SF 4298

as introduced - 92nd Legislature (2021 - 2022) Posted on 03/29/2022 08:05am

A bill for an act
relating to taxation; individual income; corporate franchise; establishing a tax
credit for certain purchases of equipment and machinery used in manufacturing
processes; proposing coding for new law in Minnesota Statutes, chapter 290.

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

Section 1.

new text begin [290.0688] PRODUCTIVITY INVESTMENT 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, the terms in subdivisions 2 to
5 have the meanings given.
new text end

new text begin Subd. 2. new text end

new text begin Capital lease. new text end

new text begin "Capital lease" means a lease that meets generally accepted
accounting principles.
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new text begin Subd. 3. new text end

new text begin Increased output. new text end

new text begin "Increased output" means an increase of at least five percent
in output or in the number of units produced per production line per time period.
new text end

new text begin Subd. 4. new text end

new text begin Improved job quality. new text end

new text begin "Improved job quality" means:
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new text begin (1) an increase of at least five percent in the average wage paid by the employer to
employees whose services performed are directly affected by the machinery or equipment
used to determine the employer's qualified purchase costs; or
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new text begin (2) an improvement of at least five percent in workplace safety as documented through
participation in workforce safety and insurance safety incentive programs.
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new text begin Subd. 5. new text end

new text begin Qualified purchase costs. new text end

new text begin (a) "Qualified purchase costs" means the costs for
acquiring new and used manufacturing machinery and equipment used to upgrade or advance
manufacturing processes in Minnesota that results in improved job quality or increased
output. Qualified purchase costs include any items, such as computer software, that are
necessary to the operation of the machinery or equipment.
new text end

new text begin (b) For machinery and equipment acquired in a transaction that includes a trade-in of
other property, the qualified purchase costs include the cost of the acquired machinery or
equipment item less the trade-in value of the other property.
new text end

new text begin (c) For machinery or equipment acquired under a capital lease, qualified purchase costs
include the equipment costs only to the extent of the fair market value of the equipment at
the inception of the lease.
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new text begin (d) Qualified purchase costs do not include:
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new text begin (1) replacement machinery or equipment that does not upgrade or advance a
manufacturing process;
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new text begin (2) delivery, training, assembly, installation costs, interest on financing, training, sales
tax, and other costs incidental to the machinery or equipment purchase;
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new text begin (3) optional warranties; and
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new text begin (4) the amount of costs used to qualify for a credit allowed under chapter 290, other than
the credit allowed under this section.
new text end

new text begin Subd. 6. new text end

new text begin Credit allowed. new text end

new text begin An employer is allowed a productivity investment tax credit
against the tax imposed under this chapter equal to 20 percent of the amount of the employer's
qualified purchase costs for the taxable year, but in no case may the credit exceed $........
new text end

new text begin Subd. 7. new text end

new text begin Credit limited; carryover. new text end

new text begin The credit is limited to 50 percent of the employer's
liability for tax as computed under this chapter for the taxable year. If the amount of the
credit determined under this subdivision for any taxable year exceeds this limitation, the
excess is a productivity investment tax credit carryover to each of the succeeding ten taxable
years. The entire amount of the excess unused credit for the taxable year is 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. The amount of the unused credit that may be added
under this paragraph must not exceed 50 percent of the taxpayer's liability for tax, less the
productivity investment tax credit for the taxable year. A productivity investment tax credit
carryover is not allowed for any taxable year in which a taxpayer is subject to revocation
tax under subdivision 12.
new text end

new text begin Subd. 8. new text end

new text begin Capital lease. new text end

new text begin For equipment and machinery acquired under a capital lease,
the qualified purchase costs are assigned to the taxable year in which the lease is executed.
new text end

new text begin Subd. 9. new text end

new text begin Nonresidents and part-year residents. new text end

new text begin For a nonresident or a part-year resident,
the credit must be allocated based on the percentage calculated under section 290.06,
subdivision 2c, paragraph (e).
new text end

new text begin Subd. 10. new text end

new text begin Pass-through entities. new text end

new text begin Credits granted to a partnership, a limited liability
company taxed as a partnership, or an S corporation are passed through to the partners,
members, shareholders, or owners, respectively, pro rata to each partner, member,
shareholder, or owner based on their share of the entity's assets or as specially allocated in
their organizational documents or any other executed agreement, as of the last day of the
taxable year.
new text end

new text begin Subd. 11. new text end

new text begin Report required. new text end

new text begin (a) By February 1, an employer that received a credit must
submit a report to the commissioner. Each employer must submit the report for the taxable
year immediately following the taxable year for which the employer claimed the credit.
Reports must be made in the form required by the commissioner. The report must demonstrate
and certify that the equipment and machinery used to determine the taxpayer's qualified
purchase costs that were used to qualify for the credit have resulted in improved job quality
or increased output. An employer that fails to file an annual report by February 1 as required
under this subdivision is subject to a $100 fine.
new text end

new text begin (b) An employer that ceases all operations and becomes insolvent must file a report in
the form required by the commissioner documenting its insolvency in lieu of filing the report
required in paragraph (a) and is exempt from the fine for failure to file a report.
new text end

new text begin (c) An employer that fails to file an annual report by April 1 may, at the commissioner's
discretion, be subject to revocation under subdivision 12.
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new text begin Subd. 12. new text end

new text begin Revocation of credit. new text end

new text begin (a) If the commissioner determines that an employer
did not improve job quality or increase output as required to be demonstrated and certified
by the report in subdivision 11, any credit received by the employer is revoked and must
be repaid by the employer.
new text end

new text begin (b) An employer required to repay a credit must file an amended return with the
commissioner of revenue and pay any amounts required to be repaid within 30 days after
becoming subject to repayment under this subdivision.
new text end

new text begin Subd. 13. new text end

new text begin Sunset. new text end

new text begin This section expires for taxable years beginning after December 31,
...., except that reporting requirements under subdivision 11 and revocation of credits under
subdivision 12 remain in effect through .... The expiration of this section does not affect the
commissioner of revenue's authority to audit or power of examination and assessment for
credits claimed under this section.
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, 2021.
new text end