SF 3127

as introduced - 82nd Legislature (2001 - 2002) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to taxation; providing economic development 
  1.3             tax incentives for businesses located outside of the 
  1.4             seven county metropolitan area; providing 
  1.5             administrative rulemaking authority; appropriating 
  1.6             money; amending Minnesota Statutes 2000, sections 
  1.7             290.06, by adding subdivisions; 290.191, subdivision 
  1.8             3; 297A.68, by adding a subdivision; Minnesota 
  1.9             Statutes 2001 Supplement, sections 275.025, by adding 
  1.10            a subdivision; 290.01, subdivision 19d; 290.191, 
  1.11            subdivisions 2; 469.1813, subdivision 6; proposing 
  1.12            coding for new law in Minnesota Statutes, chapters 
  1.13            116J; 290; 469. 
  1.14  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.15     Section 1.  [116J.8770] [DEFINITIONS.] 
  1.16     Subdivision 1.  [SCOPE.] As used in sections 116J.8770 to 
  1.17  116J.8779, the following terms have the meanings given in this 
  1.18  section. 
  1.19     Subd. 2.  [AGREEMENT.] "Agreement" means the agreement 
  1.20  between a taxpayer and the commissioner under the provisions of 
  1.21  section 116J.8777. 
  1.22     Subd. 3.  [APPLICANT.] "Applicant" means a taxpayer that is 
  1.23  operating a qualified business.  Applicant excludes a taxpayer 
  1.24  who closes or substantially reduces an operation at one location 
  1.25  in this state, other than a location in the metropolitan area, 
  1.26  and relocates substantially the same operation to another 
  1.27  location in the state.  A taxpayer may expand its qualified 
  1.28  business operations at another location in the state, if 
  1.29  existing operations of a similar nature located within this 
  2.1   state are not closed or substantially reduced or if the 
  2.2   operations that are closed or substantially reduced are located 
  2.3   in the metropolitan area.  A taxpayer may move its operations 
  2.4   from one location in this state to another location in this 
  2.5   state to expand the operation, if the relocation is made from 
  2.6   the metropolitan area to a location outside of the metropolitan 
  2.7   area, or if the commissioner determines that expansion cannot 
  2.8   reasonably be accommodated within the city in which the business 
  2.9   is located, or if the business is located in an incorporated 
  2.10  area, within the county in which the business is located, after 
  2.11  conferring with the chief elected official of the city or the 
  2.12  chair of the governing body of the county and taking into 
  2.13  consideration any evidence offered by the city or county 
  2.14  regarding the ability to accommodate expansion within the city 
  2.15  or county. 
  2.16     Subd. 4.  [COMMITTEE.] "Committee" means the business 
  2.17  investment committee created under section 116J.8775. 
  2.18     Subd. 5.  [CREDIT.] "Credit" means the amount agreed to by 
  2.19  the commissioner and the applicant, but not to exceed the 
  2.20  incremental income tax attributable to the applicant's project. 
  2.21     Subd. 6.  [FULL-TIME EMPLOYEE.] "Full-time employee" means 
  2.22  an individual who is employed for consideration for at least 35 
  2.23  hours each week or who renders any other standard of service 
  2.24  generally accepted by industry custom or practice as full-time 
  2.25  employment. 
  2.26     Subd. 7.  [INCREMENTAL INCOME TAX.] "Incremental income tax"
  2.27  means the total amount withheld during the taxable year from the 
  2.28  compensation of new employees under section 290.92 arising from 
  2.29  employment at a project that is the subject of an agreement. 
  2.30     Subd. 8.  [METROPOLITAN AREA.] "Metropolitan area" has the 
  2.31  meaning given in section 473.121, subdivision 2. 
  2.32     Subd. 9.  [NEW EMPLOYEE.] (a) "New employee" means a 
  2.33  full-time employee first employed by a taxpayer in the project 
  2.34  that is the subject of an agreement and who is hired after the 
  2.35  taxpayer enters into the tax credit agreement. 
  2.36     (b) The term new employee excludes: 
  3.1      (1) an employee of the taxpayer who performs a job that was 
  3.2   previously performed by another employee, if that job existed 
  3.3   for at least six months before hiring the employee; 
  3.4      (2) an employee of the taxpayer who was previously employed 
  3.5   in this state by a related member of the taxpayer and whose 
  3.6   employment was shifted to the taxpayer after the taxpayer 
  3.7   entered into the tax credit agreement; or 
  3.8      (3) a child, grandchild, parent, or spouse, other than a 
  3.9   spouse who is legally separated from the individual, of any 
  3.10  individual who has a direct or an indirect ownership interest of 
  3.11  at least five percent in the profits, capital, or value of the 
  3.12  taxpayer. 
  3.13     (c) Notwithstanding paragraph (b), an employee may be 
  3.14  considered a new employee under the agreement if the employee 
  3.15  performs a job that was previously performed by an employee who 
  3.16  was: 
  3.17     (1) treated under the agreement as a new employee; and 
  3.18     (2) promoted by the taxpayer to another job. 
  3.19     (d) Notwithstanding paragraph (b), the commissioner may 
  3.20  award a credit to an applicant for an employee hired before the 
  3.21  date of the agreement if: 
  3.22     (1) the applicant is in receipt of a letter from the 
  3.23  commissioner stating an intent to enter into a credit agreement; 
  3.24     (2) the letter is issued by the commissioner not later than 
  3.25  15 days after the effective date of sections 116J.8770 to 
  3.26  116J.8779; and 
  3.27     (3) the employee was hired after the date the letter was 
  3.28  issued. 
  3.29     Subd. 10.  [NONCOMPLIANCE DATE.] "Noncompliance date" 
  3.30  means, for a taxpayer that is not complying with the 
  3.31  requirements of the agreement or the provisions of sections 
  3.32  116J.8770 to 116J.8779, the day following the last date upon 
  3.33  which the taxpayer was in compliance with the requirements of 
  3.34  the agreement and the provisions of sections 116J.8770 to 
  3.35  116J.8779, as determined by the commissioner under section 
  3.36  116J.8778, subdivision 2. 
  4.1      Subd. 11.  [PASS THROUGH ENTITY.] "Pass through entity" 
  4.2   means an entity taxable under chapter 290 as a partnership or 
  4.3   exempt under section 290.9725, 290.9741, or 290.9743. 
  4.4      Subd. 12.  [QUALIFIED BUSINESS.] "Qualified business" means 
  4.5   a qualified business as defined in section 469.193. 
  4.6      Subd. 13.  [RELATED MEMBER.] "Related member" means a 
  4.7   person that, with respect to the taxpayer during any portion of 
  4.8   the taxable year, is any one of the following: 
  4.9      (1) an individual stockholder, if the stockholder and the 
  4.10  members of the stockholder's family (as defined in section 318 
  4.11  of the Internal Revenue Code of 1986, as amended) own directly, 
  4.12  indirectly, beneficially, or constructively, in the aggregate, 
  4.13  at least 50 percent of the value of the taxpayer's outstanding 
  4.14  stock; 
  4.15     (2) a partnership, estate, or trust and any partner or 
  4.16  beneficiary, if the partnership, estate, or trust, and its 
  4.17  partners or beneficiaries own directly, indirectly, 
  4.18  beneficially, or constructively, in the aggregate, at least 50 
  4.19  percent of the profits, capital, stock, or value of the 
  4.20  taxpayer; 
  4.21     (3) a corporation, and any party related to the corporation 
  4.22  in a manner that would require an attribution of stock from the 
  4.23  corporation to the party or from the party to the corporation 
  4.24  under the attribution rules of section 318 of the Internal 
  4.25  Revenue Code of 1986, as amended, if the taxpayer owns directly, 
  4.26  indirectly, beneficially, or constructively at least 50 percent 
  4.27  of the value of the corporation's outstanding stock; 
  4.28     (4) a corporation and any party related to that corporation 
  4.29  in a manner that would require an attribution of stock from the 
  4.30  corporation to the party or from the party to the corporation 
  4.31  under the attribution rules of section 318 of the Internal 
  4.32  Revenue Code, as amended, if the corporation and all such 
  4.33  related parties own in the aggregate at least 50 percent of the 
  4.34  profits, capital, stock, or value of the taxpayer; or 
  4.35     (5) a person to or from whom there is attribution of stock 
  4.36  ownership in accordance with section 1563(e) of the Internal 
  5.1   Revenue Code of 1986, except, for purposes of determining 
  5.2   whether a person is a related member under this clause, 20 
  5.3   percent is substituted for five percent wherever five percent 
  5.4   appears in section 1563(e) of the Internal Revenue Code of 1986. 
  5.5      Subd. 14.  [STATE.] "State" when the context refers to the 
  5.6   area of or locations in the state of Minnesota means the area of 
  5.7   this state, but excluding the metropolitan area. 
  5.8      Subd. 15.  [TAXPAYER.] "Taxpayer" means an individual, 
  5.9   corporation, partnership, or other entity that has tax liability 
  5.10  under chapter 290. 
  5.11     [EFFECTIVE DATE.] This section is effective the day 
  5.12  following final enactment. 
  5.13     Sec. 2.  [116J.8771] [POWERS OF COMMISSIONER.] 
  5.14     The commissioner has all the powers necessary or convenient 
  5.15  to carry out the purposes and provisions of sections 116J.8770 
  5.16  to 116J.8779, including, but not limited to, power and authority 
  5.17  to: 
  5.18     (1) promulgate procedures and rules necessary and 
  5.19  appropriate to administer the programs; establish forms for 
  5.20  applications, notifications, contracts, or any other agreements; 
  5.21  and accept applications at any time during the year; 
  5.22     (2) provide and assist taxpayers under sections 116J.8770 
  5.23  to 116J.8779, and cooperate with taxpayers that are parties to 
  5.24  agreements to promote, foster, and support economic development, 
  5.25  capital investment, and job creation or retention within the 
  5.26  state; 
  5.27     (3) enter into agreements and memoranda of understanding 
  5.28  for participation of and engage in cooperation with agencies of 
  5.29  the federal government, local units of government, universities, 
  5.30  research foundations or institutions, regional economic 
  5.31  development corporations, or other organizations for the 
  5.32  purposes of sections 116J.8770 to 116J.8779; 
  5.33     (4) gather information and conduct inquiries, in the manner 
  5.34  and by the methods as the commissioner deems desirable, 
  5.35  including without limitation, gathering information with respect 
  5.36  to applicants to make any designations or certifications 
  6.1   necessary or desirable or to gather information to assist the 
  6.2   committee with any recommendation or guidance in the furtherance 
  6.3   of the purposes of sections 116J.8770 to 116J.8779; 
  6.4      (5) establish, negotiate and effectuate any term, 
  6.5   agreement, or other document with any person, necessary or 
  6.6   appropriate to accomplish the purposes of sections 116J.8770 to 
  6.7   116J.8779; and to consent, subject to the provisions of any 
  6.8   agreement with another party, to modify or restructure any 
  6.9   agreement to which the commissioner is a party; 
  6.10     (6) fix, determine, charge, and collect any premiums, fees, 
  6.11  charges, costs, and expenses from applicants, including, without 
  6.12  limitation, any application fees, commitment fees, program fees, 
  6.13  financing charges, or publication fees as deemed appropriate to 
  6.14  pay expenses necessary or incident to the administration, 
  6.15  staffing, or operation in connection with the commissioner's or 
  6.16  the committee's activities under sections 116J.8770 to 
  6.17  116J.8779, or for preparation, implementation, and enforcement 
  6.18  of the terms of the agreement, or for consultation, advisory and 
  6.19  legal fees, and other costs; however, all fees and expenses 
  6.20  incident are the responsibility of the applicant; 
  6.21     (7) provide for sufficient personnel to permit 
  6.22  administration, staffing, operation, and related support 
  6.23  required to adequately discharge its duties and responsibilities 
  6.24  described in sections 116J.8770 to 116J.8779 from funds 
  6.25  appropriated for the administration of sections 116J.8770 to 
  6.26  116J.8779; 
  6.27     (8) require applicants, upon written request, to issue any 
  6.28  necessary authorization to the appropriate federal, state, or 
  6.29  local authority for the release of information concerning a 
  6.30  project being considered under sections 116J.8770 to 116J.8779, 
  6.31  with the information requested to include, but not be limited 
  6.32  to, financial reports, returns, or records relating to the 
  6.33  project; 
  6.34     (9) require a taxpayer to keep proper books of record and 
  6.35  account under generally accepted accounting principles, with the 
  6.36  books, records, or papers related to the agreement in the 
  7.1   custody or control of the taxpayer open for reasonable 
  7.2   inspection and audits, and including, without limitation, the 
  7.3   making of copies of the books, records, or papers, and the 
  7.4   inspection or appraisal of any of the taxpayer's or project 
  7.5   assets; and 
  7.6      (10) take whatever actions are necessary or appropriate to 
  7.7   protect the state's interest in the event of bankruptcy, 
  7.8   default, foreclosure, or noncompliance with the terms and 
  7.9   conditions of financial assistance or participation required 
  7.10  under sections 116J.8770 to 116J.8779, including the power to 
  7.11  sell, dispose, lease, or rent, upon terms and conditions 
  7.12  determined by the commissioner to be appropriate, real or 
  7.13  personal property that the commissioner may receive as a result 
  7.14  of these actions. 
  7.15     [EFFECTIVE DATE.] This section is effective the day 
  7.16  following final enactment. 
  7.17     Sec. 3.  [116J.8772] [ADMINISTRATIVE RULES; FEES.] 
  7.18     The commissioner may adopt administrative rules under 
  7.19  chapter 14 necessary to implement sections 116J.8770 to 
  7.20  116J.8779.  The rules may require recipients of credits under 
  7.21  sections 116J.8770 to 116J.8779 to pay fees to cover the 
  7.22  administrative costs of the tax credit program.  Fees collected 
  7.23  are deposited into the general fund. 
  7.24     [EFFECTIVE DATE.] This section is effective the day 
  7.25  following final enactment. 
  7.26     Sec. 4.  [116J.8773] [TAX CREDIT AWARDS.] 
  7.27     Subject to the conditions in sections 116J.8770 to 
  7.28  116J.8779, a taxpayer is allowed a credit against taxes imposed 
  7.29  under chapter 290 for a taxable year if the taxpayer is awarded 
  7.30  a credit by the commissioner under sections 116J.8770 to 
  7.31  116J.8779 for that taxable year.  The commissioner shall make 
  7.32  credit awards under sections 116J.8770 to 116J.8779 to foster 
  7.33  job creation and retention in this state.  A person that 
  7.34  proposes a project to create new jobs in this state must enter 
  7.35  into an agreement with the commissioner for the credit under 
  7.36  sections 116J.8770 to 116J.8779.  The credit may be claimed only 
  8.1   for the taxable years specified in the agreement.  The credit 
  8.2   may not exceed the incremental income tax attributable to the 
  8.3   project that is the subject of the agreement. 
  8.4      [EFFECTIVE DATE.] This section is effective the day 
  8.5   following final enactment. 
  8.6      Sec. 5.  [116J.8774] [APPLICATION FOR A PROJECT TO CREATE 
  8.7   AND RETAIN NEW JOBS.] 
  8.8      (a) A taxpayer proposing a project located or planned to be 
  8.9   located in this state may request consideration for designation 
  8.10  of its project, by formal written letter of request or by formal 
  8.11  application to the commissioner, in which the applicant states 
  8.12  its intent to make at least a specified level of investment and 
  8.13  intends to hire or retain a specified number of full-time 
  8.14  employees at a designated location in this state.  As 
  8.15  circumstances require, the commissioner may require a formal 
  8.16  application from an applicant and a formal letter of request for 
  8.17  assistance. 
  8.18     (b) To qualify for credits under sections 116J.8770 to 
  8.19  116J.8779, an applicant's project must: 
  8.20     (1) involve an investment of at least $5,000,000 in capital 
  8.21  improvements to be placed in service and to employ at least 25 
  8.22  new employees as a direct result of the project; or 
  8.23     (2) involve an investment of at least an amount (to be 
  8.24  expressly specified by the commissioner and the committee) in 
  8.25  capital improvements to be placed in service and will employ at 
  8.26  least an amount (to be expressly specified by the commissioner 
  8.27  and the committee) of new employees that the commissioner and 
  8.28  the committee have determined will provide a substantial 
  8.29  economic benefit to the area of the state in which the project 
  8.30  will be located. 
  8.31     (c) After receipt of an application, the commissioner may 
  8.32  enter into an agreement with the applicant if the application is 
  8.33  accepted under section 116J.8775. 
  8.34     [EFFECTIVE DATE.] This section is effective the day 
  8.35  following final enactment. 
  8.36     Sec. 6.  [116J.8775] [REVIEW OF APPLICATIONS.] 
  9.1      (a) The commissioner shall form a business investment 
  9.2   committee to make recommendations on applications.  At the 
  9.3   request of the commissioner, the commissioner of commerce or the 
  9.4   commissioner's designee, the commissioner of finance or the 
  9.5   commissioner's designee, the commissioner of revenue or the 
  9.6   commissioner's designee, and an elected official of the affected 
  9.7   locality, such as the chair of the governing body of the county 
  9.8   or the mayor of the city, may serve as members of the committee 
  9.9   to assist with its analysis and deliberations. 
  9.10     (b) At the commissioner's request, the committee shall 
  9.11  convene, make inquiries, and conduct studies in the manner and 
  9.12  by the methods as it deems desirable, review information with 
  9.13  respect to applicants, and make recommendations for projects to 
  9.14  benefit the area of the state outside of the metropolitan area.  
  9.15  In making its recommendation whether an applicant's application 
  9.16  for credit should be accepted, which must occur within a 
  9.17  reasonable time as determined by the nature of the application, 
  9.18  the committee shall determine that all the following conditions 
  9.19  exist: 
  9.20     (1) the applicant's project intends to make the required 
  9.21  investment in the state and intends to hire the required number 
  9.22  of new employees as a result of that project; 
  9.23     (2) the applicant's project is economically sound and will 
  9.24  benefit the area of the state outside of the metropolitan area 
  9.25  by increasing opportunities for employment and strengthen the 
  9.26  economy of the area of the state outside of the metropolitan 
  9.27  area; 
  9.28     (3) that, if not for the credit, the project would not 
  9.29  occur in the state, which may be demonstrated by any means 
  9.30  including, but not limited to, evidence that the applicant has 
  9.31  other location options and could reasonably and efficiently 
  9.32  locate at one of those locations, or demonstration that at least 
  9.33  one other state is being considered for the project, or evidence 
  9.34  the receipt of the credit is a major factor in the applicant's 
  9.35  decision and that without the credit, the applicant likely would 
  9.36  not create new jobs in the state, or demonstration that 
 10.1   receiving the credit is essential to the applicant's decision to 
 10.2   create or retain new jobs in the state; 
 10.3      (4) a cost differential is identified, using best available 
 10.4   data, in the projected costs for the applicant's project 
 10.5   compared to the costs in the competing locations, including the 
 10.6   impact of the competing state's incentive programs.  The 
 10.7   competing state's incentive programs include state, local, 
 10.8   private, and federal funds available; 
 10.9      (5) the political subdivisions affected by the project have 
 10.10  committed local incentives with respect to the project, 
 10.11  considering the local ability to assist; 
 10.12     (6) awarding the credit will result in an overall positive 
 10.13  fiscal impact to the state, as certified by the committee using 
 10.14  the best available data; and 
 10.15     (7) the credit is not prohibited by section 116J.8776. 
 10.16     [EFFECTIVE DATE.] This section is effective the day 
 10.17  following final enactment. 
 10.18     Sec. 7.  [116J.8776] [TERMS OF AND LIMITS ON CREDITS.] 
 10.19     Subdivision 1.  [LIMITATION TO AMOUNT OF COSTS OF SPECIFIED 
 10.20  ITEMS.] The total amount of the credit allowed during all tax 
 10.21  years may not exceed the aggregate amount of costs incurred by 
 10.22  the taxpayer during all prior tax years for the following items, 
 10.23  to the extent provided in the agreement: 
 10.24     (1) capital investment, including, but not limited to, 
 10.25  equipment, buildings, or land; 
 10.26     (2) infrastructure development; 
 10.27     (3) debt service, except refinancing of current debt; 
 10.28     (4) research and development; 
 10.29     (5) job training and education; 
 10.30     (6) lease costs; or 
 10.31     (7) relocation costs. 
 10.32     Subd. 2.  [RELOCATION OF JOBS.] A taxpayer may not claim 
 10.33  the credit provided by sections 116J.8770 to 116J.8779 with 
 10.34  respect to any jobs that the taxpayer relocates from one site in 
 10.35  this state to another site in this state, unless the 
 10.36  requirements under section 116J.8770, subdivision 3, are met. 
 11.1      Subd. 3.  [DETERMINATION OF AMOUNT OF CREDIT.] In 
 11.2   determining the amount of the credit to award, the committee 
 11.3   shall provide guidance on, and the commissioner shall consider, 
 11.4   the following factors: 
 11.5      (1) the number and location of jobs created and retained 
 11.6   relative to the economy of the county where the projected 
 11.7   investment is to occur; 
 11.8      (2) the potential impact on the economy of the county or 
 11.9   region of the state; 
 11.10     (3) the magnitude of the cost differential between this 
 11.11  state and the competing state; 
 11.12     (4) the incremental payroll attributable to the project; 
 11.13     (5) the capital investment attributable to the project; 
 11.14     (6) the amount of the average wage and benefits paid by the 
 11.15  applicant in relation to the wage and benefits of the area of 
 11.16  the project; 
 11.17     (7) the costs to the state and the affected political 
 11.18  subdivisions with respect to the project; and 
 11.19     (8) the financial assistance that is otherwise provided by 
 11.20  the state and the affected political subdivisions. 
 11.21     Subd. 4.  [AMOUNT AND DURATION OF CREDIT.] The commissioner 
 11.22  shall determine the amount and duration of the credit.  The 
 11.23  duration of the credit may not exceed ten taxable years.  The 
 11.24  credit may be stated as a percentage of the incremental income 
 11.25  tax attributable to the applicant's project and may include a 
 11.26  fixed dollar limitation. 
 11.27     Subd. 5.  [PASS THROUGH ENTITY.] (a) The shareholders or 
 11.28  partners of a taxpayer that is a pass through entity are 
 11.29  entitled to the credit allowed under the agreement. 
 11.30     (b) The credit provided under paragraph (a) is in addition 
 11.31  to any credit to which a shareholder or partner is otherwise 
 11.32  entitled under a separate agreement.  A pass through entity and 
 11.33  a shareholder or partner of the pass through entity may not 
 11.34  claim more than one credit under the same agreement. 
 11.35     [EFFECTIVE DATE.] This section is effective the day 
 11.36  following final enactment. 
 12.1      Sec. 8.  [116J.8777] [CONTENTS OF AGREEMENTS WITH 
 12.2   APPLICANTS.] 
 12.3      The commissioner shall enter into an agreement with an 
 12.4   applicant that is awarded a credit.  The agreement must include 
 12.5   all of the following: 
 12.6      (1) a detailed description of the project that is the 
 12.7   subject of the agreement, including the location and amount of 
 12.8   the investment and jobs created or retained; 
 12.9      (2) the duration of the credit and the first taxable year 
 12.10  for which the credit may be claimed; 
 12.11     (3) the credit amount that will be allowed for each taxable 
 12.12  year; 
 12.13     (4) a requirement that the taxpayer maintain operations at 
 12.14  the project location that is stated as a minimum number of 
 12.15  years, not to exceed ten; 
 12.16     (5) a specific method for determining the number of new 
 12.17  employees employed during a taxable year; 
 12.18     (6) a requirement that the taxpayer annually report to the 
 12.19  commissioner the number of new employees, the incremental income 
 12.20  tax withheld in connection with the new employees, and any other 
 12.21  information the commissioner needs to perform the commissioner's 
 12.22  duties; 
 12.23     (7) a requirement that the commissioner may verify with the 
 12.24  appropriate state agencies the amounts reported under clause 
 12.25  (6), and after doing so must issue a certificate to the taxpayer 
 12.26  stating that the amounts have been verified; 
 12.27     (8) a requirement that the taxpayer notify the 
 12.28  commissioner, in writing, not more than 30 days after the 
 12.29  taxpayer makes or receives a proposal that would transfer the 
 12.30  taxpayer's state tax liability obligations to a successor 
 12.31  taxpayer; 
 12.32     (9) a detailed description of the number of new employees 
 12.33  to be hired, and the occupation and payroll of the full-time 
 12.34  jobs to be created or retained as a result of the project; 
 12.35     (10) the minimum investment the business enterprise will 
 12.36  make in capital improvements, the time period for placing the 
 13.1   property in service, and the designated location in this state 
 13.2   for the investment; 
 13.3      (11) a requirement that the taxpayer provide written 
 13.4   notification to the commissioner and the committee not more than 
 13.5   30 days after the taxpayer determines that the minimum job 
 13.6   creation or retention, employment payroll, or investment no 
 13.7   longer is being or will be achieved or maintained as set forth 
 13.8   in the agreement; 
 13.9      (12) a provision that, if the total number of new employees 
 13.10  falls below a specified level, the allowance of credit is 
 13.11  suspended until the number of new employees equals or exceeds 
 13.12  the agreement amount; 
 13.13     (13) a detailed description of the items for which the 
 13.14  costs incurred by the taxpayer will be included in the 
 13.15  limitation on the credit provided in section 116J.8776; and 
 13.16     (14) any other performance conditions or contract 
 13.17  provisions as the commissioner determines are appropriate. 
 13.18     [EFFECTIVE DATE.] This section is effective the day 
 13.19  following final enactment. 
 13.20     Sec. 9.  [116J.8778] [COMPLIANCE.] 
 13.21     Subdivision 1.  [CERTIFICATE OF VERIFICATION; SUBMISSION TO 
 13.22  COMMISSIONER OF REVENUE.] A taxpayer claiming a credit must 
 13.23  submit to the commissioner of revenue a copy of the 
 13.24  commissioner's certificate of verification that it qualifies 
 13.25  under sections 116J.8770 to 116J.8779 for the taxable year.  
 13.26  Failure to submit a copy of the certificate with the taxpayer's 
 13.27  tax return does not invalidate a claim for a credit.  For a 
 13.28  taxpayer to be eligible for a certificate of verification, the 
 13.29  taxpayer must provide proof as required by the commissioner 
 13.30  before the end of each calendar year, including, but not limited 
 13.31  to, attestation by the taxpayer that: 
 13.32     (1) the project has substantially achieved the level of new 
 13.33  full-time jobs specified in its agreement; 
 13.34     (2) the project has substantially achieved the level of 
 13.35  annual payroll in this state specified in its agreement; and 
 13.36     (3) the project has substantially achieved the level of 
 14.1   capital investment in this state specified in its agreement. 
 14.2      Subd. 2.  [NONCOMPLIANCE; NOTICE; ASSESSMENT.] If the 
 14.3   commissioner determines that a taxpayer who has received a 
 14.4   credit is not complying with the requirements of the agreement 
 14.5   or all of the provisions of sections 116J.8770 to 116J.8779, the 
 14.6   commissioner shall notify the taxpayer of the alleged 
 14.7   noncompliance, and allow the taxpayer a contested case hearing 
 14.8   under chapter 14.  If, after the notice and any hearing, the 
 14.9   commissioner determines that a noncompliance exists, the 
 14.10  commissioner shall issue to the commissioner of revenue notice 
 14.11  to that effect, stating the noncompliance date. 
 14.12     [EFFECTIVE DATE.] This section is effective the day 
 14.13  following final enactment. 
 14.14     Sec. 10.  [116J.8779] [MISCELLANEOUS.] 
 14.15     Subdivision 1.  [ANNUAL REPORT.] On or before July 1 of 
 14.16  each year, the commissioner shall submit a report on the tax 
 14.17  credit program under sections 116J.8770 to 116J.8779 to the 
 14.18  governor and the legislature.  The report must include 
 14.19  information on the number of agreements that were entered the 
 14.20  preceding calendar year, a description of the project that is 
 14.21  the subject of each agreement, an update on the status of 
 14.22  projects under agreements entered into before the preceding 
 14.23  calendar year, and the sum of the credits awarded. 
 14.24     Subd. 2.  [EVALUATION OF TAX CREDIT PROGRAM.] On a biennial 
 14.25  basis, the commissioner shall evaluate the tax credit program.  
 14.26  The evaluation must include an assessment of the effectiveness 
 14.27  of the program in creating new jobs in this state and of the 
 14.28  revenue impact of the program, and may include a review of the 
 14.29  practices and experiences of other states with similar 
 14.30  programs.  The commissioner shall submit a report on the 
 14.31  evaluation to the governor and the legislature after June 30 and 
 14.32  before November 1 in each odd-numbered year. 
 14.33     Subd. 3.  [LIMITS ON LIABILITY.] Nothing in sections 
 14.34  116J.8770 to 116J.8779 may be construed as creating any rights 
 14.35  in any applicant to enter into an agreement or in any person to 
 14.36  challenge the terms of any agreement. 
 15.1      [EFFECTIVE DATE.] This section is effective the day 
 15.2   following final enactment. 
 15.3      Sec. 11.  Minnesota Statutes 2001 Supplement, section 
 15.4   275.025, is amended by adding a subdivision to read: 
 15.5      Subd. 5.  [EXEMPTION.] (a) After making the findings 
 15.6   required under paragraph (c), the governing body of a statutory 
 15.7   or home rule charter city may, by resolution, grant an exemption 
 15.8   from the tax imposed under this section to a qualified business, 
 15.9   as defined under section 469.193. 
 15.10     (b) The exemption under this subdivision is limited to: 
 15.11     (1) the tax capacity attributable to improvements 
 15.12  constructed after approval of the resolution; and 
 15.13     (2) the period of time specified in the resolution, but not 
 15.14  to exceed 20 years. 
 15.15     (c) Before approval of the resolution, the governing body 
 15.16  of the city must make written findings that proposed 
 15.17  improvements by the qualified business would not occur at a 
 15.18  location in Minnesota, outside of the metropolitan area, as 
 15.19  defined in section 473.121, subdivision 2, without provision of 
 15.20  the exemption under this subdivision and that the requirements 
 15.21  under paragraph (d) are satisfied.  The finding must include a 
 15.22  statement of facts supporting the findings. 
 15.23     (d) If the city proposes to grant an exemption under this 
 15.24  subdivision to a business that is relocating a facility, now 
 15.25  located in Minnesota and outside of the metropolitan area, as 
 15.26  defined in section 473.121, the city may not grant an exemption 
 15.27  under this subdivision, unless the governing body of the city, 
 15.28  for a facility located in an incorporated area, or the county, 
 15.29  for a facility located outside of an incorporated area, approves 
 15.30  the relocation of the business. 
 15.31     [EFFECTIVE DATE.] This section is effective beginning for 
 15.32  the state general tax levied in 2002, payable in 2003. 
 15.33     Sec. 12.  Minnesota Statutes 2001 Supplement, section 
 15.34  290.01, subdivision 19d, is amended to read: 
 15.35     Subd. 19d.  [CORPORATIONS; MODIFICATIONS DECREASING FEDERAL 
 15.36  TAXABLE INCOME.] For corporations, there shall be subtracted 
 16.1   from federal taxable income after the increases provided in 
 16.2   subdivision 19c:  
 16.3      (1) the amount of foreign dividend gross-up added to gross 
 16.4   income for federal income tax purposes under section 78 of the 
 16.5   Internal Revenue Code; 
 16.6      (2) the amount of salary expense not allowed for federal 
 16.7   income tax purposes due to claiming the federal jobs credit 
 16.8   under section 51 of the Internal Revenue Code; 
 16.9      (3) any dividend (not including any distribution in 
 16.10  liquidation) paid within the taxable year by a national or state 
 16.11  bank to the United States, or to any instrumentality of the 
 16.12  United States exempt from federal income taxes, on the preferred 
 16.13  stock of the bank owned by the United States or the 
 16.14  instrumentality; 
 16.15     (4) amounts disallowed for intangible drilling costs due to 
 16.16  differences between this chapter and the Internal Revenue Code 
 16.17  in taxable years beginning before January 1, 1987, as follows: 
 16.18     (i) to the extent the disallowed costs are represented by 
 16.19  physical property, an amount equal to the allowance for 
 16.20  depreciation under Minnesota Statutes 1986, section 290.09, 
 16.21  subdivision 7, subject to the modifications contained in 
 16.22  subdivision 19e; and 
 16.23     (ii) to the extent the disallowed costs are not represented 
 16.24  by physical property, an amount equal to the allowance for cost 
 16.25  depletion under Minnesota Statutes 1986, section 290.09, 
 16.26  subdivision 8; 
 16.27     (5) the deduction for capital losses pursuant to sections 
 16.28  1211 and 1212 of the Internal Revenue Code, except that: 
 16.29     (i) for capital losses incurred in taxable years beginning 
 16.30  after December 31, 1986, capital loss carrybacks shall not be 
 16.31  allowed; 
 16.32     (ii) for capital losses incurred in taxable years beginning 
 16.33  after December 31, 1986, a capital loss carryover to each of the 
 16.34  15 taxable years succeeding the loss year shall be allowed; 
 16.35     (iii) for capital losses incurred in taxable years 
 16.36  beginning before January 1, 1987, a capital loss carryback to 
 17.1   each of the three taxable years preceding the loss year, subject 
 17.2   to the provisions of Minnesota Statutes 1986, section 290.16, 
 17.3   shall be allowed; and 
 17.4      (iv) for capital losses incurred in taxable years beginning 
 17.5   before January 1, 1987, a capital loss carryover to each of the 
 17.6   five taxable years succeeding the loss year to the extent such 
 17.7   loss was not used in a prior taxable year and subject to the 
 17.8   provisions of Minnesota Statutes 1986, section 290.16, shall be 
 17.9   allowed; 
 17.10     (6) an amount for interest and expenses relating to income 
 17.11  not taxable for federal income tax purposes, if (i) the income 
 17.12  is taxable under this chapter and (ii) the interest and expenses 
 17.13  were disallowed as deductions under the provisions of section 
 17.14  171(a)(2), 265 or 291 of the Internal Revenue Code in computing 
 17.15  federal taxable income; 
 17.16     (7) in the case of mines, oil and gas wells, other natural 
 17.17  deposits, and timber for which percentage depletion was 
 17.18  disallowed pursuant to subdivision 19c, clause (11), a 
 17.19  reasonable allowance for depletion based on actual cost.  In the 
 17.20  case of leases the deduction must be apportioned between the 
 17.21  lessor and lessee in accordance with rules prescribed by the 
 17.22  commissioner.  In the case of property held in trust, the 
 17.23  allowable deduction must be apportioned between the income 
 17.24  beneficiaries and the trustee in accordance with the pertinent 
 17.25  provisions of the trust, or if there is no provision in the 
 17.26  instrument, on the basis of the trust's income allocable to 
 17.27  each; 
 17.28     (8) for certified pollution control facilities placed in 
 17.29  service in a taxable year beginning before December 31, 1986, 
 17.30  and for which amortization deductions were elected under section 
 17.31  169 of the Internal Revenue Code of 1954, as amended through 
 17.32  December 31, 1985, an amount equal to the allowance for 
 17.33  depreciation under Minnesota Statutes 1986, section 290.09, 
 17.34  subdivision 7; 
 17.35     (9) amounts included in federal taxable income that are due 
 17.36  to refunds of income, excise, or franchise taxes based on net 
 18.1   income or related minimum taxes paid by the corporation to 
 18.2   Minnesota, another state, a political subdivision of another 
 18.3   state, the District of Columbia, or a foreign country or 
 18.4   possession of the United States to the extent that the taxes 
 18.5   were added to federal taxable income under section 290.01, 
 18.6   subdivision 19c, clause (1), in a prior taxable year; 
 18.7      (10) 80 percent of royalties, fees, or other like income 
 18.8   accrued or received from a foreign operating corporation or a 
 18.9   foreign corporation which is part of the same unitary business 
 18.10  as the receiving corporation; 
 18.11     (11) income or gains from the business of mining as defined 
 18.12  in section 290.05, subdivision 1, clause (a), that are not 
 18.13  subject to Minnesota franchise tax; 
 18.14     (12) the amount of handicap access expenditures in the 
 18.15  taxable year which are not allowed to be deducted or capitalized 
 18.16  under section 44(d)(7) of the Internal Revenue Code; 
 18.17     (13) the amount of qualified research expenses not allowed 
 18.18  for federal income tax purposes under section 280C(c) of the 
 18.19  Internal Revenue Code, but only to the extent that the amount 
 18.20  exceeds the amount of the credit allowed under section 290.068; 
 18.21     (14) the amount of salary expenses not allowed for federal 
 18.22  income tax purposes due to claiming the Indian employment credit 
 18.23  under section 45A(a) of the Internal Revenue Code; 
 18.24     (15) the amount of any refund of environmental taxes paid 
 18.25  under section 59A of the Internal Revenue Code; 
 18.26     (16) for taxable years beginning before January 1, 2008, 
 18.27  the amount of the federal small ethanol producer credit allowed 
 18.28  under section 40(a)(3) of the Internal Revenue Code which is 
 18.29  included in gross income under section 87 of the Internal 
 18.30  Revenue Code; and 
 18.31     (17) for a corporation whose foreign sales corporation, as 
 18.32  defined in section 922 of the Internal Revenue Code, constituted 
 18.33  a foreign operating corporation during the taxable years ending 
 18.34  during calendar year 1992 and a return was filed by August 15, 
 18.35  1996, claiming the deduction under this subdivision for income 
 18.36  received from the foreign operating corporation, an amount equal 
 19.1   to 1.23 multiplied by the amount of income excluded under 
 19.2   section 114 of the Internal Revenue Code, provided the income is 
 19.3   not income of a foreign operating company; and 
 19.4      (18) for a financial institution, an amount included in 
 19.5   federal taxable income as interest income from a loan or loans 
 19.6   made by the taxpayer to a borrower, to the extent that the loan 
 19.7   is secured by qualified property.  To determine the portion of a 
 19.8   loan or loans that is secured by qualified property of the 
 19.9   borrower, the entire principal amount of the loan or loans 
 19.10  between the taxpayer and the borrower must be divided into the 
 19.11  basis of the qualified property which secures the loan or loans, 
 19.12  using for this purpose the original basis of the property on the 
 19.13  date that it was placed in service in a location in this state 
 19.14  outside of the metropolitan area, as defined in section 473.121, 
 19.15  subdivision 2.  The subtraction modification available to 
 19.16  taxpayers in any year under this clause is that portion of the 
 19.17  total interest paid by the borrower with respect to the loan 
 19.18  attributable to the qualified property as calculated under the 
 19.19  previous sentence.  The term "qualified property" means property 
 19.20  which: 
 19.21     (i) is placed in service and used at a location in 
 19.22  Minnesota outside of the metropolitan area, as defined in 
 19.23  section 473.121, subdivision 2; 
 19.24     (ii) is tangible, whether new or used, including buildings 
 19.25  and structural components of buildings and signs that are real 
 19.26  property, but not including land or improvements to real 
 19.27  property that are not a structural component of a building such 
 19.28  as landscaping, sewer lines, local access roads, fencing, 
 19.29  parking lots, and other appurtenances; 
 19.30     (iii) is depreciable under section 167 of the Internal 
 19.31  Revenue Code; 
 19.32     (iv) is acquired by purchase as defined in section 179(d) 
 19.33  of the Internal Revenue Code; and 
 19.34     (v) is used by a qualified business, as defined under 
 19.35  section 469.193. 
 19.36     [EFFECTIVE DATE.] This section is effective for taxable 
 20.1   years beginning after December 31, 2002. 
 20.2      Sec. 13.  Minnesota Statutes 2000, section 290.06, is 
 20.3   amended by adding a subdivision to read: 
 20.4      Subd. 29.  [ECONOMIC DEVELOPMENT CREDIT.] A taxpayer, as 
 20.5   defined in section 116J.8770, subdivision 15, is allowed a 
 20.6   credit against the tax imposed by this chapter.  The credit 
 20.7   equals the sum of the credits to which the taxpayer is entitled 
 20.8   under credit agreements with the commissioner of trade and 
 20.9   economic development under sections 116J.8777 and 116J.8779.  If 
 20.10  the credit exceeds the liability for tax, the commissioner shall 
 20.11  refund the amount that exceeds the liability for tax.  An amount 
 20.12  sufficient to pay the refunds authorized by this subdivision is 
 20.13  appropriated to the commissioner from the general fund. 
 20.14     [EFFECTIVE DATE.] This section is effective for taxable 
 20.15  years beginning after December 31, 2002. 
 20.16     Sec. 14.  Minnesota Statutes 2000, section 290.06, is 
 20.17  amended by adding a subdivision to read: 
 20.18     Subd. 30.  [RAIN INVESTMENT CREDIT.] (a) A credit is 
 20.19  allowed against the tax imposed by this chapter for investment 
 20.20  in a qualifying regional angel investment network fund.  The 
 20.21  credit equals 25 percent of the taxpayer's investment made in 
 20.22  the fund for the taxable year, but not to exceed the lesser of: 
 20.23     (1) the liability for tax under this chapter, including the 
 20.24  applicable alternative minimum tax; or 
 20.25     (2) the amount of the certificate under paragraph (c) 
 20.26  provided to the taxpayer by the fund. 
 20.27     (b) For purposes of this subdivision, a regional angel 
 20.28  investment network fund means a pool investment fund that: 
 20.29     (1) is organized as a limited liability company and 
 20.30  consists of members who are accredited investors within the 
 20.31  meaning of Regulation D of the Securities and Exchange 
 20.32  Commission, Code of Federal Regulations, title 17, section 
 20.33  230.501(a); and 
 20.34     (2) primarily makes equity investments in emerging 
 20.35  companies that are located in local communities in Minnesota 
 20.36  outside of the metropolitan area as defined in section 473.121, 
 21.1   subdivision 2. 
 21.2      (c) Regional angel investment network funds may apply to 
 21.3   the commissioner of trade and economic development for 
 21.4   certification as a qualifying regional angel investment net 
 21.5   fund.  The application must be in the form and made under 
 21.6   procedures specified by the commissioner of trade and economic 
 21.7   development.  The commissioner of trade and economic development 
 21.8   may certify up to ten qualifying funds and provide certificates 
 21.9   entitling investors in the funds to credits under this 
 21.10  subdivision of up to $250,000 for each ($2,500,000 in total 
 21.11  credits authorized).  In awarding certificates under this 
 21.12  paragraph, the commissioner of trade and economic development 
 21.13  shall seek to certify funds that are broadly dispersed across 
 21.14  the entire state outside of the metropolitan area, as defined in 
 21.15  section 473.121, subdivision 2. 
 21.16     (d) The commissioner may require a taxpayer to provide a 
 21.17  copy of the credit certificate under paragraph (c) to verify the 
 21.18  taxpayer's entitlement to a credit under this subdivision. 
 21.19     (e) If the amount of the credit under this subdivision for 
 21.20  any taxable year exceeds the limitation under paragraph (a), 
 21.21  clause (1), the excess is a credit carryover to each of the 15 
 21.22  succeeding taxable years.  The entire amount of the excess 
 21.23  unused credit for the taxable year must be carried first to the 
 21.24  earliest of the taxable years to which the credit may be carried 
 21.25  and then to each successive year to which the credit may be 
 21.26  carried.  The amount of the unused credit which may be added 
 21.27  under this paragraph may not exceed the taxpayer's liability for 
 21.28  tax less the credit for the taxable year. 
 21.29     [EFFECTIVE DATE.] This section is effective the day 
 21.30  following final enactment and for taxable years beginning after 
 21.31  December 31, 2001.  It applies to investments made after the 
 21.32  fund has been certified by the commissioner of trade and 
 21.33  economic development under this section. 
 21.34     Sec. 15.  [290.0681] [DEFINITIONS; EQUITY INVESTMENT 
 21.35  CREDIT.] 
 21.36     Subdivision 1.  [SCOPE.] The definitions in this section 
 22.1   apply to sections 290.0681 to 290.0684. 
 22.2      Subd. 2.  [BUSINESS.] "Business" means a corporation, 
 22.3   partnership, limited liability company, association, or sole 
 22.4   proprietorship operated for profit that operates a qualified 
 22.5   business, as defined in section 469.193. 
 22.6      Subd. 3.  [EQUITY SECURITY.] "Equity security" includes: 
 22.7      (1) common stock; 
 22.8      (2) preferred stock; 
 22.9      (3) an interest in a partnership; or 
 22.10     (4) subordinated debt that is convertible into, or entitles 
 22.11  the holder to receive upon its exercise, common stock, preferred 
 22.12  stock, or an interest in a partnership. 
 22.13     Subd. 4.  [PASS THROUGH ENTITY.] "Pass through entity" has 
 22.14  the meaning given in section 116J.8770, subdivision 11. 
 22.15     Subd. 5.  [QUALIFIED BUSINESS VENTURE.] "Qualified business 
 22.16  venture" means a business that meets the requirements of section 
 22.17  290.0683. 
 22.18     Subd. 6.  [SECURITY.] "Security" means a security as 
 22.19  defined in section 2(1) of the Securities Act of 1933, United 
 22.20  States Code, title 15, section 77b(a)(1). 
 22.21     Subd. 7.  [SUBORDINATED DEBT.] "Subordinated debt" means 
 22.22  indebtedness that is not secured and is subordinated to all 
 22.23  other indebtedness of the issuer issued or to be issued to a 
 22.24  financial institution. 
 22.25     [EFFECTIVE DATE.] This section is effective for taxable 
 22.26  years beginning after December 31, 2002. 
 22.27     Sec. 16.  [290.0682] [EQUITY INVESTMENT TAX CREDIT.] 
 22.28     Subdivision 1.  [CREDIT; INDIVIDUALS.] (a) Subject to the 
 22.29  limitations in section 290.0683, an individual who purchases the 
 22.30  equity securities or subordinated debt of a qualified business 
 22.31  venture directly from that business is allowed a credit against 
 22.32  the tax under sections 290.06, subdivision 2c, and 290.091 for 
 22.33  the taxable year an amount equal to 25 percent of the amount 
 22.34  invested.  The aggregate amount of the credit allowed an 
 22.35  individual for one or more investments in a single taxable year 
 22.36  under this section, whether directly or indirectly as owner of a 
 23.1   pass through entity, may not exceed $50,000. 
 23.2      (b) The credit may not be taken for the year in which the 
 23.3   investment is made but must be taken for the taxable year 
 23.4   beginning during the calendar year in which the application for 
 23.5   the credit becomes effective as provided in subdivision 4. 
 23.6      Subd. 2.  [PASS THROUGH ENTITIES.] (a) This section does 
 23.7   not apply to a pass through entity that has committed capital 
 23.8   under management in excess of $5,000,000. 
 23.9      (b) Subject to the limitations in section 290.0683, a pass 
 23.10  through entity that purchases the equity securities or 
 23.11  subordinated debt of a qualified business venture directly from 
 23.12  the business is eligible for a tax credit equal to 25 percent of 
 23.13  the amount invested.  The aggregate amount of credit allowed a 
 23.14  pass through entity for one or more investments in a single 
 23.15  taxable year under this section, whether directly or indirectly 
 23.16  as owner of another pass through entity, may not exceed $750,000.
 23.17     (c) The pass through entity is not eligible for the credit 
 23.18  for the year in which the investment by the pass through entity 
 23.19  is made but is eligible for the credit for the taxable year 
 23.20  beginning during the calendar year in which the application for 
 23.21  the credit becomes effective as provided in subdivision 4. 
 23.22     (d) Each individual who is an owner of a pass through 
 23.23  entity is allowed as a credit against the tax imposed by 
 23.24  sections 290.06, subdivision 2c, and 290.091, for the taxable 
 23.25  year an amount equal to the owner's allocated share of the 
 23.26  credits for which the pass through entity is eligible under this 
 23.27  subdivision.  The aggregate amount of credit allowed an 
 23.28  individual for one or more investments in a single taxable year 
 23.29  under sections 290.06, subdivision 2c, and 290.091, whether 
 23.30  directly or indirectly as owner of a pass through entity, may 
 23.31  not exceed $50,000.  If an owner's share of the pass through 
 23.32  entity's credit is limited to the maximum allowable credit under 
 23.33  this section for a taxable year, the pass through entity and its 
 23.34  owners may not reallocate the unused credit among the other 
 23.35  owners. 
 23.36     Subd. 3.  [NO CREDIT FOR BROKERED INVESTMENTS.] No credit 
 24.1   is allowed under this section for a purchase of equity 
 24.2   securities or subordinated debt if a broker's fee or commission 
 24.3   or other similar remuneration is paid or given directly or 
 24.4   indirectly for soliciting the purchase. 
 24.5      Subd. 4.  [APPLICATION.] To be eligible for the tax credit 
 24.6   under this section, the taxpayer must file an application for 
 24.7   the credit with the commissioner of trade and economic 
 24.8   development by April 15 of the year following the calendar year 
 24.9   in which the investment was made.  The commissioner may grant 
 24.10  extensions of this deadline, as the commissioner finds 
 24.11  appropriate, upon the request of the taxpayer, except that the 
 24.12  application may not be filed after September 15 of the year 
 24.13  following the calendar year in which the investment was made.  
 24.14  An application is effective for the year in which it is timely 
 24.15  filed.  The application must be on a form prescribed by the 
 24.16  commissioner and must include any supporting documentation that 
 24.17  the commissioner may require.  If an investment for which a 
 24.18  credit is applied for was paid for other than in money, the 
 24.19  taxpayer must include with the application a certified appraisal 
 24.20  of the value of the property used to pay for the investment.  
 24.21  The application for a credit for an investment made by a pass 
 24.22  through entity must be filed by the pass through entity. 
 24.23     Subd. 5.  [NONREFUNDABLE; CARRYOVER.] (a) The credit 
 24.24  allowed under this section may not exceed the amount of income 
 24.25  tax imposed by section 290.06, subdivision 2c, or 290.091, 
 24.26  whichever is greater. 
 24.27     (b) The amount of unused credit allowed under this section, 
 24.28  but not allowed as a result of the limit in paragraph (a), may 
 24.29  be carried forward for the five succeeding years.  The $50,000 
 24.30  limitation on the amount of credit allowed a taxpayer under 
 24.31  subdivisions 2 and 3 does not apply to unused amounts carried 
 24.32  forward under this subdivision. 
 24.33     [EFFECTIVE DATE.] This section is effective for taxable 
 24.34  years beginning after December 31, 2002. 
 24.35     Sec. 17.  [290.0683] [REGISTRATION OF QUALIFIED BUSINESS 
 24.36  VENTURES.] 
 25.1      Subdivision 1.  [REGISTRATION REQUIRED.] To qualify as a 
 25.2   qualified business venture for purposes of sections 290.0681 to 
 25.3   290.0684, a business must be registered with the commissioner of 
 25.4   trade and economic development.  To register, the business must 
 25.5   file with the commissioner of trade and economic development an 
 25.6   application and any supporting documents the commissioner may 
 25.7   require from time to time to determine that the business meets 
 25.8   the requirements for registration as a qualified business 
 25.9   venture under subdivision 2. 
 25.10     Subd. 2.  [QUALIFYING RULES.] A business meets the 
 25.11  requirements for registration as a qualified business venture if 
 25.12  all of the following are true when the business files the 
 25.13  application: 
 25.14     (1) it was organized after January 1 of the calendar year 
 25.15  in which its application is filed or during its most recent 
 25.16  fiscal year before filing the application, it had gross 
 25.17  revenues, as determined in accordance with generally accepted 
 25.18  accounting principles, of $5,000,000 or less on a consolidated 
 25.19  basis; 
 25.20     (2) it constitutes a qualified business as defined in 
 25.21  section 469.193; and 
 25.22     (3) it was not formed for the primary purpose of acquiring 
 25.23  all or part of the stock or assets of one or more existing 
 25.24  businesses. 
 25.25     Subd. 3.  [WHEN REGISTRATION IS EFFECTIVE.] The effective 
 25.26  date of registration for a qualified business venture whose 
 25.27  application is accepted for registration is 60 days before the 
 25.28  date its application is filed.  No credit is allowed under 
 25.29  section 290.0682 for an investment made before the effective 
 25.30  date of the registration or after the registration is revoked.  
 25.31  If a taxpayer's investment is placed initially in escrow 
 25.32  conditioned upon other investors' commitment of additional 
 25.33  funds, the date of the investment is the date escrowed funds are 
 25.34  transferred to the qualified business venture free of the 
 25.35  condition. 
 25.36     Subd. 4.  [RENEWAL REQUIRED.] (a) To remain qualified as a 
 26.1   qualified business venture, the business must renew its 
 26.2   registration annually by filing: 
 26.3      (1) a financial statement for the most recent fiscal year 
 26.4   showing gross revenues, as determined in accordance with 
 26.5   generally accepted accounting principles, of $5,000,000 or less 
 26.6   on a consolidated basis; and 
 26.7      (2) an application for renewal in which the business 
 26.8   certifies the facts required in the original application. 
 26.9      (b) Failure of a qualified business venture to renew its 
 26.10  registration by the applicable deadline results in revocation of 
 26.11  its registration effective as of the next day after the renewal 
 26.12  deadline, but does not forfeit tax credits previously allowed to 
 26.13  taxpayers who invested in the business except as provided in 
 26.14  section 290.0684. 
 26.15     (c) The commissioner of trade and economic development 
 26.16  shall send the qualified business venture notice of revocation 
 26.17  within 60 days after the renewal deadline.  A qualified business 
 26.18  venture may apply to have its registration reinstated by the 
 26.19  commissioner of trade and economic development by filing an 
 26.20  application for reinstatement, accompanied by the reinstatement 
 26.21  application fee and a late filing penalty of $1,000, within 30 
 26.22  days after receipt of the revocation notice from the 
 26.23  commissioner of trade and economic development.  A business that 
 26.24  seeks approval of a new application for registration after its 
 26.25  registration has been revoked must also pay a penalty of 
 26.26  $1,000.  A registration that has been reinstated is treated as 
 26.27  if it had not been revoked. 
 26.28     Subd. 5.  [NOTIFICATION OF COMMISSIONER.] If the gross 
 26.29  revenues of a qualified business venture exceed $5,000,000 in a 
 26.30  fiscal year, the business must notify the commissioner of trade 
 26.31  and economic development in writing of this fact by filing a 
 26.32  financial statement showing the revenues of the business for 
 26.33  that year. 
 26.34     Subd. 6.  [APPLICATION FORMS; FEES.] (a) Applications for 
 26.35  registration, renewal of registration, and reinstatement of 
 26.36  registration under this section must be in the form required by 
 27.1   the commissioner of trade and economic development.  The 
 27.2   commissioner of trade and economic development may require 
 27.3   applicants to furnish supporting information in addition to the 
 27.4   information required by this section.  The commissioner of trade 
 27.5   and economic development shall prepare blank forms for the 
 27.6   applications and shall furnish them on request. 
 27.7      (b) The fee for filing an application for registration 
 27.8   under this section is $100.  The fee for filing an application 
 27.9   for renewal of registration under this section is $50.  The fee 
 27.10  for filing an application for reinstatement of registration 
 27.11  under this section is $50. 
 27.12     (c) An application for renewal of registration under this 
 27.13  section must include a report of the number of jobs the business 
 27.14  created during the preceding year that are attributable to 
 27.15  investments that qualify under section 290.0682 for a tax credit 
 27.16  and the average wages paid by each job.  An application that 
 27.17  does not contain this information is incomplete and the 
 27.18  applicant's registration may not be renewed until the 
 27.19  information is provided. 
 27.20     Subd. 7.  [REVOCATION OF REGISTRATION.] If the commissioner 
 27.21  of trade and economic development finds that any of the 
 27.22  information contained in an application of a business registered 
 27.23  under this section is false, the commissioner shall revoke the 
 27.24  registration of the business.  The commissioner shall not revoke 
 27.25  the registration of a business solely because it ceases business 
 27.26  operations for an indefinite period of time, as long as the 
 27.27  business renews its registration each year under subdivision 4. 
 27.28     Subd. 8.  [TRANSFER OF REGISTRATION.] A registration as a 
 27.29  qualified business venture or qualified grantee business may not 
 27.30  be sold or otherwise transferred, except that if a qualified 
 27.31  business venture or qualified grantee business enters into a 
 27.32  merger, conversion, consolidation, or other similar transaction 
 27.33  with another business and the surviving company would otherwise 
 27.34  meet the criteria for being a qualified business venture or 
 27.35  qualified grantee business, the surviving company retains the 
 27.36  registration without further application to the commissioner of 
 28.1   trade and economic development.  In such a case, the qualified 
 28.2   business venture must provide the commissioner of trade and 
 28.3   economic development with written notice of the merger, 
 28.4   conversion, consolidation, or similar transaction and the name, 
 28.5   address, and jurisdiction of incorporation or organization of 
 28.6   the surviving company. 
 28.7      Subd. 9.  [REPORT BY COMMISSIONER.] The commissioner of 
 28.8   trade and economic development shall report to the legislature 
 28.9   by October 1 of each year all of the businesses that have 
 28.10  registered with the commissioner of trade and economic 
 28.11  development as qualified business ventures and qualified grantee 
 28.12  businesses.  The report must include the name and address of 
 28.13  each business, the location of its headquarters and principal 
 28.14  place of business, a detailed description of the types of 
 28.15  business in which it engages, the number of jobs created by the 
 28.16  business during the period covered by the report, and the 
 28.17  average wages paid by these jobs. 
 28.18     Subd. 10.  [DEPOSIT OF FEES.] The fees imposed by this 
 28.19  section must be deposited in the general fund. 
 28.20     [EFFECTIVE DATE.] This section is effective for taxable 
 28.21  years beginning after December 31, 2002. 
 28.22     Sec. 18.  [290.0684] [FORFEITURE OF CREDIT.] 
 28.23     Subdivision 1.  [PARTICIPATION IN BUSINESS.] (a) A taxpayer 
 28.24  who has received a credit under section 290.0682 for an 
 28.25  investment in a qualified business venture forfeits the credit 
 28.26  if, within three years after the investment was made, the 
 28.27  taxpayer participates in the operation of the qualified business 
 28.28  venture or qualified grantee business.  A taxpayer participates 
 28.29  in the operation of a qualified business venture if the 
 28.30  taxpayer, the taxpayer's spouse, parent, sibling, or child, or 
 28.31  an employee of any of these individuals or of a business 
 28.32  controlled by any of these individuals, provides services of any 
 28.33  nature to the qualified business venture for compensation, 
 28.34  whether as an employee, a contractor, or otherwise.  A person 
 28.35  who provides services to a qualified business venture, whether 
 28.36  as an officer, a member of the board of directors, or otherwise 
 29.1   does not participate in its operation if the person receives as 
 29.2   compensation only reasonable reimbursement of expenses incurred 
 29.3   in providing the services, participation in a stock option or 
 29.4   stock bonus plan, or both. 
 29.5      (b) For purposes of this section, a person controls an 
 29.6   entity if the person owns, directly or indirectly, more than ten 
 29.7   percent of the voting securities of that entity.  A voting 
 29.8   security means a security, including a general partnership 
 29.9   interest, that: 
 29.10     (1) confers upon the holder the right to vote for the 
 29.11  election of members of the board of directors or similar 
 29.12  governing body of the business; or 
 29.13     (2) is convertible into, or entitles the holder to receive 
 29.14  upon its exercise, a security that confers such a right to vote. 
 29.15     Subd. 2.  [FALSE APPLICATION.] A taxpayer who has received 
 29.16  a credit under section 290.0682 for an investment in a qualified 
 29.17  business venture forfeits the credit if the registration of the 
 29.18  qualified business venture is revoked because information in the 
 29.19  registration application was false at the time the application 
 29.20  was filed with the commissioner of trade and economic 
 29.21  development. 
 29.22     Subd. 3.  [TRANSFER OR REDEMPTION OF INVESTMENT.] A 
 29.23  taxpayer who has received a credit under this section for an 
 29.24  investment in a qualified business venture forfeits the credit 
 29.25  if: 
 29.26     (1) within one year after the investment was made, the 
 29.27  taxpayer transfers any of the securities received in the 
 29.28  investment that qualified for the tax credit to another person 
 29.29  or entity, other than in a transfer resulting from one of the 
 29.30  following: 
 29.31     (i) the death of the taxpayer; 
 29.32     (ii) a final distribution in liquidation to the owners of a 
 29.33  taxpayer that is a corporation or other entity; or 
 29.34     (iii) a merger, conversion, consolidation, or similar 
 29.35  transaction requiring approval by the owners of the qualified 
 29.36  business venture under applicable state law, to the extent the 
 30.1   taxpayer does not receive cash or tangible property in the 
 30.2   merger, conversion, consolidation, or other similar transaction; 
 30.3   or 
 30.4      (2) within five years after the investment was made, the 
 30.5   qualified business venture in which the investment was made 
 30.6   makes a redemption with respect to the securities received in 
 30.7   the investment.  If the taxpayer transfers fewer than all the 
 30.8   securities in a manner that would result in a forfeiture, the 
 30.9   amount of the credit that is forfeited is the product obtained 
 30.10  by multiplying the aggregate credit attributable to the 
 30.11  investment by a fraction whose numerator equals the number of 
 30.12  securities transferred and whose denominator equals the number 
 30.13  of securities received on account of the investment to which the 
 30.14  credit was attributable.  If the redemption amount is less than 
 30.15  the amount invested by the taxpayer in the securities to which 
 30.16  the redemption is attributable, the amount of the credit that is 
 30.17  forfeited is further reduced by multiplying it by a fraction 
 30.18  whose numerator equals the redemption amount and whose 
 30.19  denominator equals the aggregate amount invested by the taxpayer 
 30.20  in the securities involved in the redemption.  The term 
 30.21  "redemption amount" means all amounts paid that are treated as a 
 30.22  distribution in part or full payment in exchange for securities 
 30.23  under section 302(a) of the Internal Revenue Code. 
 30.24     Subd. 4.  [EFFECT OF FORFEITURE.] A taxpayer who forfeits a 
 30.25  credit under this section is liable for all past taxes avoided 
 30.26  as a result of the credit plus interest at the rate established 
 30.27  under section 270.75 computed from the date the taxes would have 
 30.28  been due if the credit had not been allowed.  The past taxes and 
 30.29  interest are due 30 days after the date the credit is forfeited; 
 30.30  a taxpayer who fails to pay the past taxes and interest by the 
 30.31  due date is subject to the penalties provided in section 289A.60.
 30.32     [EFFECTIVE DATE.] This section is effective for taxable 
 30.33  years beginning after December 31, 2002. 
 30.34     Sec. 19.  [290.0685] [INVESTMENT CREDIT; QUALIFIED BUSINESS 
 30.35  EQUIPMENT.] 
 30.36     Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
 31.1   section, the following terms have the meanings given. 
 31.2      (b) "Baseline years" means: 
 31.3      (1) calendar years 1996, 1997, and 1998, with regard to a 
 31.4   credit claimed for the purchase during calendar year 2002 of new 
 31.5   manufacturing machinery and equipment; 
 31.6      (2) calendar years 1997, 1998, and 1999, with regard to a 
 31.7   credit claimed for the purchase during calendar year 2003 of new 
 31.8   manufacturing machinery and equipment; 
 31.9      (3) calendar years 1998, 1999, and 2000, with regard to a 
 31.10  credit claimed for the purchase during calendar year 2004 of new 
 31.11  manufacturing machinery and equipment; and 
 31.12     (4) calendar years 1999, 2000, and 2001, with regard to a 
 31.13  credit claimed for the purchase during calendar year 2005 of new 
 31.14  manufacturing machinery and equipment. 
 31.15     (c) "Cost" has the same meaning and limitation as in 
 31.16  section 179(d)(3) of the Internal Revenue Code. 
 31.17     (d) "Qualified business equipment" means engines and 
 31.18  machinery, and tools and implements, of every kind used, or 
 31.19  designed to be used, in a qualified business, as defined in 
 31.20  section 469.193. 
 31.21     (e) "New qualified business equipment" means qualified 
 31.22  business equipment, the original use in this state of which 
 31.23  commences with the taxpayer or with a partnership of which the 
 31.24  taxpayer is a partner. 
 31.25     (f) "Pass through entity" has the same meaning as in 
 31.26  section 116J.8770. 
 31.27     (g) Except as provided in this paragraph, "purchase" has 
 31.28  the same meaning as in section 179(d)(2) of the Internal Revenue 
 31.29  Code.  Any property that is not manufactured or assembled 
 31.30  primarily by the taxpayer is considered purchased when the 
 31.31  agreement to acquire the property becomes binding.  Any property 
 31.32  that is manufactured or assembled primarily by the taxpayer is 
 31.33  considered purchased when the taxpayer places the property in 
 31.34  service in this state.  Notwithstanding section 179(d) of the 
 31.35  Internal Revenue Code, a taxpayer's direct or indirect 
 31.36  acquisition of new qualified business equipment is not purchased 
 32.1   on or after July 1, 2002, if the taxpayer, or a person whose 
 32.2   relationship to the taxpayer is described in section 
 32.3   179(d)(2)(A), (B), or (C) of the Internal Revenue Code, had 
 32.4   directly or indirectly entered into a binding agreement to 
 32.5   acquire the property at any time prior to July 1, 2002. 
 32.6      (h) "Qualifying period" means the period that begins July 
 32.7   1, 2002, and ends December 31, 2005. 
 32.8      (i) "Related member" has the same meaning as in section 
 32.9   116B.8770, subdivision 13. 
 32.10     (j) "State" means the area of this state, excluding the 
 32.11  metropolitan area, as defined in section 473.121, subdivision 2. 
 32.12     (k) "State average new qualified business equipment 
 32.13  investment" means either of the following: 
 32.14     (1) the average annual cost of new qualified business 
 32.15  equipment purchased for use in this state during baseline years, 
 32.16  for a taxpayer that was in existence for more than one year 
 32.17  during the baseline years; or 
 32.18     (2) zero, for a taxpayer that was not in existence for more 
 32.19  than one year during the baseline years. 
 32.20     Subd. 2.  [CREDIT ALLOWED.] (a) A nonrefundable credit is 
 32.21  allowed against the tax imposed by section 290.06 for a taxpayer 
 32.22  that purchases new qualified business equipment during the 
 32.23  qualifying period and places the qualified business equipment in 
 32.24  service in this state no later than December 31, 2006.  The 
 32.25  credit amount equals 7.5 percent of the excess of the cost of 
 32.26  the new qualified business equipment purchased during the 
 32.27  calendar year for use in a state over the state average new 
 32.28  qualified business equipment investment. 
 32.29     (b) One-seventh of the credit amount is allowed for the 
 32.30  taxable year immediately following the calendar year in which 
 32.31  the new qualified business equipment is purchased for use in the 
 32.32  state by the taxpayer or partnership.  One-seventh of the 
 32.33  taxpayer credit amount is allowed for each of the six following 
 32.34  taxable years.  Except for carried-forward amounts, the taxpayer 
 32.35  is not allowed any credit amount remaining if the new qualified 
 32.36  business equipment is sold by the taxpayer or partnership or is 
 33.1   transferred by the taxpayer or partnership out of the state 
 33.2   before the end of the seven-year period unless, at the time of 
 33.3   the sale or transfer, the new qualified business equipment has 
 33.4   been fully depreciated for federal income tax purposes. 
 33.5      Subd. 3.  [MERGERS AND ACQUISITIONS.] (a) A taxpayer that 
 33.6   acquires qualified business equipment as a result of a merger 
 33.7   with the taxpayer that commenced the original use in this state 
 33.8   of the qualified business equipment, or with a taxpayer that was 
 33.9   a partner in a partnership that commenced the original use in 
 33.10  this state of the qualified business equipment, is allowed any 
 33.11  remaining or carried-forward credit amounts to which the 
 33.12  taxpayer was entitled. 
 33.13     (b) New qualified business equipment is not considered sold 
 33.14  if a pass through entity transfers to another pass through 
 33.15  entity substantially all of its assets as part of a plan of 
 33.16  reorganization under which substantially all gain and loss is 
 33.17  not recognized by the pass through entity that is transferring 
 33.18  the new qualified business equipment to the transferee and under 
 33.19  which the transferee's basis in the new qualified business 
 33.20  equipment is determined, in whole or in part, by reference to 
 33.21  the basis of the pass through entity which transferred the new 
 33.22  qualified business equipment to the transferee. 
 33.23     (c) The provisions of this subdivision apply only if the 
 33.24  following conditions are met: 
 33.25     (1) the acquiring taxpayer or transferee does not sell the 
 33.26  new qualified business equipment or transfer the new qualified 
 33.27  business equipment out of the state before the end of the 
 33.28  seven-year period; and 
 33.29     (2) the taxpayer that sold the manufacturing machinery or 
 33.30  equipment, upon request, timely provides to the commissioner any 
 33.31  information that the commissioner considers to be necessary to 
 33.32  ascertain any remaining or carried-forward amounts to which the 
 33.33  taxpayer that sold the facility would have been entitled under 
 33.34  this section had the taxpayer not sold the manufacturing 
 33.35  machinery or equipment.  Nothing in this section may be 
 33.36  construed to allow a taxpayer to claim any credit amount with 
 34.1   respect to the acquired manufacturing machinery or equipment 
 34.2   that is greater than the amount that would have been available 
 34.3   to the taxpayer that sold the manufacturing machinery or 
 34.4   equipment had the taxpayer not sold the manufacturing machinery 
 34.5   or equipment. 
 34.6      [EFFECTIVE DATE.] This section is effective for taxable 
 34.7   years beginning after December 31, 2002. 
 34.8      Sec. 20.  Minnesota Statutes 2001 Supplement, section 
 34.9   290.191, subdivision 2, is amended to read: 
 34.10     Subd. 2.  [APPORTIONMENT FORMULA OF GENERAL APPLICATION.] 
 34.11  (a) Except for those trades or businesses required to use a 
 34.12  different formula under subdivision 3 or section 290.36, and for 
 34.13  those trades or businesses that receive permission to use some 
 34.14  other method under section 290.20 or under subdivision 4, a 
 34.15  trade or business required to apportion its net income must 
 34.16  apportion its income to this state on the basis of the 
 34.17  percentage obtained by taking the sum of:  
 34.18     (1) 75 percent of the percentage which the sales made 
 34.19  within this state in connection with the trade or business 
 34.20  during the tax period are of the total sales wherever made in 
 34.21  connection with the trade or business during the tax period; 
 34.22     (2) 12.5 percent of the percentage which the total tangible 
 34.23  property used by the taxpayer in this state in connection with 
 34.24  the trade or business during the tax period is of the total 
 34.25  tangible property, wherever located, used by the taxpayer in 
 34.26  connection with the trade or business during the tax period; and 
 34.27     (3) 12.5 percent of the percentage which the taxpayer's 
 34.28  total payrolls paid or incurred in this state or paid in respect 
 34.29  to labor performed in this state in connection with the trade or 
 34.30  business during the tax period are of the taxpayer's total 
 34.31  payrolls paid or incurred in connection with the trade or 
 34.32  business during the tax period.  
 34.33     (b) For purposes of this subdivision: 
 34.34     (1) the "total tangible property used by the taxpayer in 
 34.35  this state in connection with the trade or business" excludes 
 34.36  tangible property that is used by the taxpayer outside of the 
 35.1   metropolitan area, as defined in section 473.121, subdivision 2; 
 35.2   and 
 35.3      (2) the taxpayer's "total payrolls paid or incurred in this 
 35.4   state or paid in respect to labor performed in this state in 
 35.5   connection with the trade or business" excludes payrolls for 
 35.6   labor performed in this state but outside of the metropolitan 
 35.7   area, as defined in section 473.121, subdivision 2. 
 35.8      [EFFECTIVE DATE.] This section is effective for taxable 
 35.9   years beginning after December 31, 2001. 
 35.10     Sec. 21.  Minnesota Statutes 2000, section 290.191, 
 35.11  subdivision 3, is amended to read: 
 35.12     Subd. 3.  [APPORTIONMENT FORMULA FOR FINANCIAL 
 35.13  INSTITUTIONS.] (a) Except for an investment company required to 
 35.14  apportion its income under section 290.36, a financial 
 35.15  institution that is required to apportion its net income must 
 35.16  apportion its net income to this state on the basis of the 
 35.17  percentage obtained by taking the sum of:  
 35.18     (1) 75 percent of the percentage which the receipts from 
 35.19  within this state in connection with the trade or business 
 35.20  during the tax period are of the total receipts in connection 
 35.21  with the trade or business during the tax period, from wherever 
 35.22  derived; 
 35.23     (2) 12.5 percent of the percentage which the sum of the 
 35.24  total tangible property used by the taxpayer in this state and 
 35.25  the intangible property owned by the taxpayer and attributed to 
 35.26  this state in connection with the trade or business during the 
 35.27  tax period is of the sum of the total tangible property, 
 35.28  wherever located, used by the taxpayer and the intangible 
 35.29  property owned by the taxpayer and attributed to all states in 
 35.30  connection with the trade or business during the tax period; and 
 35.31     (3) 12.5 percent of the percentage which the taxpayer's 
 35.32  total payrolls paid or incurred in this state or paid in respect 
 35.33  to labor performed in this state in connection with the trade or 
 35.34  business during the tax period are of the taxpayer's total 
 35.35  payrolls paid or incurred in connection with the trade or 
 35.36  business during the tax period. 
 36.1      (b) For purposes of this subdivision: 
 36.2      (1) the "total tangible property used by the taxpayer in 
 36.3   this state in connection with the trade or business" excludes 
 36.4   tangible property that is used by the taxpayer outside of the 
 36.5   metropolitan area, as defined in section 473.121, subdivision 2; 
 36.6      (2) the "total intangible property owned by the taxpayer 
 36.7   and attributed to this state in connection with the trade or 
 36.8   business" excludes the following intangible property: 
 36.9      (i) lease financing receivables, if and to the extent that 
 36.10  the leased property is located within this state but outside of 
 36.11  the metropolitan area, as defined in section 473.121, 
 36.12  subdivision 2; 
 36.13     (ii) assets in the nature of loans that are secured by real 
 36.14  or tangible personal property if and to the extent that the 
 36.15  security property is located within this state but outside of 
 36.16  the metropolitan area, as defined in section 473.121, 
 36.17  subdivision 2; and 
 36.18     (iii) Assets in the nature of commercial loan and 
 36.19  installment obligations that are unsecured by real or tangible 
 36.20  personal property or secured by intangible property in this 
 36.21  state if the proceeds of the loan are to be applied in this 
 36.22  state, but outside of the metropolitan area, as defined in 
 36.23  section 473.121, subdivision 2, or if it cannot be determined 
 36.24  where the funds are to be applied and the office of the borrower 
 36.25  from which the application would be made in the regular course 
 36.26  of business is outside of the metropolitan area, as defined in 
 36.27  section 473.121, subdivision 2; and 
 36.28     (3) the taxpayer's "total payrolls paid or incurred in this 
 36.29  state or paid in respect to labor performed in this state in 
 36.30  connection with the trade or business" excludes payrolls for 
 36.31  labor performed in this state but outside of the metropolitan 
 36.32  area, as defined in section 473.121, subdivision 2. 
 36.33     [EFFECTIVE DATE.] This section is effective for taxable 
 36.34  years beginning after December 31, 2002. 
 36.35     Sec. 22.  Minnesota Statutes 2000, section 297A.68, is 
 36.36  amended by adding a subdivision to read: 
 37.1      Subd. 36.  [PURCHASES FOR QUALIFIED BUSINESS.] (a) 
 37.2   Purchases of tangible personal property or taxable services by a 
 37.3   person for use in a qualified business, as defined in section 
 37.4   469.193, are exempt, if the property or services are primarily 
 37.5   used or consumed in the operations of the qualified business. 
 37.6      (b) Purchase and use of construction materials and supplies 
 37.7   for construction of improvements to real property are exempt, if 
 37.8   the improvements after completion of construction are to be used 
 37.9   in a qualified business, as defined in section 469.193.  This 
 37.10  exemption applies regardless of whether the purchases are made 
 37.11  by the owner, lessee, or a contractor. 
 37.12     [EFFECTIVE DATE.] This section is effective for sales made 
 37.13  after June 30, 2002. 
 37.14     Sec. 23.  Minnesota Statutes 2001 Supplement, section 
 37.15  469.1813, subdivision 6, is amended to read: 
 37.16     Subd. 6.  [DURATION LIMIT.] (a) A political subdivision may 
 37.17  grant an abatement for a period no longer than ten years, except 
 37.18  as provided under paragraph paragraphs (b) and (c).  The 
 37.19  subdivision may specify in the abatement resolution a shorter 
 37.20  duration.  If the resolution does not specify a period of time, 
 37.21  the abatement is for eight years.  If an abatement has been 
 37.22  granted to a parcel of property and the period of the abatement 
 37.23  has expired, the political subdivision that granted the 
 37.24  abatement may not grant another abatement for eight years after 
 37.25  the expiration of the first abatement.  This prohibition does 
 37.26  not apply to improvements added after and not subject to the 
 37.27  first abatement. 
 37.28     (b) A political subdivision proposing to abate taxes for a 
 37.29  parcel may request, in writing, that the other political 
 37.30  subdivisions in which the parcel is located grant an abatement 
 37.31  for the property.  If one of the other political subdivisions 
 37.32  declines, in writing, to grant an abatement or if 90 days pass 
 37.33  after receipt of the request to grant an abatement without a 
 37.34  written response from one of the political subdivisions, the 
 37.35  duration limit for an abatement for the parcel by the requesting 
 37.36  political subdivision and any other participating political 
 38.1   subdivision is increased to 15 years.  If the political 
 38.2   subdivision which declined to grant an abatement later grants an 
 38.3   abatement for the parcel, the 15-year duration limit is reduced 
 38.4   by one year for each year that the declining political 
 38.5   subdivision grants an abatement for the parcel during the period 
 38.6   of the abatement granted by the requesting political 
 38.7   subdivision.  The duration limit may not be reduced below the 
 38.8   limit under paragraph (a).  
 38.9      (c) For a property that is used in the operation of a 
 38.10  qualified business, as defined in section 469.193, a political 
 38.11  subdivision may grant an abatement for a period of up to 20 
 38.12  years, notwithstanding paragraph (a) or (b). 
 38.13     [EFFECTIVE DATE.] This section is effective for abatement 
 38.14  resolutions approved after June 30, 2002. 
 38.15     Sec. 24.  [469.193] [DEFINITION OF QUALIFIED BUSINESS.] 
 38.16     (a) The definition of a "qualified business" in this 
 38.17  section applies for purposes of the following sections: 
 38.18     (1) 116J.8770 to 116J.8779; 
 38.19     (2) 275.025, subdivision 5; 
 38.20     (3) 290.01, subdivision 19d; 
 38.21     (4) 290.06, subdivisions 29 and 30; 
 38.22     (5) 290.0681 to 290.0685; 
 38.23     (6) 469.1813, subdivision 6, paragraph (c); and 
 38.24     (7) any other section which adopts it. 
 38.25     (b) To be a "qualified business," the operations of the 
 38.26  business that qualify for tax or other state provided incentives 
 38.27  must be: 
 38.28     (1) located outside of the metropolitan area, as defined in 
 38.29  section 473.121, subdivision 2; and 
 38.30     (2) at least .. percent of the payroll of the business is 
 38.31  for employees engaged in one of the following lines of business 
 38.32  or any combination of them: 
 38.33     (i) manufacturing; 
 38.34     (ii) agricultural processing; 
 38.35     (iii) mining; 
 38.36     (iv) research and development; 
 39.1      (v) warehousing; or 
 39.2      (vi) qualified high technology. 
 39.3      (c)(1) "Manufacturing" means the material staging and 
 39.4   production of tangible personal property by procedures commonly 
 39.5   regarded as manufacturing, processing, fabrication, or 
 39.6   assembling which changes some existing material into new shapes, 
 39.7   new qualities, or new combinations. 
 39.8      (2) "Mining" has the meaning given in section 613(c) of the 
 39.9   Internal Revenue Code of 1986. 
 39.10     (3) "Agricultural processing" means transforming, 
 39.11  packaging, sorting, or grading livestock or livestock products, 
 39.12  agricultural commodities, or plants or plant products into goods 
 39.13  that are used for intermediate or final consumption including 
 39.14  goods for nonfood use. 
 39.15     (4) "Research and development" means qualified research as 
 39.16  defined in section 41(d) of the Internal Revenue Code of 1986. 
 39.17     (5) "Qualified high technology" means one or more of the 
 39.18  following activities: 
 39.19     (i) advanced computing, which is any technology used in the 
 39.20  design and development of any of the following: 
 39.21     (A) computer hardware and software; 
 39.22     (B) data communications; and 
 39.23     (C) information technologies; 
 39.24     (ii) advanced materials, which are materials with 
 39.25  engineered properties created through the development of 
 39.26  specialized process and synthesis technology; 
 39.27     (iii) biotechnology, which is any technology that uses 
 39.28  living organisms, cells, macromolecules, microorganisms, or 
 39.29  substances from living organisms to make or modify a product, 
 39.30  improve plants or animals, or develop microorganisms for useful 
 39.31  purposes; 
 39.32     (iv) electronic device technology, which is any technology 
 39.33  that involves microelectronics, semiconductors, electronic 
 39.34  equipment, and instrumentation, radio frequency, microwave, and 
 39.35  millimeter electronics, and optical and optic-electrical 
 39.36  devices, or data and digital communications and imaging devices; 
 40.1      (v) engineering or laboratory testing related to the 
 40.2   development of a product; 
 40.3      (vi) technology that assists in the assessment or 
 40.4   prevention of threats or damage to human health or the 
 40.5   environment, including, but not limited to, environmental 
 40.6   cleanup technology, pollution prevention technology, or 
 40.7   development of alternative energy sources; 
 40.8      (vii) medical device technology, which is any technology 
 40.9   that involves medical equipment or products other than a 
 40.10  pharmaceutical product that has therapeutic or diagnostic value 
 40.11  and is regulated; or 
 40.12     (viii) advanced vehicles technology which is any technology 
 40.13  that involves electric vehicles, hybrid vehicles, or alternative 
 40.14  fuel vehicles, or components used in the construction of 
 40.15  electric vehicles, hybrid vehicles, or alternative fuel 
 40.16  vehicles.  An electric vehicle is a road vehicle that draws 
 40.17  propulsion energy only from an on-board source of electrical 
 40.18  energy.  A hybrid vehicle is a road vehicle that can draw 
 40.19  propulsion energy from both a consumable fuel and a rechargeable 
 40.20  energy storage system. 
 40.21     [EFFECTIVE DATE.] This section is effective the day 
 40.22  following final enactment. 
 40.23     Sec. 25.  [APPROPRIATION.] 
 40.24     The following amounts are appropriated from the general 
 40.25  fund for fiscal year 2003 to administer the provisions of this 
 40.26  act: 
 40.27     (1) $....... to the commissioner of trade and economic 
 40.28  development; and 
 40.29     (2) $....... to the commissioner of revenue.