1.1                          A bill for an act 
  1.2             relating to economic development; authorizing the 
  1.3             establishing of a biotechnology and health sciences 
  1.4             industry tax free zone; providing tax exemptions for 
  1.5             certain individuals and business entities in the zone; 
  1.6             providing for repayment of tax benefits under certain 
  1.7             circumstances; amending Minnesota Statutes 2002, 
  1.8             sections 272.02, by adding a subdivision; 290.01, 
  1.9             subdivisions 19b, 29; 290.06, subdivision 2c; 290.067, 
  1.10            subdivision 1; 290.0671, subdivision 1; 290.091, 
  1.11            subdivision 2; 290.0921, subdivision 3; 290.0922, 
  1.12            subdivision 3; 297A.68, by adding a subdivision; 
  1.13            297B.03; proposing coding for new law in Minnesota 
  1.14            Statutes, chapter 469. 
  1.15  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.16     Section 1.  [LEGISLATIVE FINDINGS.] 
  1.17     The legislature finds, as a matter of public policy, that 
  1.18  biotechnology and the health sciences hold immense promise in 
  1.19  improving the quality of our lives, including curing diseases, 
  1.20  making our foods safer and more abundant, reducing our 
  1.21  dependence on fossil fuels and foreign oil, making better use of 
  1.22  Minnesota agriculture products, and growing tens of thousands of 
  1.23  new, high-paying jobs. 
  1.24     The legislature further finds that there are hundreds of 
  1.25  discoveries made each year at the University of Minnesota, the 
  1.26  Mayo Clinic, and other research institutions that, if properly 
  1.27  commercialized, could help provide these benefits.  
  1.28     The legislature further finds that biotechnology and health 
  1.29  sciences companies benefit from location in proximity to these 
  1.30  research institutions and the many faculty, students, and other 
  2.1   intellectual and physical infrastructure these institutions 
  2.2   provide.  
  2.3      The legislature further finds that Minnesota's high-quality 
  2.4   workforce is attractive to biotechnology and health sciences 
  2.5   companies that would want to relocate, start up, or expand in 
  2.6   Minnesota. 
  2.7      The legislature further finds and declares that it is 
  2.8   appropriate and necessary, to improve our quality of life and as 
  2.9   a matter of economic development, that Minnesota take rapid and 
  2.10  affirmative steps to encourage the development of biotechnology 
  2.11  and the health sciences and the commercialization of important 
  2.12  discoveries, especially through expansion of business 
  2.13  opportunities in proximity to the research institutions where 
  2.14  those discoveries occur. 
  2.15     Sec. 2.  Minnesota Statutes 2002, section 272.02, is 
  2.16  amended by adding a subdivision to read: 
  2.17     Subd. 56.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
  2.18  PROPERTY.] (a) Improvements to real property, and personal 
  2.19  property, classified under section 273.13, subdivision 24, and 
  2.20  located within a biotechnology and health sciences industry zone 
  2.21  are exempt from ad valorem taxes levied under chapter 275. 
  2.22     (b) For property to qualify for exemption under paragraph 
  2.23  (a), the occupant must be a qualified business, as defined in 
  2.24  section 469.310. 
  2.25     (c) The exemption applies beginning for the first 
  2.26  assessment year after designation of the biotechnology and 
  2.27  health sciences industry zone by the commissioner of trade and 
  2.28  economic development.  The exemption applies to each assessment 
  2.29  year that begins during the duration of the biotechnology and 
  2.30  health sciences industry zone.  This exemption does not apply to:
  2.31     (1) a levy under section 475.61 or similar levy provisions 
  2.32  under any other law to pay general obligation bonds; or 
  2.33     (2) a levy under section 126C.17, if the levy was approved 
  2.34  by the voters before the designation of the biotechnology and 
  2.35  health sciences industry zone. 
  2.36     <b>[EFFECTIVE DATE.]</b> This section is effective beginning for 
  3.1   property taxes assessed in 2004, payable in 2005. 
  3.2      Sec. 3.  Minnesota Statutes 2002, section 290.01, 
  3.3   subdivision 19b, is amended to read: 
  3.4      Subd. 19b.  [SUBTRACTIONS FROM FEDERAL TAXABLE INCOME.] For 
  3.5   individuals, estates, and trusts, there shall be subtracted from 
  3.6   federal taxable income: 
  3.7      (1) interest income on obligations of any authority, 
  3.8   commission, or instrumentality of the United States to the 
  3.9   extent includable in taxable income for federal income tax 
  3.10  purposes but exempt from state income tax under the laws of the 
  3.11  United States; 
  3.12     (2) if included in federal taxable income, the amount of 
  3.13  any overpayment of income tax to Minnesota or to any other 
  3.14  state, for any previous taxable year, whether the amount is 
  3.15  received as a refund or as a credit to another taxable year's 
  3.16  income tax liability; 
  3.17     (3) the amount paid to others, less the amount used to 
  3.18  claim the credit allowed under section 290.0674, not to exceed 
  3.19  $1,625 for each qualifying child in grades kindergarten to 6 and 
  3.20  $2,500 for each qualifying child in grades 7 to 12, for tuition, 
  3.21  textbooks, and transportation of each qualifying child in 
  3.22  attending an elementary or secondary school situated in 
  3.23  Minnesota, North Dakota, South Dakota, Iowa, or Wisconsin, 
  3.24  wherein a resident of this state may legally fulfill the state's 
  3.25  compulsory attendance laws, which is not operated for profit, 
  3.26  and which adheres to the provisions of the Civil Rights Act of 
  3.27  1964 and chapter 363.  For the purposes of this clause, 
  3.28  "tuition" includes fees or tuition as defined in section 
  3.29  290.0674, subdivision 1, clause (1).  As used in this clause, 
  3.30  "textbooks" includes books and other instructional materials and 
  3.31  equipment purchased or leased for use in elementary and 
  3.32  secondary schools in teaching only those subjects legally and 
  3.33  commonly taught in public elementary and secondary schools in 
  3.34  this state.  Equipment expenses qualifying for deduction 
  3.35  includes expenses as defined and limited in section 290.0674, 
  3.36  subdivision 1, clause (3).  "Textbooks" does not include 
  4.1   instructional books and materials used in the teaching of 
  4.2   religious tenets, doctrines, or worship, the purpose of which is 
  4.3   to instill such tenets, doctrines, or worship, nor does it 
  4.4   include books or materials for, or transportation to, 
  4.5   extracurricular activities including sporting events, musical or 
  4.6   dramatic events, speech activities, driver's education, or 
  4.7   similar programs.  For purposes of the subtraction provided by 
  4.8   this clause, "qualifying child" has the meaning given in section 
  4.9   32(c)(3) of the Internal Revenue Code; 
  4.10     (4) income as provided under section 290.0802; 
  4.11     (5) to the extent included in federal adjusted gross 
  4.12  income, income realized on disposition of property exempt from 
  4.13  tax under section 290.491; 
  4.14     (6) to the extent not deducted in determining federal 
  4.15  taxable income or used to claim the long-term care insurance 
  4.16  credit under section 290.0672, the amount paid for health 
  4.17  insurance of self-employed individuals as determined under 
  4.18  section 162(l) of the Internal Revenue Code, except that the 
  4.19  percent limit does not apply.  If the individual deducted 
  4.20  insurance payments under section 213 of the Internal Revenue 
  4.21  Code of 1986, the subtraction under this clause must be reduced 
  4.22  by the lesser of: 
  4.23     (i) the total itemized deductions allowed under section 
  4.24  63(d) of the Internal Revenue Code, less state, local, and 
  4.25  foreign income taxes deductible under section 164 of the 
  4.26  Internal Revenue Code and the standard deduction under section 
  4.27  63(c) of the Internal Revenue Code; or 
  4.28     (ii) the lesser of (A) the amount of insurance qualifying 
  4.29  as "medical care" under section 213(d) of the Internal Revenue 
  4.30  Code to the extent not deducted under section 162(1) of the 
  4.31  Internal Revenue Code or excluded from income or (B) the total 
  4.32  amount deductible for medical care under section 213(a); 
  4.33     (7) the exemption amount allowed under Laws 1995, chapter 
  4.34  255, article 3, section 2, subdivision 3; 
  4.35     (8) to the extent included in federal taxable income, 
  4.36  postservice benefits for youth community service under section 
  5.1   124D.42 for volunteer service under United States Code, title 
  5.2   42, sections 12601 to 12604; 
  5.3      (9) to the extent not deducted in determining federal 
  5.4   taxable income by an individual who does not itemize deductions 
  5.5   for federal income tax purposes for the taxable year, an amount 
  5.6   equal to 50 percent of the excess of charitable contributions 
  5.7   allowable as a deduction for the taxable year under section 
  5.8   170(a) of the Internal Revenue Code over $500; 
  5.9      (10) for taxable years beginning before January 1, 2008, 
  5.10  the amount of the federal small ethanol producer credit allowed 
  5.11  under section 40(a)(3) of the Internal Revenue Code which is 
  5.12  included in gross income under section 87 of the Internal 
  5.13  Revenue Code; 
  5.14     (11) for individuals who are allowed a federal foreign tax 
  5.15  credit for taxes that do not qualify for a credit under section 
  5.16  290.06, subdivision 22, an amount equal to the carryover of 
  5.17  subnational foreign taxes for the taxable year, but not to 
  5.18  exceed the total subnational foreign taxes reported in claiming 
  5.19  the foreign tax credit.  For purposes of this clause, "federal 
  5.20  foreign tax credit" means the credit allowed under section 27 of 
  5.21  the Internal Revenue Code, and "carryover of subnational foreign 
  5.22  taxes" equals the carryover allowed under section 904(c) of the 
  5.23  Internal Revenue Code minus national level foreign taxes to the 
  5.24  extent they exceed the federal foreign tax credit; ~~and~~ 
  5.25     (12) in each of the five tax years immediately following 
  5.26  the tax year in which an addition is required under subdivision 
  5.27  19a, clause (7), an amount equal to one-fifth of the delayed 
  5.28  depreciation.  For purposes of this clause, "delayed 
  5.29  depreciation" means the amount of the addition made by the 
  5.30  taxpayer under subdivision 19a, clause (7), minus the positive 
  5.31  value of any net operating loss under section 172 of the 
  5.32  Internal Revenue Code generated for the tax year of the 
  5.33  addition.  The resulting delayed depreciation cannot be less 
  5.34  than zero; and 
  5.35     (13) biotechnology and health sciences industry zone income 
  5.36  as provided under section 469.316. 
  6.1      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
  6.2   years beginning after December 31, 2003. 
  6.3      Sec. 4.  Minnesota Statutes 2002, section 290.01, 
  6.4   subdivision 29, is amended to read: 
  6.5      Subd. 29.  [TAXABLE INCOME.] The term "taxable income" 
  6.6   means:  
  6.7      (1) for individuals, estates, and trusts, the same as 
  6.8   taxable net income; 
  6.9      (2) for corporations, the taxable net income less 
  6.10     (i) the net operating loss deduction under section 290.095; 
  6.11  ~~and~~ 
  6.12     (ii) the dividends received deduction under section 290.21, 
  6.13  subdivision 4; and 
  6.14     (iii) the exemption for operating in a biotechnology and 
  6.15  health sciences industry zone under section 469.317. 
  6.16     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
  6.17  years beginning after December 31, 2003. 
  6.18     Sec. 5.  Minnesota Statutes 2002, section 290.06, 
  6.19  subdivision 2c, is amended to read: 
  6.20     Subd. 2c.  [SCHEDULES OF RATES FOR INDIVIDUALS, ESTATES, 
  6.21  AND TRUSTS.] (a) The income taxes imposed by this chapter upon 
  6.22  married individuals filing joint returns and surviving spouses 
  6.23  as defined in section 2(a) of the Internal Revenue Code must be 
  6.24  computed by applying to their taxable net income the following 
  6.25  schedule of rates: 
  6.26     (1) On the first $25,680, 5.35 percent; 
  6.27     (2) On all over $25,680, but not over $102,030, 7.05 
  6.28  percent; 
  6.29     (3) On all over $102,030, 7.85 percent. 
  6.30     Married individuals filing separate returns, estates, and 
  6.31  trusts must compute their income tax by applying the above rates 
  6.32  to their taxable income, except that the income brackets will be 
  6.33  one-half of the above amounts.  
  6.34     (b) The income taxes imposed by this chapter upon unmarried 
  6.35  individuals must be computed by applying to taxable net income 
  6.36  the following schedule of rates: 
  7.1      (1) On the first $17,570, 5.35 percent; 
  7.2      (2) On all over $17,570, but not over $57,710, 7.05 
  7.3   percent; 
  7.4      (3) On all over $57,710, 7.85 percent. 
  7.5      (c) The income taxes imposed by this chapter upon unmarried 
  7.6   individuals qualifying as a head of household as defined in 
  7.7   section 2(b) of the Internal Revenue Code must be computed by 
  7.8   applying to taxable net income the following schedule of rates: 
  7.9      (1) On the first $21,630, 5.35 percent; 
  7.10     (2) On all over $21,630, but not over $86,910, 7.05 
  7.11  percent; 
  7.12     (3) On all over $86,910, 7.85 percent. 
  7.13     (d) In lieu of a tax computed according to the rates set 
  7.14  forth in this subdivision, the tax of any individual taxpayer 
  7.15  whose taxable net income for the taxable year is less than an 
  7.16  amount determined by the commissioner must be computed in 
  7.17  accordance with tables prepared and issued by the commissioner 
  7.18  of revenue based on income brackets of not more than $100.  The 
  7.19  amount of tax for each bracket shall be computed at the rates 
  7.20  set forth in this subdivision, provided that the commissioner 
  7.21  may disregard a fractional part of a dollar unless it amounts to 
  7.22  50 cents or more, in which case it may be increased to $1. 
  7.23     (e) An individual who is not a Minnesota resident for the 
  7.24  entire year must compute the individual's Minnesota income tax 
  7.25  as provided in this subdivision.  After the application of the 
  7.26  nonrefundable credits provided in this chapter, the tax 
  7.27  liability must then be multiplied by a fraction in which:  
  7.28     (1) the numerator is the individual's Minnesota source 
  7.29  federal adjusted gross income as defined in section 62 of the 
  7.30  Internal Revenue Code and increased by the additions required 
  7.31  under section 290.01, subdivision 19a, clauses (1) and (6), and 
  7.32  reduced by the subtraction under section 290.01, subdivision 
  7.33  19b, clause (13), and the Minnesota assignable portion of the 
  7.34  subtraction for United States government interest under section 
  7.35  290.01, subdivision 19b, clause (1), after applying the 
  7.36  allocation and assignability provisions of section 290.081, 
  8.1   clause (a), or 290.17; and 
  8.2      (2) the denominator is the individual's federal adjusted 
  8.3   gross income as defined in section 62 of the Internal Revenue 
  8.4   Code of 1986, increased by the amounts specified in section 
  8.5   290.01, subdivision 19a, clauses (1) and (6), and reduced by the 
  8.6   amounts specified in section 290.01, subdivision 19b, ~~clause~~ 
  8.7   clauses (1) and (13). 
  8.8      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
  8.9   years beginning after December 31, 2003. 
  8.10     Sec. 6.  Minnesota Statutes 2002, section 290.067, 
  8.11  subdivision 1, is amended to read: 
  8.12     Subdivision 1.  [AMOUNT OF CREDIT.] (a) A taxpayer may take 
  8.13  as a credit against the tax due from the taxpayer and a spouse, 
  8.14  if any, under this chapter an amount equal to the dependent care 
  8.15  credit for which the taxpayer is eligible pursuant to the 
  8.16  provisions of section 21 of the Internal Revenue Code subject to 
  8.17  the limitations provided in subdivision 2 except that in 
  8.18  determining whether the child qualified as a dependent, income 
  8.19  received as a Minnesota family investment program grant or 
  8.20  allowance to or on behalf of the child must not be taken into 
  8.21  account in determining whether the child received more than half 
  8.22  of the child's support from the taxpayer, and the provisions of 
  8.23  section 32(b)(1)(D) of the Internal Revenue Code do not apply. 
  8.24     (b) If a child who has not attained the age of six years at 
  8.25  the close of the taxable year is cared for at a licensed family 
  8.26  day care home operated by the child's parent, the taxpayer is 
  8.27  deemed to have paid employment-related expenses.  If the child 
  8.28  is 16 months old or younger at the close of the taxable year, 
  8.29  the amount of expenses deemed to have been paid equals the 
  8.30  maximum limit for one qualified individual under section 21(c) 
  8.31  and (d) of the Internal Revenue Code.  If the child is older 
  8.32  than 16 months of age but has not attained the age of six years 
  8.33  at the close of the taxable year, the amount of expenses deemed 
  8.34  to have been paid equals the amount the licensee would charge 
  8.35  for the care of a child of the same age for the same number of 
  8.36  hours of care.  
  9.1      (c) If a married couple: 
  9.2      (1) has a child who has not attained the age of one year at 
  9.3   the close of the taxable year; 
  9.4      (2) files a joint tax return for the taxable year; and 
  9.5      (3) does not participate in a dependent care assistance 
  9.6   program as defined in section 129 of the Internal Revenue Code, 
  9.7   in lieu of the actual employment related expenses paid for that 
  9.8   child under paragraph (a) or the deemed amount under paragraph 
  9.9   (b), the lesser of (i) the combined earned income of the couple 
  9.10  or (ii) the amount of the maximum limit for one qualified 
  9.11  individual under section 21(c) and (d) of the Internal Revenue 
  9.12  Code will be deemed to be the employment related expense paid 
  9.13  for that child.  The earned income limitation of section 21(d) 
  9.14  of the Internal Revenue Code shall not apply to this deemed 
  9.15  amount.  These deemed amounts apply regardless of whether any 
  9.16  employment-related expenses have been paid.  
  9.17     (d) If the taxpayer is not required and does not file a 
  9.18  federal individual income tax return for the tax year, no credit 
  9.19  is allowed for any amount paid to any person unless: 
  9.20     (1) the name, address, and taxpayer identification number 
  9.21  of the person are included on the return claiming the credit; or 
  9.22     (2) if the person is an organization described in section 
  9.23  501(c)(3) of the Internal Revenue Code and exempt from tax under 
  9.24  section 501(a) of the Internal Revenue Code, the name and 
  9.25  address of the person are included on the return claiming the 
  9.26  credit.  
  9.27  In the case of a failure to provide the information required 
  9.28  under the preceding sentence, the preceding sentence does not 
  9.29  apply if it is shown that the taxpayer exercised due diligence 
  9.30  in attempting to provide the information required. 
  9.31     In the case of a nonresident, part-year resident, or a 
  9.32  person who has earned income not subject to tax under this 
  9.33  chapter including earned income excluded pursuant to section 
  9.34  290.01, subdivision 19b, clause (13), the credit determined 
  9.35  under section 21 of the Internal Revenue Code must be allocated 
  9.36  based on the ratio by which the earned income of the claimant 
 10.1   and the claimant's spouse from Minnesota sources bears to the 
 10.2   total earned income of the claimant and the claimant's spouse. 
 10.3      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 10.4   years beginning after December 31, 2003. 
 10.5      Sec. 7.  Minnesota Statutes 2002, section 290.0671, 
 10.6   subdivision 1, is amended to read: 
 10.7      Subdivision 1.  [CREDIT ALLOWED.] (a) An individual is 
 10.8   allowed a credit against the tax imposed by this chapter equal 
 10.9   to a percentage of earned income.  To receive a credit, a 
 10.10  taxpayer must be eligible for a credit under section 32 of the 
 10.11  Internal Revenue Code.  
 10.12     (b) For individuals with no qualifying children, the credit 
 10.13  equals 1.9125 percent of the first $4,620 of earned income.  The 
 10.14  credit is reduced by 1.9125 percent of earned income or modified 
 10.15  adjusted gross income, whichever is greater, in excess of 
 10.16  $5,770, but in no case is the credit less than zero. 
 10.17     (c) For individuals with one qualifying child, the credit 
 10.18  equals 8.5 percent of the first $6,920 of earned income and 8.5 
 10.19  percent of earned income over $12,080 but less than $13,450.  
 10.20  The credit is reduced by 5.73 percent of earned income or 
 10.21  modified adjusted gross income, whichever is greater, in excess 
 10.22  of $15,080, but in no case is the credit less than zero. 
 10.23     (d) For individuals with two or more qualifying children, 
 10.24  the credit equals ten percent of the first $9,720 of earned 
 10.25  income and 20 percent of earned income over $14,860 but less 
 10.26  than $16,800.  The credit is reduced by 10.3 percent of earned 
 10.27  income or modified adjusted gross income, whichever is greater, 
 10.28  in excess of $17,890, but in no case is the credit less than 
 10.29  zero. 
 10.30     (e) For a nonresident or part-year resident, the credit 
 10.31  must be allocated based on the percentage calculated under 
 10.32  section 290.06, subdivision 2c, paragraph (e). 
 10.33     (f) For a person who was a resident for the entire tax year 
 10.34  and has earned income not subject to tax under this 
 10.35  chapter including income excluded under section 290.01, 
 10.36  subdivision 19b, clause (13), the credit must be allocated based 
 11.1   on the ratio of federal adjusted gross income reduced by the 
 11.2   earned income not subject to tax under this chapter over federal 
 11.3   adjusted gross income. 
 11.4      (g) For tax years beginning after December 31, 2001, and 
 11.5   before December 31, 2004, the $5,770 in paragraph (b) is 
 11.6   increased to $6,770, the $15,080 in paragraph (c) is increased 
 11.7   to $16,080, and the $17,890 in paragraph (d) is increased to 
 11.8   $18,890 for married taxpayers filing joint returns. 
 11.9      (h) For tax years beginning after December 31, 2004, and 
 11.10  before December 31, 2007, the $5,770 in paragraph (b) is 
 11.11  increased to $7,770, the $15,080 in paragraph (c) is increased 
 11.12  to $17,080, and the $17,890 in paragraph (d) is increased to 
 11.13  $19,890 for married taxpayers filing joint returns. 
 11.14     (i) For tax years beginning after December 31, 2007, and 
 11.15  before December 31, 2010, the $5,770 in paragraph (b) is 
 11.16  increased to $8,770, the $15,080 in paragraph (c) is increased 
 11.17  to $18,080 and the $17,890 in paragraph (d) is increased to 
 11.18  $20,890 for married taxpayers filing joint returns. 
 11.19     (j) The commissioner shall construct tables showing the 
 11.20  amount of the credit at various income levels and make them 
 11.21  available to taxpayers.  The tables shall follow the schedule 
 11.22  contained in this subdivision, except that the commissioner may 
 11.23  graduate the transition between income brackets. 
 11.24     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 11.25  years beginning after December 31, 2003. 
 11.26     Sec. 8.  Minnesota Statutes 2002, section 290.091, 
 11.27  subdivision 2, is amended to read: 
 11.28     Subd. 2.  [DEFINITIONS.] For purposes of the tax imposed by 
 11.29  this section, the following terms have the meanings given: 
 11.30     (a) "Alternative minimum taxable income" means the sum of 
 11.31  the following for the taxable year: 
 11.32     (1) the taxpayer's federal alternative minimum taxable 
 11.33  income as defined in section 55(b)(2) of the Internal Revenue 
 11.34  Code; 
 11.35     (2) the taxpayer's itemized deductions allowed in computing 
 11.36  federal alternative minimum taxable income, but excluding: 
 12.1      (i) the charitable contribution deduction under section 170 
 12.2   of the Internal Revenue Code to the extent that the deduction 
 12.3   exceeds 1.3 percent of adjusted gross income, as defined in 
 12.4   section 62 of the Internal Revenue Code; 
 12.5      (ii) the medical expense deduction; 
 12.6      (iii) the casualty, theft, and disaster loss deduction; and 
 12.7      (iv) the impairment-related work expenses of a disabled 
 12.8   person; 
 12.9      (3) for depletion allowances computed under section 613A(c) 
 12.10  of the Internal Revenue Code, with respect to each property (as 
 12.11  defined in section 614 of the Internal Revenue Code), to the 
 12.12  extent not included in federal alternative minimum taxable 
 12.13  income, the excess of the deduction for depletion allowable 
 12.14  under section 611 of the Internal Revenue Code for the taxable 
 12.15  year over the adjusted basis of the property at the end of the 
 12.16  taxable year (determined without regard to the depletion 
 12.17  deduction for the taxable year); 
 12.18     (4) to the extent not included in federal alternative 
 12.19  minimum taxable income, the amount of the tax preference for 
 12.20  intangible drilling cost under section 57(a)(2) of the Internal 
 12.21  Revenue Code determined without regard to subparagraph (E); 
 12.22     (5) to the extent not included in federal alternative 
 12.23  minimum taxable income, the amount of interest income as 
 12.24  provided by section 290.01, subdivision 19a, clause (1); and 
 12.25     (6) the amount of addition required by section 290.01, 
 12.26  subdivision 19a, clause (7); 
 12.27     less the sum of the amounts determined under the following: 
 12.28     (1) interest income as defined in section 290.01, 
 12.29  subdivision 19b, clause (1); 
 12.30     (2) an overpayment of state income tax as provided by 
 12.31  section 290.01, subdivision 19b, clause (2), to the extent 
 12.32  included in federal alternative minimum taxable income; 
 12.33     (3) the amount of investment interest paid or accrued 
 12.34  within the taxable year on indebtedness to the extent that the 
 12.35  amount does not exceed net investment income, as defined in 
 12.36  section 163(d)(4) of the Internal Revenue Code.  Interest does 
 13.1   not include amounts deducted in computing federal adjusted gross 
 13.2   income; and 
 13.3      (4) amounts subtracted from federal taxable income as 
 13.4   provided by section 290.01, subdivision 19b, ~~clause~~ clauses (12) 
 13.5   and (13). 
 13.6      In the case of an estate or trust, alternative minimum 
 13.7   taxable income must be computed as provided in section 59(c) of 
 13.8   the Internal Revenue Code. 
 13.9      (b) "Investment interest" means investment interest as 
 13.10  defined in section 163(d)(3) of the Internal Revenue Code. 
 13.11     (c) "Tentative minimum tax" equals 6.4 percent of 
 13.12  alternative minimum taxable income after subtracting the 
 13.13  exemption amount determined under subdivision 3. 
 13.14     (d) "Regular tax" means the tax that would be imposed under 
 13.15  this chapter (without regard to this section and section 
 13.16  290.032), reduced by the sum of the nonrefundable credits 
 13.17  allowed under this chapter.  
 13.18     (e) "Net minimum tax" means the minimum tax imposed by this 
 13.19  section. 
 13.20     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 13.21  years beginning after December 31, 2003. 
 13.22     Sec. 9.  Minnesota Statutes 2002, section 290.0921, 
 13.23  subdivision 3, is amended to read: 
 13.24     Subd. 3.  [ALTERNATIVE MINIMUM TAXABLE INCOME.] 
 13.25  "Alternative minimum taxable income" is Minnesota net income as 
 13.26  defined in section 290.01, subdivision 19, and includes the 
 13.27  adjustments and tax preference items in sections 56, 57, 58, and 
 13.28  59(d), (e), (f), and (h) of the Internal Revenue Code.  If a 
 13.29  corporation files a separate company Minnesota tax return, the 
 13.30  minimum tax must be computed on a separate company basis.  If a 
 13.31  corporation is part of a tax group filing a unitary return, the 
 13.32  minimum tax must be computed on a unitary basis.  The following 
 13.33  adjustments must be made. 
 13.34     (1) For purposes of the depreciation adjustments under 
 13.35  section 56(a)(1) and 56(g)(4)(A) of the Internal Revenue Code, 
 13.36  the basis for depreciable property placed in service in a 
 14.1   taxable year beginning before January 1, 1990, is the adjusted 
 14.2   basis for federal income tax purposes, including any 
 14.3   modification made in a taxable year under section 290.01, 
 14.4   subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 14.5   subdivision 7, paragraph (c). 
 14.6      For taxable years beginning after December 31, 2000, the 
 14.7   amount of any remaining modification made under section 290.01, 
 14.8   subdivision 19e, or Minnesota Statutes 1986, section 290.09, 
 14.9   subdivision 7, paragraph (c), not previously deducted is a 
 14.10  depreciation allowance in the first taxable year after December 
 14.11  31, 2000. 
 14.12     (2) The portion of the depreciation deduction allowed for 
 14.13  federal income tax purposes under section 168(k) of the Internal 
 14.14  Revenue Code that is required as an addition under section 
 14.15  290.01, subdivision 19c, clause (16), is disallowed in 
 14.16  determining alternative minimum taxable income. 
 14.17     (3) The subtraction for depreciation allowed under section 
 14.18  290.01, subdivision 19d, clause (19), is allowed as a 
 14.19  depreciation deduction in determining alternative minimum 
 14.20  taxable income. 
 14.21     (4) The alternative tax net operating loss deduction under 
 14.22  sections 56(a)(4) and 56(d) of the Internal Revenue Code does 
 14.23  not apply. 
 14.24     (5) The special rule for certain dividends under section 
 14.25  56(g)(4)(C)(ii) of the Internal Revenue Code does not apply. 
 14.26     (6) The special rule for dividends from section 936 
 14.27  companies under section 56(g)(4)(C)(iii) does not apply. 
 14.28     (7) The tax preference for depletion under section 57(a)(1) 
 14.29  of the Internal Revenue Code does not apply. 
 14.30     (8) The tax preference for intangible drilling costs under 
 14.31  section 57(a)(2) of the Internal Revenue Code must be calculated 
 14.32  without regard to subparagraph (E) and the subtraction under 
 14.33  section 290.01, subdivision 19d, clause (4). 
 14.34     (9) The tax preference for tax exempt interest under 
 14.35  section 57(a)(5) of the Internal Revenue Code does not apply.  
 14.36     (10) The tax preference for charitable contributions of 
 15.1   appreciated property under section 57(a)(6) of the Internal 
 15.2   Revenue Code does not apply. 
 15.3      (11) For purposes of calculating the tax preference for 
 15.4   accelerated depreciation or amortization on certain property 
 15.5   placed in service before January 1, 1987, under section 57(a)(7) 
 15.6   of the Internal Revenue Code, the deduction allowable for the 
 15.7   taxable year is the deduction allowed under section 290.01, 
 15.8   subdivision 19e. 
 15.9      For taxable years beginning after December 31, 2000, the 
 15.10  amount of any remaining modification made under section 290.01, 
 15.11  subdivision 19e, not previously deducted is a depreciation or 
 15.12  amortization allowance in the first taxable year after December 
 15.13  31, 2004. 
 15.14     (12) For purposes of calculating the adjustment for 
 15.15  adjusted current earnings in section 56(g) of the Internal 
 15.16  Revenue Code, the term "alternative minimum taxable income" as 
 15.17  it is used in section 56(g) of the Internal Revenue Code, means 
 15.18  alternative minimum taxable income as defined in this 
 15.19  subdivision, determined without regard to the adjustment for 
 15.20  adjusted current earnings in section 56(g) of the Internal 
 15.21  Revenue Code. 
 15.22     (13) For purposes of determining the amount of adjusted 
 15.23  current earnings under section 56(g)(3) of the Internal Revenue 
 15.24  Code, no adjustment shall be made under section 56(g)(4) of the 
 15.25  Internal Revenue Code with respect to (i) the amount of foreign 
 15.26  dividend gross-up subtracted as provided in section 290.01, 
 15.27  subdivision 19d, clause (1), (ii) the amount of refunds of 
 15.28  income, excise, or franchise taxes subtracted as provided in 
 15.29  section 290.01, subdivision 19d, clause (10), or (iii) the 
 15.30  amount of royalties, fees or other like income subtracted as 
 15.31  provided in section 290.01, subdivision 19d, clause (11). 
 15.32     (14) Alternative minimum taxable income excludes the income 
 15.33  from operating in a biotechnology and health sciences industry 
 15.34  zone as provided under section 469.317. 
 15.35     Items of tax preference must not be reduced below zero as a 
 15.36  result of the modifications in this subdivision. 
 16.1      <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 16.2   years beginning after December 31, 2003. 
 16.3      Sec. 10.  Minnesota Statutes 2002, section 290.0922, 
 16.4   subdivision 3, is amended to read: 
 16.5      Subd. 3.  [DEFINITIONS.] (a) "Minnesota sales or receipts" 
 16.6   means the total sales apportioned to Minnesota pursuant to 
 16.7   section 290.191, subdivision 5, the total receipts attributed to 
 16.8   Minnesota pursuant to section 290.191, subdivisions 6 to 8, 
 16.9   and/or the total sales or receipts apportioned or attributed to 
 16.10  Minnesota pursuant to any other apportionment formula applicable 
 16.11  to the taxpayer. 
 16.12     (b) "Minnesota property" means total Minnesota tangible 
 16.13  property as provided in section 290.191, subdivisions 9 to 11, 
 16.14  and any other tangible property located in Minnesota, but does 
 16.15  not include property of a qualified business located in a 
 16.16  biotechnology and health sciences industry zone designated under 
 16.17  section 469.314.  Intangible property shall not be included in 
 16.18  Minnesota property for purposes of this section.  Taxpayers who 
 16.19  do not utilize tangible property to apportion income shall 
 16.20  nevertheless include Minnesota property for purposes of this 
 16.21  section.  On a return for a short taxable year, the amount of 
 16.22  Minnesota property owned, as determined under section 290.191, 
 16.23  shall be included in Minnesota property based on a fraction in 
 16.24  which the numerator is the number of days in the short taxable 
 16.25  year and the denominator is 365.  
 16.26     (c) "Minnesota payrolls"  means total Minnesota payrolls as 
 16.27  provided in section 290.191, subdivision 12, but does not 
 16.28  include biotechnology and health sciences industry zone payrolls 
 16.29  under section 469.310, subdivision 8.  Taxpayers who do not 
 16.30  utilize payrolls to apportion income shall nevertheless include 
 16.31  Minnesota payrolls for purposes of this section. 
 16.32     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 16.33  years beginning after December 31, 2003. 
 16.34     Sec. 11.  Minnesota Statutes 2002, section 297A.68, is 
 16.35  amended by adding a subdivision to read: 
 16.36     Subd. 37.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY 
 17.1   ZONE.] (a) Purchases of tangible personal property or taxable 
 17.2   services by a qualified business, as defined in section 469.310, 
 17.3   are exempt if the property or services are primarily used or 
 17.4   consumed in a biotechnology and health sciences industry zone 
 17.5   designated under section 469.314. 
 17.6      (b) Purchase and use of construction materials and supplies 
 17.7   for construction of improvements to real property in a 
 17.8   biotechnology and health sciences industry zone are exempt if 
 17.9   the improvements after completion of construction are to be used 
 17.10  in the conduct of a qualified business, as defined in section 
 17.11  469.310.  This exemption applies regardless of whether the 
 17.12  purchases are made by the business or a contractor. 
 17.13     (c) The exemptions under this subdivision apply to a local 
 17.14  sales and use tax regardless of whether the local sales tax is 
 17.15  imposed on the sales taxable as defined under this chapter. 
 17.16     (d) This subdivision applies to sales made during the 
 17.17  duration of the designation of the zone. 
 17.18     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 17.19  on or after the day following final enactment. 
 17.20     Sec. 12.  Minnesota Statutes 2002, section 297B.03, is 
 17.21  amended to read: 
 17.22     297B.03 [EXEMPTIONS.] 
 17.23     There is specifically exempted from the provisions of this 
 17.24  chapter and from computation of the amount of tax imposed by it 
 17.25  the following:  
 17.26     (1) purchase or use, including use under a lease purchase 
 17.27  agreement or installment sales contract made pursuant to section 
 17.28  465.71, of any motor vehicle by the United States and its 
 17.29  agencies and instrumentalities and by any person described in 
 17.30  and subject to the conditions provided in section 297A.67, 
 17.31  subdivision 11; 
 17.32     (2) purchase or use of any motor vehicle by any person who 
 17.33  was a resident of another state or country at the time of the 
 17.34  purchase and who subsequently becomes a resident of Minnesota, 
 17.35  provided the purchase occurred more than 60 days prior to the 
 17.36  date such person began residing in the state of Minnesota and 
 18.1   the motor vehicle was registered in the person's name in the 
 18.2   other state or country; 
 18.3      (3) purchase or use of any motor vehicle by any person 
 18.4   making a valid election to be taxed under the provisions of 
 18.5   section 297A.90; 
 18.6      (4) purchase or use of any motor vehicle previously 
 18.7   registered in the state of Minnesota when such transfer 
 18.8   constitutes a transfer within the meaning of section 118, 331, 
 18.9   332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, or 
 18.10  1563(a) of the Internal Revenue Code of 1986, as amended through 
 18.11  December 31, 1999; 
 18.12     (5) purchase or use of any vehicle owned by a resident of 
 18.13  another state and leased to a Minnesota based private or for 
 18.14  hire carrier for regular use in the transportation of persons or 
 18.15  property in interstate commerce provided the vehicle is titled 
 18.16  in the state of the owner or secured party, and that state does 
 18.17  not impose a sales tax or sales tax on motor vehicles used in 
 18.18  interstate commerce; 
 18.19     (6) purchase or use of a motor vehicle by a private 
 18.20  nonprofit or public educational institution for use as an 
 18.21  instructional aid in automotive training programs operated by 
 18.22  the institution.  "Automotive training programs" includes motor 
 18.23  vehicle body and mechanical repair courses but does not include 
 18.24  driver education programs; 
 18.25     (7) purchase of a motor vehicle for use as an ambulance by 
 18.26  an ambulance service licensed under section 144E.10; 
 18.27     (8) purchase of a motor vehicle by or for a public library, 
 18.28  as defined in section 134.001, subdivision 2, as a bookmobile or 
 18.29  library delivery vehicle; 
 18.30     (9) purchase of a ready-mixed concrete truck; 
 18.31     (10) purchase or use of a motor vehicle by a town for use 
 18.32  exclusively for road maintenance, including snowplows and dump 
 18.33  trucks, but not including automobiles, vans, or pickup trucks; 
 18.34     (11) purchase or use of a motor vehicle by a corporation, 
 18.35  society, association, foundation, or institution organized and 
 18.36  operated exclusively for charitable, religious, or educational 
 19.1   purposes, except a public school, university, or library, but 
 19.2   only if the vehicle is: 
 19.3      (i) a truck, as defined in section 168.011, a bus, as 
 19.4   defined in section 168.011, or a passenger automobile, as 
 19.5   defined in section 168.011, if the automobile is designed and 
 19.6   used for carrying more than nine persons including the driver; 
 19.7   and 
 19.8      (ii) intended to be used primarily to transport tangible 
 19.9   personal property or individuals, other than employees, to whom 
 19.10  the organization provides service in performing its charitable, 
 19.11  religious, or educational purpose; 
 19.12     (12) purchase of a motor vehicle for use by a transit 
 19.13  provider exclusively to provide transit service is exempt if the 
 19.14  transit provider is either (i) receiving financial assistance or 
 19.15  reimbursement under section 174.24 or 473.384, or (ii) operating 
 19.16  under section 174.29, 473.388, or 473.405; 
 19.17     (13) purchase or use of a motor vehicle by a qualified 
 19.18  business, as defined in section 469.310, located in a 
 19.19  biotechnology and health sciences industry zone, if the motor 
 19.20  vehicle is principally garaged in the zone and is primarily used 
 19.21  as part of or in direct support of the person's operations 
 19.22  carried on in the zone.  The exemption under this clause also 
 19.23  applies to any local sales and use tax. 
 19.24     <b>[EFFECTIVE DATE.]</b> This section is effective for sales made 
 19.25  after December 31, 2003. 
 19.26     Sec. 13.  [469.310] [DEFINITIONS.] 
 19.27     Subdivision 1.  [SCOPE.] For purposes of sections 469.310 
 19.28  to 469.320, the following terms have the meanings given. 
 19.29     Subd. 2.  [APPLICANT.] "Applicant" means a local government 
 19.30  unit or units applying for designation of an area as a 
 19.31  biotechnology and health sciences industry zone or a joint 
 19.32  powers board, established under section 471.59, acting on behalf 
 19.33  of two or more local government units. 
 19.34     Subd. 3.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY 
 19.35  FACILITY.] "Biotechnology and health sciences industry facility" 
 19.36  means one or more facilities or operations involved in:  (1) 
 20.1   researching, developing, and/or manufacturing a biotechnology 
 20.2   product, medical device, or service or a biotechnology-related 
 20.3   health sciences product, medical device, or service; or (2) 
 20.4   promoting, supplying, or servicing a facility or operation 
 20.5   involved in clause (1). 
 20.6      Subd. 4.  [COMMISSIONER.] "Commissioner" means the 
 20.7   commissioner of trade and economic development. 
 20.8      Subd. 5.  [DEVELOPMENT PLAN.] "Development plan" means a 
 20.9   plan meeting the requirements of section 469.311. 
 20.10     Subd. 6.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 20.11  OR ZONE.] "Biotechnology and health sciences industry zone" or 
 20.12  "zone" means a zone designated by the commissioner under section 
 20.13  469.314. 
 20.14     Subd. 7.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 20.15  PERCENTAGE OR ZONE PERCENTAGE.] "Biotechnology and health 
 20.16  sciences industry zone percentage" or "zone percentage" means 
 20.17  the following fraction reduced to a percentage: 
 20.18     (1) the numerator of the fraction is: 
 20.19     (i) the ratio of the taxpayer's property factor under 
 20.20  section 290.191 located in the zone for the taxable year over 
 20.21  the property factor numerator determined under section 290.191, 
 20.22  plus 
 20.23     (ii) the ratio of the taxpayer's biotechnology and health 
 20.24  sciences industry zone payroll factor under subdivision 8 over 
 20.25  the payroll factor numerator determined under section 290.191; 
 20.26  and 
 20.27     (2) the denominator of the fraction is two. 
 20.28     When calculating the zone percentage for a business that is 
 20.29  part of a unitary business as defined under section 290.17, 
 20.30  subdivision 4, the denominator of the payroll and property 
 20.31  factors is the Minnesota payroll and property of the unitary 
 20.32  business as reported on the combined report under section 
 20.33  290.17, subdivision 4, paragraph (j). 
 20.34     Subd. 8.  [BIOTECHNOLOGY AND HEALTH SCIENCES INDUSTRY ZONE 
 20.35  PAYROLL FACTOR.] "Biotechnology and health sciences industry 
 20.36  zone payroll factor" or "biotechnology and health sciences 
 21.1   industry zone payroll" is that portion of the payroll factor 
 21.2   under section 290.191 that represents: 
 21.3      (1) wages or salaries paid to an individual for services 
 21.4   performed for a qualified business in a biotechnology and health 
 21.5   sciences industry zone; or 
 21.6      (2) wages or salaries paid to individuals working from 
 21.7   offices of a qualified business within a biotechnology and 
 21.8   health sciences industry zone if their employment requires them 
 21.9   to work outside the zone and the work is incidental to the work 
 21.10  performed by the individual within the zone. 
 21.11     Subd. 9.  [LOCAL GOVERNMENT UNIT.] "Local government unit" 
 21.12  means a statutory or home rule charter city, county, town, or 
 21.13  school district. 
 21.14     Subd. 10.  [PERSON.] "Person" includes an individual, 
 21.15  corporation, partnership, limited liability company, 
 21.16  association, or any other entity. 
 21.17     Subd. 11.  [QUALIFIED BUSINESS.] (a) "Qualified business" 
 21.18  means a person carrying on a trade or business at a 
 21.19  biotechnology and health sciences industry facility located 
 21.20  within a biotechnology and health sciences industry zone. 
 21.21     (b) A person that relocates a biotechnology and health 
 21.22  sciences industry facility from outside a biotechnology and 
 21.23  health sciences industry zone into a zone is not a qualified 
 21.24  business, unless the business: 
 21.25     (1)(i) increases full-time employment in the first full 
 21.26  year of operation within the biotechnology and health sciences 
 21.27  industry zone by at least 20 percent measured relative to the 
 21.28  operations that were relocated; or 
 21.29     (ii) makes a capital investment in the property located 
 21.30  within a zone equivalent to ten percent of the gross revenues of 
 21.31  operation that were relocated in the immediately preceding 
 21.32  taxable year; and 
 21.33     (2) enters a binding written agreement with the 
 21.34  commissioner that: 
 21.35     (i) pledges the business will meet the requirements of 
 21.36  clause (1); 
 22.1      (ii) provides for repayment of all tax benefits enumerated 
 22.2   under section 469.315 to the business under the procedures in 
 22.3   section 469.319, if the requirements of clause (1) are not met; 
 22.4   and 
 22.5      (iii) contains any other terms the commissioner determines 
 22.6   appropriate. 
 22.7      Subd. 12.  [RELOCATES.] (a) "Relocates" means that the 
 22.8   trade or business: 
 22.9      (1) ceases one or more operations or functions at another 
 22.10  location in Minnesota and begins performing substantially the 
 22.11  same operations or functions at a location in a biotechnology 
 22.12  and health sciences industry zone; or 
 22.13     (2) reduces employment at another location in Minnesota 
 22.14  during a period starting one year before and ending one year 
 22.15  after it begins operations in a biotechnology and health 
 22.16  sciences industry zone and its employees in the biotechnology 
 22.17  and health sciences industry zone are engaged in the same line 
 22.18  of business as the employees at the location where it reduced 
 22.19  employment. 
 22.20     (b) "Relocate" does not include an expansion by a business 
 22.21  that establishes a new facility that does not replace or 
 22.22  supplant an existing operation or employment, in whole or in 
 22.23  part. 
 22.24     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 22.25  following final enactment. 
 22.26     Sec. 14.  [469.311] [DEVELOPMENT PLAN.] 
 22.27     (a) An applicant for designation of a biotechnology and 
 22.28  health sciences industry zone must adopt a written development 
 22.29  plan for the zone before submitting the application to the 
 22.30  commissioner. 
 22.31     (b) The development plan must contain, at least, the 
 22.32  following: 
 22.33     (1) a map of the proposed zone that indicates the 
 22.34  geographic boundaries of the zone, the total area, and present 
 22.35  use and conditions generally of the land and structures within 
 22.36  those boundaries; 
 23.1      (2) evidence of community support and commitment from local 
 23.2   government, local workforce investment boards, school districts, 
 23.3   and other education institutions, business groups, and the 
 23.4   public; 
 23.5      (3) a description of the methods proposed to increase 
 23.6   economic opportunity and expansion, facilitate infrastructure 
 23.7   improvement, reduce the local regulatory burden, and identify 
 23.8   job-training opportunities; 
 23.9      (4) current social, economic, and demographic 
 23.10  characteristics of the proposed zone and anticipated 
 23.11  improvements in education, health, human services, and 
 23.12  employment if the zone is created; 
 23.13     (5) a description of anticipated activity in the zone and 
 23.14  each subzone, including, but not limited to, industrial use and 
 23.15  industrial site reuse; and 
 23.16     (6) any other information required by the commissioner. 
 23.17     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 23.18  following final enactment. 
 23.19     Sec. 15.  [469.312] [BIOTECHNOLOGY AND HEALTH SCIENCES 
 23.20  INDUSTRY ZONE; LIMITATIONS.] 
 23.21     Subdivision 1.  [MAXIMUM SIZE.] A biotechnology and health 
 23.22  sciences industry zone may not exceed 5,000 acres.  
 23.23     Subd. 2.  [SUBZONES.] The area of a biotechnology and 
 23.24  health sciences industry zone may consist of one or more 
 23.25  noncontiguous areas or subzones. 
 23.26     Subd. 3.  [DURATION LIMIT.] The maximum duration of a zone 
 23.27  is 12 years.  The applicant may request a shorter duration.  The 
 23.28  commissioner may specify a shorter duration, regardless of the 
 23.29  requested duration. 
 23.30     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 23.31  following final enactment. 
 23.32     Sec. 16.  [469.313] [APPLICATION FOR DESIGNATION.] 
 23.33     Subdivision 1.  [WHO MAY APPLY.] One or more local 
 23.34  government units, or a joint powers board under section 471.59, 
 23.35  acting on behalf of two or more units, may apply for designation 
 23.36  of an area as a biotechnology and health sciences industry 
 24.1   zone.  All or part of the area proposed for designation as a 
 24.2   zone must be located within the boundaries of each of the 
 24.3   governmental units.  A local government unit may not submit or 
 24.4   have submitted on its behalf more than one application for 
 24.5   designation of a biotechnology and health sciences industry zone.
 24.6      Subd. 2.  [APPLICATION CONTENT.] The application must 
 24.7   include: 
 24.8      (1) a development plan meeting the requirements of section 
 24.9   469.311; 
 24.10     (2) the proposed duration of the zone, not to exceed 12 
 24.11  years; 
 24.12     (3) a resolution or ordinance adopted by each of the cities 
 24.13  or towns and the counties in which the zone is located, agreeing 
 24.14  to provide all of the local tax exemptions provided under 
 24.15  section 469.315; and 
 24.16     (4) supporting evidence to allow the commissioner to 
 24.17  evaluate the application under the criteria in section 469.314. 
 24.18     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 24.19  following final enactment. 
 24.20     Sec. 17.  [469.314] [DESIGNATION OF BIOTECHNOLOGY AND 
 24.21  HEALTH SCIENCES INDUSTRY ZONE.] 
 24.22     Subdivision 1.  [COMMISSIONER TO DESIGNATE.] (a) The 
 24.23  commissioner, in consultation with the commissioner of revenue 
 24.24  and the director of the office of strategic and long-range 
 24.25  planning, shall designate not more than one biotechnology and 
 24.26  health sciences industry zone.  Priority must be given to 
 24.27  applicants with a development plan that links a higher 
 24.28  education/research institution with a biotechnology and health 
 24.29  sciences industry facility. 
 24.30     (b) The commissioner may, upon designation of a zone, 
 24.31  modify the development plan, including the boundaries of the 
 24.32  zone or subzones, if in the commissioner's opinion a modified 
 24.33  plan would better meet the objectives of the biotechnology and 
 24.34  health sciences industry zone program.  The commissioner shall 
 24.35  notify the applicant of the modification and provide a statement 
 24.36  of the reasons for the modifications. 
 25.1      Subd. 2.  [NEED INDICATORS.] (a) In evaluating applications 
 25.2   to determine the need for designation of a biotechnology and 
 25.3   health sciences industry zone, the commissioner shall consider 
 25.4   the following factors as indicators of need: 
 25.5      (1) the extent to which land in proximity to a significant 
 25.6   scientific research institution could be developed as a higher 
 25.7   and better use for biotechnology and health sciences industry 
 25.8   facilities; 
 25.9      (2) the amount of property in or near the zone that is 
 25.10  deteriorated or underutilized; and 
 25.11     (3) the extent to which property in the area would remain 
 25.12  underdeveloped or nonperforming due to physical characteristics. 
 25.13     (b) The commissioner may require applicants to provide data 
 25.14  to demonstrate how the area meets one or more of the indicators 
 25.15  of need. 
 25.16     Subd. 3.  [SUCCESS INDICATORS.] In determining the 
 25.17  likelihood of success of a proposed zone, the commissioner shall 
 25.18  consider: 
 25.19     (1) applicants that show a viable link between a higher 
 25.20  education/research institution, the biotechnology and/or medical 
 25.21  devices business sectors, and one or more units of local 
 25.22  government with a development plan; 
 25.23     (2) the extent to which the area has substantial real 
 25.24  property with adequate infrastructure and energy to support new 
 25.25  or expanded development; 
 25.26     (3) the strength and viability of the proposed development 
 25.27  goals, objectives, and strategies in the development plan; 
 25.28     (4) whether the development plan is creative and innovative 
 25.29  in comparison to other applications; 
 25.30     (5) local public and private commitment to development of a 
 25.31  biotechnology and health sciences industry facility or 
 25.32  facilities in the proposed zone and the potential cooperation of 
 25.33  surrounding communities; 
 25.34     (6) existing resources available to the proposed zone; 
 25.35     (7) how the designation of the zone would relate to other 
 25.36  economic and community development projects and to regional 
 26.1   initiatives or programs; 
 26.2      (8) how the regulatory burden will be eased for 
 26.3   biotechnology and health sciences industry facilities located in 
 26.4   the proposed zone; 
 26.5      (9) proposals to establish and link job creation and job 
 26.6   training in the biotechnology and health sciences industry with 
 26.7   research/educational institutions; and 
 26.8      (10) the extent to which the development is directed at 
 26.9   encouraging, and that designation of the zone is likely to 
 26.10  result in, the creation of high-paying jobs. 
 26.11     Subd. 4.  [DESIGNATION SCHEDULE.] (a) The schedule in 
 26.12  paragraphs (b) to (e) applies to the designation of the 
 26.13  biotechnology and health sciences industry zone. 
 26.14     (b) The commissioner shall publish the form for 
 26.15  applications and any procedural, form, or content requirements 
 26.16  for applications by no later than August 1, 2003.  The 
 26.17  commissioner may publish these requirements on the Internet, in 
 26.18  the State Register, or by any other means the commissioner 
 26.19  determines appropriate to disseminate the information to 
 26.20  potential applicants for designation. 
 26.21     (c) Applications must be submitted by October 15, 2003. 
 26.22     (d) The commissioner shall designate the zones by no later 
 26.23  than December 31, 2003. 
 26.24     (e) The designation of the zones takes effect January 1, 
 26.25  2004. 
 26.26     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 26.27  following final enactment. 
 26.28     Sec. 18.  [469.315] [TAX INCENTIVES AVAILABLE IN ZONES.] 
 26.29     Qualified businesses that operate in a biotechnology and 
 26.30  health sciences industry zone, individuals who invest in a 
 26.31  qualified business that operates in a biotechnology and health 
 26.32  sciences industry zone, and property of a qualified business 
 26.33  located in a biotechnology and health sciences industry zone 
 26.34  qualify for: 
 26.35     (1) exemption from individual income taxes as provided 
 26.36  under section 469.316; 
 27.1      (2) exemption from corporate franchise taxes as provided 
 27.2   under section 469.317; 
 27.3      (3) exemption from the state sales and use tax and any 
 27.4   local sales and use taxes on qualifying purchases as provided in 
 27.5   section 297A.68, subdivision 37; 
 27.6      (4) exemption from the state sales tax on motor vehicles 
 27.7   and any local sales tax on motor vehicles as provided under 
 27.8   section 297B.03; and 
 27.9      (5) exemption from the property tax as provided in section 
 27.10  272.02, subdivision 56. 
 27.11     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 27.12  following final enactment. 
 27.13     Sec. 19.  [469.316] [INDIVIDUAL INCOME TAX EXEMPTION.] 
 27.14     Subdivision 1.  [APPLICATION.] An individual operating a 
 27.15  qualified business in a biotechnology and health sciences 
 27.16  industry zone, and an individual making a qualifying investment 
 27.17  in a qualified business operating in a biotechnology and health 
 27.18  sciences industry zone qualifies for the exemptions from taxes 
 27.19  imposed under chapter 290, as provided in this section.  The 
 27.20  exemptions provided under this section apply only to the extent 
 27.21  that the income otherwise would be taxable under chapter 290.  
 27.22  Subtractions under this section from federal taxable income, 
 27.23  alternative minimum taxable income, or any other base subject to 
 27.24  tax are limited to the amount that otherwise would be included 
 27.25  in the tax base absent the exemption under this section. 
 27.26     Subd. 2.  [RENTS.] An individual is exempt from the taxes 
 27.27  imposed under chapter 290 on net rents derived from the rental 
 27.28  of real or tangible personal property located in a zone to a 
 27.29  qualified business for a taxable year in which the zone was 
 27.30  designated a biotechnology and health sciences industry zone.  
 27.31  If tangible personal property was used both within and outside 
 27.32  of the zone, the exemption amount for the net rental income must 
 27.33  be multiplied by a fraction, the numerator of which is the 
 27.34  number of days the property was used in the zone and the 
 27.35  denominator of which is the total days. 
 27.36     Subd. 3.  [BUSINESS INCOME.] An individual is exempt from 
 28.1   the taxes imposed under chapter 290 on net income from the 
 28.2   operation of a qualified business in a biotechnology and health 
 28.3   sciences industry zone.  If the trade or business is carried on 
 28.4   within and without the zone and the individual is not a resident 
 28.5   of Minnesota, the exemption must be apportioned based on the 
 28.6   zone percentage for the taxable year.  If the trade or business 
 28.7   is carried on within and without the zone and the individual is 
 28.8   a resident of Minnesota, the exemption must be apportioned based 
 28.9   on the zone percentage for the taxable year, except the ratios 
 28.10  under section 469.310, subdivision 7, clause (1), items (i) and 
 28.11  (ii), must use the denominators of the property and payroll 
 28.12  factors determined under section 290.191.  No subtraction is 
 28.13  allowed under this section in excess of 20 percent of the sum of 
 28.14  the biotechnology and health sciences industry zone payroll and 
 28.15  the adjusted basis of the property at the time that the property 
 28.16  is first used in the biotechnology and health sciences industry 
 28.17  zone by the business. 
 28.18     Subd. 4.  [CAPITAL GAINS.] (a) An individual is exempt from 
 28.19  the taxes imposed under chapter 290 on: 
 28.20     (1) net gain derived on a sale or exchange of real property 
 28.21  located in the zone to or with a qualified business.  If the 
 28.22  property was held by the individual during a period when the 
 28.23  zone was not designated, the gain must be prorated based on the 
 28.24  percentage of time, measured in calendar days, that the real 
 28.25  property was held by the individual during the period the zone 
 28.26  designation was in effect to the total period of time the real 
 28.27  property was held by the individual; 
 28.28     (2) net gain derived on a sale or exchange of tangible 
 28.29  personal property used by a qualified business in the zone.  If 
 28.30  the property was held by the individual during a period when the 
 28.31  zone was not designated, the gain must be prorated based on the 
 28.32  percentage of time, measured in calendar days, that the property 
 28.33  was held by the individual during the period the zone 
 28.34  designation was in effect to the total period of time the 
 28.35  property was held by the individual.  If the tangible personal 
 28.36  property was used outside of the zone during the period of the 
 29.1   zone's designation, the exemption must be multiplied by a 
 29.2   fraction, the numerator of which is the number of days the 
 29.3   property was used in the zone during the time of the designation 
 29.4   and the denominator of which is the total days the property was 
 29.5   held during the time of the designation; and 
 29.6      (3) net gain derived on a sale of an ownership interest in 
 29.7   a qualified business operating in the biotechnology and health 
 29.8   sciences industry zone, meeting the requirements of paragraph 
 29.9   (b).  The exemption on the gain must be multiplied by the zone 
 29.10  percentage of the business for the taxable year prior to the 
 29.11  sale. 
 29.12     (b) A qualified business meets the requirements of 
 29.13  paragraph (a), clause (3), if it is a corporation, an S 
 29.14  corporation, or a partnership, and for the taxable year its 
 29.15  biotechnology and health sciences industry zone percentage 
 29.16  exceeds 25 percent.  For purposes of paragraph (a), clause (3), 
 29.17  the zone percentage must be calculated by modifying the ratios 
 29.18  under section 469.310, subdivision 7, clause (1), items (i) and 
 29.19  (ii), to use the denominators of the property and payroll 
 29.20  factors determined under section 290.191.  Upon the request of 
 29.21  an individual holding an ownership interest in the entity, the 
 29.22  entity must certify to the owner, in writing, the biotechnology 
 29.23  and health sciences industry zone percentage needed to determine 
 29.24  the exemption. 
 29.25     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 29.26  years beginning after December 31, 2003. 
 29.27     Sec. 20.  [469.317] [CORPORATE FRANCHISE TAX EXEMPTION.] 
 29.28     (a) A qualified business is exempt from taxation under 
 29.29  section 290.02, the alternative minimum tax under section 
 29.30  290.0921, and the minimum fee under section 290.0922, on the 
 29.31  portion of its income attributable to operations of a qualified 
 29.32  business within the biotechnology and health sciences industry 
 29.33  zone.  This exemption is determined as follows: 
 29.34     (1) for purposes of the tax imposed under section 290.02, 
 29.35  by multiplying its taxable net income by its zone percentage and 
 29.36  subtracting the result in determining taxable income; 
 30.1      (2) for purposes of the alternative minimum tax under 
 30.2   section 290.0921, by multiplying its alternative minimum taxable 
 30.3   income by its zone percentage and reducing alternative minimum 
 30.4   taxable income by this amount; and 
 30.5      (3) for purposes of the minimum fee under section 290.0922, 
 30.6   by excluding property and payroll in the zone from the 
 30.7   computations of the fee. 
 30.8      (b) No subtraction is allowed under this section in excess 
 30.9   of 20 percent of the sum of the corporation's biotechnology and 
 30.10  health sciences industry zone payroll and the adjusted basis of 
 30.11  the property at the time that the property is first used in the 
 30.12  biotechnology and health sciences industry zone by the 
 30.13  corporation. 
 30.14     <b>[EFFECTIVE DATE.]</b> This section is effective for taxable 
 30.15  years beginning after December 31, 2003. 
 30.16     Sec. 21.  [469.319] [REPAYMENT OF TAX BENEFITS.] 
 30.17     Subdivision 1.  [REPAYMENT OBLIGATION.] A business must 
 30.18  repay the amount of the tax reduction received during the two 
 30.19  years immediately before it ceased to operate in the zone, if 
 30.20  the business: 
 30.21     (1) received tax reductions authorized by section 469.315; 
 30.22     (2) relocated into a biotechnology and health sciences 
 30.23  industry zone after designation of the zone; and 
 30.24     (3) ceased to operate its facility located within the 
 30.25  biotechnology and health sciences industry zone or otherwise 
 30.26  ceases to be or is not a qualified business. 
 30.27     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 30.28  the following terms have the meanings given. 
 30.29     (b) "Business" means any person who received tax benefits 
 30.30  enumerated in section 469.315. 
 30.31     (c) "Commissioner" means the commissioner of revenue. 
 30.32     Subd. 3.  [DISPOSITION OR REPAYMENT.] The repayment must be 
 30.33  paid to the state to the extent it represents a state tax 
 30.34  reduction and to the county to the extent it represents a 
 30.35  property tax reduction.  Any amount repaid to the state must be 
 30.36  deposited in the general fund.  Any amount repaid to the county 
 31.1   for the property tax exemption must be distributed to the local 
 31.2   governments with authority to levy taxes in the zone in the same 
 31.3   manner provided for distribution of payment of delinquent 
 31.4   property taxes.  Any repayment of local sales taxes must be 
 31.5   repaid to the city or county imposing the local sales tax. 
 31.6      Subd. 4.  [REPAYMENT PROCEDURES.] (a) For the repayment of 
 31.7   taxes imposed under chapter 290 or 297A or local taxes collected 
 31.8   pursuant to section 297A.99, a business must file an amended 
 31.9   return with the commissioner of revenue and pay any taxes 
 31.10  required to be repaid within 30 days after ceasing to do 
 31.11  business in the zone.  The amount required to be repaid is 
 31.12  determined by calculating the tax for the period or periods for 
 31.13  which repayment is required without regard to the exemptions and 
 31.14  credits allowed under section 469.315. 
 31.15     (b) For the repayment of taxes imposed under chapter 297B, 
 31.16  a business must pay any taxes required to be repaid to the motor 
 31.17  vehicle registrar, as agent for the commissioner of revenue, 
 31.18  within 30 days after ceasing to do business in the zone. 
 31.19     (c) For the repayment of property taxes, the county auditor 
 31.20  shall prepare a tax statement for the business, applying the 
 31.21  applicable tax extension rates for each payable year and provide 
 31.22  a copy to the business.  The business must pay the taxes to the 
 31.23  county treasurer within 30 days after receipt of the tax 
 31.24  statement. 
 31.25     (d) The provisions of chapters 270 and 289A relating to the 
 31.26  commissioner's authority to audit, assess, and collect the tax 
 31.27  and to hear appeals are applicable to the repayment required 
 31.28  under paragraphs (a) and (b).  The commissioner may impose civil 
 31.29  penalties as provided in chapter 289A, and the additional tax 
 31.30  and penalties are subject to interest at the rate provided in 
 31.31  section 270.75, from 30 days after ceasing to do business in the 
 31.32  biotechnology and health sciences industry zone until the date 
 31.33  the tax is paid. 
 31.34     (e) If a property tax is not repaid under paragraph (c), 
 31.35  the county treasurer shall add the amount required to be repaid 
 31.36  to the property taxes assessed against the property for payment 
 32.1   in the year following the year in which the treasurer discovers 
 32.2   that the business ceased to operate in the biotechnology and 
 32.3   health sciences industry zone. 
 32.4      (f) For determining the tax required to be repaid, a tax 
 32.5   reduction is deemed to have been received on the date that the 
 32.6   tax would have been due if the taxpayer had not been entitled to 
 32.7   the exemption. 
 32.8      (g) The commissioner may assess the repayment of taxes 
 32.9   under paragraph (d) any time within two years after the business 
 32.10  ceases to operate in the biotechnology and health sciences 
 32.11  industry zone, or within any period of limitations for the 
 32.12  assessment of tax under section 289A.38, whichever period is 
 32.13  later. 
 32.14     Subd. 5.  [WAIVER AUTHORITY.] The commissioner may waive 
 32.15  all or part of a repayment, if the commissioner, in consultation 
 32.16  with the commissioner of trade and economic development and 
 32.17  appropriate officials from the local government units in which 
 32.18  the business is located, determines that requiring repayment of 
 32.19  the tax is not in the best interest of the state or the local 
 32.20  government units and the business ceased operating as a result 
 32.21  of circumstances beyond its control including, but not limited 
 32.22  to: 
 32.23     (1) a natural disaster; 
 32.24     (2) unforeseen industry trends; or 
 32.25     (3) loss of a major supplier or customer. 
 32.26     <b>[EFFECTIVE DATE.]</b> This section is effective the day 
 32.27  following final enactment. 
 32.28     Sec. 22.  [469.320] [ZONE PERFORMANCE; REMEDIES.] 
 32.29     Subdivision 1.  [REPORTING REQUIREMENT.] An applicant 
 32.30  receiving designation of a biotechnology and health sciences 
 32.31  industry zone under section 469.314 must annually report to the 
 32.32  commissioner on its progress in meeting the zone performance 
 32.33  goals under the development plan for the zone. 
 32.34     Subd. 2.  [PROCEDURES.] For reports required by subdivision 
 32.35  1, the commissioner may prescribe: 
 32.36     (1) the required time or times by which the reports must be 
 33.1   filed; 
 33.2      (2) the form of the report; and 
 33.3      (3) the information required to be included in the report. 
 33.4      Subd. 3.  [REMEDIES.] If the commissioner determines, based 
 33.5   on a report filed under subdivision 1 or other available 
 33.6   information, that a zone or subzone is failing to meet its 
 33.7   performance goals, the commissioner may take any actions the 
 33.8   commissioner determines appropriate, including modification of 
 33.9   the boundaries of the zone or a subzone or termination of the 
 33.10  zone or a subzone.  Before taking any action, the commissioner 
 33.11  shall consult with the applicant and the affected local 
 33.12  government units, including notifying them of the proposed 
 33.13  actions to be taken.  The commissioner shall publish any order 
 33.14  modifying a zone in the State Register and on the Internet.  The 
 33.15  applicant may appeal the commissioner's order under the 
 33.16  contested case procedures of chapter 14. 
 33.17     Subd. 4.  [EXISTING BUSINESSES.] An action to remove area 
 33.18  from a zone or to terminate a zone under this section does not 
 33.19  apply to: 
 33.20     (1) the property tax on improvements constructed before the 
 33.21  first January 2 following publication of the commissioner's 
 33.22  order; 
 33.23     (2) sales tax on purchases made before the first day of the 
 33.24  next calendar month beginning at least 30 days after publication 
 33.25  of the commissioner's order; and 
 33.26     (3) individual income tax or corporate franchise tax 
 33.27  attributable to a facility that was in operation before the 
 33.28  publication of the commissioner's order.