Biomass Feasibility Project Final Report - Xcel Energy

Real Estate Tax Exemptions
Since real estate taxes are levied by local municipalities, counties and school districts, JOBZ is as
much a local incentive as it is a state incentive. For a greenfield project, taxes currently paid on
the bare land will continue to be paid, but taxes on improvements will be exempt. An addition
to an existing plant can qualify for JOBZ, but the existing plant will continue to pay the same
property tax as before. A vacant building placed by the city in JOBZ will be tax-exempt to a
new user.
Corporate Franchise Tax Exemption
The JOBZ Franchise Tax exemption applies to profits directly attributable to the JOBZ project. A
Minnesota start-up in JOBZ, or a company new to Minnesota, would receive the deduction on its
entire Minnesota profit. But if the company maintains other operations in non-JOBZ Minnesota
locations, the JOBZ exemption is prorated on the basis of the company’s total Minnesota
employment. If the company has shut down at a non-JOBZ site and moved to a JOBZ site, it
must employ 20% more workers and its deduction is prorated by subtracting the number of jobs
at its former location from its new total. Minnesota Department of Revenue Schedule M500
details that calculation.
Note that of the three categories of exemptions -- Sales, Corporate and Property -- only the
Corporate Tax exemption is prorated for a relocating company. Sales and use tax and property
tax connected to the JOBZ project are entirely exempt regardless of the company’s other -- or
previous -- Minnesota employment.
JOBZ Timeframe
The JOBZ program took effect on January 1, 2004. Since then, more than 300 projects have
signed onto it. Under the existing statute, exemptions for all existing and future projects are to
expire at the same time: JOBZ’s expiration date, December 31, 2015. Thus, the nearer we get to
2016, the less cumulative benefit a new JOBZ project will receive. But a bill introduced at the
legislature in 2006 would provide a full 10 years of benefits to any project that begins before
2016.
For detailed information on JOBZ, go to www.deed.state.mn.us and click on the JOBZ logo.
Among many files on that site, you will find a useful calculator to help you estimate the value of
the deductions based on your own company’s numbers.
For a discussion of JOBZ eligibility for your project, call Dentley Haugesag at the Minnesota
Department of Employment and Economic Development, 651-297-1174, or send an email to:
dentley.haugesag@state.mn.us
For information on JOBZ tax forms, go to: http://www.taxes.state.mn.us, click on 2006 income tax
forms and instructions, and click on JOBZ.
Tax Increment Financing (TIF)
TIF is a method used by Minnesota municipalities to help finance business expansions and
developments. Tax increment financing districts are established under the provisions of
Minnesota Statutes, Section 469.174 through 469.179. Under that statute, cities use increased
taxes generated by projects in TIF districts to pay off bonds issued to fund development costs.
Identifying Effective Biomass Strategies: Page 101
Quantifying Minnesota’s Resources and Evaluating Future Opportunities