As job losses continue to mount in the state’s construction industry, legislative leaders and the Governor Tim Pawlenty moved swiftly to enact a comprehensive jobs bill last week, culminating with a signing ceremony in the governor’s office last Thursday. At the urging of a coalition of construction workers, contractors, architects, engineers and others in the construction industry, state legislative leaders formed a jobs task force which resulted in early enactment of a range of tax incentives for new construction, building renovation and investment in job-creating businesses.
Investment Tax Credit
An investment tax credit of up to 25 percent of the investment in qualified small businesses was hotly debated by legislative leadership and the governor’s office. While the governor strongly supported use of the credit, he insisted that legislative leaders find funding within the existing state budget for the credit. When legislators agreed to repeal a tax credit for gasoline purchases by low income taxpayers, the bill was finalized and sent to the governor for signature. The maximum cumulative credit for a taxpayer is $250,000 for married couples filing joint returns and $125,000 for all other filers. No more than $4 million in investment in any one qualified business is eligible for the credit.
Local Government Financing for Energy Improvements
Authority was established to allow local governments to finance energy improvements to qualified real property. Funding would be provided through the issuance of revenue bonds repaid by special assessments against the property on a voluntary basis. The financing term cannot exceed 20 years or the average useful life of the improvements, whichever is shorter. The principal amount of the loan is limited to 10 percent of the appraised value of the property or the actual cost of the installation, whichever is less.
Historic Structure Rehabilitation Credit
Minnesota joins a majority of states that match the federal credit for rehabilitation of historic structures with a similar state credit. The new provision allows a taxpayer in Minnesota to obtain a credit equal to the amount of the federal rehabilitation credit for certified historic structures. Since the federal credit is a 20-percent credit, the combined federal and state credit is now 40 percent. The new law allows a grant in lieu of the credit equal to 90 percent of the credit which would otherwise be allowed.
Transportation Infrastructure Loans
The Minnesota Public Finance Authority is now authorized to make loans to cities for transportation infrastructure projects by issuing revenue bonds to be repaid by city taxes, such as tax increment or special taxes, including lodging, liquor and amusement taxes. These bonds could be in the form of the Federal Build America Bonds authorized by the stimulus act, but are not required to take this form.
Conduit Financing for Qualified Green Building
The new law authorizes cities to issue industrial revenue bonds for qualified green building and sustainable design projects. A city, using its redevelopment agency (such as an HRA or an EDA), has authority to issue industrial development bonds for projects that reduce the consumption of electricity, reduce carbon dioxide emissions, increase the use of solar cells in the state, and increase the use of fuel cells to generate energy. At least 75 percent of the building’s square footage must be certified as compliant with a recognized rating system, such as LEED, Green Globes or GreenStar.
Compact TIF District
A new TIF district was created under the bill for “compact development” which removes or replaces outdated structures with new development. The district’s length is the maximum allowed under law, 25 years. Unlike districts of similar length, local authorities do not need to make findings that the buildings are blighted before they can be removed from a Compact Development District.
A number of other specific provisions create flexibility or additional funding sources for specific projects in Bloomington, St. Paul, Oakdale, North Mankato, Cohasset, East Grand Forks and on the Iron Range.