Minnesota Session Laws - 1984, Regular Session

  

                         Laws of Minnesota 1984 

                        CHAPTER 388-H.F.No. 1877 
           An act relating to enterprise zones; expanding the 
          definition of areas eligible for designation as zones; 
          limiting the designation of border city enterprise 
          zones; clarifying the tax incentives available in 
          enterprise zones; amending Minnesota Statutes 1983 
          Supplement, sections 273.1312, subdivisions 4 and 5; 
          273.1313, subdivisions 1 and 2; 273.1314, subdivisions 
          1, 6, 7, 8, 9, 10, and by adding a subdivision. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1983 Supplement, section 
273.1312, subdivision 4, is amended to read: 
    Subd. 4.  [ELIGIBILITY REQUIREMENTS.] An area is eligible 
for designation if the following requirements are met:  
    (a) Its The boundary of the zone or each subdivision of the 
zone is continuous and includes vacant or underutilized lands or 
buildings.  
    (b) The area of the zone is less than 400 acres and.  The 
total market value of the taxable property contained in the zone 
at the time of application is less than $100,000 per acre or 
$300,000 per acre for an area located wholly within a first 
class city, except that these.  A zone which is located in a 
city of the third or fourth class may be divided into two to 
four separate subdivisions which need not be contiguous with 
each other.  Each subdivision must contain not less than 100 
acres.  The restrictions provided by this paragraph shall not 
apply to areas designated pursuant to paragraph (c), clause (2) 
or (3).  
    (c) (1) The proposed zone is located within an economic 
hardship area, as established by meeting two or more of the 
following criteria:  
    (A) the number of residential housing units within the area 
which are substandard is 15 percent or greater under criteria 
prescribed by the commissioner using data collected by the 
bureau of the census or data submitted by the municipality and 
approved by the commissioner;  
    (B) the percentage of households within the area that fall 
below the poverty level, as determined by the United States 
census bureau, is 20 percent or greater;  
    (C) (i) the total market value of commercial and industrial 
property in the area has declined over three of the preceding 
five years, or (ii) the total market value of all property in 
the area, as equalized by the sales ratio study, has declined or 
its growth it has lagged three percentage points behind the 
statewide growth in total equalized market value in the state 
increased less than ten percent over the preceding three-year 
period;  
    (D) for the last full year for which data is available, the 
nonfarm per capita income in the area was 90 percent or less of 
the median per capita income for the state, excluding standard 
metropolitan stastistical areas, or for the standard 
metropolitan statistical area if the area is located in a 
standard metropolitan statistical area;  
    (E) (i) the current rate of unemployment in the area is 120 
percent of the statewide average unemployment for the previous 
year last 12-month period for which verifiable figures are 
available, or (ii) the total number of employment positions has 
declined by ten percent during the last 18 months; or 
    (2) The area is so designated under federal legislation 
providing for federal tax benefits to investors, employers or 
employees in enterprise zones; or 
    (3) The area consists of a statutory or home rule charter 
city with a contiguous border with a city in another state or 
with a contiguous border with a city in Minnesota which has a 
contiguous border with a city in another state and the area is 
determined by the commissioner to be economically or fiscally 
distressed.  
    For purposes of this subdivision, an economic hardship area 
must have a population under the most recent federal decennial 
census of at least (i) 4,000 if any of the area is located 
wholly or partly within a standard metropolitan statistical 
area, or (ii) 2,500 for an area located outside of a standard 
metropolitan statistical area, or (iii) no minimum in the case 
of an area located in an Indian reservation; except that, in the 
case of two or more cities seeking designation of an enterprise 
zone under a joint exercise of power pursuant to section 471.59, 
the minimum population required by this provision shall not 
exceed the sum of the populations of those cities.  
     Sec. 2.  Minnesota Statutes 1983 Supplement, section 
273.1312, subdivision 5, is amended to read: 
    Subd. 5.  [LIMITATION.] No area may be designated as an 
enterprise zone after December 31, 1986.  No area may be 
designated as an enterprise zone which qualifies pursuant to 
section 273.1312, subdivision 4, paragraph (c), clause (3), 
after December 31, 1983. 
     Sec. 3.  Minnesota Statutes 1983 Supplement, section 
273.1313, subdivision 1, is amended to read: 
    Subdivision 1.  [DEFINITIONS.] (a) As used in this section, 
the following terms have the meanings given them.  
    (b) "Commissioner" means the commissioner of revenue.  
    (c) "Employment property" means taxable property, excluding 
land but including buildings, structures, fixtures, and 
improvements that satisfy each of the following conditions:  
    (1) The property is located within an enterprise zone 
designated according to section 273.1312.  
    (2) The property is commercial or industrial property which 
is not used in a trade or business which either is described in 
section 103(b)(6)(O) of the Internal Revenue Code of 1954, as 
amended through January 15, 1983, or is property of a public 
utility.  
    (d) "Market value" of a parcel of employment property means 
the value of the taxable property as annually determined 
pursuant to section 273.12, less (i) the market value of all 
property existing at the time of application for classification, 
as last assessed prior to the time of application, and (ii) any 
increase in the market value of the property referred to in 
clause (i) as assessed in each year after the employment 
property is first placed in service.  In each year, any change 
in the values of the employment property and the other property 
on the land shall be deemed to be proportionate unless caused by 
a capital improvement or loss.  
    (e) "Municipality" means any home rule charter or statutory 
city or county, but a county may not exercise the powers granted 
in this section with reference to property situated within a 
city.  
    (f) Notwithstanding the provisions of clauses 
paragraphs (c) and (d) "employment property" and "market value" 
includes in the case of taxable real property located in an 
enterprise zone designated under section 273.1312, subdivision 
4, paragraph (c), clause (3), the entire value of the commercial 
and industrial property, including land, used in a trade or 
business which is not used in a trade or business which either 
is described in section 103(b)(6)(0) 103(b)(0)(ii) of the 
Internal Revenue Code of 1954, as amended through January 15, 
1983, or is the property of a public utility; provided that.  
The provisions of this paragraph shall not apply to employment 
property located in an enterprise zone designated pursuant to 
section 273.1312, subdivision 4, paragraph (c), clause (3), that 
is assessed pursuant to the first clause of the first sentence 
of section 273.13, subdivision 9, paragraph (4).  
     Sec. 4.  Minnesota Statutes 1983 Supplement, section 
273.1313, subdivision 2, is amended to read: 
    Subd. 2.  [PROGRAM.] (a) The governing body of any 
municipality which contains a designated enterprise zone as 
provided by section 273.1312 shall by resolution establish a 
program for classification of new property or improvements to 
existing property as employment property pursuant to the 
provisions of this section.  Applications for classification 
under the program shall be filed with the municipal clerk or 
auditor in a form prescribed by the commissioner, with additions 
as may be prescribed by the municipal governing body.  The 
application shall contain, where appropriate, a legal 
description of the parcel of land on which the facility is to be 
situated or improved; a general description of the facility or 
improvement and its proposed use, the probable time schedule for 
undertaking the any construction or improvement, and information 
regarding the matters referred to in paragraph (d); the market 
value and the assessed value of the land and of all other 
taxable property then situated on it, according to the most 
recent assessment; and if the property is to be improved or 
expanded, an estimate of the probable cost of the new 
construction or improvement and the market value of the new or 
improved facility (excluding land) when completed.  
    (b) Upon receipt of an application the municipal clerk or 
auditor, subject to any prior approval required by the 
resolution establishing the program, shall furnish a copy to the 
assessor for the property and to the governing body of each 
school district and other public body authorized to levy taxes 
on the property, and shall publish a notice in the official 
newspaper of the time and place of a hearing to be held by the 
governing body on the application, not less than 30 days after 
the notice is published, stating that the applicant, the 
assessor, representatives of the affected taxing authorities, 
and any taxpayer of the municipality may be heard or may present 
their views in writing at or before the hearing.  The hearing 
may be adjourned from time to time, but the governing body shall 
take action on the application by resolution within 30 days 
after the hearing.  If disapproved, the reasons shall be set 
forth in the resolution, and the applicant may appeal to the 
commissioner within 30 days thereafter, but only on the ground 
that the determination is arbitrary, in relation to prior 
determinations as to classification under the program, or based 
upon a mistake of law.  If approved, the resolution shall 
include determinations as to the matters set forth in paragraph 
(d), and the clerk or auditor shall transmit it to the 
commissioner.  
         (c) Within 60 days after receipt of an approved application 
or an appeal from the disapproval of an application, the 
commissioner shall take action on it.  The commissioner shall 
approve each application approved by the governing body if he 
finds that it complies with the provisions of this section.  If 
he disapproves the application, or finds grounds exist for 
appeal of a disapproved application, he shall transmit the 
finding to the governing body and the applicant.  When grounds 
for appeal have been determined to exist, the governing body 
shall reconsider and take further action on the application 
within 30 days after receipt of the commissioner's notice and 
serve written notice of the action upon the applicant.  The 
applicant, within 30 days after receipt of notice of final 
disapproval by the commissioner or the governing body, may 
appeal from the disapproval to a court of competent jurisdiction.
         (d) In the case of enterprise zones qualifying pursuant to 
section 273.1312, subdivision 4, paragraph (c), clause (1), an 
application shall not be approved unless the governing body 
finds and determines that the construction or improvement of the 
facility: 
         (1) Is reasonably likely to create new employment or 
prevent a loss of employment in the municipality;  
         (2) Is not likely to have the effect of transferring 
existing employment from one or more other municipalities within 
the state;  
         (3) Is not likely to cause the total market value of 
employment property within the municipality to exceed five 
percent of the total market value of all taxable property within 
the municipality; or if it will, the resulting limitation upon 
the increase of the assessed value of all taxable property 
within the municipality, considering the amount of additional 
municipal services likely to be required for the employment 
property, is not likely to substantially impede the operation or 
the financial integrity of the municipality or any other public 
body levying taxes on property in the municipality; and 
    (4) Will not result in the reduction of the assessed value 
of existing property within the municipality owned by the 
applicant, through abandonment, demolition, or otherwise, 
without provision for the restoration of the existing property 
within a reasonable time in a manner sufficient to restore the 
assessed valuation.  
     (e) In the case of enterprise zones qualifying pursuant to 
section 273.1312, subdivision 4, paragraph (c), clause (3), an 
application for assessment as employment property under section 
273.13, subdivision 9, or for a tax reduction pursuant to 
section 273.1314, subdivision 9, may not be approved unless the 
governing body finds and determines that the construction or 
improvement of the facility is not likely to have the effect of 
transferring existing employment from one or more other 
municipalities within the state.  
    Sec. 5.  Minnesota Statutes 1983 Supplement, section 
273.1314, subdivision 1, is amended to read: 
    Subdivision 1.  [DEFINITIONS.] For purposes of this 
section, the following terms have the meanings given.  
    (a) "City" means a statutory or home rule charter city.  
    (b) "Commissioner" means the commissioner of energy, 
planning, and economic development or its successor agency.  
    (c) "Legislative advisory commission" means the legislative 
advisory commission established under section 3.30.  
    (d) "Municipality" means a city or a county for an area 
located outside the boundaries of a city.  If an area lies in 
two or more cities or in both incorporated and unincorporated 
areas, municipality shall include an entity formed pursuant to 
section 471.59 by the governing bodies of the cities with 
jurisdiction over the incorporated area and the counties with 
jurisdiction over the unincorporated area.  
     Sec. 6.  Minnesota Statutes 1983 Supplement, section 
273.1314, subdivision 6, is amended to read: 
    Subd. 6.  [LOCAL CONTRIBUTION.] No area may be designated 
as an enterprise zone unless the municipality agrees to make a 
qualifying local contribution in the form of (a) a property tax 
reduction for employment property as provided by section 
273.1313 for any business qualifying for a state tax reduction 
pursuant to this section, or (b) an equivalent.  A qualifying 
local contribution may in the alternative be a local 
contribution or investment out of other municipal funds, but 
excluding any special federal grants or loans, equivalent to the 
property tax reduction.  If the local contribution is to be used 
to fund additional reductions in state taxes, the commissioner 
and the governing body of the municipality shall enter an 
agreement for timely payment to the state to reimburse the state 
for the amount of tax revenue foregone as a result.  
    Sec. 7.  Minnesota Statutes 1983 Supplement, section 
273.1314, subdivision 7, is amended to read: 
    Subd. 7.  [LIMITATIONS; NUMBER OF DESIGNATIONS.] (a) In 
each of the years 1983 and 1984, the commissioner shall 
designate at least two but not more than five areas as 
enterprise zones.  No designations shall be made after December 
31, 1984.  
    (b) No more than one area may be designated as an 
enterprise zone in any county, except that two areas may be 
designated in a county containing a city of the first class.  
    (c) No more than one area two areas in a congressional 
district may be designated as an enterprise zone in any calendar 
year 1984.  
    This subdivision shall not apply to enterprise zones 
designated pursuant to section 273.1312, subdivision 4, 
paragraph (c), clause (2) or (3).  
    Sec. 8.  Minnesota Statutes 1983 Supplement, section 
273.1314, subdivision 8, is amended to read: 
    Subd. 8.  [FUNDING LIMITATIONS.] The maximum amount of the 
tax reductions which may be authorized pursuant to designations 
of enterprise zones under section 273.1312 and this section is 
limited to $32,000,000.  The maximum amount of this total which 
may be authorized by the commissioner for tax reductions 
pursuant to subdivision 9 that will reduce tax revenues which 
otherwise would have been received during fiscal years 1984 and 
1985 is limited to $8,000,000.  Of the total limitation and the 
1984-1985 biennial limitation the commissioner shall allocate to 
enterprise zones designated under section 273.1312, subdivision 
4, paragraph (c), clause (3), an amount equal to $10,000,000 and 
$4,000,000 respectively.  These funds shall be allocated among 
such zones on a per capita basis.  An amount sufficient to fund 
the state funded property tax credits, the refundable income tax 
credits, and the sales tax exemption, as authorized pursuant to 
this section is appropriated to the commissioner of revenue. 
Upon designation of an enterprise zone the commissioner shall 
certify the total amount available for tax reductions in the 
zone for its duration.  The amount certified shall reduce the 
amount available for tax reductions in other enterprise zones. 
If subsequent estimates indicate or actual experience shows that 
the approved tax reductions will result in amounts of tax 
reductions in excess of the amount certified for the zone, the 
commissioner shall implement a plan to reduce the available tax 
reductions in the zone to an amount within the sum certified for 
the zone.  If subsequent estimates indicate or actual experience 
shows that the approved tax reductions will result in amounts of 
tax reductions below the amount certified, the difference shall 
be available for certification in other zones or used in 
connection with an amended plan of tax reductions for the zone 
as the commissioner determines appropriate.  If the tax 
reductions authorized result in reduced revenues for a dedicated 
fund, the commissioner of finance shall transfer equivalent 
amounts to the dedicated fund from the general fund as necessary.
    Sec. 9.  Minnesota Statutes 1983 Supplement, section 
273.1314, subdivision 9, is amended to read: 
    Subd. 9.  [AUTHORIZED FORMS OF STATE TAX REDUCTIONS.] (a) 
The following types of tax reductions may be approved by the 
commissioner for businesses located in an enterprise zone: 
    (1) An exemption from the general sales tax imposed by 
chapter 297A for purchases of construction materials or 
equipment for use in the zone if the purchase was made after the 
date of application for the zone; 
    (2) A credit against the income tax of an employer for 
additional workers employed in the zone, other than workers 
employed in construction, up to a maximum of $3,000 per employee 
per year;  
    (3) An income tax credit for a percentage of the cost of 
debt financing to construct new or expanded facilities in the 
zone; 
    (4) A state paid property tax credit for a portion of the 
property taxes paid by a new commercial or industrial facility 
or the additional property taxes paid by an expansion of an 
existing commercial or industrial facility in the zone. 
    (b) The municipality shall specify in its application for 
designation the types of tax reductions it seeks to be made 
available in the zone and the percentage rates and other 
appropriate limitations on the reductions.  
    (c) Upon designation of an enterprise zone and approval by 
the commissioner of the tax reductions to be made available 
therein, the commissioner of revenue shall take the steps 
necessary to implement the tax reductions.  
    (d) The tax reductions provided by this subdivision shall 
not apply to any facility described in section 103(b)(6)(O) of 
the Internal Revenue Code of 1954, as amended through January 
15, 1983, or to any regulated public utility.  
    (e) The commissioner shall approve tax reductions 
authorized by paragraph (a) within an enterprise zone designated 
pursuant to section 273.1312, subdivision 4, paragraph (c), 
clause (3), only after the governing body of a city designated 
as an enterprise zone has designated an area or areas, each 
consisting of at least 100 acres, of the city not in excess of 
400 acres in which the tax reductions may be provided.  
    (f) In addition to the tax reductions authorized by 
paragraph (a), for an enterprise zone designated under section 
273.1312, subdivision 4, paragraph (c), clause (3), the 
following types of tax reductions may be approved:  
    (1) A credit against income tax for workers employed in the 
zone up and not qualifying for a credit under paragraph (a), 
clause (2), subject to a maximum of $1,500 per employee per year;
    (2) A state paid property tax credit for a portion of the 
property taxes paid by a commercial or industrial facility 
located in the zone.  Notwithstanding paragraph (d), the credits 
provided by this paragraph may be provided to the businesses 
described in section 103(b)(6)(0)(i) of the Internal Revenue 
Code of 1954, as amended through December 31, 1983.  
    (g) Each tax reduction provided to a business pursuant to 
this subdivision shall terminate not longer than five years 
after the effective date of the tax reduction for the business. 
Subject to the five year limitation, the tax reductions may be 
provided after expiration of the zone's designation.  
    (h) The income tax credits provided pursuant to clauses (a) 
and (f) may be refundable.  
    Sec. 10.  Minnesota Statutes 1983 Supplement, section 
273.1314, subdivision 10, is amended to read: 
    Subd. 10.  [RECAPTURE.] Any business which (a) receives tax 
reductions authorized by subdivision 9, classification as 
employment property pursuant to section 273.1312, or an 
alternative local contribution under subdivision 6; and which 
(b) ceases to operate its facility located within the enterprise 
zone within two years after the expiration of the tax reductions 
shall repay the amount of the tax reduction or local 
contribution pursuant to the following schedule:  
      Termination                                   Repayment
      of operations                                  Portion
      Less than 6 months                            100 percent
      6 months or more but less than 12 months       75 percent
      12 months or more but less than 18 months      50 percent
      18 months or more but less than 24 months      25 percent
    The repayment must be paid to the state to the extent it 
represents a tax reduction under subdivision 9 and to the 
municipality to the extent it represents a property tax 
reduction or other local contribution.  Any amount repaid to the 
state must be credited to the amount certified as available for 
tax reductions in the zone pursuant to subdivision 8.  Any 
amount repaid to the municipality must be used by the 
municipality for economic development purposes.  
    Sec. 11.  Minnesota Statutes 1983 Supplement, section 
273.1314, is amended by adding a subdivision to read: 
    Subd. 16a.  [ZONE BOUNDARY REALIGNMENT.] The commissioner 
may approve specific applications by a municipality to amend the 
boundaries of a zone or of an area or areas designated pursuant 
to section 273.1314, subdivision 9, paragraph (e) at any time. 
Boundaries of a zone may not be amended to create noncontiguous 
subdivisions.  If the commissioner approves the amended 
boundaries, the change is effective on the date of approval.  
    Sec. 12.  [TRANSITION PROVISION.] 
    State paid property tax credits authorized by Minnesota 
Statutes, section 273.1314, subdivision 9, may be authorized by 
a municipality beginning with property taxes levied in 1983, 
payable in 1984.  The exemption from the general sales tax 
authorized by Minnesota Statutes, section 273.1314, subdivision 
9, may be authorized by a municipality for purchases made after 
the date an application is submitted by the municipality for 
designation as an enterprise zone.  The income tax credits 
authorized by Minnesota Statutes, section 273.1314, subdivision 
9, may be authorized by a municipality for taxable years 
beginning during or after the calendar year in which the zone 
was designated.  
    Sec. 13.  [EFFECTIVE DATE.] 
    This act is effective the day following final enactment. 
    Approved April 17, 1984