H.F. No. 445, as introduced - 86th Legislative Session (2009-2010) Posted on Feb 02, 2009
1.1A bill for an act1.2relating to taxation; corporate franchise tax; allowing a five-year tax exemption
1.3for certain new facilities and expansions; amending Minnesota Statutes 2008,
1.4sections 290.01, subdivision 29; 290.0921, subdivision 3; 290.0922, subdivisions
1.52, 3; proposing coding for new law in Minnesota Statutes, chapter 116J.
1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.7 Section 1. [116J.8751] TAX EXEMPTION FOR NEW AND EXPANDING
1.9 Subdivision 1. Definitions. (a) As used in the section, the following terms have
1.10the meanings given.
1.11(b) "Project" means any revenue-producing enterprise, or any combination of two or
1.12more of these enterprises, if the project is conducted by a qualifying business.
1.13(c) "Project percentage" means the following fraction reduced to a percentage for
1.14an approved project:
1.15(1) the numerator of the fraction is:
1.16(i) the ratio of the taxpayer's property factor under section 290.191 attributable to
1.17the project for the taxable year over the property factor numerator determined under
1.18section 290.191, plus
1.19(ii) the ratio of the taxpayer's project payroll factor under paragraph (d) over the
1.20payroll factor numerator determined under section 290.191; and
1.21(2) the denominator of the fraction is two.
1.22When calculating the project percentage for a business that is part of a unitary
1.23business as defined under section 290.17, subdivision 4, the denominator of the payroll
1.24and property factors is the Minnesota payroll and property of the unitary business as
1.25reported on the combined report under section 290.17, subdivision 4, paragraph (j).
2.1(d) "Project payroll factor" is that portion of the payroll factor under section 290.191
2.2attributable to wages or salaries paid to individuals employed as a result of the project.
2.3(e) "Qualifying business" means a corporation or other entity subject to tax under
2.4section 290.02 that either:
2.5(1) through the employment of knowledge or labor adds value to a product, process,
2.6or service that results in the creation of new wealth; or
2.7(2) operates tourism-related businesses and activities, including recreation, historical
2.8and cultural events, guide services, and unique lodging and food services that serve as
2.10(f) "Relocates" means that the trade or business:
2.11(1) ceases one or more operations or functions at another location in Minnesota and
2.12begins performing substantially the same operations or functions in connection with the
2.13eligible project; or
2.14(2) reduces employment at another location in Minnesota during a period starting
2.15one year before and ending one year after it begins operation of the project and its
2.16employees in the project are engaged in the same line of business as the employees at the
2.17location where it reduced employment; but excludes
2.18(3) an expansion by a business that establishes a new facility that does not replace or
2.19supplant an existing operation or employment, in whole or in part.
2.20"Trade or business" includes any business entity that is substantially similar in operation
2.21or ownership to the business entity seeking to be a qualified business under this section.
2.22(g) "Relocation payroll percentage" is a fraction, the numerator of which is the
2.23project payroll of the business for the taxable year minus the payroll from the relocated
2.24operations in the last full year of operations prior to the relocation, and the denominator of
2.25which is the project payroll of the business for the taxable year. The relocation payroll
2.26percentage of a business that is not a relocating business is 100 percent.
2.27 Subd. 2. Application for tax exemption. Upon application by a project operator to
2.28the commissioner, the net income of a project may be exempt from corporate franchise
2.29tax for a period not exceeding five years from commencement of project operations. The
2.30application for the exemption must be reviewed as to the eligibility of the project by
2.31the commissioner who shall determine whether the granting of the exemption is in the
2.32best interest of the people of Minnesota and, if the commissioner so determines, shall
2.33approve the exemption. A qualified business is eligible only if it either is a new business
2.34or is an existing business that is constructing, purchasing or leasing additional facilities
2.35in Minnesota, and is employing ... or more additional employees in Minnesota. The
2.36commissioner shall, after making its determination, enter a business subsidy agreement
3.1with the applicant and after doing so shall certify the findings to the commissioner of
3.3 Subd. 3. Notice to competitors. The project operator shall provide notice to
3.4competitors in the manner prescribed by the commissioner.
3.5 Subd. 4. Calculation of exemption. (a) A qualified business is exempt from
3.6taxation on its income attributable to an eligible project approved by the commissioner.
3.7The exemption applies to the tax under section 290.02, the alternative minimum tax under
3.8section 290.0921, and the minimum fee under section 290.0922, on the portion of its
3.9income attributable to the eligible project. This exemption is determined as follows:
3.10(1) for purposes of the tax imposed under section 290.02, by multiplying its
3.11taxable net income by its project percentage and by its relocation payroll percentage and
3.12subtracting the result in determining taxable income;
3.13(2) for purposes of the alternative minimum tax under section 290.0921, by
3.14multiplying its alternative minimum taxable income by its project percentage and by
3.15its relocation payroll percentage and reducing alternative minimum taxable income by
3.16this amount; and
3.17(3) for purposes of the minimum fee under section 290.0922, by excluding project
3.18property and payroll from the computations of the fee or by exempting the entity under
3.19section 290.0922, subdivision 2, clause (9).
3.20(b) No subtraction is allowed under this section in excess of 20 percent of the sum of
3.21the corporation's project payroll and the adjusted basis of the property when the property
3.22is first used in the project by the corporation.
3.23EFFECTIVE DATE.This section is effective July 1, 2009, and applies to taxable
3.24years beginning after December 31, 2008.
3.25 Sec. 2. Minnesota Statutes 2008, section 290.01, subdivision 29, is amended to read:
3.26 Subd. 29. Taxable income. The term "taxable income" means:
3.27(1) for individuals, estates, and trusts, the same as taxable net income;
3.28(2) for corporations, the taxable net income less
3.29(i) the net operating loss deduction under section
3.30(ii) the dividends received deduction under section
3.31(iii) the exemption for operating in a job opportunity building zone under section
3.33(iv) the exemption for operating in a biotechnology and health sciences industry
3.34zone under section
4.1(v) the exemption for operating in an international economic development zone
4.3(vi) the exemption for projects approved under section 116J.8751.
4.4EFFECTIVE DATE.This section is effective for taxable years beginning after
4.5December 31, 2008.
4.6 Sec. 3. Minnesota Statutes 2008, section 290.0921, subdivision 3, is amended to read:
4.7 Subd. 3. Alternative minimum taxable income. "Alternative minimum taxable
4.8income" is Minnesota net income as defined in section
4.9includes the adjustments and tax preference items in sections 56, 57, 58, and 59(d), (e),
4.10(f), and (h) of the Internal Revenue Code. If a corporation files a separate company
4.11Minnesota tax return, the minimum tax must be computed on a separate company basis.
4.12If a corporation is part of a tax group filing a unitary return, the minimum tax must be
4.13computed on a unitary basis. The following adjustments must be made.
4.14(1) For purposes of the depreciation adjustments under section 56(a)(1) and
4.1556(g)(4)(A) of the Internal Revenue Code, the basis for depreciable property placed in
4.16service in a taxable year beginning before January 1, 1990, is the adjusted basis for federal
4.17income tax purposes, including any modification made in a taxable year under section
4.20For taxable years beginning after December 31, 2000, the amount of any remaining
4.21modification made under section
4.23allowance in the first taxable year after December 31, 2000.
4.24(2) The portion of the depreciation deduction allowed for federal income tax
4.25purposes under section 168(k) of the Internal Revenue Code that is required as an
4.26addition under section
4.27alternative minimum taxable income.
4.28(3) The subtraction for depreciation allowed under section
4.29clause (18), is allowed as a depreciation deduction in determining alternative minimum
4.31(4) The alternative tax net operating loss deduction under sections 56(a)(4) and 56(d)
4.32of the Internal Revenue Code does not apply.
4.33(5) The special rule for certain dividends under section 56(g)(4)(C)(ii) of the Internal
4.34Revenue Code does not apply.
5.1(6) The special rule for dividends from section 936 companies under section
5.256(g)(4)(C)(iii) does not apply.
5.3(7) The tax preference for depletion under section 57(a)(1) of the Internal Revenue
5.4Code does not apply.
5.5(8) The tax preference for intangible drilling costs under section 57(a)(2) of the
5.6Internal Revenue Code must be calculated without regard to subparagraph (E) and the
5.7subtraction under section
5.8(9) The tax preference for tax exempt interest under section 57(a)(5) of the Internal
5.9Revenue Code does not apply.
5.10(10) The tax preference for charitable contributions of appreciated property under
5.11section 57(a)(6) of the Internal Revenue Code does not apply.
5.12(11) For purposes of calculating the tax preference for accelerated depreciation or
5.13amortization on certain property placed in service before January 1, 1987, under section
5.1457(a)(7) of the Internal Revenue Code, the deduction allowable for the taxable year is the
5.15deduction allowed under section
5.16For taxable years beginning after December 31, 2000, the amount of any remaining
5.17modification made under section
5.18depreciation or amortization allowance in the first taxable year after December 31, 2004.
5.19(12) For purposes of calculating the adjustment for adjusted current earnings in
5.20section 56(g) of the Internal Revenue Code, the term "alternative minimum taxable
5.21income" as it is used in section 56(g) of the Internal Revenue Code, means alternative
5.22minimum taxable income as defined in this subdivision, determined without regard to the
5.23adjustment for adjusted current earnings in section 56(g) of the Internal Revenue Code.
5.24(13) For purposes of determining the amount of adjusted current earnings under
5.25section 56(g)(3) of the Internal Revenue Code, no adjustment shall be made under section
5.2656(g)(4) of the Internal Revenue Code with respect to (i) the amount of foreign dividend
5.27gross-up subtracted as provided in section
5.28amount of refunds of income, excise, or franchise taxes subtracted as provided in section
5.30income subtracted as provided in section
5.31(14) Alternative minimum taxable income excludes the income from operating in a
5.32job opportunity building zone as provided under section
5.33(15) Alternative minimum taxable income excludes the income from operating in a
5.34biotechnology and health sciences industry zone as provided under section
5.35(16) Alternative minimum taxable income excludes the income from operating in an
5.36international economic development zone as provided under section
6.1(17) Alternative minimum taxable income excludes the income attributable to an
6.2approved project under section 116J.8751.
6.3Items of tax preference must not be reduced below zero as a result of the
6.4modifications in this subdivision.
6.5EFFECTIVE DATE.This section is effective for taxable years beginning after
6.6December 31, 2008.
6.7 Sec. 4. Minnesota Statutes 2008, section 290.0922, subdivision 2, is amended to read:
6.8 Subd. 2. Exemptions. The following entities are exempt from the tax imposed
6.9by this section:
6.10(1) corporations exempt from tax under section
6.11(2) real estate investment trusts;
6.12(3) regulated investment companies or a fund thereof; and
6.13(4) entities having a valid election in effect under section 860D(b) of the Internal
6.15(5) town and farmers' mutual insurance companies;
6.16(6) cooperatives organized under chapter 308A or 308B that provide housing
6.17exclusively to persons age 55 and over and are classified as homesteads under section
6.19(7) an entity, if for the taxable year all of its property is located in a job opportunity
6.20building zone designated under section
6.21building zone payroll under section
6.22(8) an entity, if for the taxable year all of its property is located in an international
6.23economic development zone designated under section
6.24international economic development zone payroll under section
6.25under this clause applies to taxable years beginning during the duration of the international
6.26economic development zone
6.27(9) an entity, if for the taxable year its project percentage under section 116J.8751
6.28is 100 percent.
6.29Entities not specifically exempted by this subdivision are subject to tax under this
6.30section, notwithstanding section
6.31EFFECTIVE DATE.This section is effective for taxable years beginning after
6.32December 31, 2008.
6.33 Sec. 5. Minnesota Statutes 2008, section 290.0922, subdivision 3, is amended to read:
7.1 Subd. 3. Definitions. (a) "Minnesota sales or receipts" means the total sales
7.2apportioned to Minnesota pursuant to section
7.3attributed to Minnesota pursuant to section
7.4total sales or receipts apportioned or attributed to Minnesota pursuant to any other
7.5apportionment formula applicable to the taxpayer.
7.6(b) "Minnesota property" means total Minnesota tangible property as provided in
7.8but does not include: (1) property located in a job opportunity building zone designated
7.10health sciences industry zone designated under section
7.11beginning during the duration of the zone, property of a qualified business located in
7.12the international economic development zone designated under section
7.13property attributable to a project approved under section 116J.8751. Intangible property
7.14shall not be included in Minnesota property for purposes of this section. Taxpayers who
7.15do not utilize tangible property to apportion income shall nevertheless include Minnesota
7.16property for purposes of this section. On a return for a short taxable year, the amount of
7.17Minnesota property owned, as determined under section
7.18Minnesota property based on a fraction in which the numerator is the number of days in
7.19the short taxable year and the denominator is 365.
7.20(c) "Minnesota payrolls" means total Minnesota payrolls as provided in section
7.23payrolls under section
7.24the duration of the zone, international economic development zone payrolls under section
7.26116J.8751. Taxpayers who do not utilize payrolls to apportion income shall nevertheless
7.27include Minnesota payrolls for purposes of this section.
7.28EFFECTIVE DATE.This section is effective for taxable years beginning after
7.29December 31, 2008.