1.1 A bill for an act
1.2 relating to taxation; income;
proposing a refundable credit for conversion of
1.3 underutilized buildings;
allowing grants in lieu of the credit; proposing a sunset
1.4 for the credit; requiring
reports;proposing coding for new law in Minnesota
1.5 Statutes, chapter 290.
1.6 BE IT ENACTED BY THE
LEGISLATURE OF THE STATE OF MINNESOTA:
1.7 Section 1. [290.0687]
CREDIT FOR CONVERSION OF UNDERUTILIZED
1.8 BUILDINGS.
1.9 Subdivision
1.Definitions. (a) For purposes of this section, the following
terms have
1.10 the meanings given.
1.11 (b) "Account"
means the conversion credit administration account in the special revenue
1.12 fund.
1.13 (c)
"Applicant" means the developer, owner, or taxpayer applying for the
credit or grant
1.14 and receiving the
allocation certificate.
1.15 (d) "Placed in
service" means the completion of substantial conversion work that would
1.16 allow for occupancy of
the entire building or an identifiable portion of the building.
1.17 (e) "Qualifying
conversion expenses" means expenses for a qualifying project.
1.18 (f) "Qualifying
project" means a building project:
1.19 (1) to convert a
structure that was first placed in service at least fifteen years before
1.20 conversion begins;
1.21 (2) that demonstrates
significant conversion of use in one of two ways:
2.1 (i) the structure was
converted from one commercial, income-producing, habitable use
2.2 to another for which
the structure had not been previously used or for which purpose the
2.3 structure was not
intentionally built; or
2.4 (ii) the structure has
had at least 50 percent of its occupiable floor area vacant for a
2.5 period of no fewer
than five years and the proposed conversion will return that vacant area
2.6 to an
income-producing, habitable condition; and
2.7 (3) that is otherwise
eligible for the credit under this section.
2.8 Subd.
2.Credit or grant allowed. (a) A credit against the tax imposed
under this chapter
2.9 or a grant is allowed
equal to not more than 30 percent of the total cost of qualifying
2.10 conversion expenses for
a qualifying project. The credit is claimable and the grant is payable
2.11 in the year the
qualifying project is placed in service.
2.12 (b) To qualify for the
credit under this section, the qualifying project must fulfill the
2.13 following requirements:
2.14 (1) at least 75 percent
of the existing external walls of the structure must be retained as
2.15 exterior or interior
walls, with at least 50 percent of the existing external walls kept in place
2.16 as external walls;
2.17 (2) at least 75 percent
of the existing internal structural framework of the building must
2.18 be retained in place;
and
2.19 (3) the conversion work
must commence and be completed within three years of the
2.20 date of the allocation
certificate issued under subdivision 3.
2.21 (c) An applicant can
apply for a credit or a grant or a combination of a credit and grant
2.22 under this section.
2.23 (d) A claimant is not
allowed a credit or grant under this section for any qualifying
2.24 conversion expenses that
are used to claim the credit under section 290.0681.
2.25 Subd. 3.Application;
allocations. (a) To qualify for a credit or grant under this
section,
2.26 the applicant for a
qualifying project must apply to the commissioner of employment and
2.27 economic development for
either a credit or grant, or both, before the conversion begins.
2.28 The application must
contain the information and be in the form prescribed by the
2.29 commissioner of
employment and economic development and include the following:
2.30 (1) relevant financial
information on the qualifying project, including but not limited to
2.31 estimated and final
conversion costs, materials costs, labor costs, the number of jobs created
3.1 during construction, a
calculation of the preconversion adjusted basis, and the assessed
3.2 property value in tax
year before conversion;
3.3 (2) a statement
affirming that the qualifying project meets the requirements under this
3.4 section;
3.5 (3) demographic
information on the applicant, contractor, and persons employed;
3.6 (4) a statement of
whether the application is for a credit or grant in lieu of credit or a
3.7 combination of the
two; and
3.8 (5) information
designating the taxpayer qualifying for the credit or the recipient of the
3.9 grant.
3.10 (b) A conversion credit
administration account is established in the special revenue fund.
3.11 The commissioner of
employment and economic development may collect a fee for
3.12 application of up to one
percent of estimated qualifying conversion expenses to offset costs
3.13 associated with
personnel and administrative expenses related to administering the credit
3.14 and preparing the
economic impact report in subdivision 9. Application fees are deposited
3.15 in the account.
3.16 (c) Upon approving an
application, the commissioner of employment and economic
3.17 development shall issue
an allocation certificate that:
3.18 (1) verifies an
applicant's eligibility for the credit or grant;
3.19 (2) states the amount of
credit or grant anticipated to be awarded for the qualifying
3.20 project;
3.21 (3) states the fiscal
year in which the credit or grant is allocated, and that the taxpayer
3.22 or grant recipient is
entitled to either the credit or the grant, or both, at the time the qualifying
3.23 project is placed in
service; and
3.24 (4) states the date
after which the allocation is no longer available.
3.25 (d) The commissioner of
employment and economic development must determine if the
3.26 project is eligible for
a credit or a grant, or both, under this section and must notify the
3.27 applicant in writing of the
determination. Eligibility for the credit is subject to review and
3.28 audit by the
commissioner of employment and economic development.
3.29 (e) Any decision of the
commissioner of employment and economic development under
3.30 paragraph (c) may be
challenged as a contested case under chapter 14. The contested case
3.31 proceeding must be
initiated within 45 days of the date of written notification by the
3.32 commissioner of
employment and economic development.
4.1 Subd.
4.Credit certificates; grants. (a) The applicant of a qualifying
project for which
4.2 the commissioner of
employment and economic development has issued an allocation
4.3 certificate must
notify the commissioner of employment and economic development when
4.4 the qualifying project
is placed in service. Upon verifying that the qualifying project has
4.5 been placed in
service, the commissioner of employment and economic development must
4.6 issue a credit
certificate to the taxpayer designated in the application or must pay a grant
to
4.7 the recipient
designated in the application. The credit certificate must state the amount of
4.8 the credit. The credit
and the grant amount must not exceed 30 percent of qualifying
4.9 conversion costs.
4.10 (b) The recipient of a
credit certificate may sell, assign, or otherwise transfer, in whole
4.11 or in part, the
certificate to one or more persons before the credit is claimed. No portion of
4.12 the credit certificate
may be transferred more than two times before the credit is claimed.
4.13 An assignment is not
valid unless the assignee notifies the commissioner of employment
4.14 and economic development
within 30 days of the date the assignment is made. The
4.15 commissioner of
employment and economic development must prescribe the forms necessary
4.16 for notifying the
commissioner of employment and economic development of the assignment
4.17 of a credit certificate
and for claiming a credit by assignment.
4.18 (c) Credits passed
through to partners, members, shareholders, or owners pursuant to
4.19 subdivision 5 are not an
assignment of a credit certificate under this subdivision.
4.20 (d) An agreement between
the commissioner of employment and economic development
4.21 and the recipient of a
credit certificate may allow the credit certificate to be issued to another
4.22 individual or entity.
4.23 Subd. 5.Partnerships;
multiple owners. Credits granted to a partnership, limited
4.24 liability company taxed
as a partnership, S corporation, or multiple owners of property are
4.25 passed through to the
partners, members, shareholders, or owners, respectively, pro rata to
4.26 each partner, member,
shareholder, or owner based on their share of the entity's assets or
4.27 as specially allocated
in their organizational documents or any other executed agreement,
4.28 as of the last day of
the taxable year.
4.29 Subd. 6.Credit
refundable. If the amount of credit that the taxpayer is eligible to
receive
4.30 under this section
exceeds the liability for tax under this chapter, the commissioner of
4.31 revenue shall refund the
excess to the taxpayer.
4.32 Subd. 7.Appropriations.
(a) The amounts necessary to pay the refunds and grants
4.33 authorized under this
section are appropriated to the commissioner of revenue and the
4.34 commissioner of
employment and economic development from the general fund.
5.1 (b) Amounts in the
account are appropriated to the commissioner of employment and
5.2 economic development
for costs associated with personnel and administrative expenses
5.3 related to
administering the conversion credit in this section and for costs associated
with
5.4 preparing the economic
impact report required in subdivision 9.
5.5 Subd.
8.Manner of claiming credit or grant. (a) The commissioner of
revenue shall
5.6 prescribe the manner
in which the credit may be claimed. This may include allowing the
5.7 credit only as a
separately processed claim for refund. If the credit under this section is
5.8 separately processed
as a claim for refund, the commissioner of revenue must determine
5.9 how to reconcile the
payment of the credit once the taxpayer files and determines liability.
5.10 (b) The commissioner of
employment and economic development shall prescribe the
5.11 manner in which the
grant may be paid. This may include allowing the grant to be paid in
5.12 installments.
5.13 Subd. 9.Reports
required. (a) The commissioner of employment and economic
5.14 development must
dedicate a sufficient amount of the administrative fee to prepare, or
5.15 contract to be prepared,
the following reports to the chairs and ranking minority members
5.16 of the legislative
committees with jurisdiction over taxes:
5.17 (1) an annual report on
the economic impact of all qualifying projects put in service in
5.18 each fiscal year; and
5.19 (2) a comprehensive
five-year report after December 31, 2031, which shall include the:
5.20 (i) location of all
completed and in-progress qualifying projects under this program;
5.21 (ii) amount of building
materials reclaimed or reused;
5.22 (iii) amount of building
materials repurposed onsite, which may include existing structural
5.23 and finishing
components;
5.24 (iv) leasing and sales
information for completed qualifying projects, including occupancy
5.25 percentages and rental
rates;
5.26 (v) energy savings and
sustainability measures utilized;
5.27 (vi) applicant
demographics and numbers of persons employed; and
5.28 (vii) changes in use of
the structures.
5.29 (b) The reports must
comply with sections 3.195 and 3.197.
5.30 Subd.
10.Sunset. This section expires after fiscal year 2031, except
that the commissioner
5.31 of employment and
economic development's authority to issue credit certificates under
6.1 subdivision 4 based on
allocation certificates that were issued before fiscal year 2032 remains
6.2 in effect through
2035, and the reporting requirements in subdivision 9 remain in effect
6.3 through the year
following the year in which all allocation certificates have either been
6.4 canceled or resulted
in issuance of credit certificates, or 2036, whichever is earlier.
6.5 EFFECTIVE DATE.
This section is effective for taxable years beginning after December
6.6 31, 2025.
6.7 Sec. 2. PUBLIC PROCESS;
CREDIT FOR CONVERSION OF UNDERUTILIZED
6.8 BUILDINGS.
6.9 Upon completion of the development of the conversion
program application information
6.10 and forms required to
claim the credits in section 1, the commissioner of employment and
6.11 economic development
shall hold a public hearing for the purpose of receiving stakeholder
6.12 feedback and shall make
revisions as deemed appropriate. The commissioner shall make
6.13 available to the public
sufficient materials to allow stakeholders to engage in self-education
6.14 and promotion of this
program.
6.15 EFFECTIVE DATE. This
section is effective the day following final enactment.
