1.1 	A bill for an act
1.2 	relating to taxation; tax increment financing; transit improvement areas;
1.3 	amending Minnesota Statutes 2010, sections 469.174, subdivision 12; 469.176, 
1.4 	subdivision 4c; 469.1763, subdivision 2.
1.5 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.6 	Section 1. Minnesota Statutes 2010, section 469.174, subdivision 12, is amended to 
1.7 	read:
1.8 		Subd. 12.Economic development district. "Economic development district" 
1.9 	means a type of tax increment financing district which consists of any project, or portions 
1.10 	of a project, which the authority finds to be in the public interest because:
1.11 	(1) it will discourage commerce, industry, or manufacturing from moving their 
1.12 	operations to another state or municipality; or
1.13 	(2) it will result in increased employment in the state; or
1.14 	(3) it will result in preservation and enhancement of the tax base of the state.; or
1.15 	(4) it is located in a transit improvement area as defined in section 469.351, 
1.16 	subdivisions 1 to 3, and it will be used to support activities for which the transit 
1.17 	improvement area was designated.

1.18 	EFFECTIVE DATE. This section applies to all districts, regardless of when the 
1.19 	request for certification was made.

1.20 	Sec. 2. Minnesota Statutes 2010, section 469.176, subdivision 4c, is amended to read:
1.21 		Subd. 4c.Economic development districts. (a) Revenue derived from tax 
1.22 	increment from an economic development district may not be used to provide 
1.23 	improvements, loans, subsidies, grants, interest rate subsidies, or assistance in any form 
2.1 	to developments consisting of buildings and ancillary facilities, if more than 15 percent 
2.2 	of the buildings and facilities (determined on the basis of square footage) are used for a 
2.3 	purpose other than:
2.4 	(1) the manufacturing or production of tangible personal property, including 
2.5 	processing resulting in the change in condition of the property;
2.6 	(2) warehousing, storage, and distribution of tangible personal property, excluding 
2.7 	retail sales;
2.8 	(3) research and development related to the activities listed in clause (1) or (2);
2.9 	(4) telemarketing if that activity is the exclusive use of the property;
2.10 	(5) tourism facilities;
2.11 	(6) qualified border retail facilities; or
2.12 	(7) space necessary for and related to the activities listed in clauses (1) to (6).; or
2.13 	(8) activities within a transit improvement area as defined in section 496.351, 
2.14 	subdivisions 1 to 3.
2.15 	(b) Notwithstanding the provisions of this subdivision, revenues derived from tax 
2.16 	increment from an economic development district may be used to provide improvements, 
2.17 	loans, subsidies, grants, interest rate subsidies, or assistance in any form for up to 15,000 
2.18 	square feet of any separately owned commercial facility located within the municipal 
2.19 	jurisdiction of a small city, if the revenues derived from increments are spent only to 
2.20 	assist the facility directly or for administrative expenses, the assistance is necessary to 
2.21 	develop the facility, and all of the increments, except those for administrative expenses, 
2.22 	are spent only for activities within the district.
2.23 	(c) A city is a small city for purposes of this subdivision if the city was a small city 
2.24 	in the year in which the request for certification was made and applies for the rest of 
2.25 	the duration of the district, regardless of whether the city qualifies or ceases to qualify 
2.26 	as a small city.
2.27 	(d) Notwithstanding the requirements of paragraph (a) and the finding requirements 
2.28 	of section 469.174, subdivision 12, tax increments from an economic development district 
2.29 	may be used to provide improvements, loans, subsidies, grants, interest rate subsidies, or 
2.30 	assistance in any form to developments consisting of buildings and ancillary facilities, if 
2.31 	all the following conditions are met:
2.32 	(1) the municipality finds that the project will create or retain jobs in this state, 
2.33 	including construction jobs, and that construction of the project would not have 
2.34 	commenced before July 1, 2011, without the authority providing assistance under the 
2.35 	provisions of this paragraph;
2.36 	(2) construction of the project begins no later than July 1, 2011; and
3.1 	(3) the request for certification of the district is made no later than June 30, 2011.

3.2 	EFFECTIVE DATE. This section applies to all districts, regardless of when the 
3.3 	request for certification was made.

3.4 	Sec. 3. Minnesota Statutes 2010, section 469.1763, subdivision 2, is amended to read:
3.5 		Subd. 2. Expenditures outside district. (a) For each tax increment financing 
3.6 	district, an amount equal to at least 75 percent of the total revenue derived from tax 
3.7 	increments paid by properties in the district must be expended on activities in the district 
3.8 	or to pay bonds, to the extent that the proceeds of the bonds were used to finance activities 
3.9 	in the district or to pay, or secure payment of, debt service on credit enhanced bonds. 
3.10 	For districts, other than redevelopment districts for which the request for certification 
3.11 	was made after June 30, 1995, the in-district percentage for purposes of the preceding 
3.12 	sentence is 80 percent. Not more than 25 percent of the total revenue derived from tax 
3.13 	increments paid by properties in the district may be expended, through a development fund 
3.14 	or otherwise, on activities outside of the district but within the defined geographic area of 
3.15 	the project except to pay, or secure payment of, debt service on credit enhanced bonds. 
3.16 	For districts, other than redevelopment districts for which the request for certification was 
3.17 	made after June 30, 1995, the pooling percentage for purposes of the preceding sentence is 
3.18 	20 percent. The revenue derived from tax increments for the district that are expended on 
3.19 	costs under section 469.176, subdivision 4h, paragraph (b), may be deducted first before 
3.20 	calculating the percentages that must be expended within and without the district.
3.21 	(b) In the case of a housing district, a housing project, as defined in section 469.174, 
3.22 	subdivision 11, is an activity in the district.
3.23 	(c) All administrative expenses are for activities outside of the district, except that 
3.24 	if the only expenses for activities outside of the district under this subdivision are for 
3.25 	the purposes described in paragraph (d), administrative expenses will be considered as 
3.26 	expenditures for activities in the district.
3.27 	(d) The authority may elect, in the tax increment financing plan for the district, 
3.28 	to increase by up to ten percentage points the permitted amount of expenditures for 
3.29 	activities located outside the geographic area of the district under paragraph (a). As 
3.30 	permitted by section 469.176, subdivision 4k, the expenditures, including the permitted 
3.31 	expenditures under paragraph (a), need not be made within the geographic area of the 
3.32 	project. Expenditures that meet the requirements of this paragraph are legally permitted 
3.33 	expenditures of the district, notwithstanding section 469.176, subdivisions 4b, 4c, and 4j. 
3.34 	To qualify for the increase under this paragraph, the expenditures must:
4.1 	(1) be used exclusively to assist housing that meets the requirement for a qualified 
4.2 	low-income building, as that term is used in section 42 of the Internal Revenue Code;
4.3 	(2) not exceed the qualified basis of the housing, as defined under section 42(c) of 
4.4 	the Internal Revenue Code, less the amount of any credit allowed under section 42 of 
4.5 	the Internal Revenue Code; and
4.6 	(3) be used to:
4.7 	(i) acquire and prepare the site of the housing;
4.8 	(ii) acquire, construct, or rehabilitate the housing; or
4.9 	(iii) make public improvements directly related to the housing.; or
4.10 	(4) be used within designated improvement areas as defined in section 469.351, 
4.11 	subdivisions 1 to 3.
4.12 	(e) For a district created within a biotechnology and health sciences industry 
4.13 	zone as defined in section 469.330, subdivision 6, a district created within a transit 
4.14 	improvement area as defined in section 469.351, subdivisions 1 to 3, or for an existing 
4.15 	district districts located within such a biotechnology and health sciences industry zone
4.16 	or a transit improvement area, tax increment derived from such a district districts may 
4.17 	be expended outside of the district but within the zone, or a transit improvement area,
4.18 	only for expenditures required for the construction of public infrastructure necessary to 
4.19 	support the activities of the biotechnology and health sciences industry zone, or the transit 
4.20 	improvement area, including land acquisition, and other redevelopment costs as defined 
4.21 	in section 469.176, subdivision 4j. These expenditures are considered as expenditures 
4.22 	for activities within the district.

4.23 	EFFECTIVE DATE. This section applies to all districts, regardless of when the 
4.24 	request for certification was made.