Senate Counsel, Research
and Fiscal Analysis
Minnesota Senate Bldg.
95 University Avenue W. Suite 3300
St. Paul, MN 55155
(651) 296-4791
Tom Bottern
Director
   Senate   
State of Minnesota
 
 
 
 
 
H.F. No. 3931 - Omnibus Tax Bill (Unofficial Engrossment)
 
Author: Senator Rod Skoe
 
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
Eric S. Silvia, Senate Counsel (651/296-1771)
Jack Paulson, Senate Analyst (651/296-4954)
 
Date: May 11, 2016



 

ARTICLE 1

INCOME AND CORPORATE FRANCHISE TAXES

Section 1. Angel investment credit; certification of qualified small businesses. Adds a condition to the certification requirements for a qualified small business to be eligible for investment. At least 51 percent of the total value of all contractual agreements pertaining to its primary business activity must be for services performed in Minnesota. Adds a similar requirement for investments in qualified greater Minnesota businesses so that at least 51 percent of the total value of all contractual agreements pertaining to its primary business activity must be for services performed in greater Minnesota. The commissioner of revenue must exempt a business from this requirement if the business certifies that the services required under a contract cannot be performed in Minnesota or greater Minnesota, respectively. The business must re-certify every six months. Effective beginning in tax year 2016.

Section 2. Tax time savings grant program. Establishes the tax time savings grant program to make grants to nonprofit organizations to fund the integration of financial capability services into the delivery of taxpayer assistance services. Establishes eligibility requirements for applicants including dedicating at least one staff or volunteer position to coordinate financial capability services with initiation through completion of defined outcomes. Prohibits specified conflicts of interest between grant applicants and financial institutions. An applicant is allowed to receive funding from financial institutions not contingent on the applicant offering the services of that financial institution. Allows a grant recipient to use grant funds to dedicate a staff or volunteer position to coordinate financial capability services.

Section 3. Internal Revenue Code reference; federal update. Updates the reference to the Internal Revenue Code (Code) in the tax administration chapter. Effective the day following final enactment, and effective for Minnesota purposes at the same time as for federal purposes. This change has no substantive effect. 

Section 4. Net income; additions to federal taxable income; federal update.  Updates the reference to the Code for purposes of calculating Minnesota net income and Minnesota taxable income to adopt a number of changes made to federal taxable income between December 31, 2014 and December 31, 2015. Some federal changes were extensions of items that were previously in effect but had been allowed to sunset.

Minnesota would conform to all federal changes except section 179 expensing, for which current law would remain in effect. While Minnesota conforms to the increased expensing amount, taxpayers are required to add 80 percent of the increased section 179 expensing allowed at the federal level to taxable income, and then subtract one-fifth of the amount added back in each of the five following tax years.

Effective the day following final enactment, and changes are effective for Minnesota purposes at the same time they are effective for federal purposes. A summary of federal conformity items follows the summary of this Article.

Section 5 also requires individual filers to add back the amount of charitable prepared food donations deducted from their federal income tax calculation for purposes of taking the donation credit in a later section. Effective beginning in tax year 2016.

Section 6. Subtractions from federal taxable income; federal update. Strikes the Minnesota subtraction for transportation fringe benefits. This deduction from federal taxable income was made permanent at the federal level, so the Minnesota subtraction is no longer necessary. Effective the day following final enactment, and changes are effective for Minnesota purposes at the same time they are effective for federal purposes.    

Section 7. Additions to federal taxable income; federal update; prepared food donations. Requires taxpayers to add 80 percent of section 179 expensing taxable income (one-fifth of the expensed amount is added back in each of the five following tax years). Effective the day following final enactment, and changes are effective for Minnesota purposes at the same time they are effective for federal purposes. Requires corporate filers to add back the amount of charitable prepared food donations deducted from their federal income tax calculation for purposes of taking the donation credit in a later section. Effective beginning in tax year 2016.

Section 8. Federal update to individual alternative taxable income, wages, built in gains for S corporations, and credits. Updates the reference to the Code for federal changes that impact Minnesota tax provisions not part of the computation of regular tax. Effective the day following final enactment, and changes are effective for Minnesota purposes at the same time they are effective for federal purposes.    

Section 9. Prepared food donation credit. Authorizes restaurants to claim a nonrefundable credit equal to 20 percent of the value of their charitable prepared food donations, as defined under federal law. A restaurant is defined as a facility operated for profit in the usual and customary business of serving meals to customers with a kitchen in its facility that receives at least 70 percent of its gross receipts from the sale of prepared food. Effective beginning in tax year 2016.

Section 10. Working family credit. Expands the Minnesota working family credit to single filers 21-24 years of age. Modifies the amounts of earned income to which the credit applies and is phased out, and modifies the percentage of earned income on which the credit is calculated, so that claimants at the lowest income levels would be eligible for larger credit amounts and the credit would extend to higher income levels. The income levels are adjusted annually for inflation.

  • For filers with no dependent children, the percentage of earned income on which the credit is calculated, the level of earned income to which the percentage is applied, and the percentage by which the credit phases out over the earned income threshold, the income threshold amount are increased. 
  • For filers with dependent children, the percentage of earned income on which the credit is calculated is increased and the level of earned income to which the percentage is applied is reduced. The percentage by which the credit phases out over the earned income threshold is reduced and the threshold amount is increased. 
  • Strikes language that temporarily increases the phaseout thresholds for married filers filing a joint return, so that the increase in the phaseout is made permanent. Under current law, the increase in the phaseout extends through 2017. Making permanent the increased phaseout is also a federal conformity item.

Effective beginning in tax year 2016.

Section 11. Citizenship credit. Authorizes a refundable income tax credit of $700 per individual for qualified expenses incurred in connection with the citizenship application process. The credit is allowed if the taxpayers’ total income (between the individual and spouse) is equal to or below 200 percent of the federal poverty guideline. The credit may be claimed for the taxpayer, spouse, and qualifying dependents. The credit is not allowed to individuals eligible to be claimed as dependents, nor to individuals who qualify for a federal waiver of citizenship expenses. Effective beginning in tax year 2016.

Section 12. Nameless job application review process credit. Authorizes a refundable credit for establishing and registering a nameless job application review process, defined as a system that removes the name of job applicants prior to review or request for interview and that prevents a person reviewing applications or requests for interview from knowing the name of the applicant. An employer becomes a “qualified employer” by registering with the Department of Human Rights and certifying that the employer has implemented a nameless job application review process. The qualified employer must annually renew its registration. The Department of Human Rights is required to implement procedures to verify that the employer qualifies as a qualified employer and to monitor the qualified employer’s compliance in maintaining the nameless job application review process. 

The credit equals $100 per employee employed in Minnesota, up to $40,000 per year for a qualified employer. The number of employees is determined by the average number of FTEs employed by the qualified employer in the 12 months immediately preceding registration with the Department of Human Rights. No more than $1 million in tax credits may be allocated in a calendar year. Effective beginning in tax year 2016.

Section 13. Student loan credit. Authorizes a refundable credit of up to $1,000 for eligible individuals and their parents equal to a specified percentage of student loan payments in excess of ten percent of adjusted gross income. An eligible individual is an individual with qualified education loans related to an undergraduate or graduate degree at a postsecondary institution. Loans must have been incurred on behalf of the individual or individual’s spouse. The percentage of payments eligible for the credit for eligible individuals is 50 percent; for eligible individuals in a public service job (excluding public education), the percentage is 65 percent; and for eligible individuals in an education profession, the percentage is 75 percent. Parents of eligible individuals may claim the difference between the amount paid by the eligible individual and $1,000. Effective beginning in tax year 2016.

Section 14. Reading credit. Makes permanent the temporary refundable reading credit authorized for tax year 2014, with some modifications. The credit equals 75 percent of the amount of eligible expenses used to pay for tutoring and related expenses associated with treating dyslexia or other reading-based deficits for a qualifying child, up to $3,000. The child must have been evaluated for a specific learning disability or by a licensed psychologist and determined to have dyslexia or a deficit in basic reading skills, reading comprehension, reading fluency, or spelling. Expenses eligible for the credit exclude any expenses used to claim the credit and subtraction for K-12 expenses under current law and any amounts compensated by insurance or a pre-tax account. Eligible expenses include tutoring, instruction, treatment, or evaluation. A claimant must provide sufficient documentation of eligibility for the credit, in a form to be determined by the commissioners of revenue and education. The refund may be assigned to a qualifying financial institution or a 501(c)(3) organization, as with refunds for the K-12 credit under current law. Effective beginning in tax year 2016.

Section 15. Credit for parents of stillborn children. Authorizes a $2,000 refundable credit for taxpayers who have been issued a certificate of birth resulting in stillbirth from the state registrar. The credit is allowed in the taxable year in which the stillbirth occurred and if the child would have been a dependent of the taxpayer under the Internal Revenue Code. Effective beginning in tax year 2016.

Section 16. Alternative minimum taxable income; prepared food donation credit; federal conformity. Adds a cross reference to the addition to federal taxable income for purposes of calculating alternative minimum taxable income, effective beginning in tax year 2016. Strikes the reference to the transportation fringe benefits subtraction that was stricken in an earlier section as a federal conformity provision, effective the day following final enactment, and effective for Minnesota purposes at the same time the provision is effective for federal purposes.    

Section 17. Federal update, property tax refund. Updates the reference to the Code in the property tax refund chapter. Effective retroactively for refunds based on property taxes payable after December 31, 2015, and rent paid after December 31, 2014.

Section 18. Federal update; estate tax. Updates the reference to the Code in the estate tax chapter, effective the day following final enactment, and effective for Minnesota purposes at the same time the provision is effective for federal purposes. This change has no substantive effect.

Section 19. Amended returns; certain IRA rollovers; exclusion for incarcerated individuals. Adds uncodified language to reflect federal changes to exclude from gross income civil damages, restitution, or other monetary awards that a taxpayer received as compensation for a wrongful incarceration. This provision applies to tax years beginning before, on or, after the date of enactment. This section extends the time for filing an amended individual income tax return for to claim a refund for taxes paid on civil damages restitution, or other monetary awards that a taxpayer received for wrongful incarceration until September 1, 2016 if the general statute of limitations has expired.

A separate federal provision was enacted to extend the time for filing amended returns for an individual who made retroactive IRA rollovers from payments received from an airline in bankruptcy. The period to claim a refund is September 1, 2016 if the general statute of limitations to claim a refund has expired.

Effective the day following final enactment.

Sections 20 and 21. Appropriations; tax time savings grant program. Appropriates $400,000 in fiscal year 2017 from the general fund for the program. Up to 5 percent of this amount may be used for administration. Base funding is $400,000 per year. Appropriates $400,000 in fiscal year 2017 from the general fund for taxpayer assistance grants. Up to 5 percent may be used for administration of the grants program. After fiscal year 2017, the base funding is $800,000 per year.

Summary of Federal Conformity Provisions

Slain Officer Family Support Act (2015) – allows deductions made by Minnesota taxpayers for families of certain slain officers to flow through to their 2014 state returns. Without this change, taxpayers deducting contributions for the families of the detectives on their 2014 federal returns would be required to add those contributions to Minnesota taxable income on their 2014 state returns and then deduct them from Minnesota taxable income on their 2015 state returns.

Don’t Tax Our Fallen Public Safety Heroes Act (2015) – excluded federal or state benefits paid to surviving dependents of a public safety officer killed in the line of duty also apply to state benefits that were payable without regard to whether the officer’s death was in the line of duty.

Bipartisan Budget Act of 2015 – clarified the treatment of partnership interest created by gift and changed partnership audit rules.

Protecting Americans from Tax Hikes Act of 2015 (PATH); Consolidated Appropriations Act of 2016 – for purposes of calculating federal taxable income, created new provisions and modified and/or extended existing provisions.  Changes include:

  • Exclusion of compensation paid to individuals who were wrongfully incarcerated from gross income; effective retroactively for all tax years;
  • Rollover from employer-sponsored retirement plans and traditional IRAs into SIMPLE (savings incentive match plan for employees) IRAs following the end of the two-year period that started when the employee first participated in the SIMPLE IRA.
  • Allowance of contributions to agricultural research organizations claimed under the itemized deduction for charitable contributions;
  • Clarification of valuation rules for charitable remainder unitrusts;
  • Ineligibility of REITs to participate in tax-free spinoffs;
  • Exclusion from gross income clean coal power grants for non-corporate taxpayers; grant recipients must reduce the basis of any property acquired using the grant; and
  • Prohibition of the transfer of losses from tax indifferent parties.

Modifications to existing provisions:

  • Expands the definition of qualified higher education expenses that can be paid for with distributions from section 529 college savings plans to include the purchase of computers and related equipment; 
  • Extension of the exclusion from gross income for qualified scholarships to apply to payments resulting from required participation in a comprehensive work-learning-service program at a work college;
  • Allowance of the excise tax on high-cost employer-sponsored health coverage to be claimed as an itemized deduction (the imposition of the excise tax is delayed to 2020).
  • Extension of the exclusion of reimbursements of medical expenses of a deceased employee’s beneficiary who is not a surviving spouse or dependent under age 27 to apply to distributions from medical trusts (limited to certain governmental health plans); and
  • Allowance of ABLE (Achieving a Better Life Experience) accounts for a designated beneficiary to be opened in states other than the state of residency of the beneficiary.

Provisions extended to tax years 2015 and 2016 or otherwise as indicated

  • Deduction in adjusted gross income for up to $4,000 of qualified tuition and related expenses;
  • Exclusion for discharge of indebtedness income on principal residence;
  • Itemized deduction for mortgage insurance premiums on a principal residence;
  • Bonus depreciation, extended at 50 percent to tax years 2015 to 2017, 40 percent in tax year 2018, and 30 percent in tax year 2019 (Under the bill, Minnesota would not conform to the extension of bonus depreciation, but would retain its current law requirement that taxpayers add-back to taxable income 80 percent of the increased depreciation amount in the first tax year, and then subtract one-fifth of the amount added back in each of the five following tax years.);
  • Classification of certain racehorses as 3-year property;
  • First-year 50 percent bonus depreciation and alternative minimum depreciation adjustment exemption for qualified second generation biofuel plant property;
  • Allowed depreciation of certain motorsports entertainment complex property over 7 years;
  • Allowed expensing of 50 percent of the cost of advanced mine safety equipment;
  • Allowed accelerated depreciation of qualified Indian reservation property; and
  • Allowed expensing for the first $15 million of production costs of films and television shows;

Provisions made permanent

  • Deduction in adjusted gross income of up to $250 for classroom or professional development expenses paid by a K-12 grade educator;
  • Increased limitation on valuation of qualified conservation contributions of appreciated real property;
  • Increased section 179 expensing amount and phaseout threshold for tax year 2015 to $500,000 and $2 million; with the increased amounts indexed for inflation beginning in 2016 (Minnesota would not conform to this provision but would require the 80 percent addback for the first year and 20 percent subtraction for the following five years as under current law);
  • For taxpayers 70 ½ years of age or older, exclusion from gross income up to $100,000 of IRA distributions made directly to charitable organizations (the amount excluded is not allowed as a charitable deduction);
  • Parity for in allowable deduction for employer-provided transit expenses with employer-provided parking expenses;
  • Enhanced deduction for donations of food inventory;
  • Deduction for energy efficient commercial building property;
  • Allowed depreciation of leasehold improvements and qualified restaurant property, including new restaurant property and improvements to retail property over 15 years;
  • Extension of basis adjustment to S corporation stock when the S corporation donates appreciated property, which is equal to the tax basis of the property rather than the fair market value;
  • Increased exclusion for gain from the sale of qualified small business stock sold by an individual from 50 percent to 100 percent for original issue C corporation stock. The exclusion applies to certain stock purchased in businesses with less than $50 million of assets that is held for at least five years;
  • Treatment of dividends of regulated investment companies;
  • Exclusion of active financing income from the definition of Subpart F income for U.S. shareholders with at least 10 percent interest in a controlled foreign corporation;
  • Extension of the special rule limiting payments from controlled subsidiaries of tax-exempt organizations that are subject to the unrelated business income tax to the amount in excess of allowable payments under arm’s length transactions rules, only if a binding written contract between the entities was in effect on August 17, 2006;
  • Reduction in the minimum holding period for built-in gains on sales of assets of S corporations that converted from C corporations from ten years to five years so that S corporations can sell assets held more than five years without being taxed on built-in gains; and
  • Parity in qualified transportation fringe benefits under which employers may exclude up to the same maximum amount per month per employee for vanpool and transit pass expenses as for parking.

 

ARTICLE 2

SALES AND USE TAXES

Sections 1 to 5. Remote seller collection and remittance requirements. These sections expand nexus for purposes of triggering collection and remittance of sales tax for remote sales transactions, and modify collection, remittance and reporting requirements for sellers.

Section 1. Definitions. Modifies the definition of a “retailer maintaining a place of business in the state” to include having a storage facility in the state, employing a state resident who works from a home office in the state, or having a marketplace provider or other third party operating in the state under the retailer’s authority to facilitate or process sales in the state.

Section 2. Retailer not maintaining a place of business in the state. Modifies the criteria by which retailers not maintaining a place of business in the state are required to collect and remit sales and use taxes:

  • engaging in direct response marketing in the state, which includes:
  • transmitting mail, flyers, or other messages, including through social media;
  • collecting and using data on purchasers or potential purchasers in the state; or
  • any other activity that uses persons, tangible property, digital files or information, or software in the state to enhance the probability that the contact will result in a sale to the customer in the state;
  • conducting any part of the process of the sale in the state; or
  • offering its products through a marketplace operated by a marketplace provider who is required to collect and remit sales and use taxes in the state. 

Section 3. Affiliated entities. Modifies the definition of “affiliated entities.” A retailer having an in-state affiliate is required to collect and remit sales and use tax. Adds criteria by which an affiliate entity is deemed to be a related party to the retailer (and thus required to collect and remit sales and use tax) to include:

  • selling taxable products that are the same as or similar to the retailer or selling under the same or similar name;
  • maintaining a facility such as an office, warehouse, distribution center, or the like to facilitate sales in the state made by the out-of-state retailer;
  • using intellectual property with consent or knowledge that is the same or similar to the out-of-state retailer’s intellectual property;
  • delivering, installing, assembling, performing maintenance or repair services on tangible personal property in the state if the property is sold to in-state customers by the out-of-state retailer;
  • facilitating delivery of tangible personal property to in-state customers by allowing a customer to pick up the property at a facility in the state; or
  • sharing information systems or employees with, or engaging in intercompany transactions with the out-of-state retailer.

Also deems two entities as related parties if the entities are related taxpayers under the Internal Revenue Code for purposes of certain disallowed deductions, or if the transactions are disallowed losses between partnerships and their owners under the Code.

Entities that have one or more ownership relationships designed with the purpose of avoiding establishment of affiliate nexus would also be deemed related parties.

Section 4. Marketplace provider and marketplace seller. Establishes definitions for “marketplace provider” and “marketplace seller.”  A marketplace provider is any person who facilitates a retail sale by a seller, which includes:

  • listing or advertising taxable items or services for sale in any forum; and
  • collecting payment from a customer and transmitting the payment to the seller, regardless of whether the marketplace provider is compensated for its services.

A marketplace seller is any seller that has sales facilitated by a marketplace provider. A seller is presumed to have a marketplace provider in the state if the seller enters into an agreement with the in-state marketplace provider for purposes of facilitating sales, and the seller’s gross receipts are at least $10,000 in the most recent 12-month period.

Section 5. Collection and remittance requirements. Establishes collection and remittance requirements for marketplace sellers and marketplace providers. Marketplace providers are required to collect and remit sales and use tax under provisions in existing law, except when a marketplace seller for whom the marketplace facilitates a sale either:

  • provides a copy of its registration to collect and remit sales and use tax to the marketplace provider before the marketplace provider facilitates the sale; or
  • the marketplace seller appears on a list published by the Department of Revenue of the entities registered to collect and remit sales and use taxes in the state.

Requires the commissioner to promulgate regulations regarding the list. Relieves a marketplace provider of liability to collect and remit sales and use taxes, in most cases, to the extent that the provider demonstrates that failure to collect and remit was due to incorrect or insufficient information provided by the marketplace seller.

Section 6. Sales tax exemption; siding production facility materials. Authorizes a sales tax exemption for building materials and supplies for constructing a siding facility that can produce up to 400 million square feet of siding annually. The tax must be paid upfront and then refunded under provisions of current law. Effective for sales and purchases made after June 30, 2016.

Section 7. Sales tax exemption; properties destroyed by fire. Authorizes a sales tax exemption for building materials, equipment, and supplies for constructing or replacing real property in Madelia affected by the February 3, 2016 fire. The tax must be paid upfront and then refunded under provisions of current law. Effective for sales and purchases made after June 30, 2016 and before July 1, 2018.

Section 8. Sales tax exemption; former Duluth Central High School redevelopment. Authorizes a sales tax exemption for materials and supplies and equipment incorporated into a private redevelopment project on the site of the former Duluth Central High School, provided that the development is subject to property tax. The tax must be paid upfront and then refunded under provisions of current law. Effective for sales and purchases made after June 30, 2016 and before January 1, 2018.

Sections 9 to 11. Refund provisions; sales tax exemptions. Adds cross references to the sales tax exemptions in sections 6 to 8 for purposes of refund applications. Effective dates correspond with the specific exemptions.

Section 12. Severability. Provides that if any provision in sections 1 to 5 or 13 are held invalid, other provisions not affected by the invalidity are given effect. Effective the day following final enactment.

Section 13. Effective date. Establishes that the provisions of sections 1 to 5 are effective upon the U.S. Supreme Court overturning or expanding its 1992 Quill decision, which held that physical presence is required in a state for the state to require a retailer to collect and remit sales and use taxes. If Congress enacts a law authorizing states to impose collection and remittance requirements for retailers without physical presence in the state, Minnesota must enforce the provisions of sections 1 to 5 to the extent allowed under federal law. 

 

ARTICLE 3

PROPERTY TAXES

Section 1. Property tax adjustment; cooperative association. Allows a cooperative electric association that has elected to be subject to rate regulation under section 216B.026 to file with the public utilities commission for approval of an adjustment for real and personal property taxes, fees and permits.  The Dakota Electric Authority (DEA) is the only electric cooperative that has elected to be rate-regulated. Effective the day following final enactment.

Section 2. Restrictions on transfers of specific parts. Allows a county to review a deed or other instrument conveying a parcel of land for transfer or division for conformity with the county’s land use regulations before the county auditor transfers or divides the land or its net tax capacity. Effective the day following final enactment. 

Section 3. State general tax refund. Provides a mechanism for a refund of the state general tax for eligible business. A “job creation zone” is defined as an area including one or more contiguous census tracts where the unemployment rate average is at least 75 percent higher than the statewide average unemployment rate as estimated by the U.S. Census Bureau.

An eligible business located within the seven-county metropolitan area, or located outside the seven-county metropolitan area but in a city with a population greater than 40,000 is an employer that: (i) is located in a job creation zone; (ii) pays at least 50 percent of the business’s total wages to employees who reside either within a job creation zone where the business is located or any contiguous census tract; and (iii) is a for-profit business.

An eligible business located outside the seven-county metropolitan area and in a city or township with a population less than 40,000 is an employer that: (i) pays at least 50 percent of the business’s total wages to employees who reside in any job creation zone not located in either the seven-county metropolitan area or in a city located outside the seven-county metropolitan area with a population greater than 40,000; and (ii) is a for-profit business.

If a business received a refund in the immediately preceding year, but does not qualify in the current year because the business is located in an area that no longer meets the requirements of a 'job creation zone', the business may apply for a onetime refund equal to one-half the amount of the refund received in the immediately preceding year. 

Effective for taxes payable in 2016 through taxes payable in 2026. The commissioner of emploment and economic development must provide a written report to the legislature  by January 15, 2013 concerning the refunds issued under this section.

Section 4. Metropolitan Council; obligations. Authorizes the Metropolitan Council to issue regional transit capital debt up to $82,100,000.  Of this amount, $40,100,000 may be issued after July 1, 2016, and $42,000,000 may be issued after July 1, 2017.  Effective the day following final enactment, and applies to the seven-county metropolitan area.

Section 5. Riparian protection aid. Appropriates $10,000,000 for aids payable in 2017 and thereafter to counties to enforce and implement the riparian protection and water quality practices under section 103F.48. Aid shall equal: (1) each county’s share of the total number of agricultural acres in the state, divided by two; plus (2) each county’s share of the number of miles of public water basins, each county’s share of the number of centerline miles of public watercourses, and each county’s share of the number of miles of public drainage ditches, divided by two; multiplied by (3) $10,000.000.  Aid to a county shall not be greater than $200,000 or less than $25,000.  Aid shall be paid in the same manner and at the same time as county program aid payments. Effective for aids payable in 2017 and thereafter.

Section 6.  Cook/Orr hospital district.  Modifies the use of levy proceeds for the Cook/Orr hospital district by allowing levy proceeds to be used for administrative, operation, or salary expenses for the Cook ambulance service and the Orr ambulance service. Effective the day following final enactment. 

Sections 7-11. Cloquet area fire and ambulance special taxing district. Modifies special laws relating to the Cloquet area fire and ambulance special taxing district by clarifying the district’s ability to incur debt. The district may issue debt but only after obtaining approval of a majority of the electors voting on the question of issuing the obligation. The debt service for debt used to finance capital costs for ambulance service shall be levied within the primary service area, and debt service used to finance capital costs for fire service shall be levied within municipalities receiving fire services.  The district shall pledge its full faith and credit and taxing power without limitation as to rate or amount for the payment of the district’s debt. A property tax on property located in a municipality that wishes to withdraw from the district will remain in effect until the obligations outstanding on the date of withdrawal are satisfied. Effective in Cloquet and Perch Lake Township the day after compliance with approval and filing requirements. 

Section 12. 2016 Appeals and equalization course township waiver. Provides that if a city or town that conducts local board of appeal and equalization meetings certified by February 1, 2016 that it was in compliance with the requirements of section 274.014, subdivision 2, but no member of the local board who has attended an appeals and equalization course training within the preceding four years attended the local board's meeting for 2016, the board shall have its powers reinstated for the 2017 assessment year by resolution of the governing body of the city or town and by certifying that it is in compliance with the requirements of 274.014, subdivision 2. Effective the day following final enactment.

Section 13.  Lake Mille Lacs area property tax abatement recommendation. Requires the commissioner of revenue to prepare a written recommendation to the house and senate committee on taxes on the potential use of property tax abatements in providing economic relief for business in the vicinity of Lake Mille Lacs that were negatively affected by the early closing of the 2015 walleye fishing season. The report is due by January 2, 2017. Effective the day following final enactment. 

Section 14. Soccer stadium; property tax exemption; special assessment. Provides that any real or personal property acquired, owned, leased, controlled, used, or occupied by the city of St Paul for the primary purpose of providing a stadium for a Major League Soccer team is exempt from property tax. The properties are still subject to special assessments. Any real or property subject to a lease or use agreement between the city and another person for uses related to the purpose of the operation of the stadium and related parking facilities are also exempt regardless of the length of the lease or use agreement.  This property tax exemption does not apply to any real property that is leased for residential, business, or commercial development or any other purpose not necessary to the operation of the stadium. Effective upon approval by the St. Paul City Council.

Section 15. Appropriation. Appropriates $1,200,000 in fiscal year 2016 only from the general fund to the commissioner of revenue for a grant to the city of Madelia that shall be paid on June 30, 2016. 

 

ARTICLE 4

LOCAL DEVELOPMENT

Section 1. City of Burnsville; TIF modification. Modifies special legislation authorized in 2008 for the city of Burnsville by: (i) allowing the creation of economic development districts within the project area; (ii) extending the four-year “knockdown” rule to nine years for any district; and (iii) extending, by two years, the authority to approve districts under the authorization. Effective upon compliance by the governing body of the city of Burnsville with approval and filing requirements.

Section 2. City of Maple Grove; TIF modification. Modifies special legislation authorized in 2014 for the city of Maple Grove by providing that the “project area” may be all or a portion of the designated metes and bounds description, and provides for any additional property necessary to cause the property included in the district to consist of complete parcels. Effective upon compliance by the governing body of the city of Maple Grove with approval and filing requirements.

Section 3. City of Anoka; TIF 5-year rule extension. Provides a three-year extension of the five-year rule for the city of Anoka’s Greens of Anoka redevelopment tax increment financing district by deeming its certification date as June 29, 2012, rather than its actual certification date of July 2, 2012. In 2014, the legislature provided that for redevelopment districts certified after April 20, 2009 and before June 30, 2012, the five-year rule is extended to eight years after certification of the district. Effective upon compliance by the governing body of the city of Anoka with approval and filing requirements.

Section 4. City of Edina; TIF Approval extension. Provides an extension for the city of Edina to file approval of a 2014 special law authorizing the creation of tax increment financing districts. The city must file its certificate of approval by June 30, 2016, and provides that any action taken by the city in reliance on the authorization are deemed consistent with the authorization. Effective the day following final enactment. 

Section 5. City of Northfield; TIF 5-year rule extension. Provides a one-year extension of the five-year rule for the city of Northfield’s Riverfront tax increment financing district. The district was certified on July 12, 2006, and the five-year rule would have expired on July 12, 2011, but the legislature granted a five-year extension for all redevelopment districts certified after June 30, 2003 and before April 30, 2009. This section provides an additional one-year extension to July 12, 2017. Effective upon compliance by the governing body of the city of Northfield with approval and filing requirements.

 

ARTICLE 5

IRON RANGE RESOURCES AND REHABILITATION BOARD

Section 1. Iron Range resources and rehabilitation; insurance. Provides that after seeking a recommendation from the IRRRB the commissioner may purchase insurance the commissioner deems necessary and appropriate to insure facilities operated by the board.

Section. 2. Iron Range resources and rehabilitation; contribution. Provides that the commissioner, after consultation with the IRRRB, has the sole discretion to decide match requirements under the Minerals 21st Century Fund.

Section 3. Definitions. Amends the definition of ‘Authority’ under the Public Utilities chapter to clarify that ‘authority’ also means the commissioner of Iron Range resources and rehabilitation, acting after consulting with the IRRRB.

Section 4. Municipality. Provides that the commissioner of Iron Range resources and rehabilitation, after seeking a recommendation from the IRRRB, shall, with the commissioner of revenue, make an annual determination concerning the eligibility of a municipality in the Iron Range fiscal disparities program.

Section 5. School fund allocation. Clarifies that the ‘school fund allocation’ under the Iron Range fiscal disparities program shall be an amount certified by the commissioner of Iron Range resources and rehabilitation, after seeing a recommendation from the IRRRB.

Section 6. Development; forest development. Provides that the commissioner of resources and rehabilitation, after seeking a recommendation from the IRRRB, may assist a county, upon their request, in carrying out any project for the long range development of its forest resources through matching funds or otherwise.

Section 7. Commissioner; definition. Clarifies when ‘commissioner’ means the commissioner of revenue or the commissioner of Iron Range resources and rehabilitation.

Section 8. Iron Range Resources and Rehabilitation Board. Provides that all expenditures and projects made by the commissioner of Iron Range resources and rehabilitation shall first be submitted to the IRRRB who shall recommend approval, disapproval or modification of the expenditures and projects.

Section 9. Forest trust. Clarifies that the commissioner, after requesting a recommendation from the IRRRB, may purchase and sell forest land in the taconite assistance area. Proceeds derived from the sale may be expended after the commissioner has sought a recommendation from the IRRRB.

Section 10. Private entity participation. Provides that the commissioner of Iron Range resources and rehabilitation, after seeking a recommendation from the IRRRB, may acquire an equity interest in any project for which the commissioner provides funding.

Section 11. Spending authority. Clarifies that the commissioner of Iron Range resources and rehabilitation, with the IRRRB’s recommendation, shall give highest priority to programs and projects that target relief in areas that have the largest percentage of job and population losses relating to the economic downtown in the taconite industry.

Section 12. Sale or privatization of functions. Provides that the commissioner of Iron Range resources and rehabilitation may not sell or privatize the Ironworld Discovery Center or Giants Ridge Golf and Ski Resort without first seeking a recommendation from the IRRRB.

Section 13. Budgeting. Provides that the commissioner of Iron Range resources and rehabilitation shall submit its annual budget to the IRRRB for a recommendation.

Section 14. Receipts from contracts; appropriation. Provides that all funds deposited into the IRRRB board account from fees or other sources of revenue from the public use of the Giants Ridge Recreation Area may be expended by the commissioner of Iron Range resources and rehabilitation after seeking a recommendation from the IRRRB.

Section 15. Project approval. Clarifies that certain projects, including tax increment financing projects, shall be submitted by the commissioner of Iron Range Resources and Rehabilitation to the IRRRB for a recommendation.

Section 16. Project approval; Northeast Minnesota Economic Development Fund. Provides that the commissioner of Iron Range Resources and Rehabilitation must first seek a recommendation from the IRRRB before preparing a list of projects to be funded from the Fund, and clarifies that a project must be approved by the commissioner.

Section 17. Advisory committees; Northeast Minnesota Economic Development Fund. Provides that the commissioner shall not act on a proposal until the commissioner has sought review from the IRRRB of the evaluation and recommendation of any advisory committee.

Section 18. Use of repayments and earnings. Provides that principal and interest received in repayment of loans made under this section must be deposited into the northeast Minnesota economic development fund account in the special revenue fund. The commissioner of Iron Range resources and rehabilitation must seek a recommendation from the IRRRB for any use of the funds as appropriated under this section.

Section 19. Taconite Area Environmental Protection Fund; creation, purpose. Clarifies that any local development project funded with money from the Fund must first be approved by the commissioner of Iron Range resources and rehabilitation after seeking a recommendation from the IRRRB.

Section 20. Taconite area environmental protection fund; administration. Provides that the commissioner of Iron Range resources and rehabilitation may waive certain requirements of the fund and may submit projects for consideration to the governor, after seeking a recommendation from the IRRRB.

Section 21. Taconite economic development fund. Clarifies that the commissioner of Iron Range resources and rehabilitation must seek a recommendation from the IRRRB concerning proposed expenditures, or transfers from the fund.

Section 22. Iron Range school consolidation and cooperatively operated school fund. Provides that expenditures from the fund must be approved by the commissioner of Iron Range resources and rehabilitation after seeking review of the expenditure by the IRRRB.

Section 23. Iron Range higher education account. Clarifies that the commissioner of Iron Range resources and rehabilitation must approval all expenditures from the account, after seeking review and recommendation of the expenditures from the IRRRB.

Section 24. Douglas J. Johnson economic protection trust fund; use of money. Provides that forest land in the taconite assistance area may be sold by the commissioner of Iron Range resources and rehabilitation after seeking a recommendation from the IRRRB.

Section 25. Investment of fund. Requires that expenditures from the special account must be approval by the commissioner of Iron Range resources and rehabilitation after seeking a recommendation from the IRRRB.

Section 26. Douglas J. Johnson economic protection trust fund; project approval. Clarifies approval requirements for projects funded by the DJJ trust fund. The commissioner of Iron Range resources and rehabilitation must seek review and a recommendation from the IRRRB.

Section 27. Douglas J. Johnson economic protection trust fund; expenditure of funds. Clarifies the expenditure of funds from the DJJ trust fund by the commissioner of Iron Range resources and rehabilitation, after seeking a recommendation by the IRRRB.

Section 28. Douglas J. Johnson economic protection trust fund; temporary loan authority. Provides that the commissioner of Iron Range resources and rehabilitation may use money from the fund to provide loans and grants, after seeking a recommendation from the IRRRB.

Section 29. Douglas J. Johnson economic protection trust fund; project approval. Clarifies that the commissioner must seek approval of the IRRRB before proposing certain projects.  

Section 30. Douglas J. Johnson economic protection trust fund; grant and loan fund. Clarifies the approval procedure before making any grant or loans.

Section 31. Douglas J. Johnson economic protection trust fund; long-range plan. Clarifies the requirements of a long-range plan for the DJJ and specifies that no project shall be recommended by the IRRRB if the board finds that the project is not consistent with the goals and objectives established in the plan.

Section 32. Unmined iron ore; valuation petition. Clarifies that taxing districts may petition the commissioner of Iron Range resources and rehabilitation for authority to petition the county to verify the existence of any unmined ore within its jurisdiction. The commissioner may grant the petition after seeking a recommendation from the IRRRB.

Section 33. Iron Range resources and rehabilitation board; early separation incentive program authorization. Permits the commissioner of Iron Range resources and rehabilitation to offer early separation incentives to employees over 60 years old or who have accumulated 30 years of service.  The commissioner is also authorized to offer a targeted separation incentive program for employees at Giants Ridge who will be eliminated if the IRRRB ceases to manage Giants Ridge. The incentives must be paid out of money available to the commissioner, after seeking a recommendation from the IRRRB.

Section 34. Revisor’s instruction. Instructs the revisor of statutes to identify and propose changes to Minnesota Statutes and Minnesota Rules that are consistent with the goals of this act to: (i) transfer discretionary approval authority for all expenditures and projects from the IRRRB to the commissioner; and (ii) provide that the commissioner must, in good faith, seek the review and recommendations of the IRRRB before exercising approval authority. The revisor shall submit its proposal for introduction during the 2017 regular legislative session. 

 

ARTICLE 6

FAMILY AND MEDICAL BENEFITS

Creates a mandatory 12-week unpaid leave to care for sick relatives for employees working for employers of 21 or more employees. The leave is modeled after the Federal Family and Medical Leave Act and is subject to most of the same rules as currently existing state leave for pregnancy and bonding leave. The bill also establishes an insurance benefit program for employees that is modeled in many ways after the state’s unemployment insurance program. There are three types of benefits available. Those benefits are pregnancy benefits, bonding benefits, and family care benefits. Pregnancy benefits are paid for periods of medical conditions related to pregnancy. Bonding benefits are paid to adoptive, birth, and foster parents for periods of bonding with a child. Family care benefits are paid for periods of care for a family member with a serious health condition. Pregnancy benefits are defined as medical benefits, and family care and bonding benefits are defined as family benefits.

Employers of 21 or more employees and wages earned by their employees are covered by the paid benefit program. An employer of less than 21 employees may opt into the program.

Benefits are capped at a weekly amount equal to the annual statewide average weekly wage as defined under the unemployment law. That average wage is calculated annually and is currently $988.  Benefit duration is capped at 12 weeks total for family benefits and medical benefits during a 52-week period.

To be eligible for benefits an employee must have earned approximately $2,700 in wages subject to unemployment taxes during the same time frame as necessary to qualify for unemployment benefits. The $2,700 threshold is indexed to state wage inflation.

Employees and employers will fund the benefits by paying taxes through the unemployment compensation tax collection structure. All employers with 21 or more employees subject to the unemployment law must pay taxes, as must employers who reimburse for unemployment benefits paid. The tax will be on the amount of wages that is subject to the FICA old age tax, which currently is $118,500. The maximum combined tax is 1.5 percent and the minimum tax is 0.1 percent. Taxes will be adjusted annually based on the level of revenue needed to pay benefits and to administer the program. The original tax rates are currently left blank in the bill.

There is a process provided for employers who provide benefits at least as good as those provided under the bill to opt out of the program. Those opting out will have to pay a smaller tax for administrative purposes. Self-employed individuals are permitted to opt in to the program.

The program is to be administered by the Department of Employment and Economic Development under a new division created for that purpose. Much of the process for operating the program is identical to or based on the unemployment compensation system.

There is an appropriation for start-up costs. The program is scheduled to be operational beginning January 1, 2020.

Section 1. Family and medical insurance date. Provides for the classification of data under the family and medical benefit insurance program.

Section 2. Employee; minimum length of employment. Amends the period for which an employee must work to qualify for pregnancy, bonding leave to six months from 12 months for consistency with the requirements for benefits. The family care leave is subject to the same six-month requirement.

Section 3. Child. Provides that the definition of “child” for the purpose of family care leave is that in the family care leave section.

Section 4. Continued insurance. Amends an employer’s obligation for continuing insurance coverage for an employee on state required bonding and parenting leave.

Section 5. Family care leave. Creates an unpaid 12-week family care leave subject to the same requirements that exist for state mandated unpaid pregnancy and bonding leave.

Section 6. Comparable position. Provides the same job protection rights to an employee on family care leave as is provided to employees on pregnancy and bonding leave.

Section 7. Relationship to other leave. Regulates how mandated state unpaid leave will interact with paid employer leave and periods for which paid benefits are provided under the new chapter 268B.

Sections 8 to 11 amend various statutes under the department’s jurisdiction to account for the receipt of family or medical leave benefits (“benefits”).

Section 8. Parents receiving family and medical leave benefits. Exempts parents receiving benefits from certain Minnesota Family Investment Program (“MFIP”) employment services requirement.

Section 9. Eligibility for diversionary work program. Exempts certain benefit recipients from diversionary work requirements under MFIP.

Section 10. Universal participation required. Exempts certain benefit recipient from an MFIP requirement to have an employment plan.

Section 11. Earned income. Includes benefits as earned income under the general assistance and Minnesota supplement aid programs as well as programs governed by chapters 256L and 256J. 

Section 12. Use of data. Authorizes the sharing of unemployment insurance data with the program.

Section 13. Definitions. In particular:

Subdivision 7 defines “employee" (those eligible for benefits) as those employees for whom taxes are paid under the program.

Subdivision 8 defines “employer" as employers with 21 or more employees who are subject to pay unemployment taxes or reimbursements are included.

Subdivisions 10 to 12 define the three types of insured benefits that can be paid under the program. These include benefits for pregnancy, bonding, and family care.

Section 14. Family and medical benefit insurance program creation. Assigns administration of the program to a newly created division in DEED.

Section 15. Eligibility. Specifies benefit eligibility requirements. An applicant must have sufficient wage credits to qualify for the establishment of an unemployment insurance benefit account and must establish a need for one of the benefits.

Section 16. Applications. Regulates applications for benefits to assist the commissioner in determining eligibility.

Section 17. Determination of application. Creates a process for determining benefit amounts and eligibility.

Section 18. Employer notification. Provides for employer notification of benefit determinations.

Section 19. Appeal process. Creates an appeal process modeled after the unemployment compensation appeal process but not identical to it.

Section 20. Benefits. Regulates the amount and payment of benefits.

Section 21. Employment protections. Provides certain employment protections for employees seeking and obtaining benefits. Specifies that no employment leave rights nor job protection is independently provided under the paid benefit program.

Section 22. Substitution of other plan; employer exclusions. Creates a process and requirements for employers to opt out of the program by providing a qualifying employer benefit plan.

Section 23. Self-employed election of coverage. Provides a process and requirements for a self-employed individual to opt in to the program.

Section 24. Small employer election of coverage. Provides a process and requirements for a self-employed individual to opt in to the program.

Section 25. Taxation. Provides a tax to fund the program. Taxes are imposed in an equal amount on employers and employees. The tax base is the FICA old age tax base, which is currently $118,500. The tax will be collected through the unemployment insurance tax system.

Section 26. Collection of taxes. Provides for tax collection procedures and rules.

Section 27. Administrative costs. Provides for a maximum administrative cost ceiling of seven percent of benefits paid.

Section 28. Public outreach. Authorizes public outreach about the benefit program.

Section 29. Applicant’s false representations. Provides for penalties for certain applicant behavior.

Section 30. Employer misconduct; penalty. Provides penalties for certain employer behavior.

Section 31. Records; audits. Authorizes enforcement audits and requires certain record keepings.

Section 22. Subpoenas; oaths. Authorizes administrative subpoenas and the imposition of sworn testimony.

Section 33. Mediation and conciliation. Authorizes mediation and conciliation services by the department.

Section 34. Disclosure to DEED. Adds references to the new family and medical leave benefit program chapter for purposes of information disclosure from the Department of Revenue to DEED.

Section 35. Initial tax rates. Sets a 0.045 percent tax rate for calendar year 2019.

Section 36. Appropriation. Provides a general fund appropriation for fiscal year 2017 for program start-up and sets appropriations bases for subsequent fiscal years.

Section 37. Effective date intention. Provides that the legislative intent is for benefits to not be applied or paid until January 1, 2020 and after. Unless otherwise specified, other sections in the article are effective August 1, 2016.

 
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