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| S.F. No. 1062 - Green Job Opportunity Building Zones (Green JOBZ); Miscellaneous Tax Provisions (First Engrossment) | |
| Author: | Senator Julie Rosen |
| Prepared by: | Darlene Sliwa, Senate Research (651/296-1890) |
| Date: | March 27, 2009 |
ARTICLE 1 GREEN JOB OPPORTUNITY BUILDING ZONES
Section 1, subdivision 1 (Use of Data), paragraph (a), clause 15 exempts the State Auditor from the data privacy provisions of the Unemployment Insurance Program to the extent necessary to conduct audits of Green Jobs Opportunity Building Zones ("Green JOBZ"). The State Auditor currently has this authority with respect to the Job Opportunity Building Zones (JOBZ) program.
Clause 16 exempts any agency responsible for monitoring compliance with JOBZ or Green JOBZ business subsidy agreements from the data privacy provisions of the Unemployment Insurance Program.
Section 2, subdivision 3 (Administration of Enterprise, Job Opportunity, Biotechnology and Health Sciences Industry Zone, and Green Job Opportunity Building Zone Programs) authorizes the Commissioner of Revenue to disclose income and franchise tax information and general sales and use tax information to the Department of Employment and Economic Development and local units of government in which a qualified business is located as is necessary to enforce Green JOBZ benefits.
Section 3 [Disclosure to Legislative Auditor and State Auditor] requires the Commissioner of Revenue to disclose tax return information to the State Auditor to conduct audits of Green JOBZ and business subsidy agreements.
Section 4, subdivision 90 (Green Job Opportunity Building Zone Property) exempts improvements to real and personal property located within a Green JOBZ from ad valorem taxes. Provides that the exemption begins the first assessment year after designation of the Green JOBZ. Describes requirements for qualification.
Section 5, subdivision 7 (Exemption) provides that the Wind Energy Production Tax does not apply to electricity produced by wind energy conversion systems owned or operated by a qualified business located in a Green JOBZ.
Section 6, subdivision 16 (Report of Green Job Opportunity Building Zone Benefits; Penalty for Failure to File Report) requires each qualified business to file an annual report with the Commissioner of Revenue listing the tax benefits specified in Article 1, Section 23 that were received the previous year. Requires the Commissioner to send a notice to a business that fails to timely submit a report directing the business to respond within 60 days. If a business fails to submit a report it will not longer qualify for Green JOBZ benefits and it is subject to repayment.
Section 7, subdivision 19b (Subtractions from Federal Taxable Income), clause 18 adds Green JOBZ income to the list of items that individuals, estates, and trusts may subtract from federal taxable income.
Section 8, subdivision 29 (Taxable Income) modifies the definition of "taxable income" by adding an exemption for operating in a Green JOBZ.
Section 9, subdivision 2c (Schedules of Rates for Individuals, Estates, and Trusts) provides that tax-exempt Green JOBZ income is excluded from the numerator and denominator of the nonresident allocation fraction.
Section 10, subdivision 37 (Green Job Opportunity Building Zone Jobs Credit) allows a refundable credit for job creation in a Green JOBZ.
Section 11, subdivision 1 (Amount of Credit) provides than an individual with exempt Green JOBZ income must prorate the child and dependent care credit in the same manner as a nonresident.
Section 12, subdivision 1 (Credit Allowed) provides that an individual with exempt Green JOBZ income must prorate the working family credit in the same manner as a nonresident.
Section 13, subdivision 2 (Definitions) allows a subtraction from alternative minimum taxable income for tax exempt Green JOBZ income.
Section 14, subdivision 3 (Alternative Minimum Taxable Income) allows a subtraction from alternative minimum taxable income for tax exempt Green JOBZ income.
Section 15, subdivision 2 (Exemptions) exempts an entity from the Minimum Fee for Corporations and Partnerships if all of its property and payroll is within a Green JOBZ for the taxable year.
Section 16, subdivision 3 (Definitions) provides that "Minnesota property" does not include property of a qualified business located in a Green JOBZ.
Section 17, subdivision 42 (Green Job Opportunity Building Zones), paragraph (a) exempts purchases of tangible personal property and taxable services by a qualified business from the Local Sales and Use Tax if they are primarily used in a Green JOBZ.
Paragraph (b) exempts the purchase and use of construction materials, supplies and equipment incorporated into the construction or improvements to real property in a Green JOBZ from the Local Sales and Use Tax, as long as the improvements are used in future operation of the qualified business.
Paragraph (c) provides that the exemptions under this subdivision apply to a local sales and use tax regardless of whether the local sales tax is imposed on the taxable sales.
Paragraph (d) specifies that the subdivision applies to sales, if the purchase was made and delivery received during the duration of the zone.
Section 18 [Definitions] defines "applicant," "Commissioner," "Green Job Opportunity Building Zone, Green JOBZ, or Zone," "Green Job Opportunity Building Zone payroll factor," "Green Job Opportunity Building Zone percentage or zone percentage," "local government unit," "person," "qualified business," and "relocation" for purposes of sections 18 to 30.
Section 19 [Green Job Opportunity Building Zones; Limitations], subdivision 1 (Zones) requires the area of a Green JOBZ to consist of defined property boundaries in a business subsidy agreement.
Subdivision 2 (Location) provides that a Green JOBZ may be located anywhere in the state.
Subdivision 3 (Border City Development Zones) prohibits the area of a Green JOBZ to include the area of a border city development zone. Prohibits a city to provide tax incentives under Minnesota Statutes 479.1734 (Tax Incentives Outside Zones) to individuals or businesses for operations or activity in a Green JOBZ.
Subdivision 4 (Duration Limit) provides that the maximum duration of a zone is 12 years. Prohibits the Commissioner of Employment and Economic Development to approve a business subsidy agreement after December 31, 2015.
Section 20 [Application for Designation], subdivision 1 (Eligibility) provides that one or more local government units, or a joint powers board, acting on behalf of two or more units, may apply for designation of an area as a Green JOBZ. Specifies that all or part of the proposed area must be located within the boundaries of each governmental unit.
Subdivision 2 (Application) requires a local government unit to submit an application to the Commissioner of Employment and Economic Development to receive designation for a Green JOBZ.
Subdivision 3 (State Review Criteria) specifies the criteria that the Commissioner must consider when reviewing an application and a business subsidy agreement.
Section 21 [Business Subsidy Agreements; Reports], subdivision 1 (Green JOBZ Business Subsidy Agreement) requires business subsidy agreements, as described in Article 1, Section 18, to comply with this section.
Subdivision 2 (Business Subsidy Agreement Requirements) provides that a business subsidy agreement is not effective until the Commissioner of Employment and Economic Development approves it. Describes the items that must be included in an agreement.
Subdivision 3 (Standard Agreement) requires the Commissioner to develop a standard business subsidy agreement.
Subdivision 4 (Business Subsidy Reports) requires local units of government to provide the Commissioner a report two years after entering into a business subsidy agreement and each year thereafter on the progress of the qualified business. If a qualified business fails to provide information necessary for the first report, the Commissioner must hold it out of compliance or remove it from the program.
Subdivision 5 (Public Notice and Hearing) requires a local government to provide public notice and hearing prior to approving a business subsidy agreement.
Section 22 [Designation of Green Job Opportunity Building Zones], subdivision 1 (Designation Schedule) provides that Green JOBZs are designated continuously after the Commissioner of Employment and Economic Development approves an application and the duration of the zone begins when the Commissioner approves the business subsidy agreement.
Subdivision 2 (Geographic Distribution) requires the Commissioner to set a goal to distribute zones throughout the state.
Subdivision 4 (Rulemaking Exemption) provides that the Commissioner's actions in establishing the Green JOBZ program are not rules and are not subject to the Administrative Procedure Act.
Section 23 [Tax Incentives Available in Zones] specifies the tax benefits that a qualified business located in a Green JOBZ and an individual who invests in a qualified business may receive.
Section 24 [Individual Income Tax Exemption], subdivision 1 (Application) exempts an individual, estate, or trust operating a trade or business in a Green JOBZ, or an individual, estate, or trust making a qualified investment in a qualified business in a Green JOBZ from income and franchise taxes as specified in the section.
Subdivision 2 (Rents) exempts an individual, estate, or trust from income and franchise taxes on net rents derived from real or tangible property as specified.
Subdivision 3 (Business Income) exempts an individual, estate, or trust from income and franchise taxes on net income from the operation of a qualified business in a Green JOBZ as specified.
Subdivision 4 (Capital Gains) exempts an individual, estate, or trust from income and franchise taxes on the net gain derived on the sale or exchange of real property or tangible personal property used by a qualified business and derived on the sale of an ownership interest in a qualified business operating in a Green JOBZ as specified.
Section 25 [Corporate Franchise Tax Exemption] exempts a qualified business from the corporate franchise tax, the alternative minimum tax, and the minimum fee on the portion of its income attributable to operation within a Green JOBZ. Specifies how the exemption is determined.
Section 26 [Green Jobs Credit], provides for a credit for payroll in excess of the threshold defined for the Green JOBZ program in this section.
Section 27 [Repayment of Tax Benefits by Businesses that No Longer Operate in a Zone], subdivision 1 (Repayment Obligation) requires a business to repay any benefits received from Article 1, Section 23, during the first two years before it ceased to be a qualified business or it failed to meet the requirements of the business subsidy agreement.
Subdivision 1a (Repayment Obligation of Businesses not Operating in Zone) requires persons that receive benefits without operating a business in a Green JOBZ to repay benefits as described in this section.
Subdivision 2 (Definitions) defines "business," "Commissioner," and "person that receives benefits without operating a business in a zone" for purposes of the section.
Subdivision 3 (Disposition of Repayment) provides that repayment must be paid to the state, the county, and the Commissioner of Revenue as specified.
Subdivision 4 (Repayment Procedures) describes the process for repayment of taxes including how taxes must be assessed and how a business must file.
Subdivision 5 (Waiver Authority) allows the Commissioner of Revenue to waive all or part of repayment if it is not in the best interest of the state or local governments and the business ceased operation due to specified circumstances.
Subdivision 6 (Reconciliation) provides that this section prevails when it is inconsistent with specified sections relating to business subsidies and economic grants.
Section 28 [Breach of Agreements by Businesses that Continue to Operate in Zone], paragraph (a) defines a "Business in violation of its business subsidy agreement but not subject to section 469.369" as a business that is operating in violation of a business subsidy agreement, but still maintains a level of operation in the Green JOBZ that does not subject it to repayment.
Paragraph (b) provides that a business described in paragraph (a) that does not sign a new or amended business subsidy agreement is subject to repayment from the day it ceases to meet the requirements of the first agreement.
Paragraph (c) provides that a business described in paragraph (a) ceases to be a qualified business the last day that is has to meet the goals stated in the agreement. Authorizes the Commissioner of Employment and Economic Development to extend the period to meet the goals in the agreement for up to one year.
Paragraph (d) specifies when a business described in paragraph (a) is not eligible for income, franchise, sales, and property tax exemptions.
Paragraph (e) describes the process that a business described in paragraph (a) must go through to resume eligibility of benefits.
Paragraph (f) specifies how the length of ineligibility must be determined.
Paragraph (g) prohibits an adjusted zone duration of property from being altered again to allow the business additional benefits.
Paragraph (h) provides that a business described in paragraph (a) becomes eligible for benefits by entering into a new or amended business subsidy agreement as specified.
Paragraph (i) provides that a business that violates the terms of an agreement authorized under paragraph (h) is permanently barred from seeking benefits and is subject to repayment.
Section 29 [Prohibition Against Amendments to Business Subsidy Agreement] prohibits the terms of a business subsidy agreement to be amended to change job creation, job retention, or wage goals, except as authorized under Article 1, Section 28.
Section 30 [Certification of Continuing Eligibility for Green JOBZ Benefits] requires a qualified business to send an annual certification to the Commissioner of Revenue on whether it is in compliance with the agreements required as a condition for eligibility of tax benefits in Article 1, Section 23. Provides that if a qualified business fails to submit a certification or misrepresents information it is subject to repayment and is permanently barred from obtaining benefits. Requires the Commissioner of Revenue to send a notice to a business that fails to submit a timely certification requiring it to be sent within 30 days and advising on the consequences of failure to do so. Provides that the certification is public information.
Section 31 [State Auditor; Audits of Green Job Opportunity Building Zones and Business Subsidy Agreements] allows the Office of the State Auditor to annually audit the creation and operation of all Green JOBZs and business subsidy agreements. Provides that the State Auditor may request tax return information from the Commissioner of Revenue and wage detail reports from the Commissioner of Employment and Economic Development as necessary to perform an audit.
ARTICLE 2 MINNESOTA SMALL BUSINESS INVESTMENT COMPANY CREDIT
Section 1 [Minnesota Small Business Investment Company Credit], subdivision 1 (Definitions) defines "affiliate," "allocation date," "designated capital," "Minnesota small business investment company," "certified investor," "person," "qualified business," "qualified debt instrument," "qualified distribution," "qualified investment," "qualified underserved area business," "state premium tax liability," and "qualified seed fund" for purposes of Article 2, Section 1.
Subdivision 2 (Certification), paragraphs (a) and (b), require the Commissioner to provide a standardized format for applying for the small business investment credit. Requires an applicant to:
file an application with the department;
pay a nonrefundable application fee of $7,500;
Paragraph (c) authorizes the department to certify an applicant that is located, headquartered, and licensed or registered to conduct business in Minnesota, that invests cash in qualified businesses as its primary business activity, and that meets the criteria of the section.
Paragraph (d) requires the department to review the applicant's organizational documents and business history to determine if the requirements of the section are satisfied.
Paragraph (e) requires the department to issue a certification or refusal within 60 days after receipt of an application.
Paragraph (f) requires the department to begin accepting applications to become a Minnesota business investment company by September 30, 2009.
Subdivision 3 (Requirements), paragraph (a), provides that an insurance company or affiliate must not beneficially own 15 percent or more of the voting securities or other voting ownership interest, manage, or control the direction of investments of a Minnesota small business investment company.
Paragraph (b) authorizes a Minnesota small business investment company to obtain one or more guarantees, indemnities, bonds, insurance policies, or other payment undertakings for the benefit of certified investors from any entity, with the exception of aggregation as specified.
Paragraph (c) provides that the subdivision does not preclude a certified investor, insurance company, or other party from exercising its legal rights and remedies, monitoring a Minnesota small business investment company to ensure its compliance, or disallowing any investments that have not been approved by the department.
Paragraph (d) authorizes the department to contract with an independent third party to review, investigate, and certify that the applications comply with the provisions of this section.
Subdivision 4 (Aggregate Limitations on Investment Credits; Allocation), paragraph (a) caps the aggregate amount of investment tax credits to be allocated to all certified investors of Minnesota small business investment companies at $38 million.
Paragraph (b) specifies the way that credit allocations will be filed at the department.
Paragraph (c) specifies that in the event that two or more Minnesota small business investment companies file credit allocation claims on the same day, and the aggregate amount of the credit allocation claims exceeds the aggregate limit of credits or the lesser amount of credits that remain unallocated on that day, the credits will be allocated on a pro rata basis as provided.
Paragraph (d) requires the department to notify the Minnesota small business investment company, within 20 days of receiving a credit allocation claim, about the amount of credits that will be allocated to each of the certified investors. If a Minnesota small business investment company does not receive the necessary investment of designated capital within ten business days of the notice of allocation, the excess amount will be forfeited. The forfeited credits will be reallocated among certified investors of other Minnesota small business investment companies on a pro rata basis. Authorizes the Commissioner to levy a fine of not more than $50,000 on any certified investor that does not invest the full amount of designated capital allocated by the department.
Paragraph (e) prohibits a certified investor, on an aggregate basis, to file an allocation claim for more than 25 percent of the maximum amount of authorized investment tax credits.
Subdivision 5 (Requirements for Continuance of Certification), paragraph (a), specifies the qualified investments that a Minnesota small business investment company must make to continue to be eligible for certification.
Paragraph (b) requires a Minnesota small business investment company to request a written determination from the department that the proposed investment will qualify prior to making the investment. Specifies the notice requirements. Authorizes the department to consider the proposed investment a qualified investment, even if it does not meet the definition of a qualified investment or a qualified business.
Paragraph (c) provides that the designated capital not invested in qualified investments by a Minnesota small business investment company may be held or invested in the manner that the company deems appropriate. Provides that designated capital returned to a Minnesota small business investment company after it has been invested in qualified investments, may be invested again in qualified investments and count toward the requirements of this section.
Paragraph (d) provides that a Minnesota small business investment company may not receive management fees if, within four years after its allocation date, the company has not placed at least 60 percent of the designated capital in qualified investments.
Paragraph (e) provides that a Minnesota small business investment company will not be able to receive management fees if, within six years after its allocation date, the company has not placed at least 100 percent of the designated capital in qualified investments.
Paragraph (f) prohibits a Minnesota small business investment company from making a qualified investment without the specific approval of the department if after the investment, on an aggregate basis with its affiliates, it would own more than 49 percent of the common equity or voting interests of the qualified business. Specifies Minnesota small business investment company rights with respect to a default.
Paragraph (g) prohibits a Minnesota small business investment company from investing more than 15 percent of its designated capital in any one qualified business without the specific approval of the department.
Paragraph (h) requires the cumulative amount of all qualified investments made by a Minnesota small business investment company from the allocation date to be considered for purposes of calculating investment percentage requirements under this section.
Subdivision 6 (Minnesota Business Investment Company Reporting Requirements), paragraph (a), specifies the information that a Minnesota small business investment company must report to the department.
Paragraph (b) requires a Minnesota small business investment company to pay the department an annual, nonrefundable certification fee of $5,000 on or before April 1, or $10,000 if later.
Paragraph (c) specifies notice requirements relating to subdivision 5, paragraph (a).
Subdivision 7 (Distributions), paragraph (a) authorizes a Minnesota small business investment company to make qualified distributions at any time and specifies the circumstances under which it can make a distribution that is not qualified.
Paragraph (b) specifies when a business is deemed to have relocated outside of Minnesota. Specifies the circumstances under which the cumulative amount of qualified investments must be reduced when a business in which a qualified investment is made relocates to another state.
Paragraph (c) specifies the amount that a Minnesota small business investment company must pay to a qualified seed fund.
Subdivision 8 (Audit; State Participation), paragraph (a) provides that cumulative distributions made by a Minnesota small business investment company to its certified investors and equity holders, other than qualified distributions, may be audited as specified.
Paragraph (b) specifies the circumstances under which a Minnesota small business investment company must pay the department a portion of its distributions.
Subdivision 9 (Decertification), paragraph (a), requires the department to conduct an annual review of each Minnesota small business investment company. The cost will be paid by each company according to a fee schedule.
Paragraph (b) provides that any material violation of the section may be grounds for decertification, recapture of tax credits previously taken, and forfeiture of future tax credits.
Paragraph (c) provides that once a Minnesota small business investment company has invested an amount cumulatively equal to 100 percent of its designated capital in qualified investments and has met the requirements of the section, it is no longer subject to regulation or reporting. If the company has not met the requirements, the department must provide notice within 60 days.
Paragraph (d) requires the department to send notice of decertification to the Commissioner of Revenue and to each certified investor whose tax credit was subject to recapture or forfeiture.
Subdivision 10 (Revocation of Certification) authorizes the department to revoke the certification of a Minnesota small business investment company as specified.
Subdivision 11 (Registration Requirements) requires all investments for which tax credits are awarded to be registered or specifically exempt from registration.
Subdivision 12 (Reporting) requires the department to prepare an annual report that includes information as specified.
Subdivision 13 (Rules) provides that the Commissioner's actions in establishing procedures and requirements and in making determinations and certifications to administer this section are not rules and are not subject to the Administrative Procedure Act.
Section 2 [Minnesota Small Business Investment Company Credit], subdivision 1 (Credit Allowed), paragraph (a) provides a tax credit against the insurance tax for certified investors.
Paragraph (b) prohibits the credit for the taxable year to exceed the liability for tax under that year. If there is an excess, it must be an investment carryover to future taxable years.
Paragraph (c) provides that a certified investor claiming a credit is not required to pay an additional retaliatory tax.
Subdivision 2 (Repayment of Tax Benefits Received), paragraph (a) provides that decertification of a Minnesota small business investment company, or revocation of certification, will result in disallowance of credits to certified investors and repayment of credits claimed for the previous year.
Paragraph (b) provides that specified provisions relating to audit, assessment, refund, collection, and appeals are applicable to credits claimed and repayments. Allows the Commissioner to impose civil penalties.
ARTICLE 3 JOB GROWTH INVESTMENT TAX CREDIT
Section 1 [Job Growth Investment Tax Credit], subdivision 1 (Definitions) defines "qualifying small business," "qualifying green job small business," "regional investment fund," and "qualified taxpayer" for purposes of Article 3, Section 1.
Subdivision 2 (Credit Allowed, Holding Period, Limitations, and Carryover) allows a qualified taxpayer a credit against the income and franchise tax for investments made in a qualified regional investment fund, a qualifying small business, or a qualifying green job small business. Specifies the credit amount, how the credit may be claimed, investments that qualify for the credit, and the process for credit carryover.
Subdivision 3 (Qualified Regional Investment Fund; Requirements) provides the requirements for certification of a qualified regional investment fund.
Subdivision 4 (Certification of Funds) specifies the application process for qualified regional investment funds and sets requirements for how certifications may be awarded. Provides for an application fee of $1,250.
Subdivision 5 (Fund Requirements) requires the Commissioner to enter into an agreement with each of the qualified regional investment funds as specified. Requires an annual report.
Subdivision 6 (Certification of Individual Investors) specifies the application process for qualified taxpayers for certification as a qualified individual investor and sets requirements for how certifications may be awarded. Provides for an application fee of $250.
Subdivision 7 (Qualified Individual Investor Requirements) requires the Commissioner to enter into an agreement with each qualified individual investor as specified. Requires an annual report.
Subdivision 8 (Rulemaking) provides that the Commissioner's actions in establishing procedures and requirements and in making determinations and certifications to administer this section are not rules and are not subject to the Administrative Procedure Act.
Section 2, subdivision 36 (Job Growth Investment Tax Credit) provides a taxpayer a credit against the income and franchise taxes as specified. Authorizes the Commissioner to utilize audit and examination powers to verify taxpayer eligibility.
ARTICLE 4 BIOMETHANE ENERGY
Section 1, subdivision 5b (Qualifying Biomethane Energy Project) allows a natural gas utility to include programs for the installation of qualifying biomethane energy projects in its conservation plan. Provides that energy savings may not be counted toward the utility's one percent goal, but may count toward savings above that percentage and may be considered when establishing performance incentives. Allows cost-effectiveness to be measured using a different standard than for other energy conservation improvements if the Commissioner determines that it is in the public interest to encourage biomethane projects.
Section 2 [Distributed Energy Resources], subdivision 1 (Generation Projects) allows any utility to use five percent of the total amount to be spent on energy conservation improvements on qualifying Minnesota biomethane energy projects.
Subdivision 2 (Definitions) defines a "qualifying biomethane energy project" and modifies the definition of a "qualifying solar electric project" for purposes of this subdivision and Minnesota Statutes 216B.241, subdivision 1 (Energy Conservation Improvement).
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