2006 Minnesota Statutes

469.316 INDIVIDUAL INCOME TAX EXEMPTION.
    Subdivision 1. Application. An individual, estate, or trust operating a trade or business in a
job opportunity building zone, and an individual, estate, or trust making a qualifying investment
in a qualified business operating in a job opportunity building zone qualifies for the exemptions
from taxes imposed under chapter 290, as provided in this section. The exemptions provided
under this section apply only to the extent that the income otherwise would be taxable under
chapter 290. Subtractions under this section from federal taxable income, alternative minimum
taxable income, or any other base subject to tax are limited to the amount that otherwise would
be included in the tax base absent the exemption under this section. This section applies only to
taxable years beginning during the duration of the job opportunity building zone.
    Subd. 2. Rents. An individual, estate, or trust is exempt from the taxes imposed under chapter
290 on net rents derived from real or tangible personal property used by a qualified business and
located in a zone for a taxable year in which the zone was designated a job opportunity building
zone. If tangible personal property was used both within and outside of the zone by the qualified
business, the exemption amount for the net rental income must be multiplied by a fraction, the
numerator of which is the number of days the property was used in the zone and the denominator
of which is the total days the property is rented by the qualified business.
    Subd. 3. Business income. An individual, estate, or trust is exempt from the taxes imposed
under chapter 290 on net income from the operation of a qualified business in a job opportunity
building zone. If the trade or business is carried on within and without the zone and the individual
is not a resident of Minnesota, or the taxpayer is an estate or trust, the exemption must be
apportioned based on the zone percentage and the relocation payroll percentage for the taxable
year. If the trade or business is carried on within and without the zone and the individual is
a resident of Minnesota, the exemption must be apportioned based on the zone percentage and
the relocation payroll percentage for the taxable year, except the ratios under section 469.310,
subdivision 7 , clause (1), items (i) and (ii), must use the denominators of the property and payroll
factors determined under section 290.191. No subtraction is allowed under this section in excess
of 20 percent of the sum of the job opportunity building zone payroll and the adjusted basis of
the property at the time that the property is first used in the job opportunity building zone by the
business.
    Subd. 4. Capital gains. (a) An individual, estate, or trust is exempt from the taxes imposed
under chapter 290 on:
(1) net gain derived on a sale or exchange of real property located in the zone and used by
a qualified business. If the property was held by the individual, estate, or trust during a period
when the zone was not designated, the gain must be prorated based on the percentage of time,
measured in calendar days, that the real property was held by the individual, estate, or trust
during the period the zone designation was in effect to the total period of time the real property
was held by the individual;
(2) net gain derived on a sale or exchange of tangible personal property used by a qualified
business in the zone. If the property was held by the individual, estate, or trust during a period
when the zone was not designated, the gain must be prorated based on the percentage of time,
measured in calendar days, that the property was held by the individual, estate, or trust during
the period the zone designation was in effect to the total period of time the property was held by
the individual. If the tangible personal property was used outside of the zone during the period
of the zone's designation, the exemption must be multiplied by a fraction, the numerator of
which is the number of days the property was used in the zone during the time of the designation
and the denominator of which is the total days the property was held during the time of the
designation; and
(3) net gain derived on a sale of an ownership interest in a qualified business operating in the
job opportunity building zone, meeting the requirements of paragraph (b). The exemption on the
gain must be multiplied by the zone percentage of the business for the taxable year prior to the sale.
(b) A qualified business meets the requirements of paragraph (a), clause (3), if it is a
corporation, an S corporation, or a partnership, and for the taxable year its job opportunity
building zone percentage exceeds 25 percent. For purposes of paragraph (a), clause (3), the
zone percentage must be calculated by modifying the ratios under section 469.310, subdivision
7 , clause (1), items (i) and (ii), to use the denominators of the property and payroll factors
determined under section 290.191. Upon the request of an individual, estate, or trust holding an
ownership interest in the entity, the entity must certify to the owner, in writing, the job opportunity
building zone percentage needed to determine the exemption.
History: 1Sp2003 c 21 art 1 s 21; 1Sp2005 c 3 art 7 s 14