JOBZ

• Reminder: All Construction Within JOBZone Must Pay Prevailing Wage
• JOBZ Minnesota Business Assistance Forms are Due Now
• Department of Revenue Publishes Definition of “Retail”
• JOBZ Lawsuit Update
• JOBZ Resources

JOBZ Tracker

The number of completed JOBZ deals stands at 231 projects, resulting in 3,533 new jobs averaging $11.42 an hour. Businesses also promise to retain 7,105 existing jobs and to make more than $288 million in new capital investments, according to data from the signed business subsidy agreements.

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Second-Year Report Shows Continued JOBZ Success

Two years into the 12-year life of the JOBZ program, Greater Minnesota communities continue to use incentives to attract new business investment throughout the state. A second-year analysis of the JOBZ initiative, prepared by the Minnesota Department of Employment and Economic Development (DEED), shows that the tax-free development program is a key reason for business investment, confirming that 92 percent of the businesses would not have made the same investment in the same location without the JOBZ benefits. The report offers details about full-time job creation by JOBZ businesses, as well as a regional breakdown of JOBZ projects, jobs, wages and tax benefits throughout Minnesota. The full report can be viewed online at: http://www.deed.state.mn.us/bizdev/PDFs/jobzannRpt2005.pdf.

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Department of Revenue Publishes JOBZ Tax Exemptions Fact Sheet

The Minnesota Department of Revenue has published an informative new fact sheet detailing the several kinds of tax exemptions and credits that are available to JOBZ businesses. The fact sheet appears on the Department of Revenue website, and includes a link to a printer-friendly PDF version of the document. To download a copy of the fact sheet, click on the following link, or cut and paste it into your browser. http://www.taxes.state.mn.us/property/publications/fact_sheets/html_content/jobzfs.shtml.

New Wage/Benefit Rate Will Be Effective July 1

A new wage/benefit floor of $10.58 per hour will take effect July 1 for businesses that sign a JOBZ business subsidy agreement. The floor is the minimum total wage/benefit package that must be paid by companies that receive a public subsidy such as the tax incentives offered through the JOBZ program. The number is equal to 110 percent of the federal poverty guideline for a family of four, as established by the U.S. Department of Health and Human Services. The new poverty threshold is $20,000 per year; that’s $9.62 per hour, multiplied by 110 percent to arrive at the new wage/benefit floor of $10.58 per hour.

Reminder: All Construction Within JOBZone Must Pay Prevailing Wage

The prevailing wage requirement for JOBZ construction extends throughout the life of the program, regardless of how many individual construction projects occur within the zone. For example, let’s say a qualified business decides to build a new facility on a JOBZ parcel. That business must pay the prevailing wage. Let’s say the same business decides to build another facility on the same JOBZ parcel. That business must pay the prevailing wage. Some JOBZ business apparently have been paying the prevailing wage only on the first construction project, believing that the prevailing wage requirements do not apply to subsequent construction. That belief is mistaken: Businesses must pay the prevailing wage on any and all construction project that occur on a JOBZ parcel.

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JOBZ Minnesota Business Assistance Forms are Due Now

Government agencies with the authority to award JOBZ are required to submit a Minnesota Business Assistance Form (MBAF) for business subsidy agreements signed in 2004 and 2005 and/or if they represent a population of more than 2,500 persons. Please be aware that JOBZone projects must be reported through 2015 even if goals have been achieved. If we do not receive a report by June 1, your agency is prohibited by statute from awarding business subsidies until a report has been filed. The reporting form is available at www.deed.state.mn.us/Community/subsidies/MBAFForm.htm. Please use the online application to complete the form and contact Ed Hodder at (651) 296-0580 if you have any questions or need additional information.

Department of Revenue Publishes Definition of “Retail”

Retail businesses are now explicitly prohibited under the revised JOBZ bill passed by the 2005 Legislature. The Minnesota Department of Revenue’s interpretation of the new rule – including its definition of “retail” – was published in the State Register on April 17. Following is a reprint of the Revenue Notice as published:

Introduction

Under the Minnesota Job Opportunity Building Zone (“JOBZ”) laws, a variety of tax exemptions and credits are available to qualified businesses that are operating in a Zone. During the 2005 Special Session of the Minnesota Legislature, the definition of “qualified business” for purposes of the JOBZ program was amended to preclude retailers from qualifying for JOBZ benefits. In particular, Minnesota Statutes, section 469.310, subdivision 11, was amended by 2005 Minnesota Laws, 1st Special Session, Chapter 1, Article 4, Section 107 to read, in part:

(f) A business is not a qualified business if, at its location or locations in the zone, the business is primarily engaged in making retail sales to purchasers who are physically present at the business’s zone location. The change is effective for businesses that sign business subsidy agreements after June 30, 2005.

This revenue notice (developed in consultation with the Department of Employment and Economic Development) provides guidance on the scope of this law change. It describes those businesses that are not eligible for JOBZ benefits because at their JOBZ location the business is engaged in making retail sales. Nothing in this notice is meant to imply that any other businesses are appropriate JOBZ businesses: all such businesses must meet all other JOBZ eligibility requirements before qualifying for JOBZ tax benefits.

Department Position

1. Definition of retail sale
    
1. A business is engaged in making retail sales if it is selling any merchandise to the general public. Many, but not all of these businesses are classified under the North American Industry Classification System (NAICS) under “Retail Trade”. Businesses classified under this section include businesses such as grocery stores, gasoline stations, hardware stores, automobile dealerships, and department stores.
    
2. A business is engaged in retail sales if it leases merchandise to the general public. This includes businesses such as video or furniture rental stores.
    
3. Restaurants, bars and other businesses that sell food or beverages to consumers are also engaged in making retail sales.
    
2. Zone activities must be retail operations
    
   A business is only a retail operation if the business being conducted at the JOBZ location involves sales to purchasers who are physically present. The mere fact that a business is primarily engaged in retail sale activities (as described above) does not preclude it from being a qualified business for those activities that are not retail sale activities. Example: Furniture Company X’s primary business is the operation of 100 furniture stores throughout the United States. Besides stocking its stores with furniture purchased from independent manufacturers, X also has a plant at which the Company manufactures end tables that are sold to customers at stores throughout the United States. X also has centralized customer service offices that handle customer inquiries and debt collection. Neither the manufacturing operation nor the customer service center involves any sales to purchasers who are physically present in the JOBZ. Therefore, X could locate either operation in a Zone and be eligible for JOBZ tax benefits.
    
3. Customers physically present at the JOBZ location
    
   The mere fact that the JOBZ location makes retail sales, as defined above, directly to consumers does not make a business ineligible for JOBZ benefits if the sales are not made to customers who are physically present at the JOBZ location. Example: Furniture Company Y is the largest mail order retail seller of furniture in the United States. It has no stores in Minnesota or anywhere else. All of its sales are generated through mail order. Since customers are never physically present at the JOBZ location, Y can locate into a JOBZ and be eligible for JOBZ tax benefits. (Cite 30 SR 1133) State Register, Monday 17 April 2006 Page 1133
    
4. Providers of services
    
   Businesses that are primarily engaged in providing services are generally not engaged in making retail sales, and therefore not precluded from being a qualified business under this revenue notice. This includes businesses such as dental, medical, legal or accounting services, or repair shops.
    
5. Retail businesses that claim JOBZ benefits
    
   Businesses whose JOBZ activities are primarily engaged in making retail sales as defined in this notice are not eligible for JOBZ benefits. This is true even if the business is operating within a JOBZ zone pursuant to a business subsidy agreement entered into with the appropriate local government entity.
   
   

JOBZ Lawsuit Update

The state constitutional challenge to Minnesota’s JOBZ program is moving slowly toward its court hearing. A stipulation of facts agreed to by both sides is nearing completion. No court date has yet been set, but oral arguments are likely to be presented in Ramsey County Court sometime in May or June, with a decision anticipated within 90 days after the hearing. We continue to monitor the lawsuit and will communicate developments as quickly and efficiently as possible. All public documents related to the lawsuit can be found on the JOBZ website: http://www.deed.state.mn.us/bizdev/jobzTechAssist.htm.

JOBZ Key Contacts

For most JOBZ-related questions, you’ll get the fastest and most accurate responses if you direct your general questions first to your local sub-zone administrator or one of DEED’s business marketing representatives, all of whom have contact information listed on the JOBZ web page: http://www.deed.state.mn.us/bizdev/PDFs/jobzAdmSupCont.pdf.

In addition, five DEED technical assistance representatives are ready to answer any purely technical questions you might have about any of the 10 zones. To reach the appropriate technical assistance representative for your zone, check the following list:

Land of the Dancing Sky and Upper Minnesota Valley
Marcus Martin: 651-282-6789, marcus.martin@state.mn.us

Positively Southern Minnesota JOBZ Growth Corridor and Region 5 JOB Zone
Emily Johnson: 651-282-5014, emily.a.johnson@state.mn.us

Southwest Regional Zone and Headwaters Zone
Kristin Prososki: 651-297-7133, kristin.prososki@state.mn.us

Southern Minnesota JOBZ Alliance and Northeast Minnesota Zone
Roy Murphy: 651-296-2529, roy.murphy@state.mn.us

West Central Minnesota Zone and East Central Zone (7E)
Tom Carlson: 651-297-1945, tom.carlson@state.mn.us

Other technical assistance representatives:

MNPRO and Community Profiles
Judy Parker: 651-296-3963, judy.parker@state.mn.us

Business subsidy policies, public hearings, annual reporting
Ed Hodder: 651-296-0580, ed.hodder@state.mn.us

Program-related information about specific businesses:
Mark Lofthus, DEED Director of Business Development
651-297-4567, mark.lofthus@state.mn.us

Tax and revenue information:
Anne Gravelle, Department of Revenue Tax Specialist
651-556-6836, anne.gravelle@state.mn.us

Information about Prevailing Wage requirements and compliance:
Erik Oelker, Department of Labor and Industry Senior Investigator
651-284-6269, erik.oelker@state.mn.us

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