Minnesota Direct Financial Incentives
Minnesota's economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment.
Minnesota’s new Job Creation Fund “JCF” will be available on January 1, 2014. The JCF can provide up to $1,000,000 in grants to approved businesses after specific job creation and investment goals are achieved (minimum 10 jobs created and $500,000 in capital investment). The grants are provided in the form of capital investment rebates and job creation awards. The program allows for up to $2,000,000 in capital investment and job creation rebates for large projects with capital investment in excess of $25 Million and the creation of 200 or more qualifying jobs.
A 7.5% (Greater Minnesota) or 5.0% (Twin Cities Metro Area) capital investment rebate of up to $500,000 (or $1,000,000 for large projects) is available to qualifying projects. The rebate applies to all activities associated with improvements to real property (e.g., land and buildings) including construction materials, supplies, and labor. JCF also includes job creation awards of up to $500,000 (or $1,000,000 for large projects). Annual job creation awards of up to $3,000 per job are available based on the following schedule: $1,000 per job at $26-35,000, $2,000 per job at $35-45,000, and $3,000 per job at wages above $45,000 per year.
Both the rebate and the annual job creation award are available once agreed-upon capital investment and job creation goals have been achieved. Funds are available for up to 5 years (Twin Cities Metro Area) or 7 Years (Greater Minnesota) or until the dollars allocated to the project have been fully disbursed, whichever occurs first. The program also allows for a capital investment award for large job retention projects.
Minnesota Investment Fund (MIF):
MIF provides below-market financing for businesses acquiring "fixed assets" (such as equipment, buildings, and land) and adding new jobs. The project must meet the agreed-upon criteria for private investment, number of jobs created or retained, and wages paid. There is a maximum of $500,000 per project (which can be forgiven) and at least 50% of total project costs must be privately financed through owner equity and other lending sources. Terms are for a maximum of 20 years for real estate and generally 7 years for machinery and equipment. Interest rates are negotiable.
Angel Investment Tax Credit:
Minnesota's Angel Investment Tax Credit stimulates investment in early-stage companies through an investment tax credit. Funded at $59 million over five years, the program provides a 25 percent income tax credit for investments into qualified technology businesses. A unique feature of the program is that the credit can be "refundable," meaning that an investor who has no tax liability in Minnesota can make an investment into a qualified Minnesota firm and receive a full refund for the eligible credit amount. About $12 million in tax credits remain through 2014.
Angel Loan Fund:
Minnesota's Angel Loan Fund “ALF” provides a new funding option for businesses certified to participate in the Angel Tax Credit Program. ALF offers direct loans to qualified businesses for up to 10% of the total amount of equity investment received by the business in a 12-month funding round. The terms are 0% interest for 7 years, non-recourse, with a balloon payment. Loan amounts range for a minimum of $20,000 to a maximum of $250,000. Funds may be used for start-up costs, working capital, business acquisitions and expansions, franchise financing, equipment loans, inventory financing, construction, commercial, and non-passive real estate acquisitions.
Research and Development Tax Credit:
The research and development tax credit has been improved by doubling the size of the credit and expanding the program to include more business entities. The credit for R&D is 10% of the first $2,000,000 in eligible expenses and 2.5% of eligible expenses in excess of $2,000,000. Individuals involved in partnerships, S-Corporations, and limited liability companies are allowed to claim the credit against their individual income taxes. This is a refundable credit.
Data Center Incentive Program:
Minnesota is aggressively pursuing new data and network operation center projects by offering a sales tax exemption on enterprise information technology equipment, electricity used in the operation of the center, and computer software (refund). In addition, there is no personal property tax levy. To qualify, the facility must be at least 25,000 square feet and include at least $30,000,000 of capital investment within the first four years. Businesses also realize significant savings on cooling costs due to our cooler climate, our low-cost and abundant water supply, and cost-competitive reliable energy sources.
Job Opportunity Building Zone (JOBZ) Program:
Tax-free zones have been established in the area outside the seven-county Twin Cities metropolitan region to promote job creation and business development. Businesses locating or expanding in these zones will receive exemption from most taxes. Tax exemptions include corporate income tax, sales tax on goods and services purchased for use in the zone, and commercial/industrial property taxes. JOBZ businesses will also receive tax credits for high-wage job creation. This program will sunset on December 31, 2015.
Minnesota Job Skills Partnership:
Provides state grants of up to $400,000 to educational institutions for the development of customized training programs in partnership with businesses that meet specific business needs.
Small Business Development Loan Program:
For established manufacturers with fixed asset expansion costs in excess of $1,000,000 and adding a substantial number of new jobs. Through industrial development bonds, the Agricultural and Economic Development Board can support a loan at below market interest rates. Interest rates are the market rate of interest for similar securities at the time the bonds are sold. Rates are fixed for the life of the loan and terms can be for up to 20 years for real estate, 10 years or 80% of the useful life for equipment, and may not exceed the weighted average useful life of the assets financed.
The Greater Minnesota Business Development Public Infrastructure Grant Program provides up to 50 percent of the capital costs of the public infrastructure to help support the economic success of communities outside the seven-county metropolitan area. The Innovative Business Development Public Infrastructure (BDPI) Program provides grants to local governmental units for up to 50 percent of the capital cost of the public infrastructure necessary to expand or retain jobs in new innovative businesses and organization. The Small Cities Development Program awards grants to help develop or redevelop small communities through new or rehabilitating existing housing, constructing or rehabilitating public infrastructure, and assisting businesses and industries.
Minnesota State Contact:
John Shoffner, CPA, MBA
Director of Business Development
Minnesota Department of Employment and Economic Development
Business and Community Development Division
First National Bank Building
332 Minnesota Street
St. Paul, MN 55101
(800) 657-3858 or (651) 259-7445
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.