Bill Text: MN SF730 | 2013-2014 | 88th Legislature | Engrossed
Bill Title: Small business investment credit modification
Spectrum: Bipartisan Bill
Status: (Introduced - Dead) 2013-03-05 - Comm report: To pass as amended and re-refer to Taxes [SF730 Detail]
Download: Minnesota-2013-SF730-Engrossed.html
1.2relating to economic development; modifying the small business investment
1.3credit; amending Minnesota Statutes 2012, section 116J.8737, subdivisions 1,
1.42, 5, 7, 8, 9.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2012, section 116J.8737, subdivision 1, is amended to
1.7read:
1.8 Subdivision 1. Definitions. (a) For the purposes of this section, the following terms
1.9have the meanings given.
1.10(b) "Qualified small business" means a business that has been certified by the
1.11commissioner under subdivision 2.
1.12(c) "Qualified investor" means an investor who has been certified by the
1.13commissioner under subdivision 3.
1.14(d) "Qualified fund" means a pooled angel investment network fund that has been
1.15certified by the commissioner under subdivision 4.
1.16(e) "Qualified investment" means a cash investment in a qualified small business
1.17of a minimum of:
1.18(1) $10,000 in a calendar year by a qualified investor; or
1.19(2) $30,000 in a calendar year by a qualified fund.
1.20A qualified investment must be made in exchange for common stock, a partnership
1.21or membership interest, preferred stock,debt with mandatory conversion to equity, or an
1.22equivalent ownership interest as determined by the commissioner.
1.23(f) "Family" means a family member within the meaning of the Internal Revenue
1.24Code, section 267(c)(4).
2.1(g) "Pass-through entity" means a corporation that for the applicable taxable year is
2.2treated as an S corporation or a general partnership, limited partnership, limited liability
2.3partnership, trust, or limited liability company and which for the applicable taxable year is
2.4not taxed as a corporation under chapter 290.
2.5(h) "Intern" means a student of an accredited institution of higher education, or a
2.6former student who has graduated in the past six months from an accredited institution
2.7of higher education, who is employed by a qualified small business in a nonpermanent
2.8position for a duration of nine months or less that provides training and experience in the
2.9primary business activity of the business.
2.10(i) "Qualified greater Minnesota business" means a qualified small business that
2.11is also certified by the commissioner as a qualified greater Minnesota business under
2.12subdivision 2, paragraph (h).
2.13(j) "Liquidation event" means a conversion of qualified investment for cash, cash
2.14and other consideration, or any other form of equity or debt interest.
2.15EFFECTIVE DATE.This section is effective for qualified small businesses
2.16certified after June 30, 2013.
2.17 Sec. 2. Minnesota Statutes 2012, section 116J.8737, subdivision 2, is amended to read:
2.18 Subd. 2. Certification of qualified small businesses. (a) Businesses may apply
2.19to the commissioner for certification as a qualified small business for a calendar year.
2.20In addition, the business' application may request certification as a qualified greater
2.21Minnesota business under paragraph (h). The application must be in the form and
2.22be made under the procedures specified by the commissioner, accompanied by an
2.23application fee of $150. Application fees are deposited in the small business investment
2.24tax credit administration account in the special revenue fund. The application for
2.25certification for 2010 must be made available on the department's Web site by August 1,
2.262010. Applications for subsequent years' certification must be made available on the
2.27department's Web site by November 1 of the preceding year.
2.28(b) Within 30 days of receiving an application for certification under this
2.29subdivision, the commissioner must either certify the business as satisfying the conditions
2.30required of a qualified small business or a qualified greater Minnesota business, request
2.31additional information from the business, or reject the application for certification. If
2.32the commissioner requests additional information from the business, the commissioner
2.33must either certify the business or reject the application within 30 days of receiving the
2.34additional information. If the commissioner neither certifies the business nor rejects
2.35the application within 30 days of receiving the original application or within 30 days of
3.1receiving the additional information requested, whichever is later, then the application is
3.2deemed rejected, and the commissioner must refund the $150 application fee. A business
3.3that applies for certification and is rejected may reapply.
3.4(c) To receive certification as a qualified small business, a business must satisfy
3.5all of the following conditions:
3.6(1) the business has its headquarters in Minnesota;
3.7(2) at least 51 percent of the business's employees are employed in Minnesota, and
3.851 percent of the business's total payroll is paid or incurred in the state;
3.9(3) the business is engaged in, or is committed to engage in, innovation in Minnesota
3.10in one of the following as its primary business activity:
3.11(i) using proprietary technology to add value to a product, process, or service in a
3.12qualified high-technology field;
3.13(ii) researching or developing a proprietary product, process, or service in a qualified
3.14high-technology field; or
3.15(iii) researching, developing, or producing a new proprietary technology for use in
3.16the fields of agriculture, tourism, forestry, mining, manufacturing, or transportation;
3.17(4) other than the activities specifically listed in clause (3), the business is not
3.18engaged in real estate development, insurance, banking, lending, lobbying, political
3.19consulting, information technology consulting, wholesale or retail trade, leisure,
3.20hospitality, transportation, construction, ethanol production from corn, or professional
3.21services provided by attorneys, accountants, business consultants, physicians, or health
3.22care consultants;
3.23(5) the business has fewer than 25 employees;
3.24(6) the business must pay its employees annual wages of at least 175 percent of the
3.25federal poverty guideline for the year for a family of four and must pay its interns annual
3.26wages of at least 175 percent of the federal minimum wage used for federally covered
3.27employers, except that this requirement must be reduced proportionately for employees
3.28and interns who work less than full-time, and does not apply to an executive, officer, or
3.29member of the board of the business, or to any employee who owns, controls, or holds
3.30power to vote more than 20 percent of the outstanding securities of the business;
3.31(7) the business has not been in operation for more than ten years;
3.32(8) the business has not previously received private equity investments of more
3.33than $4,000,000;and
3.34 (9) the business is not an entity disqualified under section80A.50 , paragraph (b),
3.35clause (3);
3.36 (10) the business has not issued securities that are traded on a public exchange; and
4.1 (11) the proprietary technology is not older than ten years.
4.2(d) In applying the limit under paragraph (c), clause (5), the employees in all members
4.3of the unitary business, as defined in section290.17, subdivision 4 , must be included.
4.4(e) In order for a qualified investment in a business to be eligible for tax credits,:
4.5 (1) the business must have applied for and received certification for the calendar
4.6year in which the investment was made prior to the date on which the qualified investment
4.7was made;
4.8(2) the business must not have issued securities that are traded on a public exchange;
4.9(3) the business must not issue securities that are traded on a public exchange within
4.10180 days after the date on which the qualified investment was made; and
4.11(4) the business must not have a liquidation event within 180 days after the date on
4.12which the qualified investment was made.
4.13(f) The commissioner must maintain a list of qualified small businesses and qualified
4.14greater Minnesota businesses certified under this subdivision for the calendar year and
4.15make the list accessible to the public on the department's Web site.
4.16(g) For purposes of this subdivision, the following terms have the meanings given:
4.17(1) "qualified high-technology field" includes aerospace, agricultural processing,
4.18renewable energy, energy efficiency and conservation, environmental engineering, food
4.19technology, cellulosic ethanol, information technology, materials science technology,
4.20nanotechnology, telecommunications, biotechnology, medical device products,
4.21pharmaceuticals, diagnostics, biologicals, chemistry, veterinary science, and similar
4.22fields;and
4.23(2) "proprietary technology" means the technical innovations that are unique and
4.24legally owned or licensed by a business and includes, without limitation, those innovations
4.25that are patented, patent pending, a subject of trade secrets, or copyrighted; and
4.26(3) "greater Minnesota" means the area of Minnesota located outside of the
4.27metropolitan area as defined in section 473.121, subdivision 2.
4.28(h) To receive certification as a qualified greater Minnesota business, a business must
4.29satisfy all of the requirements of paragraph (c) and must satisfy the following conditions:
4.30(1) the business has its headquarters in greater Minnesota; and
4.31(2) at least 51 percent of the business's employees are employed in greater Minnesota,
4.32and 51 percent of the business's total payroll is paid or incurred in greater Minnesota.
4.33EFFECTIVE DATE.This section is effective for qualified small businesses
4.34certified after June 30, 2013.
4.35 Sec. 3. Minnesota Statutes 2012, section 116J.8737, subdivision 5, is amended to read:
5.1 Subd. 5. Credit allowed. (a) A qualified investor or qualified fund is eligible for a
5.2credit equal to:
5.3(1) 25 percent of the qualified investment in a qualified small business; or
5.4(2) 50 percent of the qualified investment in a qualified greater Minnesota business.
5.5Investments made by a pass-through entity qualify for a credit only if the entity is a
5.6qualified fund. The commissioner must not allocate more than $11,000,000 in credits to
5.7qualified investors or qualified funds for taxable years beginning after December 31, 2009,
5.8and before January 1, 2011, and must not allocate more than $12,000,000 in credits per
5.9year for taxable years beginning after December 31, 2010, and before January 1, 2013,
5.10or more than $20,000,000 in credits per taxable year for taxable years beginning after
5.11December 31, 2012, and before January 1, 2015. Any portion of a taxable year's credits
5.12that is not allocated by the commissioner does not cancel and may be carried forward to
5.13subsequent taxable years until all credits have been allocated.
5.14(b) The commissioner may not allocate more than a total maximum amount in credits
5.15for a taxable year to a qualified investor for the investor's cumulative qualified investments
5.16as an individual qualified investor and as an investor in a qualified fund; for married
5.17couples filing joint returns the maximum is $250,000, and for all other filers the maximum
5.18is $125,000. The commissioner may not allocate more than a total of $1,000,000 in credits
5.19over all taxable years for qualified investments in any one qualified small business.
5.20(c) The commissioner may not allocate a credit to a qualified investor either as an
5.21individual qualified investor or as an investor in a qualified fund if the investor receives
5.22more than 50 percent of the investor's gross annual income from the qualified small
5.23business in which the qualified investment is proposed. A member of the family of an
5.24individual disqualified by this paragraph is not eligible for a credit under this section. For
5.25a married couple filing a joint return, the limitations in this paragraph apply collectively
5.26to the investor and spouse. For purposes of determining the ownership interest of an
5.27investor under this paragraph, the rules under section 267(c) and 267(e) of the Internal
5.28Revenue Code apply.
5.29(d) Applications for tax credits for 2010 must be made available on the department's
5.30Web site by September 1, 2010, and the department must begin accepting applications
5.31by September 1, 2010. Applications for subsequent years must be made available by
5.32November 1 of the preceding year.
5.33(e) Qualified investors and qualified funds must apply to the commissioner for tax
5.34credits. Tax credits must be allocated to qualified investors or qualified funds in the order
5.35that the tax credit request applications are filed with the department. The commissioner
5.36must approve or reject tax credit request applications within 15 days of receiving the
6.1application. The investment specified in the application must be made within 60 days of
6.2the allocation of the credits. If the investment is not made within 60 days, the credit
6.3allocation is canceled and available for reallocation. A qualified investor or qualified fund
6.4that fails to invest as specified in the application, within 60 days of allocation of the
6.5credits, must notify the commissioner of the failure to invest within five business days of
6.6the expiration of the 60-day investment period.
6.7(f) All tax credit request applications filed with the department on the same day must
6.8be treated as having been filed contemporaneously. If two or more qualified investors or
6.9qualified funds file tax credit request applications on the same day, and the aggregate
6.10amount of credit allocation claims exceeds the aggregate limit of credits under this section
6.11or the lesser amount of credits that remain unallocated on that day, then the credits must
6.12be allocated among the qualified investors or qualified funds who filed on that day on a
6.13pro rata basis with respect to the amounts claimed. The pro rata allocation for any one
6.14qualified investor or qualified fund is the product obtained by multiplying a fraction,
6.15the numerator of which is the amount of the credit allocation claim filed on behalf of
6.16a qualified investor and the denominator of which is the total of all credit allocation
6.17claims filed on behalf of all applicants on that day, by the amount of credits that remain
6.18unallocated on that day for the taxable year.
6.19(g) A qualified investor or qualified fund, or a qualified small business acting on their
6.20behalf, must notify the commissioner when an investment for which credits were allocated
6.21has been made, and the taxable year in which the investment was made. A qualified fund
6.22must also provide the commissioner with a statement indicating the amount invested by
6.23each investor in the qualified fund based on each investor's share of the assets of the
6.24qualified fund at the time of the qualified investment. After receiving notification that the
6.25investment was made, the commissioner must issue credit certificates for the taxable year
6.26in which the investment was made to the qualified investor or, for an investment made by
6.27a qualified fund, to each qualified investor who is an investor in the fund. The certificate
6.28must state that the credit is subject to revocation if the qualified investor or qualified
6.29fund does not hold the investment in the qualified small business for at least three years,
6.30consisting of the calendar year in which the investment was made and the two following
6.31years. The three-year holding period does not apply if:
6.32(1) the investment by the qualified investor or qualified fund becomes worthless
6.33before the end of the three-year period;
6.34(2) 80 percent or more of the assets of the qualified small business is sold before
6.35the end of the three-year period;
6.36(3) the qualified small business is sold before the end of the three-year period; or
7.1(4) the qualified small business's common stock begins trading on a public exchange
7.2before the end of the three-year period.
7.3(h) The commissioner must notify the commissioner of revenue of credit certificates
7.4issued under this section.
7.5EFFECTIVE DATE.This section is effective for taxable years beginning after
7.6December 31, 2012.
7.7 Sec. 4. Minnesota Statutes 2012, section 116J.8737, subdivision 7, is amended to read:
7.8 Subd. 7. Revocation of credits. (a) If the commissioner determines that a
7.9qualified investor or qualified fund did not meet the three-year holding period required in
7.10subdivision 5, paragraph (g), any credit allocated and certified to the investor or fund is
7.11revoked and must be repaid by the investor.
7.12(b) If the commissioner determines that a business did not meet the employment
7.13and payroll requirements in subdivision 2, paragraph (c), clause (2), or (h), clause (2), as
7.14applicable, in any of the five calendar years following the year in which an investment in the
7.15business that qualified for a tax credit under this section was made, the business must repay
7.16the following percentage of the credits allowed for qualified investments in the business:
7.25(c) The commissioner must notify the commissioner of revenue of every credit
7.26revoked and subject to full or partial repayment under this section.
7.27(d) For the repayment of credits allowed under this section and section290.0692 ,
7.28a qualified small business, qualified investor, or investor in a qualified fund must file an
7.29amended return with the commissioner of revenue and pay any amounts required to be
7.30repaid within 30 days after becoming subject to repayment under this section.
7.31EFFECTIVE DATE.This section is effective the day following final enactment.
7.32 Sec. 5. Minnesota Statutes 2012, section 116J.8737, subdivision 8, is amended to read:
7.33 Subd. 8. Data privacy. (a) Data contained in an application submitted to the
7.34commissioner under subdivision 2, 3, or 4 are nonpublic data, or private data on
8.1individuals, as defined in section13.02, subdivision 9 or 12, except that the following
8.2data items are public:
8.3(1) the name, mailing address, telephone number, e-mail address, contact person's
8.4name, and industry type of a qualified small business upon approval of the application
8.5and certification by the commissioner under subdivision 2;
8.6(2) the name of a qualified investor upon approval of the application and certification
8.7by the commissioner under subdivision 3;
8.8(3) the name of a qualified fund upon approval of the application and certification
8.9by the commissioner under subdivision 4;
8.10(4) for credit certificates issued under subdivision 5, the amount of the credit
8.11certificate issued, amount of the qualifying investment, the name of the qualifying investor
8.12or qualifying fund that received the certificate, and the name of the qualifying small
8.13business in which the qualifying investment was made;
8.14(5) for credits revoked under subdivision 7, paragraph (a), the amount revoked and
8.15the name of the qualified investor or qualified fund; and
8.16(6) for credits revoked under subdivision 7, paragraphs (b) and (c), the amount
8.17revoked and the name of the qualified small business.
8.18(b) The following data, including data classified as nonpublic or private, must be
8.19provided to the consultant for use in conducting the program evaluation under subdivision
8.2010:
8.21(1) the commissioner of employment and economic development shall provide data
8.22contained in an application for certification received from a qualified small business,
8.23qualified investor, or qualified fund, and any annual reporting information received on a
8.24qualified small business, qualified investor, or qualified fund; and
8.25(2) the commissioner of revenue shall provide data contained in any applicable tax
8.26returns of a qualified small business, qualified investor, or qualified fund.
8.27EFFECTIVE DATE.This section is effective the day following final enactment.
8.28 Sec. 6. Minnesota Statutes 2012, section 116J.8737, subdivision 9, is amended to read:
8.29 Subd. 9. Report to legislature. Beginning in 2011, the commissioner must
8.30annually report by March 15 to the chairs and ranking minority members of the legislative
8.31committees having jurisdiction over taxes and economic development in the senate and
8.32the house of representatives, in compliance with sections3.195 and
3.197 , on the tax
8.33credits issued under this section. The report must include:
8.34(1) the number and amount of the credits issued;
8.35(2) the recipients of the credits;
9.1(3) for each qualified small business, its location, line of business, and if it received
9.2an investment resulting in certification of tax credits;
9.3(4) the total amount of investment in each qualified small business resulting in
9.4certification of tax credits;
9.5(5) for each qualified small business that received investments resulting in tax
9.6credits, the total amount of additional investment that did not qualify for the tax credit;
9.7(6) the number and amount of credits revoked under subdivision 7;
9.8(7) the number and amount of credits that are no longer subject to the three-year
9.9holding period because of the exceptions under subdivision 5, paragraph (g), clauses
9.10(1) to (4);and
9.11(8) the number of qualified small businesses that are women or minority-owned; and
9.12(9) any other information relevant to evaluating the effect of these credits.
1.3credit; amending Minnesota Statutes 2012, section 116J.8737, subdivisions 1,
1.42, 5, 7, 8, 9.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2012, section 116J.8737, subdivision 1, is amended to
1.7read:
1.8 Subdivision 1. Definitions. (a) For the purposes of this section, the following terms
1.9have the meanings given.
1.10(b) "Qualified small business" means a business that has been certified by the
1.11commissioner under subdivision 2.
1.12(c) "Qualified investor" means an investor who has been certified by the
1.13commissioner under subdivision 3.
1.14(d) "Qualified fund" means a pooled angel investment network fund that has been
1.15certified by the commissioner under subdivision 4.
1.16(e) "Qualified investment" means a cash investment in a qualified small business
1.17of a minimum of:
1.18(1) $10,000 in a calendar year by a qualified investor; or
1.19(2) $30,000 in a calendar year by a qualified fund.
1.20A qualified investment must be made in exchange for common stock, a partnership
1.21or membership interest, preferred stock,
1.22equivalent ownership interest as determined by the commissioner.
1.23(f) "Family" means a family member within the meaning of the Internal Revenue
1.24Code, section 267(c)(4).
2.1(g) "Pass-through entity" means a corporation that for the applicable taxable year is
2.2treated as an S corporation or a general partnership, limited partnership, limited liability
2.3partnership, trust, or limited liability company and which for the applicable taxable year is
2.4not taxed as a corporation under chapter 290.
2.5(h) "Intern" means a student of an accredited institution of higher education, or a
2.6former student who has graduated in the past six months from an accredited institution
2.7of higher education, who is employed by a qualified small business in a nonpermanent
2.8position for a duration of nine months or less that provides training and experience in the
2.9primary business activity of the business.
2.10(i) "Qualified greater Minnesota business" means a qualified small business that
2.11is also certified by the commissioner as a qualified greater Minnesota business under
2.12subdivision 2, paragraph (h).
2.13(j) "Liquidation event" means a conversion of qualified investment for cash, cash
2.14and other consideration, or any other form of equity or debt interest.
2.15EFFECTIVE DATE.This section is effective for qualified small businesses
2.16certified after June 30, 2013.
2.17 Sec. 2. Minnesota Statutes 2012, section 116J.8737, subdivision 2, is amended to read:
2.18 Subd. 2. Certification of qualified small businesses. (a) Businesses may apply
2.19to the commissioner for certification as a qualified small business for a calendar year.
2.20In addition, the business' application may request certification as a qualified greater
2.21Minnesota business under paragraph (h). The application must be in the form and
2.22be made under the procedures specified by the commissioner, accompanied by an
2.23application fee of $150. Application fees are deposited in the small business investment
2.24tax credit administration account in the special revenue fund. The application for
2.25certification for 2010 must be made available on the department's Web site by August 1,
2.262010. Applications for subsequent years' certification must be made available on the
2.27department's Web site by November 1 of the preceding year.
2.28(b) Within 30 days of receiving an application for certification under this
2.29subdivision, the commissioner must either certify the business as satisfying the conditions
2.30required of a qualified small business or a qualified greater Minnesota business, request
2.31additional information from the business, or reject the application for certification. If
2.32the commissioner requests additional information from the business, the commissioner
2.33must either certify the business or reject the application within 30 days of receiving the
2.34additional information. If the commissioner neither certifies the business nor rejects
2.35the application within 30 days of receiving the original application or within 30 days of
3.1receiving the additional information requested, whichever is later, then the application is
3.2deemed rejected, and the commissioner must refund the $150 application fee. A business
3.3that applies for certification and is rejected may reapply.
3.4(c) To receive certification as a qualified small business, a business must satisfy
3.5all of the following conditions:
3.6(1) the business has its headquarters in Minnesota;
3.7(2) at least 51 percent of the business's employees are employed in Minnesota, and
3.851 percent of the business's total payroll is paid or incurred in the state;
3.9(3) the business is engaged in, or is committed to engage in, innovation in Minnesota
3.10in one of the following as its primary business activity:
3.11(i) using proprietary technology to add value to a product, process, or service in a
3.12qualified high-technology field;
3.13(ii) researching or developing a proprietary product, process, or service in a qualified
3.14high-technology field; or
3.15(iii) researching, developing, or producing a new proprietary technology for use in
3.16the fields of agriculture, tourism, forestry, mining, manufacturing, or transportation;
3.17(4) other than the activities specifically listed in clause (3), the business is not
3.18engaged in real estate development, insurance, banking, lending, lobbying, political
3.19consulting, information technology consulting, wholesale or retail trade, leisure,
3.20hospitality, transportation, construction, ethanol production from corn, or professional
3.21services provided by attorneys, accountants, business consultants, physicians, or health
3.22care consultants;
3.23(5) the business has fewer than 25 employees;
3.24(6) the business must pay its employees annual wages of at least 175 percent of the
3.25federal poverty guideline for the year for a family of four and must pay its interns annual
3.26wages of at least 175 percent of the federal minimum wage used for federally covered
3.27employers, except that this requirement must be reduced proportionately for employees
3.28and interns who work less than full-time, and does not apply to an executive, officer, or
3.29member of the board of the business, or to any employee who owns, controls, or holds
3.30power to vote more than 20 percent of the outstanding securities of the business;
3.31(7) the business has not been in operation for more than ten years;
3.32(8) the business has not previously received private equity investments of more
3.33than $4,000,000;
3.34 (9) the business is not an entity disqualified under section
3.35clause (3);
3.36 (10) the business has not issued securities that are traded on a public exchange; and
4.1 (11) the proprietary technology is not older than ten years.
4.2(d) In applying the limit under paragraph (c), clause (5), the employees in all members
4.3of the unitary business, as defined in section
4.4(e) In order for a qualified investment in a business to be eligible for tax credits
4.5 (1) the business must have applied for and received certification for the calendar
4.6year in which the investment was made prior to the date on which the qualified investment
4.7was made;
4.8(2) the business must not have issued securities that are traded on a public exchange;
4.9(3) the business must not issue securities that are traded on a public exchange within
4.10180 days after the date on which the qualified investment was made; and
4.11(4) the business must not have a liquidation event within 180 days after the date on
4.12which the qualified investment was made.
4.13(f) The commissioner must maintain a list of qualified small businesses and qualified
4.14greater Minnesota businesses certified under this subdivision for the calendar year and
4.15make the list accessible to the public on the department's Web site.
4.16(g) For purposes of this subdivision, the following terms have the meanings given:
4.17(1) "qualified high-technology field" includes aerospace, agricultural processing,
4.18renewable energy, energy efficiency and conservation, environmental engineering, food
4.19technology, cellulosic ethanol, information technology, materials science technology,
4.20nanotechnology, telecommunications, biotechnology, medical device products,
4.21pharmaceuticals, diagnostics, biologicals, chemistry, veterinary science, and similar
4.22fields;
4.23(2) "proprietary technology" means the technical innovations that are unique and
4.24legally owned or licensed by a business and includes, without limitation, those innovations
4.25that are patented, patent pending, a subject of trade secrets, or copyrighted; and
4.26(3) "greater Minnesota" means the area of Minnesota located outside of the
4.27metropolitan area as defined in section 473.121, subdivision 2.
4.28(h) To receive certification as a qualified greater Minnesota business, a business must
4.29satisfy all of the requirements of paragraph (c) and must satisfy the following conditions:
4.30(1) the business has its headquarters in greater Minnesota; and
4.31(2) at least 51 percent of the business's employees are employed in greater Minnesota,
4.32and 51 percent of the business's total payroll is paid or incurred in greater Minnesota.
4.33EFFECTIVE DATE.This section is effective for qualified small businesses
4.34certified after June 30, 2013.
4.35 Sec. 3. Minnesota Statutes 2012, section 116J.8737, subdivision 5, is amended to read:
5.1 Subd. 5. Credit allowed. (a) A qualified investor or qualified fund is eligible for a
5.2credit equal to:
5.3(1) 25 percent of the qualified investment in a qualified small business; or
5.4(2) 50 percent of the qualified investment in a qualified greater Minnesota business.
5.5Investments made by a pass-through entity qualify for a credit only if the entity is a
5.6qualified fund. The commissioner must not allocate more than $11,000,000 in credits to
5.7qualified investors or qualified funds for taxable years beginning after December 31, 2009,
5.8and before January 1, 2011, and must not allocate more than $12,000,000 in credits per
5.9year for taxable years beginning after December 31, 2010, and before January 1, 2013,
5.10or more than $20,000,000 in credits per taxable year for taxable years beginning after
5.11December 31, 2012, and before January 1, 2015. Any portion of a taxable year's credits
5.12that is not allocated by the commissioner does not cancel and may be carried forward to
5.13subsequent taxable years until all credits have been allocated.
5.14(b) The commissioner may not allocate more than a total maximum amount in credits
5.15for a taxable year to a qualified investor for the investor's cumulative qualified investments
5.16as an individual qualified investor and as an investor in a qualified fund; for married
5.17couples filing joint returns the maximum is $250,000, and for all other filers the maximum
5.18is $125,000. The commissioner may not allocate more than a total of $1,000,000 in credits
5.19over all taxable years for qualified investments in any one qualified small business.
5.20(c) The commissioner may not allocate a credit to a qualified investor either as an
5.21individual qualified investor or as an investor in a qualified fund if the investor receives
5.22more than 50 percent of the investor's gross annual income from the qualified small
5.23business in which the qualified investment is proposed. A member of the family of an
5.24individual disqualified by this paragraph is not eligible for a credit under this section. For
5.25a married couple filing a joint return, the limitations in this paragraph apply collectively
5.26to the investor and spouse. For purposes of determining the ownership interest of an
5.27investor under this paragraph, the rules under section 267(c) and 267(e) of the Internal
5.28Revenue Code apply.
5.29(d) Applications for tax credits for 2010 must be made available on the department's
5.30Web site by September 1, 2010, and the department must begin accepting applications
5.31by September 1, 2010. Applications for subsequent years must be made available by
5.32November 1 of the preceding year.
5.33(e) Qualified investors and qualified funds must apply to the commissioner for tax
5.34credits. Tax credits must be allocated to qualified investors or qualified funds in the order
5.35that the tax credit request applications are filed with the department. The commissioner
5.36must approve or reject tax credit request applications within 15 days of receiving the
6.1application. The investment specified in the application must be made within 60 days of
6.2the allocation of the credits. If the investment is not made within 60 days, the credit
6.3allocation is canceled and available for reallocation. A qualified investor or qualified fund
6.4that fails to invest as specified in the application, within 60 days of allocation of the
6.5credits, must notify the commissioner of the failure to invest within five business days of
6.6the expiration of the 60-day investment period.
6.7(f) All tax credit request applications filed with the department on the same day must
6.8be treated as having been filed contemporaneously. If two or more qualified investors or
6.9qualified funds file tax credit request applications on the same day, and the aggregate
6.10amount of credit allocation claims exceeds the aggregate limit of credits under this section
6.11or the lesser amount of credits that remain unallocated on that day, then the credits must
6.12be allocated among the qualified investors or qualified funds who filed on that day on a
6.13pro rata basis with respect to the amounts claimed. The pro rata allocation for any one
6.14qualified investor or qualified fund is the product obtained by multiplying a fraction,
6.15the numerator of which is the amount of the credit allocation claim filed on behalf of
6.16a qualified investor and the denominator of which is the total of all credit allocation
6.17claims filed on behalf of all applicants on that day, by the amount of credits that remain
6.18unallocated on that day for the taxable year.
6.19(g) A qualified investor or qualified fund, or a qualified small business acting on their
6.20behalf, must notify the commissioner when an investment for which credits were allocated
6.21has been made, and the taxable year in which the investment was made. A qualified fund
6.22must also provide the commissioner with a statement indicating the amount invested by
6.23each investor in the qualified fund based on each investor's share of the assets of the
6.24qualified fund at the time of the qualified investment. After receiving notification that the
6.25investment was made, the commissioner must issue credit certificates for the taxable year
6.26in which the investment was made to the qualified investor or, for an investment made by
6.27a qualified fund, to each qualified investor who is an investor in the fund. The certificate
6.28must state that the credit is subject to revocation if the qualified investor or qualified
6.29fund does not hold the investment in the qualified small business for at least three years,
6.30consisting of the calendar year in which the investment was made and the two following
6.31years. The three-year holding period does not apply if:
6.32(1) the investment by the qualified investor or qualified fund becomes worthless
6.33before the end of the three-year period;
6.34(2) 80 percent or more of the assets of the qualified small business is sold before
6.35the end of the three-year period;
6.36(3) the qualified small business is sold before the end of the three-year period; or
7.1(4) the qualified small business's common stock begins trading on a public exchange
7.2before the end of the three-year period.
7.3(h) The commissioner must notify the commissioner of revenue of credit certificates
7.4issued under this section.
7.5EFFECTIVE DATE.This section is effective for taxable years beginning after
7.6December 31, 2012.
7.7 Sec. 4. Minnesota Statutes 2012, section 116J.8737, subdivision 7, is amended to read:
7.8 Subd. 7. Revocation of credits. (a) If the commissioner determines that a
7.9qualified investor or qualified fund did not meet the three-year holding period required in
7.10subdivision 5, paragraph (g), any credit allocated and certified to the investor or fund is
7.11revoked and must be repaid by the investor.
7.12(b) If the commissioner determines that a business did not meet the employment
7.13and payroll requirements in subdivision 2, paragraph (c), clause (2), or (h), clause (2), as
7.14applicable, in any of the five calendar years following the year in which an investment in the
7.15business that qualified for a tax credit under this section was made, the business must repay
7.16the following percentage of the credits allowed for qualified investments in the business:
7.25(c) The commissioner must notify the commissioner of revenue of every credit
7.26revoked and subject to full or partial repayment under this section.
7.27(d) For the repayment of credits allowed under this section and section
7.28a qualified small business, qualified investor, or investor in a qualified fund must file an
7.29amended return with the commissioner of revenue and pay any amounts required to be
7.30repaid within 30 days after becoming subject to repayment under this section.
7.31EFFECTIVE DATE.This section is effective the day following final enactment.
7.32 Sec. 5. Minnesota Statutes 2012, section 116J.8737, subdivision 8, is amended to read:
7.33 Subd. 8. Data privacy. (a) Data contained in an application submitted to the
7.34commissioner under subdivision 2, 3, or 4 are nonpublic data, or private data on
8.1individuals, as defined in section
8.2data items are public:
8.3(1) the name, mailing address, telephone number, e-mail address, contact person's
8.4name, and industry type of a qualified small business upon approval of the application
8.5and certification by the commissioner under subdivision 2;
8.6(2) the name of a qualified investor upon approval of the application and certification
8.7by the commissioner under subdivision 3;
8.8(3) the name of a qualified fund upon approval of the application and certification
8.9by the commissioner under subdivision 4;
8.10(4) for credit certificates issued under subdivision 5, the amount of the credit
8.11certificate issued, amount of the qualifying investment, the name of the qualifying investor
8.12or qualifying fund that received the certificate, and the name of the qualifying small
8.13business in which the qualifying investment was made;
8.14(5) for credits revoked under subdivision 7, paragraph (a), the amount revoked and
8.15the name of the qualified investor or qualified fund; and
8.16(6) for credits revoked under subdivision 7, paragraphs (b) and (c), the amount
8.17revoked and the name of the qualified small business.
8.18(b) The following data, including data classified as nonpublic or private, must be
8.19provided to the consultant for use in conducting the program evaluation under subdivision
8.2010:
8.21(1) the commissioner of employment and economic development shall provide data
8.22contained in an application for certification received from a qualified small business,
8.23qualified investor, or qualified fund, and any annual reporting information received on a
8.24qualified small business, qualified investor, or qualified fund; and
8.25(2) the commissioner of revenue shall provide data contained in any applicable tax
8.26returns of a qualified small business, qualified investor, or qualified fund.
8.27EFFECTIVE DATE.This section is effective the day following final enactment.
8.28 Sec. 6. Minnesota Statutes 2012, section 116J.8737, subdivision 9, is amended to read:
8.29 Subd. 9. Report to legislature. Beginning in 2011, the commissioner must
8.30annually report by March 15 to the chairs and ranking minority members of the legislative
8.31committees having jurisdiction over taxes and economic development in the senate and
8.32the house of representatives, in compliance with sections
8.33credits issued under this section. The report must include:
8.34(1) the number and amount of the credits issued;
8.35(2) the recipients of the credits;
9.1(3) for each qualified small business, its location, line of business, and if it received
9.2an investment resulting in certification of tax credits;
9.3(4) the total amount of investment in each qualified small business resulting in
9.4certification of tax credits;
9.5(5) for each qualified small business that received investments resulting in tax
9.6credits, the total amount of additional investment that did not qualify for the tax credit;
9.7(6) the number and amount of credits revoked under subdivision 7;
9.8(7) the number and amount of credits that are no longer subject to the three-year
9.9holding period because of the exceptions under subdivision 5, paragraph (g), clauses
9.10(1) to (4);
9.11(8) the number of qualified small businesses that are women or minority-owned; and
9.12(9) any other information relevant to evaluating the effect of these credits.
