1.1 A bill for an act
1.2 relating to taxation; proposing a new markets tax credit; providing for
1.3 administration of the credit; allowing for disclosure of certain information; requiring
1.4 a report; appropriating money; amending Minnesota Statutes 2024, sections
1.5 13.4967, by adding a subdivision; 116J.401, subdivision 3; 270B.14, subdivision
1.6 2; 297I.20, by adding a subdivision; proposing coding for new law as Minnesota
1.7 Statutes, chapter 116Y.
1.8BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.9 Section 1. Minnesota Statutes 2024, section 13.4967, is amended by adding a subdivision
1.10to read:
1.11 Subd. 9.New markets tax credit.Disclosure of information regarding issuance of new
1.12market tax credit certificates is governed under section 270B.14, subdivision 2, paragraph
1.13(a), clause (4).
1.14 EFFECTIVE DATE.This section is effective the day following final enactment.
1.15 Sec. 2. Minnesota Statutes 2024, section 116J.401, subdivision 3, is amended to read:
1.16 Subd. 3.Classification and release of data on individuals.(a) Data collected on
1.17individuals pursuant to a program operated by the commissioner are private data on
1.18individuals as defined in section 13.02, subdivision 12, unless more restrictively classified
1.19by law.
1.20 (b) The commissioner may release to the Department of Revenue data on individuals to
1.21the extent required to administer the new markets tax credit under chapter 116Y and section
1.22297I.20, subdivision 7.
1.23 EFFECTIVE DATE.This section is effective the day following final enactment.
1Sec. 2.
25-04269 as introduced02/28/25 REVISOR EAP/EN
SENATE
STATE OF MINNESOTA
S.F. No. 2327NINETY-FOURTH SESSION
(SENATE AUTHORS: PUTNAM, Nelson, Weber and Dibble)
OFFICIAL STATUSD-PGDATE
Introduction and first reading03/10/2025
Referred to Taxes 2.1 Sec. 3. [116Y.01] NEW MARKETS TAX CREDIT.
2.2 Subdivision 1.Definitions.(a) For purposes of this section, the following terms have
2.3the meanings given.
2.4 (b) "Affiliated group" has the meaning given in section 297I.01, subdivision 1a.
2.5 (c) "Applicable percentage" means zero percent for each of the first two credit allowance
2.6dates and ten percent for each of the final five credit allowance dates.
2.7 (d) "CDFI fund" means the Community Development Financial Institutions fund of the
2.8United States Department of the Treasury.
2.9 (e) "Commissioner" means the commissioner of employment and economic development.
2.10 (f) "Credit allowance date" means:
2.11 (1) the date on which a qualified equity investment is initially made; and
2.12 (2) each of the six anniversary dates thereafter.
2.13 (g) "Greater Minnesota allocation" means $100,000,000 in qualified equity investment
2.14authority to be awarded for investment in qualified active low-income community businesses
2.15with principal business operations in a greater Minnesota county.
2.16 (h) "Greater Minnesota county" means any county located in Minnesota that is not a
2.17metropolitan county.
2.18 (i) "Internal Revenue Code" has the meaning given in section 290.01, subdivision 31.
2.19 (j) "Metropolitan allocation" means $100,000,000 in qualified equity investment authority
2.20to be awarded for investment in qualified active low-income community businesses with
2.21principal business operations in a metropolitan county.
2.22 (k) "Metropolitan county" has the meaning given in section 473.121, subdivision 4.
2.23 (l) "Minnesota qualified community development entity" means a qualified community
2.24development entity that is or whose controlling entity is headquartered in this state.
2.25 (m) "Principal business operations" means the physical location of a business where at
2.26least 60 percent of a qualified active low-income community business's employees work.
2.27An out-of-state business that has agreed to relocate employees or a Minnesota business that
2.28has agreed to hire employees using the proceeds of a qualified low-income community
2.29investment to establish principal business operations in Minnesota is deemed to have principal
2.30business operations in Minnesota if the business satisfies the requirements of this paragraph
2Sec. 3.
25-04269 as introduced02/28/25 REVISOR EAP/EN 3.1within 180 days of receiving the qualified low-income community investment or another
3.2date as agreed by the business and the commissioner.
3.3 (n) "Purchase price" means the amount paid to the qualified community development
3.4entity for a qualified equity investment.
3.5 (o) "Qualified active low-income community business" has the meaning given in section
3.645D of the Internal Revenue Code, except that any business that derives or projects to derive
3.715 percent or more of its annual revenue from the rental or sale of real estate is not considered
3.8to be a qualified active low-income community business. This exception does not apply to
3.9a business that is controlled by or under common control with another business if the second
3.10business:
3.11 (1) does not derive or project to derive 15 percent or more of its annual revenue from
3.12the rental or sale of real estate; and
3.13 (2) is the primary tenant of the real estate leased from the initial business.
3.14A business is deemed a qualified active low-income community business for the duration
3.15of a qualified low-income community investment if the qualified community development
3.16entity reasonably expects, at the time it makes the qualified low-income community
3.17investment, that the business will continue to satisfy the requirements for being a qualified
3.18active low-income community business throughout the entire period of the qualified
3.19low-income community investment.
3.20 (p) "Qualified community development entity" has the meaning given in section 45D
3.21of the Internal Revenue Code, provided that the entity:
3.22 (1) has previously entered into an allocation agreement with the CDFI fund with respect
3.23to credits authorized by section 45D of the Internal Revenue Code; and
3.24 (2) includes the state within the service area set forth in the allocation agreement.
3.25 (q) "Qualified equity investment" means an equity investment in a qualified community
3.26development entity, if the equity investment:
3.27 (1) is acquired after the effective date of this section at its original issuance solely in
3.28exchange for cash;
3.29 (2) has at least 100 percent of its cash purchase price used by the qualified community
3.30development entity to make qualified low-income community investments in qualified
3.31active low-income community businesses that have their principal business operations in
3.32the state of Minnesota; and
3Sec. 3.
25-04269 as introduced02/28/25 REVISOR EAP/EN 4.1 (3) is:
4.2 (i) designated by the qualified community development entity as a qualified equity
4.3investment under this section; and
4.4 (ii) except for a Minnesota qualified community development entity, at least 50 percent
4.5designated by the qualified community development entity as a qualified equity investment
4.6under section 45D of the Internal Revenue Code.
4.7An investment that does not qualify under clause (1) is a qualified equity investment if the
4.8investment met the requirements of this paragraph while under possession of a prior holder.
4.9 (r) "Qualified low-income community investment" means any capital or equity investment
4.10in, or loan to, any qualified active low-income community business.
4.11 (s) "Tax credit" or "credit" means a credit against the tax imposed by chapter 297I,
4.12including any retaliatory tax governed under the provisions of section 297I.05, subdivision
4.1311.
4.14 (t) "Taxpayer" means a taxpayer as defined in section 297I.01, subdivision 16.
4.15 Subd. 2.Credit allowed; qualification; limitation.(a) An entity is eligible for a credit
4.16against the tax imposed under chapter 297I, subject to the requirements of this section.
4.17 (b) The credit equals the applicable percentage for each credit allowance date multiplied
4.18by the purchase price paid to the qualified community development entity for the qualified
4.19equity investment.
4.20 (c) The credit is not salable. The credit may be assigned but only to an affiliated group
4.21of the taxpayer. An assignment is not valid unless the assignee notifies the commissioner
4.22of revenue within 30 days of the date that the assignment is made. The commissioner of
4.23revenue shall prescribe the forms necessary for notifying the commissioner of revenue of
4.24the assignment of a credit certificate and for claiming a credit by assignment.
4.25 Subd. 3.Application.(a) A qualified community development entity that seeks to have
4.26an equity investment designated as a qualified equity investment and eligible for the credit
4.27under this section shall apply to the commissioner on a form provided by the commissioner
4.28that includes:
4.29 (1) the name, address, and tax identification number of the applicant, and evidence of
4.30the applicant's certification as a qualified community development entity by the CDFI fund;
4.31 (2) a copy of the allocation agreement executed by the applicant or its controlling entity
4.32and the CDFI fund;
4Sec. 3.
25-04269 as introduced02/28/25 REVISOR EAP/EN 5.1 (3) a certificate executed by an executive officer of the applicant attesting that the
5.2allocation agreement remains in effect and has not been revoked or canceled by the CDFI
5.3fund;
5.4 (4) a description of the proposed amount, structure, and purchaser of the equity
5.5investment;
5.6 (5) the amount of qualified equity investment authority sought under the greater
5.7Minnesota allocation or the metropolitan allocation, as applicable, which collectively may
5.8not exceed the applicant or its controlling entity's available qualified equity investment
5.9authority under section 45D of the Internal Revenue Code multiplied by two, provided this
5.10limitation does not apply to a Minnesota qualified community development entity;
5.11 (6) if required by clause (5), evidence of the applicant or its controlling entity's available
5.12qualified equity investment authority under section 45D of the Internal Revenue Code; and
5.13 (7) a nonrefundable application fee of $5,000 paid to the commissioner to offset costs
5.14associated with personnel and administrative expenses related to administering the credit.
5.15 (b) The commissioner shall set a date to accept applications not less than 30 days but
5.16not more than 45 days after the date the CDFI fund announces allocation awards under a
5.17notice of funding availability that was published in the Federal Register in November 2024.
5.18 (c) A qualified community development entity may apply for both a greater Minnesota
5.19allocation and a metropolitan allocation.
5.20 (d) The commissioner shall also accept applications on the date established in paragraph
5.21(b) from qualified community development entities that comply with paragraph (a), clauses
5.22(1) to (4), but not clauses (5) and (6). Applicants that do not comply with the requirements
5.23of paragraph (a), clauses (5) and (6), or comply with the requirements of paragraph (a),
5.24clauses (5) and (6), for a portion of their applications, are eligible for an allocation of
5.25qualified investment authority only if the amount of equity investments for which applicants
5.26meeting the requirements of paragraph (a), clauses (1) to (6), does not exceed the limitation
5.27established in subdivision 4, paragraph (c).
5.28 (e) The commissioner shall award any remaining qualified equity investment authority
5.29described in paragraph (d), according to the amount of qualified equity investment authority
5.30requested that does not satisfy the requirements of paragraph (a), clauses (5) and (6), on a
5.31pro rata basis to the total remaining qualified equity investment not requiring the designation
5.32as a qualified equity investment under section 45D of the Internal Revenue Code. The
5.33requirements of this section for allocations of qualified investment authority under paragraph
5Sec. 3.
25-04269 as introduced02/28/25 REVISOR EAP/EN 6.1(d) are waived with respect to awards of qualified equity investment authority, but all other
6.2requirements of this section apply.
6.3 Subd. 4.Certification and timing of qualified equity investments.(a) Within 30 days
6.4after receipt of an application, the commissioner shall grant or deny the application in full
6.5or in part. If the commissioner denies any part of the application, the commissioner shall
6.6inform the applicant of the grounds for the denial. If the applicant provides the information
6.7required by the commissioner or otherwise completes its application within 15 days of the
6.8notice of denial, the application is deemed complete as of the original date of submission.
6.9If the applicant fails to provide the requested information or complete its application within
6.10the 15-day period, the applicant must submit a new application.
6.11 (b) If the application is deemed complete, the commissioner shall certify the proposed
6.12equity investment as a qualified equity investment eligible for a credit under this section.
6.13The commissioner shall provide written notice of the certification to the qualified community
6.14development entity. Once the qualified community development entity identifies the
6.15taxpayers who are allocated credits and their respective credit amounts, the qualified
6.16community development entity shall provide a notice of allocation to the commissioner.
6.17The commissioner shall provide a certification to the qualified community development
6.18entity and each taxpayer containing the credit amount and utilization schedule for which
6.19the taxpayer is eligible. If the taxpayer's eligibility to utilize the credits change due to a
6.20transfer of a qualified equity investment or a change in allocation pursuant to paragraph (c),
6.21the qualified community development entity shall notify the commissioner of the change.
6.22 (c) The aggregate amount of credits allowed to all certified qualified equity investments
6.23in greater Minnesota counties is $50,000,000. The aggregate amount of credits allowed to
6.24all certified qualified equity investments in metropolitan counties is $50,000,000. The
6.25commissioner shall certify applications for the greater Minnesota allocation and the
6.26metropolitan allocation in proportionate percentages based upon the ratio of the amount of
6.27qualified equity investments requested in applications for each allocation to the total amount
6.28of qualified equity investments requested in all applications for each allocation received on
6.29the same day.
6.30 (d) If a pending request cannot be fully certified, the commissioner shall certify the
6.31portion that may be certified unless the qualified community development entity elects to
6.32withdraw its request rather than receive a partial award of qualified equity investment
6.33authority.
6Sec. 3.
25-04269 as introduced02/28/25 REVISOR EAP/EN 7.1 (e) A qualified community development entity must make its qualified equity investment
7.2by January 1, 2028.
7.3 (f) An approved applicant may transfer all or a portion of its certified qualified equity
7.4investment authority to its controlling entity or any affiliate group or partner of the controlling
7.5entity that is also a qualified community development entity if the applicant provides the
7.6information required in the application with respect to the transferee and the applicant
7.7notifies the commissioner in the notice required by paragraph (g). Within 90 days after
7.8receiving notice of certification under paragraph (b), the applicant or transferee shall:
7.9 (1) issue qualified equity investments in an amount equal to the total amount of certified
7.10qualified equity investment authority;
7.11 (2) receive cash in the amount of the certified qualified equity investment; and
7.12 (3) if the applicant or transferee is not a Minnesota qualified community development
7.13entity, designate 50 percent of the qualified equity investment authority as a qualified equity
7.14investment under section 45D of the Internal Revenue Code.
7.15The entity to which the certified qualified equity investment authority is transferred is
7.16responsible for any assessment resulting from an audit by the commissioner of revenue.
7.17 (g) The qualified community development entity must provide the commissioner with
7.18evidence of the receipt of the cash investment and, if the qualified community development
7.19entity is not a Minnesota qualified community development entity, the designation of 50
7.20percent of the qualified equity investment as a qualified equity investment under section
7.2145D of the Internal Revenue Code within 95 days after receiving notice of certification. If
7.22the qualified community development entity does not receive the cash investment, issue the
7.23qualified equity investment within 90 days following receipt of the certification notice, and
7.24comply with paragraph (f), clause (3), if applicable, the certification is void. A voided
7.25certification must be returned to the commissioner and must first be awarded pro rata to
7.26applicants that received awards of qualified equity investment authority and complied with
7.27paragraph (f).
7.28 (h) The commissioner shall notify the commissioner of revenue of credits approved
7.29under this subdivision within 15 days of granting an application.
7.30 Subd. 5.Credit recapture.(a) The commissioner of revenue must recapture credits
7.31should it determine any of the following:
7Sec. 3.
25-04269 as introduced02/28/25 REVISOR EAP/EN 8.1 (1) any amount of the federal tax credit available with respect to a qualified equity
8.2investment that is eligible for a credit under this section is recaptured under section 45D of
8.3the Internal Revenue Code;
8.4 (2) the qualified community development entity redeems or makes principal repayment
8.5with respect to a qualified equity investment prior to seven years after the date of issuance
8.6of the qualified equity investment; or
8.7 (3) the qualified community development entity fails to invest at least 100 percent of
8.8the cash purchase price of the qualified equity investment in qualified low-income community
8.9investments in greater Minnesota counties or metropolitan counties, as applicable, within
8.1012 months of the issuance of the qualified equity investment and maintains the investment
8.11in qualified low-income community investments in greater Minnesota counties or
8.12metropolitan counties, as applicable, until the last credit allowance date for the qualified
8.13equity investment.
8.14 (b) Upon verification of the event indicated in the notification, the commissioner must
8.15notify the entity otherwise eligible for the credit allowed under this section and issue an
8.16assessment for overpayment under the provisions of section 289A.37, subdivision 2, and
8.17notify the entity of ineligibility for future credits with respect to the qualified equity
8.18investment.
8.19 (c) The recapture under paragraph (a), clause (1), must be proportionate to the federal
8.20recapture with respect to the qualified equity investment. The recapture under paragraph
8.21(a), clause (2), must be proportionate to the amount of the redemption or repayment with
8.22respect to the qualified equity investment. The recapture under paragraph (a), clause (3),
8.23must be proportionate to the amount of qualified equity investment that was failed to be
8.24invested or maintained.
8.25 (d) For purposes of paragraph (a), clause (3), an investment is considered maintained
8.26by a qualified community development entity even if the investment has been sold or repaid,
8.27provided that the qualified community development entity reinvests an amount equal to the
8.28capital returned to or recovered by the qualified community development entity from the
8.29original investment, exclusive of any profits realized, in another qualified low-income
8.30community investment in this state as required under the greater Minnesota allocation or
8.31metropolitan allocation within 12 months after the receipt of that capital. Periodic loan
8.32repayments received by a qualified community development entity from a qualified active
8.33low-income community business within a calendar year must be treated as maintained in
8.34qualified low-income community investments if a qualified community development entity
8Sec. 3.
25-04269 as introduced02/28/25 REVISOR EAP/EN 9.1reinvests the repayments in qualified low-income community investments by the end of the
9.2following calendar year.
9.3 (e) A qualified community development entity is not required to reinvest capital returned
9.4from qualified low-income community investments after the sixth anniversary of the issuance
9.5of the qualified equity investment, the proceeds of which were used to make the qualified
9.6low-income community investment, and the qualified low-income community investment
9.7is considered held by the qualified community development entity through the seventh
9.8anniversary of the qualified equity investment's issuance.
9.9 (f) With respect to any one qualified active low-income community business, the
9.10maximum amount of qualified low-income community investments made in that business
9.11in aggregate with all of its affiliated groups that may be counted toward the satisfaction of
9.12paragraph (a), clause (3), is $10,000,000, whether made by one or several qualified
9.13community development entities but exclusive of redeemed or repaid qualified low-income
9.14community investment by the qualified active low-income community business.
9.15 (g) The commissioner shall provide notice to the qualified community development
9.16entity of any proposed recapture of credits pursuant to this subdivision. The notice must
9.17specify the conditions under which the deficiency resulting in the proposed recapture occurred
9.18and state that the credits will be recaptured within 90 days unless the qualified community
9.19development entity complies with the conditions identified in the notice. If the entity does
9.20not comply with the conditions identified in the notice within the 90-day period, the
9.21commissioner shall provide the entity and the taxpayer from whom the credit is to be
9.22recaptured with a final order of recapture. Any credit for which a final recapture order has
9.23been issued must be recaptured by the commissioner from the taxpayer who claimed the
9.24credit on a tax return. The qualified equity investment authority of the recaptured credits
9.25must be returned to the commissioner and must first be awarded pro rata to applicants that
9.26have received awards of qualified equity investment authority and complied with this
9.27subdivision.
9.28 (h) If credits are recaptured under this section, any remaining credit is forfeited.
9.29 Subd. 6.Examination.The commissioner may conduct examinations to verify that the
9.30credits under this section have been received and applied according to the requirements of
9.31this section and to verify that no event has occurred that would result in a recapture of credits
9.32under subdivision 5.
9.33 Subd. 7.Annual reporting by community development entities.(a) Each qualified
9.34community development entity shall submit an annual report to the commissioner within
9Sec. 3.
25-04269 as introduced02/28/25 REVISOR EAP/EN 10.1120 days after the beginning of each calendar year during the compliance period. No annual
10.2report is due prior to the first anniversary of the initial credit allowance date. The report
10.3must include but is not limited to information with respect to all qualified low-income
10.4community investments made by the qualified community development entity, including:
10.5 (1) the date and amount of, and bank statements or wire transfer reports documenting,
10.6qualified low-income community investments;
10.7 (2) the name and address of each qualified active low-income community business
10.8funded by the qualified community development entity, the number of persons employed
10.9by the business at the time of the initial qualified low-income community investment, and
10.10a brief description of the business and its financing;
10.11 (3) the number of employment positions maintained by each qualified active low-income
10.12community business as of the date of the report or the end of the preceding calendar year
10.13and the average annual salaries of those positions;
10.14 (4) the total number of employment positions created and retained as a result of qualified
10.15low-income community investments and the average annual salaries of those positions;
10.16 (5) a certification by its chief executive officer or similar officer that no credits have
10.17been subject to recapture under subdivision 5; and
10.18 (6) any changes with respect to the taxpayers entitled to claim credits with respect to
10.19qualified equity investments issued by the qualified community development entity since
10.20its last report pursuant to this section.
10.21 (b) Each qualified community development entity shall pay the commissioner an annual
10.22fee of $1,500. The initial annual fee required of the qualified community development entity
10.23is due and payable to the commissioner along with the submission of documentation required
10.24under subdivision 4, paragraph (g). Each subsequent annual fee is required to be submitted
10.25with the annual report under paragraph (a).
10.26 (c) The qualified community development entity is not required to provide the annual
10.27report set forth in this section for qualified low-income community investments that have
10.28been redeemed or repaid.
10.29 Subd. 8.Program report.If the credit under this section has not been reviewed under
10.30the provisions of section 3.8855 by December 15, 2034, the commissioner, with input from
10.31the commissioner of revenue, shall report to the legislature no later than December 31, 2034,
10.32regarding the implementation of the credit under this section, including an evaluation of
10.33the credit using the components listed in section 3.885, subdivision 5.
10Sec. 3.
25-04269 as introduced02/28/25 REVISOR EAP/EN 11.1 Subd. 9.Expiration.This section expires for taxable years beginning after December
11.231, 2031, except that the commissioner's authority to allow the credit under subdivision 2
11.3based on certificates that were issued under subdivision 4 before expiration remains in effect
11.4through the year following the year in which all certificates have either been canceled or
11.5resulted in issuance of credit certificates or 2036, whichever is earlier.
11.6 Subd. 10.Account created; appropriation.The Minnesota new markets tax credit
11.7account is created in the special revenue fund in the state treasury. The account is
11.8administered by the commissioner. Application and reporting fees required under subdivision
11.93, paragraph (a), clause (7), are appropriated to the commissioner for costs associated with
11.10certifying applications and for personnel and administrative expenses related to administering
11.11the credit under this section.
11.12 EFFECTIVE DATE.This section is effective for taxable years beginning after December
11.1331, 2025.
11.14Sec. 4. Minnesota Statutes 2024, section 270B.14, subdivision 2, is amended to read:
11.15 Subd. 2.Disclosure to Department of Employment and Economic Development.(a)
11.16Data relating to individuals are treated as follows:
11.17 (1) Return information may be disclosed to the Department of Employment and Economic
11.18Development to the extent provided in clause (2) and for the purposes provided in clause
11.19(3).
11.20 (2) The data that may be disclosed is limited to the amount of gross income earned by
11.21an individual, the total amounts of earnings from each employer, and the employer's name.
11.22 (3) Data may be requested pertaining only to individuals who have claimed benefits
11.23under sections 268.03 to 268.23 and only if the individuals are the subject of investigations
11.24based on other information available to the Department of Employment and Economic
11.25Development. Data received may be used only as set forth in section 268.19, subdivision
11.261, paragraph (b).
11.27 (4) Notwithstanding the limitation in this subdivision, the commissioner may disclose
11.28return information to the Department of Employment and Economic Development to the
11.29extent required to administer the new markets tax credit in section 297I.20.
11.30 (b) Data pertaining to corporations or other employing units may be disclosed to the
11.31Department of Employment and Economic Development to the extent necessary for the
11.32proper enforcement of chapter 268.
11Sec. 4.
25-04269 as introduced02/28/25 REVISOR EAP/EN 12.1 EFFECTIVE DATE.This section is effective the day following final enactment.
12.2 Sec. 5. Minnesota Statutes 2024, section 297I.20, is amended by adding a subdivision to
12.3read:
12.4 Subd. 7.New markets tax credit.(a) A taxpayer may claim a credit against the premiums
12.5tax imposed under this chapter equal to the amount calculated under section 116Y.01,
12.6subdivision 2. The credit is claimed beginning in the taxable year of the third credit allowance
12.7date. If the amount of the credit exceeds the liability for tax under this chapter, the excess
12.8is a credit carryover to each of the five succeeding taxable years. The entire amount of the
12.9excess unused credit for the taxable year must be carried first to the earliest of the taxable
12.10years to which the credit may be carried and then to each successive year to which the credit
12.11may be carried. This credit does not affect the calculation of fire state aid under section
12.12477B.03 and police state aid under section 477C.03.
12.13 (b) This subdivision expires January 1, 2034, for taxable years beginning after and
12.14premiums received after December 31, 2033.
12.15 EFFECTIVE DATE.This section is effective for taxable years beginning after December
12.1631, 2025.
12Sec. 5.
25-04269 as introduced02/28/25 REVISOR EAP/EN