SF 3489

as introduced - 89th Legislature (2015 - 2016) Posted on 04/12/2016 11:34am

A bill for an act
relating to taxation; providing a Minnesota housing tax credit against income and
insurance taxes; requiring reports; amending Minnesota Statutes 2014, section
297I.20, by adding a subdivision; proposing coding for new law in Minnesota
Statutes, chapters 290; 462A.

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

Section 1.

new text begin [290.0682] MINNESOTA HOUSING TAX CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin For purposes of this section:
new text end

new text begin (1) "taxpayer" means a taxpayer as defined in section 290.01, subdivision 6, or a
taxpayer as defined in section 297I.01, subdivision 16; and
new text end

new text begin (2) terms defined in section 462A.38 have the meanings given in that section.
new text end

new text begin Subd. 2. new text end

new text begin Credit allowed. new text end

new text begin (a) A taxpayer is allowed a Minnesota housing tax credit
against the taxes imposed under this chapter and chapter 297I. The credit equals the
amount allocated to the taxpayer and indicated on the eligibility statement issued to the
taxpayer under section 462A.38. The taxpayer may claim the amount allocated in the year
in which the credit is allocated and in each of the five following taxable years.
new text end

new text begin (b) A taxpayer eligible for the credit must submit to the commissioner a copy of
the eligibility statement issued by the agency or suballocator with respect to the qualified
Minnesota project, a copy of the project owner's tax return that must be filed as required
under chapter 289A, and any other information required by the commissioner.
new text end

new text begin (c) Credits granted to a partnership, a limited liability company taxed as a
partnership, S corporation, or multiple owners of property are passed through to the
partners, members, shareholders, or owners, respectively, pro rata to each partner, member,
shareholder, or owner based on the partner's, member's, shareholder's, or owner's share of
the entity's assets or as specially allocated in the organizational documents as of the last
day of the taxable year in which the eligibility statement was issued.
new text end

new text begin Subd. 3. new text end

new text begin Limitations; carryover. new text end

new text begin (a) A credit allowed under this section may not
exceed liability for tax under this chapter and chapter 297I.
new text end

new text begin (b) If the amount of the credit under this section exceeds the limitation under
paragraph (a), the excess is a Minnesota housing tax credit carryover to each of the 11
succeeding taxable years. The entire amount of the excess unused credit for the taxable
year must be carried first to the earliest of the taxable years to which the credit may be
carried and then to each successive year to which the credit may be carried.
new text end

new text begin Subd. 4. new text end

new text begin Assignment. new text end

new text begin (a) The recipient of a Minnesota housing tax credit may
assign the credit to another taxpayer, who is then allowed the credit under this section or
section 297I.20, subdivision 4. The commissioner shall prescribe the forms necessary for
claiming a credit by assignment.
new text end

new text begin (b) All or any portion of tax credits issued under this section may be assigned and
reassigned to another taxpayer without regard to ownership in the qualified Minnesota
project and without regard to any other allocation of credits, depreciation, profits, or losses
under the entities' organizational documents. The assignor and assignee of tax credits
must notify the commissioner of the assignment in the form and manner as specified by
the commissioner.
new text end

new text begin Subd. 5. new text end

new text begin Audit powers. new text end

new text begin Notwithstanding the eligibility statement issued by the
agency or a suballocator under section 462A.38, the commissioner may utilize any audit
and examination powers under chapter 270C or 289A, to the extent necessary to verify
that the taxpayer is eligible for the credit and to assess for the amount of any improperly
claimed credit and that the owner is in compliance with the compliance agreement.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2016.
new text end

Sec. 2.

Minnesota Statutes 2014, section 297I.20, is amended by adding a subdivision
to read:

new text begin Subd. 4. new text end

new text begin Minnesota housing tax credit. new text end

new text begin An insurance company may claim a
credit against the premiums tax imposed under this chapter equal to the amount indicated
on the eligibility statement issued to the company, or to a person who has assigned the
credit to the insurance company, as provided under section 290.0682, subdivision 4. If
the amount of the credit exceeds the liability for tax under this chapter, the excess is a
Minnesota housing tax credit carryover to each of the 11 succeeding taxable years. The
entire amount of the excess unused credit for the taxable year must be carried first to the
earliest of the taxable years to which the credit may be carried and then to each successive
year to which the credit may be carried. An insurance company may assign the credit to
another taxpayer, as provided in section 290.0682, subdivision 4. This credit does not
affect the calculation of police and fire aid under section 69.021.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2016.
new text end

Sec. 3.

new text begin [462A.38] MINNESOTA HOUSING TAX CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms
have the meanings given unless the context clearly requires otherwise.
new text end

new text begin (b) "Compliance agreement" means an agreement:
new text end

new text begin (1) between the owner of a qualified Minnesota project and the agency or suballocator;
new text end

new text begin (2) that is recorded as an affordable housing restriction on the real property on which
the qualified Minnesota project is located; and
new text end

new text begin (3) that requires the project to be operated under the requirements of this section
for the compliance period.
new text end

new text begin The agreement may be subordinated to the lien of a bank or other institutional lender
providing financing to the qualified Minnesota project upon the request of the bank
or lender.
new text end

new text begin (c) "Compliance period" means the 15-year period beginning with the first taxable
year a credit is allowed under this section.
new text end

new text begin (d) "Eligibility statement" means a statement issued by the agency or suballocator
to the owner certifying that a project is a qualified Minnesota project and documenting
allocation of the Minnesota housing tax credit. The eligibility statement must specify the
annual amount of the credit allocated to the project for the taxable year and for the five
following taxable years and be in a form prescribed by the commissioner of the agency, in
consultation with the commissioner of revenue.
new text end

new text begin (e) "Federal low-income housing tax credit" means the federal tax credit provided in
section 42 of the Internal Revenue Code.
new text end

new text begin (f) "Greater Minnesota" means the area of Minnesota located outside of the
metropolitan area as defined in section 473.121, subdivision 2.
new text end

new text begin (g) "Internal Revenue Code" has the meaning given in section 290.01, subdivision 31.
new text end

new text begin (h) "Owner" means the owner of a qualified Minnesota project.
new text end

new text begin (i) "Qualified Minnesota project" means a low-income housing project that is:
new text end

new text begin (1) located in Minnesota;
new text end

new text begin (2) financed with tax-exempt bonds pursuant to section 42(i)(2) of the Internal
Revenue Code;
new text end

new text begin (3) determined by the agency to be eligible for a federal low-income housing tax
credit without regard to whether or not a federal low-income housing credit is allocated
to the project; and
new text end

new text begin (4) a project for which the owner has entered into a compliance agreement with the
agency or the suballocator that is enforceable by state and local agencies.
new text end

new text begin (j) "Suballocator" means an allocator, other than the agency, of low-income federal
housing credits and credits under this section as provided in section 462A.222.
new text end

new text begin (k) "Taxpayer" has the meaning given in section 290.0682, subdivision 1, paragraph
(c).
new text end

new text begin (l) Terms not otherwise defined in this subdivision have the meanings given in
section 42 of the Internal Revenue Code.
new text end

new text begin Subd. 2. new text end

new text begin Minnesota housing tax credit; allocation. new text end

new text begin (a) The agency and all
suballocators may annually allocate credits during a six-year period beginning January 1,
2017, and ending December 31, 2022. The total amount of credits that may be allocated
each year is the sum of:
new text end

new text begin (1) for the year beginning January 1, 2017, and ending December 31, 2017, only,
$7,000,000;
new text end

new text begin (2) any unused Minnesota housing tax credits, if any, for the preceding calendar
years; and
new text end

new text begin (3) any Minnesota housing tax credits returned to the agency or a suballocator by the
owner of a qualified Minnesota project and available for reallocation under subdivision 5,
paragraph (b).
new text end

new text begin (b) The agency shall allocate credits only to qualified Minnesota projects that the
agency determines:
new text end

new text begin (1) are eligible for the federal low-income housing tax credit; and
new text end

new text begin (2) are not financially feasible without the credit.
new text end

new text begin (c) The agency must allocate 50 percent of the total amount allocated to qualified
Minnesota projects in greater Minnesota.
new text end

new text begin (d) The allocation to any one qualified Minnesota project equals one-sixth of the total
federal low-income housing tax credit allowable over the ten-year federal credit period
without regard to whether the project is allocated a federal low-income housing tax credit.
new text end

new text begin Subd. 3. new text end

new text begin Credit allowed. new text end

new text begin When the agency or a suballocator allocates a credit
amount to the owner of a project, the agency or suballocator must issue an eligibility
statement to the owner. The owner may claim the amount allocated in the year in which
the credit is allocated and in each of the five following taxable years, or may assign the
credit as provided in section 290.0682.
new text end

new text begin Subd. 4. new text end

new text begin Credit duration. new text end

new text begin Except for unused credits carried forward under section
290.0682, the agency may allocate a credit and issue an eligibility statement to a taxpayer
for a Minnesota housing tax credit for a project one time, with the credit allowed in the
taxable year in which the agency issues the eligibility statement and the following five
taxable years.
new text end

new text begin Subd. 5. new text end

new text begin Recapture. new text end

new text begin (a) If the agency or suballocator finds that a qualified project
issued an eligibility statement is not meeting the terms of the compliance agreement, the
owner must repay the credit awarded to the project by the agency or the suballocator. No
holder of the credit other than the owner is responsible for repayment of the credit.
new text end

new text begin (b) Amounts repaid under this subdivision before January 1, 2022, are available for
reallocation as provided in subdivision 2.
new text end

new text begin (c) Amounts repaid under this subdivision after December 31, 2021, are credited
to the general fund.
new text end

new text begin Subd. 6. new text end

new text begin Report. new text end

new text begin (a) By January 15 of each year following a year in which the
agency allocates a credit under this section, the agency shall submit a written report to the
chairs and ranking minority members of the committees of the legislature with jurisdiction
over housing and taxes, in compliance with sections 3.195 and 3.197, on the success and
efficiency of the Minnesota housing tax credit program.
new text end

new text begin (b) The report must:
new text end

new text begin (1) specify the number of qualified Minnesota projects that were allocated tax credits
in the year and the total number of housing units supported in each project;
new text end

new text begin (2) provide descriptive information about each qualified Minnesota housing project
that was allocated credits, including:
new text end

new text begin (i) the geographic location of the project; and
new text end

new text begin (ii) demographic information about residents intended to be served by the project,
including household type, income levels, and rents or set-asides; and
new text end

new text begin (3) provide housing market and demographic information that demonstrates how the
qualified Minnesota projects that were allocated tax credits address the need for affordable
housing in the communities they serve as well as information about any remaining
disparities in affordability of housing in those communities.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment,
with credit allocations allowed for taxable years beginning after December 31, 2016.
new text end

Sec. 4. new text begin PURPOSE STATEMENT; TAX EXPENDITURES.
new text end

new text begin Subdivision 1. new text end

new text begin Authority. new text end

new text begin This section is intended to fulfill the requirement under
Minnesota Statutes, section 3.192, that a bill creating, renewing, or continuing a tax
expenditure must include a statement of intent that clearly provides the purpose for the tax
expenditure and a standard or goal against which its effectiveness may be measured.
new text end

new text begin Subd. 2. new text end

new text begin Minnesota housing tax credit. new text end

new text begin The provisions of sections 1 to 3 allowing
a Minnesota housing tax credit are intended to increase development and availability of
low-income housing in Minnesota. The standards against which the effectiveness of the
credit is to be measured are the number of new residential units that became available to
low-income households in projects that are allocated Minnesota housing credits, compared
with the number of new residential units that became available to low-income households in
calendar year 2016, and also the increase in the number of residential units in high-shortage
areas separately for the seven-county metropolitan area and greater Minnesota.
new text end