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State of Minnesota
S.F. No. 404 - Housing tax credit (as proposed to be amended by the A-4)
Author: Senator Carla J. Nelson
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
Date: March 20, 2019


Section 1. Minnesota Housing Tax Credit.

Subdivision 1. Definitions. Defines the following terms: 

“Agency” means the Minnesota Housing Finance Agency (MHFA).

“Minnesota housing tax credit contribution fund” means the affordable housing fund established in section 3.

“Qualified project” means a project qualifying for a loan or grant under section 3.

“Taxpayer” means an individual or corporation subject to the individual income or corporate franchise tax, or the insurance premiums tax.

Subdivision 2. Credit allowed. Allows a credit for the amount of contributions made in a tax year to the Minnesota housing tax credit contribution fund against the individual income tax, corporate franchise tax, and the insurance premiums tax. The credit is allowed for contributions of at least $100 but not more than $5 million. Taxpayers must claim the credit in the manner provided by the commissioner and must include the credit certificate issued by MHFA under subdivision 3. The credit is nonrefundable but may be carried forward for up to ten years. Contributions used to claim the credit may not be used to calculate any other state income tax deduction or credit. Credits claimed by nonresidents and part year residents are apportioned based on their Minnesota-sourced income.

Subdivision 3. Allocation. Allows taxpayers to designate contributions for a specific project other than their own project. Requires MHFA to send a contributing taxpayer a credit certificate statement within 30 days of a contribution, along with a copy to the Department of Revenue. The certificate must state the dollar amount of the contribution, the date of the contribution, and whether the contribution was designated for a specific project. Limits the aggregate amount of tax credits to $25 million per year.

Subdivision 4. Partnerships; multiple owners. Requires the credit to be allocated for partners in a partnership, members of a LLC, shareholders of a S corp, or multiple owners of property according to their share of the entity.

Subdivision 5. Recapture. Provides that credits claimed by taxpayers are not subject to recapture. Canceled credits or grants must be returned to the tax credit contribution fund and MHFA is not required to return contributions to taxpayers who indicated the contribution was to be used for a specific project for which the loan or grant is recaptured or cancelled.

Subdivision 6. Sunset. Requires the credit to sunset as of tax year 2029. Allows the credit carryforward provisions to continue through 2039.

Section 2. Minnesota housing tax credit. Authorizes the credit against the insurance premiums tax with the same provisions as the credit against income and corporate franchise tax authorized under section 1. The credit does not affect calculation of police and fire aid.  

Section 3. Minnesota housing tax credit contribution fund.

Subdivision 1. Fund created. Establishes the fund at MHFA for disbursements of loans and grants to eligible recipients.

Subdivision 2. Use of funds; grant and loan program. Permits the commissioner to award grants and loans for multifamily and single family developments for persons of low and moderate income. Lists the allowable uses of funds. Authorizes the commissioner to give preference to proposals that include waivers or regulatory changes that result in identifiable cost avoidance or cost reduction. Requires that, to the extent practicable, equal amounts of grants and loans be made for housing units in the metro area and greater Minnesota, and that the commissioner may give preference to proposals that provide for a wide range of incomes within a community or development. Requires that 50 percent of the financing must be set aside for projects primarily serving households at or below 50 percent of area median income.

Subdivision 3. Eligible recipients. Authorizes the commissioner to award grants and loans to:

  • Cities;
  • Federally recognized American Indian tribes or subdivisions located in Minnesota;
  • Tribal housing corporations;
  • Private developers;
  • Nonprofit organizations;
  • HRAs;
  • Public housing authorities; and
  • Owners of housing projects, excluding those who own the housing and use it as their domicile.

Funds must be used for projects that serve individuals who meet specified income limits: a homeownership project must serve households whose incomes were below 115 percent of the greater state or area median income, and a rental project must serve households with incomes below 80 percent of the state or area median income.

Subdivision 4. Recapture. Provides that loans or grants are subject to recapture by the commissioner and that recaptured or repaid loans or grants must be redeposited in the fund.

Subdivision 5. Appropriation. Provides an unspecified appropriation for the MHFS to administer the program.

Subdivision 6. Report. Requires a report to the legislative committees having jurisdiction over housing regarding the credits, grants, and loans issued by region.

Section 4. Purpose statement. States that the purpose of the credit is to support the need for affordable housing.

The bill is effective beginning in tax year 2020. 

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