SF 2388

as introduced - 80th Legislature (1997 - 1998) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act
  1.2             relating to taxation; providing for border city 
  1.3             development zones and other tax incentives in border 
  1.4             cities; changing administrative provisions for border 
  1.5             city enterprise zones; modifying the recapture of the 
  1.6             incentives in zones; appropriating money; amending 
  1.7             Minnesota Statutes 1996, sections 290.06, by adding 
  1.8             subdivisions; 290.091, subdivision 2; 297A.25, by 
  1.9             adding a subdivision; 469.170, by adding a 
  1.10            subdivision; and 469.171, subdivision 9; Minnesota 
  1.11            Statutes 1997 Supplement, section 290.01, subdivision 
  1.12            19b; proposing coding for new law in Minnesota 
  1.13            Statutes, chapters 272; 290; 469; and 477A. 
  1.14  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.15                             ARTICLE 1
  1.16                   BORDER CITY DEVELOPMENT ZONES
  1.17     Section 1.  [272.0212] [BORDER DEVELOPMENT ZONE PROPERTY.] 
  1.18     Subdivision 1.  [EXEMPTION.] All property, including 
  1.19  personal property, in a zone is exempt to the extent and for the 
  1.20  duration provided by the zone designation and under sections 
  1.21  469.1931 to 469.1933. 
  1.22     Subd. 2.  [LIMITS ON EXEMPTION.] Property in a zone is not 
  1.23  exempt under this section from the following: 
  1.24     (1) special assessments; 
  1.25     (2) ad valorem property taxes specifically levied for the 
  1.26  payment of principal and interest on debt obligations; and 
  1.27     (3) all taxes levied by a school district, except equalized 
  1.28  school levies as defined in section 273.1398, subdivision 1, 
  1.29  paragraph (e). 
  2.1      Subd. 3.  [RESIDENTIAL RENTAL PROPERTY.] The exemption 
  2.2   provided under this section is available for residential rental 
  2.3   property only if: 
  2.4      (1) the property is in substantial compliance with all 
  2.5   applicable state and local zoning, building, and housing laws, 
  2.6   ordinances, or codes; and 
  2.7      (2) the property owner files an affidavit with the assessor 
  2.8   before June 1 of the assessment year stating that the property 
  2.9   is in substantial compliance with all applicable state and local 
  2.10  zoning, building, and housing laws, ordinances, or codes. 
  2.11     Subd. 4.  [STATE AID.] Property exempt under this section 
  2.12  is included in the net tax capacity for purposes of computing 
  2.13  aids under chapter 477A. 
  2.14     Subd. 5.  [DEFINITIONS.] (a) For purposes of this section, 
  2.15  the following terms have the meanings given. 
  2.16     (b) "Residential rental property" means class 4a and class 
  2.17  4b property as defined in section 273.13. 
  2.18     (c) "Zone" means a border city development zone designated 
  2.19  under the provisions of section 469.1931. 
  2.20     Sec. 2.  Minnesota Statutes 1997 Supplement, section 
  2.21  290.01, subdivision 19b, is amended to read: 
  2.22     Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  2.23  individuals, estates, and trusts, there shall be subtracted from 
  2.24  federal taxable income: 
  2.25     (1) interest income on obligations of any authority, 
  2.26  commission, or instrumentality of the United States to the 
  2.27  extent includable in taxable income for federal income tax 
  2.28  purposes but exempt from state income tax under the laws of the 
  2.29  United States; 
  2.30     (2) if included in federal taxable income, the amount of 
  2.31  any overpayment of income tax to Minnesota or to any other 
  2.32  state, for any previous taxable year, whether the amount is 
  2.33  received as a refund or as a credit to another taxable year's 
  2.34  income tax liability; 
  2.35     (3) the amount paid to others, less the credit allowed 
  2.36  under section 290.0674, not to exceed $1,625 for each dependent 
  3.1   in grades kindergarten to 6 and $2,500 for each dependent in 
  3.2   grades 7 to 12, for tuition, textbooks, and transportation of 
  3.3   each dependent in attending an elementary or secondary school 
  3.4   situated in Minnesota, North Dakota, South Dakota, Iowa, or 
  3.5   Wisconsin, wherein a resident of this state may legally fulfill 
  3.6   the state's compulsory attendance laws, which is not operated 
  3.7   for profit, and which adheres to the provisions of the Civil 
  3.8   Rights Act of 1964 and chapter 363.  For the purposes of this 
  3.9   clause, "tuition" includes fees or tuition as defined in section 
  3.10  290.0674, subdivision 1, clause (1).  As used in this clause, 
  3.11  "textbooks" includes books and other instructional materials and 
  3.12  equipment used in elementary and secondary schools in teaching 
  3.13  only those subjects legally and commonly taught in public 
  3.14  elementary and secondary schools in this state.  Equipment 
  3.15  expenses qualifying for deduction includes expenses as defined 
  3.16  and limited in section 290.0674, subdivision 1, clause (3).  
  3.17  "Textbooks" does not include instructional books and materials 
  3.18  used in the teaching of religious tenets, doctrines, or worship, 
  3.19  the purpose of which is to instill such tenets, doctrines, or 
  3.20  worship, nor does it include books or materials for, or 
  3.21  transportation to, extracurricular activities including sporting 
  3.22  events, musical or dramatic events, speech activities, driver's 
  3.23  education, or similar programs; 
  3.24     (4) to the extent included in federal taxable income, 
  3.25  distributions from a qualified governmental pension plan, an 
  3.26  individual retirement account, simplified employee pension, or 
  3.27  qualified plan covering a self-employed person that represent a 
  3.28  return of contributions that were included in Minnesota gross 
  3.29  income in the taxable year for which the contributions were made 
  3.30  but were deducted or were not included in the computation of 
  3.31  federal adjusted gross income.  The distribution shall be 
  3.32  allocated first to return of contributions until the 
  3.33  contributions included in Minnesota gross income have been 
  3.34  exhausted.  This subtraction applies only to contributions made 
  3.35  in a taxable year prior to 1985; 
  3.36     (5) income as provided under section 290.0802; 
  4.1      (6) the amount of unrecovered accelerated cost recovery 
  4.2   system deductions allowed under subdivision 19g; 
  4.3      (7) to the extent included in federal adjusted gross 
  4.4   income, income realized on disposition of property exempt from 
  4.5   tax under section 290.491; 
  4.6      (8) to the extent not deducted in determining federal 
  4.7   taxable income, the amount paid for health insurance of 
  4.8   self-employed individuals as determined under section 162(l) of 
  4.9   the Internal Revenue Code, except that the 25 percent limit does 
  4.10  not apply.  If the taxpayer deducted insurance payments under 
  4.11  section 213 of the Internal Revenue Code of 1986, the 
  4.12  subtraction under this clause must be reduced by the lesser of: 
  4.13     (i) the total itemized deductions allowed under section 
  4.14  63(d) of the Internal Revenue Code, less state, local, and 
  4.15  foreign income taxes deductible under section 164 of the 
  4.16  Internal Revenue Code and the standard deduction under section 
  4.17  63(c) of the Internal Revenue Code; or 
  4.18     (ii) the lesser of (A) the amount of insurance qualifying 
  4.19  as "medical care" under section 213(d) of the Internal Revenue 
  4.20  Code to the extent not deducted under section 162(1) of the 
  4.21  Internal Revenue Code or excluded from income or (B) the total 
  4.22  amount deductible for medical care under section 213(a); 
  4.23     (9) the exemption amount allowed under Laws 1995, chapter 
  4.24  255, article 3, section 2, subdivision 3; 
  4.25     (10) to the extent included in federal taxable income, 
  4.26  postservice benefits for youth community service under section 
  4.27  121.707 for volunteer service under United States Code, title 
  4.28  42, section 5011(d), as amended; and 
  4.29     (11) the amount of income or gain included in federal 
  4.30  taxable income under section 1366 of the Internal Revenue Code 
  4.31  flowing from a corporation that has a valid election in effect 
  4.32  for the taxable year under section 1362 of the Internal Revenue 
  4.33  Code which is not allowed to be an "S" corporation under section 
  4.34  290.9725; and 
  4.35     (12) border city development zone income allowed as a 
  4.36  subtraction under section 290.0803. 
  5.1      Sec. 3.  Minnesota Statutes 1996, section 290.06, is 
  5.2   amended by adding a subdivision to read: 
  5.3      Subd. 26.  [BORDER CITY ZONE CREDIT.] (a) A corporation may 
  5.4   claim a credit against the tax imposed by this section and 
  5.5   sections 290.0921 and 290.0922.  The allowable credit equals the 
  5.6   tax liability attributable to business conducted within a zone. 
  5.7      (b) Tax liability means the tax liability under this 
  5.8   section and sections 290.0921 and 290.0922 after any other 
  5.9   credits. 
  5.10     (c) The tax liability attributable to business conducted 
  5.11  within a zone means the taxpayer's tax liability multiplied by a 
  5.12  fraction: 
  5.13     (1) the numerator of which is (i) the ratio of the 
  5.14  taxpayer's property factor under section 290.191 located in the 
  5.15  zone to the taxpayer's total Minnesota property factor, plus 
  5.16  (ii) the ratio of the taxpayer's payroll factor under section 
  5.17  290.191 for services performed in the zone to the taxpayer's 
  5.18  total Minnesota payroll factor; and 
  5.19     (2) the denominator of which is two. 
  5.20     (d) Any portion of the taxpayer's tax liability that is 
  5.21  attributable to illegal activity conducted in the zone must not 
  5.22  be used to calculate a credit under this subdivision. 
  5.23     (e) The credit allowed under this section continues through 
  5.24  the taxable year in which the zone designation expires. 
  5.25     (f) To be eligible for a credit under this subdivision, the 
  5.26  taxpayer must file an annual return under this chapter. 
  5.27     (g) The credit allowed under this subdivision may not 
  5.28  exceed the tax liability of the taxpayer for the taxable year. 
  5.29     (h) "Zone" means a border city development zone designated 
  5.30  under the provisions of section 469.1931. 
  5.31     Sec. 4.  Minnesota Statutes 1996, section 290.06, is 
  5.32  amended by adding a subdivision to read: 
  5.33     Subd. 27.  [BORDER CITY NEW INDUSTRY CREDIT.] (a) To 
  5.34  provide a tax incentive for new industry in border cities, a 
  5.35  corporation is allowed a credit against the tax imposed by this 
  5.36  section. 
  6.1      (b) For purposes of this subdivision, a border city means 
  6.2   any city that is authorized to create a border city development 
  6.3   zone under section 469.1931. 
  6.4      (c) The credit equals one percent of the wages and salaries 
  6.5   paid by the taxpayer during the taxable year for employees whose 
  6.6   principal place of work is located in a border city but outside 
  6.7   of a zone designed under section 469.1931.  The credit applies 
  6.8   for the first three taxable years of the operation of the 
  6.9   corporation in the border city.  In the fourth and fifth taxable 
  6.10  years of the operation of the corporation in the border city, 
  6.11  the credit equals 0.5 percent of the wages and salaries.  After 
  6.12  the fifth year, no credit is allowed. 
  6.13     (d) The credit under this subdivision applies only to a 
  6.14  corporate enterprise engaged in assembling, fabricating, 
  6.15  manufacturing, mixing, or processing of any agricultural, 
  6.16  mineral, or manufactured product or combinations of them. 
  6.17     Sec. 5.  [290.0803] [BORDER CITY ZONE SUBTRACTION.] 
  6.18     Subdivision 1.  [SUBTRACTION FROM FEDERAL TAXABLE 
  6.19  INCOME.] (a) To the extent the amounts were included in federal 
  6.20  taxable income, a qualified taxpayer may subtract income 
  6.21  received or earned during the period of time that the qualified 
  6.22  taxpayer was a resident of a zone, not to exceed $1,000,000 for 
  6.23  the taxable year.  
  6.24     (b) The following amounts are not included in the 
  6.25  subtraction: 
  6.26     (1) capital gains received in the tax year prorated based 
  6.27  on the percentage of time that the asset was held by the 
  6.28  qualified taxpayer while the qualified taxpayer was not a 
  6.29  resident of the zone; 
  6.30     (2) winnings from a lottery or similar games, if: 
  6.31     (i) the game was not sponsored by this state; 
  6.32     (ii) the drawings were held before the individual became a 
  6.33  resident of the zone; or 
  6.34     (iii) the validation date on the lottery ticket is either 
  6.35  before the qualified taxpayer became a resident of the zone or 
  6.36  after the qualified taxpayer ceased being a resident of the 
  7.1   zone; and 
  7.2      (3) income from illegal activity while the taxpayer was a 
  7.3   resident of the zone. 
  7.4      Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
  7.5   the following terms have the meanings given. 
  7.6      (b) "Qualified taxpayer" means an individual who meets the 
  7.7   residency rules and includes an estate of an individual who was 
  7.8   a resident of a zone at the time of death. 
  7.9      (c) "Zone" means a border city development zone designated 
  7.10  under the provisions of section 469.1931. 
  7.11     Subd. 3.  [COORDINATION WITH OTHER PROVISIONS.] Income used 
  7.12  to calculate a subtraction or deduction under any other 
  7.13  provision of this chapter may not be used to calculate the 
  7.14  subtraction under this section. 
  7.15     Subd. 4.  [RESIDENCY RULES.] (a) An individual is a 
  7.16  resident of a zone if the individual was domiciled in an area 
  7.17  that is designated a zone for a period of 183 consecutive days.  
  7.18  A taxpayer may begin calculating the 183-day period during the 
  7.19  183 days immediately before the designation of the area as a 
  7.20  zone.  After a taxpayer has completed the 183-day residency 
  7.21  requirement under this subdivision, the taxpayer is considered 
  7.22  to have been a resident of the zone beginning from the first day 
  7.23  used to determined if the 183-day residency requirement has been 
  7.24  met. 
  7.25     (b) If a taxpayer completes the residency requirements 
  7.26  before the end of the taxable year in which the taxpayer first 
  7.27  resided in the zone, the taxpayer may claim the subtraction 
  7.28  under this section for the taxable year. 
  7.29     (c) If the taxpayer completes the residency requirements in 
  7.30  a taxable year after the tax year in which the taxpayer first 
  7.31  resided in the zone, the following apply: 
  7.32     (1) if the taxpayer completes the residency requirement in 
  7.33  a taxable year after the taxable year in which the taxpayer 
  7.34  first resided in the zone and before the filing date for the 
  7.35  annual return for the taxable year in which the taxpayer first 
  7.36  resided in the zone, the taxpayer may claim the subtraction 
  8.1   allowed under this section for the taxable year in which the 
  8.2   taxpayer first resided in the zone; and 
  8.3      (2) if the taxpayer completes the residency requirement in 
  8.4   a taxable year after the taxable year in which the taxpayer 
  8.5   first resided in the zone and after the filing date for the 
  8.6   annual return for the taxable year in which the taxpayer first 
  8.7   resided in the zone, the taxpayer may claim the subtraction 
  8.8   allowed under this section for the taxable year in which the 
  8.9   taxpayer completed the residency requirement and may claim the 
  8.10  deduction for the tax year in which the taxpayer first resided 
  8.11  in the zone by filing an amended return for the taxable year in 
  8.12  which the taxpayer first resided in the zone. 
  8.13     Subd. 5.  [FILING REQUIREMENTS.] To be eligible for the 
  8.14  subtraction under this section, a qualified taxpayer must file: 
  8.15     (1) an annual return under this chapter; and 
  8.16     (2) a withholding form prescribed by the commissioner with 
  8.17  the qualified taxpayer's employer within ten days after the 
  8.18  residency requirements under subdivision 4 is completed. 
  8.19     Sec. 6.  Minnesota Statutes 1996, section 290.091, 
  8.20  subdivision 2, is amended to read: 
  8.21     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
  8.22  this section, the following terms have the meanings given: 
  8.23     (a) "Alternative minimum taxable income" means the sum of 
  8.24  the following for the taxable year: 
  8.25     (1) the taxpayer's federal alternative minimum taxable 
  8.26  income as defined in section 55(b)(2) of the Internal Revenue 
  8.27  Code; 
  8.28     (2) the taxpayer's itemized deductions allowed in computing 
  8.29  federal alternative minimum taxable income, but excluding the 
  8.30  Minnesota charitable contribution deduction and the medical 
  8.31  expense deduction; 
  8.32     (3) for depletion allowances computed under section 613A(c) 
  8.33  of the Internal Revenue Code, with respect to each property (as 
  8.34  defined in section 614 of the Internal Revenue Code), to the 
  8.35  extent not included in federal alternative minimum taxable 
  8.36  income, the excess of the deduction for depletion allowable 
  9.1   under section 611 of the Internal Revenue Code for the taxable 
  9.2   year over the adjusted basis of the property at the end of the 
  9.3   taxable year (determined without regard to the depletion 
  9.4   deduction for the taxable year); 
  9.5      (4) to the extent not included in federal alternative 
  9.6   minimum taxable income, the amount of the tax preference for 
  9.7   intangible drilling cost under section 57(a)(2) of the Internal 
  9.8   Revenue Code determined without regard to subparagraph (E); 
  9.9      (5) to the extent not included in federal alternative 
  9.10  minimum taxable income, the amount of interest income as 
  9.11  provided by section 290.01, subdivision 19a, clause (1); 
  9.12     less the sum of the amounts determined under the following 
  9.13  clauses (1) to (3) (4): 
  9.14     (1) interest income as defined in section 290.01, 
  9.15  subdivision 19b, clause (1); 
  9.16     (2) an overpayment of state income tax as provided by 
  9.17  section 290.01, subdivision 19b, clause (2), to the extent 
  9.18  included in federal alternative minimum taxable income; and 
  9.19     (3) the amount of investment interest paid or accrued 
  9.20  within the taxable year on indebtedness to the extent that the 
  9.21  amount does not exceed net investment income, as defined in 
  9.22  section 163(d)(4) of the Internal Revenue Code.  Interest does 
  9.23  not include amounts deducted in computing federal adjusted gross 
  9.24  income; and 
  9.25     (4) border city development zone income allowed as a 
  9.26  subtraction under section 290.0803. 
  9.27     In the case of an estate or trust, alternative minimum 
  9.28  taxable income must be computed as provided in section 59(c) of 
  9.29  the Internal Revenue Code. 
  9.30     (b) "Investment interest" means investment interest as 
  9.31  defined in section 163(d)(3) of the Internal Revenue Code. 
  9.32     (c) "Tentative minimum tax" equals seven percent of 
  9.33  alternative minimum taxable income after subtracting the 
  9.34  exemption amount determined under subdivision 3. 
  9.35     (d) "Regular tax" means the tax that would be imposed under 
  9.36  this chapter (without regard to this section and section 
 10.1   290.032), reduced by the sum of the nonrefundable credits 
 10.2   allowed under this chapter.  
 10.3      (e) "Net minimum tax" means the minimum tax imposed by this 
 10.4   section. 
 10.5      (f) "Minnesota charitable contribution deduction" means a 
 10.6   charitable contribution deduction under section 170 of the 
 10.7   Internal Revenue Code to or for the use of an entity described 
 10.8   in section 290.21, subdivision 3, clauses (a) to (e).  When the 
 10.9   federal deduction for charitable contributions is limited under 
 10.10  section 170(b) of the Internal Revenue Code, the allowable 
 10.11  contributions in the year of contribution are deemed to be first 
 10.12  contributions to entities described in section 290.21, 
 10.13  subdivision 3, clauses (a) to (e). 
 10.14     Sec. 7.  Minnesota Statutes 1996, section 297A.25, is 
 10.15  amended by adding a subdivision to read: 
 10.16     Subd. 73.  [BORDER CITIES; CAPITAL EQUIPMENT; CONSTRUCTION 
 10.17  MATERIALS.] (a) The gross receipts from the sale of machinery 
 10.18  and equipment and repair parts are exempt, if the machinery and 
 10.19  equipment: 
 10.20     (1) are used in connection with a trade or business; 
 10.21     (2) are placed in service in a city that has designated a 
 10.22  zone under section 469.1931, regardless of whether the machinery 
 10.23  and equipment are used in a zone; and 
 10.24     (3) have a useful life of 12 months or more. 
 10.25     (b) The gross receipts from the sale of construction 
 10.26  materials are exempt, if they are used to construct a facility 
 10.27  for use in a trade or business located in a city that has 
 10.28  designated a zone under section 469.1931, regardless of whether 
 10.29  the facility is located in a zone. 
 10.30     (c) The exemptions under this subdivision apply regardless 
 10.31  of whether the purchase is made by the owner, the user, or a 
 10.32  contractor. 
 10.33     Sec. 8.  [469.1931] [BORDER CITY DEVELOPMENT ZONES.] 
 10.34     Subdivision 1.  [DESIGNATION.] To encourage economic 
 10.35  development, to revitalize the designated areas, to expand tax 
 10.36  base and economic activity, and to provide job creation, growth, 
 11.1   and retention, the following border cities may designate, by 
 11.2   resolution, areas of the city as development zones after a 
 11.3   public hearing upon 30 days' notice, the city of: 
 11.4      (1) Breckenridge may designate all or any part of the city 
 11.5   as a zone; 
 11.6      (2) Dillworth may designate one or more areas, not to 
 11.7   exceed six distinct areas, of the city, containing in total not 
 11.8   more than 100 acres; 
 11.9      (3) East Grand Forks may designate all or any part of the 
 11.10  city as a zone; 
 11.11     (4) Moorhead may designate one or more areas, not to exceed 
 11.12  six distinct areas, of the city, containing in total not more 
 11.13  than 100 acres; and 
 11.14     (5) Ortonville may designate one or more areas, not to 
 11.15  exceed six distinct areas, of the city, containing in total not 
 11.16  more than 100 acres. 
 11.17     Subd. 2.  [DEVELOPMENT PLAN.] (a) Before designating a 
 11.18  development zone, the city must adopt a written development plan 
 11.19  that addresses: 
 11.20     (1) evidence of adverse economic conditions within the area 
 11.21  resulting from competition with the bordering state or the 1997 
 11.22  floods or both; 
 11.23     (2) the viability of the development plan; 
 11.24     (3) public and private commitment to and other resources 
 11.25  available for the area; 
 11.26     (4) how designation would relate to a development and 
 11.27  revitalization plan for the city as a whole; and 
 11.28     (5) how the local regulatory burden will be eased for 
 11.29  businesses operating in the area. 
 11.30     (b) The development plan must include: 
 11.31     (1) a map of the proposed zone that indicates the 
 11.32  geographic boundaries, the total area, and the present use and 
 11.33  conditions generally of land and structures within the area; 
 11.34     (2) evidence of community support and commitment from 
 11.35  residential and business interests; 
 11.36     (3) a description of the methods proposed to increase 
 12.1   economic opportunity and expansion, facilitate infrastructure 
 12.2   improvement, and identify job opportunities; and 
 12.3      (4) the duration of the zone designation, not to exceed 15 
 12.4   years. 
 12.5      Subd. 3.  [FILING.] The city must file a copy of the 
 12.6   resolution and development plan with the commissioner of trade 
 12.7   and economic development.  The designation takes effect for the 
 12.8   first calendar year that begins more than 90 days after the 
 12.9   filing. 
 12.10     Sec. 9.  [469.1932] [TAX INCENTIVES.] 
 12.11     Subdivision 1.  [ZONE INCENTIVES.] An individual who is a 
 12.12  resident of a border city development zone or a business that 
 12.13  conducts business activity within a border city development zone 
 12.14  may qualify for the property tax exemption under section 
 12.15  272.0212, the individual income tax subtraction under section 
 12.16  290.0803, the corporate franchise tax credit under section 
 12.17  290.06, subdivision 26, and the sales tax exemption under 
 12.18  section 297A.25, subdivision 73. 
 12.19     Subd. 2.  [PHASEOUT AT END OF ZONE DURATION.] During the 
 12.20  last three years of the duration of a border city development 
 12.21  zone, the available exemptions, subtractions, or credits are 
 12.22  reduced by the following percentages for the taxes payable year 
 12.23  or the taxable years that begin during: 
 12.24     (1) the calendar year that is two years before the final 
 12.25  year of designation as a development zone, 25 percent; 
 12.26     (2) the calendar year that is immediately before the final 
 12.27  year of designation as a development zone, 50 percent; and 
 12.28     (3) for the final calendar year of designation as a 
 12.29  development zone, 75 percent. 
 12.30     Sec. 10.  [469.1933] [DISQUALIFIED TAXPAYERS.] 
 12.31     Subdivision 1.  [DELINQUENT TAXPAYERS.] An individual who 
 12.32  is a resident of a border city development zone or a business 
 12.33  that conducts business activity within a border city development 
 12.34  zone is not eligible for the exemptions, subtractions, or 
 12.35  credits available in the border city development zone, if the 
 12.36  individual or business owes delinquent amounts under chapter 290 
 13.1   or if the individual or business owns property located in the 
 13.2   city or county in which the zone is located on which the 
 13.3   property taxes are delinquent. 
 13.4      Subd. 2.  [RELOCATION WITHIN CITY OR COUNTY.] If a business 
 13.5   located in the city or county in which the border city 
 13.6   development zone is located relocates from outside a zone into a 
 13.7   zone in the city or county, the business is not eligible for the 
 13.8   exemptions, subtractions, or credits available in the border 
 13.9   city development zone, unless the governing body of the city or 
 13.10  county or both, as applicable, approve the relocation of the 
 13.11  business. 
 13.12     Subd. 3.  [RELOCATION FROM OUTSIDE CITY OR COUNTY.] (a) If 
 13.13  a business relocates more than 25 full-time equivalent jobs from 
 13.14  a location in Minnesota outside of the county in which the zone 
 13.15  is located, the business must notify the commissioner of trade 
 13.16  and economic development and the city and county governments 
 13.17  from which the jobs are being relocated.  The business is not 
 13.18  eligible for the exemptions, subtractions, and credits available 
 13.19  in the border city development zone, if the governing body of 
 13.20  the city or county from which the jobs are being relocated 
 13.21  adopts a resolution objecting to the relocation. 
 13.22     (b) The business becomes eligible for the exemptions, 
 13.23  subtractions, and credits available in the zone when each city 
 13.24  and county that objected to the relocation rescinds its 
 13.25  objection by resolution. 
 13.26     (c) A city or county that objects to the relocation of jobs 
 13.27  must file a copy of the resolution with the commissioners of 
 13.28  trade and economic development and revenue, and the city that 
 13.29  created the border city development zone into which the jobs 
 13.30  were transferred. 
 13.31     Subd. 4.  [MAXIMUM LIMIT FOR AN INDIVIDUAL.] A resident of 
 13.32  a border city development zone is eligible for the exemptions, 
 13.33  subtractions, and credits in development zones until the 
 13.34  commissioner of revenue determines that the aggregate state and 
 13.35  local tax revenues foregone as a result of all exemptions, 
 13.36  subtractions, and credits for all zones to that individual 
 14.1   reaches $10,000,000. 
 14.2      Sec. 11.  [469.1934] [TAX INCENTIVES OUTSIDE ZONES.] 
 14.3      Subdivision 1.  [AUTHORITY.] A city with authority to 
 14.4   establish a border city development zone under section 469.1931 
 14.5   may grant the tax incentives provided by this section.  This 
 14.6   authority applies only to projects located outside of a zone. 
 14.7      Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 14.8   the following terms have the meanings given. 
 14.9      (b) "Primary sector business" means an individual, 
 14.10  corporation, limited liability company, partnership, 
 14.11  association, or other entity that through the employment of 
 14.12  knowledge or labor adds value to a product, process, or service 
 14.13  that results in the creation of wealth. 
 14.14     (c) "Project" means any revenue-producing enterprise or any 
 14.15  combination of two or more enterprises.  For purposes of the 
 14.16  income tax exemption under subdivision 4, project means both a 
 14.17  primary sector business and tourism and includes the 
 14.18  establishment of a new qualifying business or the expansion of a 
 14.19  qualifying existing business. 
 14.20     (d) "Tourism" means all tourism-related businesses and 
 14.21  activities including recreation, historical and cultural events, 
 14.22  guide services, and unique lodging and food services which serve 
 14.23  as destination attractions. 
 14.24     Subd. 3.  [PROPERTY TAX.] (a) A city may grant a partial or 
 14.25  complete exemption from property taxation of all buildings, 
 14.26  structures, fixtures, and improvements used in or necessary to 
 14.27  the operation of a project for a period not exceeding five years 
 14.28  from the date the project begins operating.  A partial exemption 
 14.29  must be stated as a percentage of the total ad valorem taxes 
 14.30  assessed against the property. 
 14.31     (b) In addition to, or in lieu of, a property tax exemption 
 14.32  under paragraph (a), a city may establish an amount due as 
 14.33  payments in lieu of ad valorem taxes on buildings, structures, 
 14.34  fixtures, and improvements used in the operation of a project. 
 14.35  The city council shall designate the amount of the payments for 
 14.36  each year and the beginning year and the concluding year for 
 15.1   payments in lieu of taxes.  The option to make payments in lieu 
 15.2   of taxes under this section may not extend beyond the 20th year 
 15.3   after project operations begin.  To establish the amount of 
 15.4   payments in lieu of taxes, the city council may use actual or 
 15.5   estimated levels of assessment and taxation or may designate 
 15.6   different amounts of payments in lieu of other taxes in 
 15.7   different years to recognize future project expansion plans or 
 15.8   other considerations.  The payments in lieu shall be collected 
 15.9   and distributed in the same manner as ad valorem taxes. 
 15.10     (c) The city council must determine whether granting the 
 15.11  exemption or payments in lieu of taxes, or both, is in the best 
 15.12  interest of the city, and if it so determines, must give its 
 15.13  approval. 
 15.14     Subd. 4.  [INCOME TAX.] (a) Upon application by the project 
 15.15  operator to the city, the net income of a project may be exempt 
 15.16  from state taxation under chapter 290 for a period not exceeding 
 15.17  five years from the beginning of project operations. 
 15.18     (b) The exemption under this subdivision applies after any 
 15.19  credit allowed under section 290.06, subdivision 27. 
 15.20     (c) After any notice period required by subdivision 5, the 
 15.21  city council must determine whether granting the exemption is in 
 15.22  the best interest of the city, and if it so determines, must 
 15.23  give its approval. 
 15.24     Subd. 5.  [NOTICE TO COMPETITORS.] (a) Before an exemption 
 15.25  or other concession is granted under subdivision 3 or 4, the 
 15.26  procedure under this subdivision applies. 
 15.27     (b) Unless the city council determines that no existing 
 15.28  business within the city would be a potential competitor of the 
 15.29  project, the project operator shall publish two notices to 
 15.30  competitors of the application of the tax exemption or payments 
 15.31  in lieu in the official newspaper of the city.  The commissioner 
 15.32  of revenue shall prescribe the form of the notice.  The two 
 15.33  notices must be published at least one week apart.  The 
 15.34  publications must be completed not less than 15 days nor more 
 15.35  than 30 days before the city council approves the tax exemption 
 15.36  or payments in lieu of taxes. 
 16.1      Sec. 12.  [469.1935] [NEW HOME EXEMPTION.] 
 16.2      The governing body of a city with authority to establish a 
 16.3   border city development zone under section 469.1931 may grant a 
 16.4   property tax exemption for the first $75,000 of estimated market 
 16.5   value of new property that will be assessed under section 
 16.6   273.13, subdivision 22, as class 1, or under subdivision 25, as 
 16.7   class 4bb, and that consists of no more than one dwelling unit.  
 16.8   The exemption does not apply to the value of the land.  The 
 16.9   exemption applies to the first two assessment years that begin 
 16.10  after construction began on the dwelling.  The following 
 16.11  requirements apply: 
 16.12     (1) the governing body must grant the exemption by 
 16.13  resolution.  It may rescind or amend the resolution at any time, 
 16.14  effective for assessment years beginning after the date of 
 16.15  adoption; 
 16.16     (2) special assessments and taxes on the property upon 
 16.17  which the dwelling is situated are not delinquent; and 
 16.18     (3) the first owner after the builder resides on the 
 16.19  property or the builder still owns the property.  A builder 
 16.20  includes a person who builds that person's own residence. 
 16.21     Sec. 13.  [477A.06] [BORDER CITY AID.] 
 16.22     (a) The commissioner of revenue shall pay aid to a city, 
 16.23  county, or special taxing district, other than a school 
 16.24  district, in which a border city development zone, designated 
 16.25  under section 469.1931, is located.  The commissioner of revenue 
 16.26  shall pay the aid at the times provided under section 477A.015. 
 16.27     (b) The amount of the aid payable to Clay county, the city 
 16.28  of Dillworth, the city of Moorhead, Polk county, the city of 
 16.29  Ortonville, Wilkin county, and any special taxing district 
 16.30  equals the amount of tax that would have been payable during the 
 16.31  calendar year to the governmental unit if the tax exemption 
 16.32  under section 272.0212 had not applied. 
 16.33     (c) The amount of aid payable to the cities of Breckenridge 
 16.34  and East Grand Forks equals the amount of the city's adjusted 
 16.35  levy limit base under section 275.72, less the following amounts:
 16.36     (1) the amount of aid specified under section 275.72, 
 17.1   subdivision 2, clauses (2) and (3); and 
 17.2      (2) the property taxes paid to the city for debt levies and 
 17.3   by property that does not qualify for the exemption under 
 17.4   section 272.0212. 
 17.5      (d) The commissioner of revenue shall pay additional border 
 17.6   city aid to a municipality, as defined in section 469.174, with 
 17.7   a tax increment financing district located in whole or part in a 
 17.8   border city development zone.  The amount of this aid equals the 
 17.9   reduction in tax increments that result from the property tax 
 17.10  exemptions provided by the border city development zone.  The 
 17.11  commissioner shall calculate the reduction in tax increments 
 17.12  using an assumption that each taxing district levied the full 
 17.13  amount permitted under its levy limits.  If no levy limit 
 17.14  applies to a taxing district, the commissioner shall use the tax 
 17.15  rate for the taxing district from the last year before the 
 17.16  exemptions for the border city development zone took effect.  
 17.17  The commissioner may adjust this tax rate for later changes in 
 17.18  class rates enacted by the legislature, if the commissioner 
 17.19  determines the changes would have a material effect on the rate. 
 17.20     (e) An amount sufficient to pay the aid required by this 
 17.21  section is appropriated to the commissioner of revenue from the 
 17.22  general fund. 
 17.23     Sec. 14.  [EFFECTIVE DATE.] 
 17.24     This article is effective the day following final enactment 
 17.25  for each of the cities upon compliance with Minnesota Statutes, 
 17.26  section 645.021, by the cities of Breckenridge, Dillworth, East 
 17.27  Grand Forks, Moorhead, and Ortonville. 
 17.28                             ARTICLE 2
 17.29                          ENTERPRISE ZONES
 17.30     Section 1.  Minnesota Statutes 1996, section 469.170, is 
 17.31  amended by adding a subdivision to read: 
 17.32     Subd. 5e.  [LIMITS ON MULTIYEAR PLANS.] The requirements 
 17.33  for a multiyear enterprise zone tax credit distribution plan 
 17.34  under subdivisions 5a to 5d apply only for: 
 17.35     (1) each business that will receive more than $25,000 in 
 17.36  credits in a year; or 
 18.1      (2) tax reductions under section 469.171, subdivision 1, 
 18.2   for businesses in areas designated under section 469.171, 
 18.3   subdivision 5. 
 18.4      Sec. 2.  Minnesota Statutes 1996, section 469.171, 
 18.5   subdivision 9, is amended to read: 
 18.6      Subd. 9.  [RECAPTURE.] Any business that (1) receives tax 
 18.7   reductions authorized by subdivisions 1 to 8, classification as 
 18.8   employment property pursuant to section 469.170, or an 
 18.9   alternative local contribution under section 469.169, 
 18.10  subdivision 5; and (2) ceases to operate its facility located 
 18.11  within the enterprise zone within two years after the expiration 
 18.12  of the tax reductions shall repay the amount of the tax 
 18.13  reduction or local contribution pursuant to the following 
 18.14  schedule:  
 18.15        Termination                                   Repayment
 18.16        of operations                                   Portion
 18.17        Less than 6 months                            100 percent
 18.18        6 months or more but less than 12 months       75 percent
 18.19        12 months or more but less than 18 months      50 percent
 18.20        18 months or more but less than 24 months      25 percent
 18.21  received during the six years immediately before it stopped 
 18.22  operating in the zone. 
 18.23     The repayment must be paid to the state to the extent it 
 18.24  represents a tax reduction under subdivisions 1 to 8 and to the 
 18.25  municipality to the extent it represents a property tax 
 18.26  reduction or other local contribution.  Any amount repaid to the 
 18.27  state must be credited to the amount certified as available for 
 18.28  tax reductions in the zone pursuant to section 469.169, 
 18.29  subdivision 7.  Any amount repaid to the municipality must be 
 18.30  used by the municipality for economic development purposes.  The 
 18.31  commissioner of revenue may seek repayment of tax credits from a 
 18.32  business ceasing to operate within an enterprise zone.  
 18.33     Sec. 3.  [EFFECTIVE DATE.] 
 18.34     Section 1 is effective for plans required to be filed after 
 18.35  the day following final enactment. 
 18.36     Section 2 is effective for tax reductions received 
 19.1   beginning in the first calendar year after the day following 
 19.2   final enactment.