time the real property was held by the 
 27.25  individual; 
 27.26     (2) net gain derived on a sale or exchange of tangible 
 27.27  personal property used by a qualified business in the 
 27.28  international economic development zone.  If the property was 
 27.29  held by the individual during a period when the zone was not 
 27.30  designated, the gain must be prorated based on the percentage of 
 27.31  time, measured in calendar days, that the property was held by 
 27.32  the individual during the period the zone designation was in 
 27.33  effect to the total period of time the property was held by the 
 27.34  individual.  If the tangible personal property was used outside 
 27.35  of the zone during the period of the zone's designation, the 
 27.36  exemption must be multiplied by a fraction, the numerator of 
 28.1   which is the number of days the property was used in the zone 
 28.2   during the time of the designation and the denominator of which 
 28.3   is the total days the property was held during the time of the 
 28.4   designation; and 
 28.5      (3) net gain derived on a sale of an ownership interest in 
 28.6   a qualified business operating in the international economic 
 28.7   development zone, meeting the requirements of paragraph (b).  
 28.8   The exemption on the gain must be multiplied by the zone 
 28.9   percentage of the business for the taxable year prior to the 
 28.10  sale. 
 28.11     (b) A qualified business meets the requirements of 
 28.12  paragraph (a), clause (3), if it is a corporation, an S 
 28.13  corporation, or a partnership, and for the taxable year its 
 28.14  international economic development zone percentage exceeds 25 
 28.15  percent.  For purposes of paragraph (a), clause (3), the zone 
 28.16  percentage must be calculated by modifying the ratios under 
 28.17  section 469.321, subdivision 9, clause (1), items (i) and (ii), 
 28.18  to use the denominators of the property and payroll factors 
 28.19  determined under section 290.191.  Upon the request of an 
 28.20  individual holding an ownership interest in the entity, the 
 28.21  entity must certify to the owner, in writing, the international 
 28.22  economic development zone percentage needed to determine the 
 28.23  exemption. 
 28.24     [EFFECTIVE DATE.] This section is effective for taxable 
 28.25  years beginning after December 31, 2004. 
 28.26     Sec. 19.  [469.326] [CORPORATE FRANCHISE TAX EXEMPTION.] 
 28.27     (a) A qualified business is exempt from taxation under 
 28.28  section 290.02, the alternative minimum tax under section 
 28.29  290.0921, and the minimum fee under section 290.0922, on the 
 28.30  portion of its income attributable to operations within the 
 28.31  international economic development zone.  This exemption is 
 28.32  determined as follows: 
 28.33     (1) for purposes of the tax imposed under section 290.02, 
 28.34  by multiplying its taxable net income by its zone percentage and 
 28.35  subtracting the result in determining taxable income; 
 28.36     (2) for purposes of the alternative minimum tax under 
 29.1   section 290.0921, by multiplying its alternative minimum taxable 
 29.2   income by its zone percentage and reducing alternative minimum 
 29.3   taxable income by this amount; and 
 29.4      (3) for purposes of the minimum fee under section 290.0922, 
 29.5   by excluding property and payroll in the zone from the 
 29.6   computations of the fee or by exempting the entity under section 
 29.7   290.0922, subdivision 2, clause (8). 
 29.8      (b) No subtraction is allowed under this section in excess 
 29.9   of 20 percent of the sum of the corporation's international 
 29.10  economic development zone payroll and the adjusted basis of the 
 29.11  property at the time that the property is first used in the 
 29.12  international economic development zone by the corporation. 
 29.13     (c) This section applies only to taxable years beginning 
 29.14  during the duration of the international economic development 
 29.15  zone. 
 29.16     [EFFECTIVE DATE.] This section is effective for taxable 
 29.17  years beginning after December 31, 2004. 
 29.18     Sec. 20.  [469.327] [JOBS CREDIT.] 
 29.19     Subdivision 1.  [CREDIT ALLOWED.] A qualified business is 
 29.20  allowed a credit against the taxes imposed under chapter 290.  
 29.21  The credit equals seven percent of the: 
 29.22     (1) lesser of: 
 29.23     (i) zone payroll for the taxable year, less the zone 
 29.24  payroll for the base year; or 
 29.25     (ii) total Minnesota payroll for the taxable year, less 
 29.26  total Minnesota payroll for the base year; minus 
 29.27     (2) $30,000 multiplied by the number of full-time 
 29.28  equivalent employees that the qualified business employs in the 
 29.29  international economic development zone for the taxable year, 
 29.30  minus the number of full-time equivalent employees the business 
 29.31  employed in the zone in the base year, but not less than zero. 
 29.32     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 29.33  the following terms have the meanings given. 
 29.34     (b) "Base year" means the taxable year beginning during the 
 29.35  calendar year prior to the calendar year in which the zone 
 29.36  designation took effect. 
 30.1      (c) "Full-time equivalent employees" means the equivalent 
 30.2   of annualized expected hours of work equal to 2,080 hours. 
 30.3      (d) "Minnesota payroll" means the wages or salaries 
 30.4   attributed to Minnesota under section 290.191, subdivision 12, 
 30.5   for the qualified business or the unitary business of which the 
 30.6   qualified business is a part, whichever is greater. 
 30.7      (e) "Zone payroll" means wages or salaries used to 
 30.8   determine the zone payroll factor for the qualified business, 
 30.9   less the amount of compensation attributable to any employee 
 30.10  that exceeds $100,000. 
 30.11     Subd. 3.  [INFLATION ADJUSTMENT.] For taxable years 
 30.12  beginning after December 31, 2005, the dollar amounts in 
 30.13  subdivision 1, clause (2), and subdivision 2, paragraph (e), are 
 30.14  annually adjusted for inflation.  The commissioner of revenue 
 30.15  shall adjust the amounts by the percentage determined under 
 30.16  section 290.06, subdivision 2d, for the taxable year. 
 30.17     Subd. 4.  [REFUNDABLE.] If the amount of the credit exceeds 
 30.18  the liability for tax under chapter 290, the commissioner of 
 30.19  revenue shall refund the excess to the qualified business. 
 30.20     Subd. 5.  [APPROPRIATION.] An amount sufficient to pay the 
 30.21  refunds authorized by this section is appropriated to the 
 30.22  commissioner of revenue from the general fund. 
 30.23     [EFFECTIVE DATE.] This section is effective for taxable 
 30.24  years beginning after December 31, 2004. 
 30.25     Sec. 21.  [469.328] [REPAYMENT OF TAX BENEFITS.] 
 30.26     Subdivision 1.  [REPAYMENT OBLIGATION.] A person must repay 
 30.27  the amount of the tax reduction received under section 469.324, 
 30.28  subdivision 1, clauses (1) to (6), or refund received under 
 30.29  section 469.327, during the two years immediately before it 
 30.30  ceased to operate in the zone, if the person ceased to operate 
 30.31  its facility located within the zone or otherwise ceases to be 
 30.32  or is not a qualified business. 
 30.33     Subd. 2.  [DISPOSITION OF REPAYMENT.] The repayment must be 
 30.34  paid to the state to the extent it represents a state tax 
 30.35  reduction and to the county to the extent it represents a 
 30.36  property tax reduction.  Any amount repaid to the state must be 
 31.1   deposited in the general fund.  Any amount repaid to the county 
 31.2   for the property tax exemption must be distributed to the local 
 31.3   governments with authority to levy taxes in the zone in the same 
 31.4   manner provided for distribution of payment of delinquent 
 31.5   property taxes.  Any repayment of local sales or use taxes must 
 31.6   be repaid to the jurisdiction imposing the local sales or use 
 31.7   tax. 
 31.8      Subd. 3.  [REPAYMENT PROCEDURES.] (a) For the repayment of 
 31.9   taxes imposed under chapter 290 or 297A or local taxes collected 
 31.10  pursuant to section 297A.99, a person must file an amended 
 31.11  return with the commissioner of revenue and pay any taxes 
 31.12  required to be repaid within 30 days after ceasing to be a 
 31.13  qualified business.  The amount required to be repaid is 
 31.14  determined by calculating the tax for the period for which 
 31.15  repayment is required without regard to the tax reductions 
 31.16  allowed under section 469.324. 
 31.17     (b) For the repayment of taxes imposed under chapter 297B, 
 31.18  a person must pay any taxes required to be repaid to the motor 
 31.19  vehicle registrar, as agent for the commissioner of revenue, 
 31.20  within 30 days after ceasing to do business in the zone. 
 31.21     (c) For the repayment of property taxes, the county auditor 
 31.22  shall prepare a tax statement for the person, applying the 
 31.23  applicable tax extension rates for each payable year and provide 
 31.24  a copy to the business.  The person must pay the taxes to the 
 31.25  county treasurer within 30 days after receipt of the tax 
 31.26  statement.  The taxpayer may appeal the valuation and 
 31.27  determination of the property tax to the tax court within 30 
 31.28  days after receipt of the tax statement. 
 31.29     (d) The provisions of chapters 270 and 289A relating to the 
 31.30  commissioner of revenue's authority to audit, assess, and 
 31.31  collect the tax and to hear appeals are applicable to the 
 31.32  repayment required under paragraphs (a) and (b).  The 
 31.33  commissioner may impose civil penalties as provided in chapter 
 31.34  289A, and the additional tax and penalties are subject to 
 31.35  interest at the rate provided in section 270.75, from 30 days 
 31.36  after ceasing to do business in the zone until the date the tax 
 32.1   is paid. 
 32.2      (e) If a property tax is not repaid under paragraph (c), 
 32.3   the county treasurer shall add the amount required to be repaid 
 32.4   to the property taxes assessed against the property for payment 
 32.5   in the year following the year in which the treasurer discovers 
 32.6   that the person ceased to operate in the international economic 
 32.7   development zone. 
 32.8      (f) For determining the tax required to be repaid, a tax 
 32.9   reduction is deemed to have been received on the date that the 
 32.10  tax would have been due if the person had not been entitled to 
 32.11  the tax reduction. 
 32.12     (g) The commissioner of revenue may assess the repayment of 
 32.13  taxes under paragraph (d) at any time within two years after the 
 32.14  person ceases to be a qualified business, or within any period 
 32.15  of limitations for the assessment of tax under section 289A.38, 
 32.16  whichever is later. 
 32.17     Subd. 4.  [WAIVER AUTHORITY.] The commissioner may waive 
 32.18  all or part of a repayment, if the commissioner of revenue, in 
 32.19  consultation with the foreign trade zone authority and 
 32.20  appropriate officials from the state and local government units, 
 32.21  determines that requiring repayment of the tax is not in the 
 32.22  best interest of the state or local government and the business 
 32.23  ceased operating as a result of circumstances beyond its 
 32.24  control, including, but not limited to: 
 32.25     (1) a natural disaster; 
 32.26     (2) unforeseen industry trends; or 
 32.27     (3) loss of a major supplier or customer. 
 32.28     [EFFECTIVE DATE.] This section is effective the day 
 32.29  following final enactment. 
 32.30     Sec. 22.  [DEPARTMENT OF EMPLOYMENT AND ECONOMIC 
 32.31  DEVELOPMENT STUDY; INTERNATIONAL AIR FREIGHT.] 
 32.32     The commissioner of employment and economic development 
 32.33  must study and analyze the issue of whether the state would 
 32.34  benefit from more than one international economic development 
 32.35  zone as defined in Minnesota Statutes, section 469.321.  The 
 32.36  commissioner shall solicit input on the issue from businesses, 
 33.1   communities, and economic development organizations.  The 
 33.2   commissioner must report the results of the study and analysis 
 33.3   to the committees of the legislature having jurisdiction over 
 33.4   economic development issues by December 1, 2004, along with any 
 33.5   legislative recommendations.