Frequently Asked Questions
JOBZ Program:
Is there a prohibition against retail?
Yes. Pursuant to M.S. 469.310, subd. 11(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."
What is a Qualified Business?
A person other than a public utility carrying on a non-retail trade or business at a place of business located within a JOB Zone. A business is not considered to be a "qualified business" until it enters into a Business Subsidy Agreement with the local unit of government. In the case of a relocation from a location in Minnesota, a business is not a "qualified business" until it enters into a Business Subsidy Agreement with the local unit of government, AND enters into a Relocation Agreement with the State.
In accordance with the business subsidy law, what reports do I have to submit if I get a JOBZ ?
According to the JOBZ statute, all incentives given under the JOBZ program must be treated as a business subsidy and thus local units of government must comply with the requirements of the business subsidy law. The Zone or Subzone administrators must annually submit a Business Subsidy report to DEED for each business benefiting from JOBZ status (Minn. Business Assistance Form). Zone Administrators must also submit an annual Development report to DEED. Finally, qualified businesses must submit annual tax returns to the Department of Revenue.
Will DEED assist with marketing the zones?
Yes. DEED’s business development and marketing staff will assist zones and subzones in their marketing efforts. In addition, zones will be identified in DEED's marketing materials and listed on MNPRO and DEED websites. Zones are also responsible for marketing themselves as they indicate in the original zone application.
Can Zone or Subzone boundaries be amended?
Yes. See DEED's JOBZ Zone Modification Process for further information. The process is one of many technical assistance items on the JOBZ web page.
Can subzone administrators control who receives zone benefits?
Yes. Because benefits received in the zone are subject to the business subsidy law, the communities can set criteria that can qualify or disqualify a business to receive JOBZ benefits.
What if a company moves to another Zone location?
The repayment provision applies when the company ceases to operate in the Zone or fails to meet goals of a business subsidy agreement.
Employment:
How long does a business that relocates into a tax free zone have to maintain its increased employment?
For the duration of the zone. If a business stops meeting its employment goals required by the statute, the relocation agreement, and the Business Subsidy Agreement, they will no longer meet the definition of a "qualified business" and will thus be ineligible to receive tax exemptions. They will also need to repay the previous tax benefits in accordance with the claw back provisions outlined in the law.
Is there a required wage amount that must be paid to every employee who works in a JOBZ?
Yes. Pursuant to M.S. 469.310, Subd. 11 (g), "A qualifying business must pay each employee compensation, including benefits not mandated by law, that on an annualized basis is equal to at least 110 percent of the federal poverty rate for a family of four" and that rate must be adjusted/increased annually on July 1 of each year.
Do Minnesota's prevailing wage requirements in M.S. 116J.871 apply to JOBZ projects?
- Yes. Please contact the Department of Labor and Industry for Prevailing Wage questions.
- Contact: Erik K. Oelker, MN Dept. of Labor and Industry, 651-284-5091, fax: 651-284-5740
- Prevailing Wage Requirements
- Prevailing Wage Mechanics
Attorney General's Prevailing Wage Letter
Local Community:
How can communities protect existing businesses from unfair competition?
Local units of government can set goals and requirements in their business subsidy agreements. Also, the JOBZ law contains specific requirements for a company moving into a zone from another Minnesota non-zone location. By signing a Zone Agreement, JOBZ Administrators are pledging not to recruit businesses from other JOBZs.
Can I award a TIF benefit to a JOBZ parcel within a TIF district?
No, this property is generally exempt from taxation and, therefore, is not included in captured tax capacity under the TIF Act. Captured tax capacity is the value that generates tax increment. Thus, exclusion from captured tax capacity prevents the generation of increment even though the property pays some debt levies. (School operating referenda, the other category of taxes that continue to apply, are calculated on market value, rather than tax capacity, and do no enter in TIF calculations at all.) In addition, if a TIF district is created within a zone, when the zone designation expires and the property becomes taxable, the value at the time of the expiration of the exemption will be included in "original tax capacity" of the TIF district. This will prevent capturing of increases in the value of the property that occur during the zone designation.
Can I award an economic development abatement (under M.S. 469.1812, 469.1813, 469.1814 and 469.1815) to a JOBZ parcel?
There is no strict prohibition against awarding an economic development abatement to a JOBZ parcel, but the justification for such abatements on top of substantial JOBZ benefits may be questionable. Moreover, if economic development abatements are planned to allow the reallocation of the taxes for the payment of bonds (in a fashion similar to TIF), it must be understood that the property tax exemption provided by JOBZ will substantially diminish the property taxes that may be abated. Abatements on a parcel are limited to the local tax rate multiplied by the net tax capacity of a parcel, but the net tax capacity excludes the value of the improvements that are exempt by JOBZ, even though that value is subject to general obligation debt levies. Also, if the abatements precede the JOBZ benefits, the use of JOBZ may jeopardize the bond payments by exempting amounts that can no longer be diverted to bond payments.
Can I assess a business for infrastructure to support the development of a site within a tax free zone?
Yes, levies to pay off GO Bonds on parcels within a JOBZ zone are specifically exempt.
Can a city still charge fees to in-zone businesses for basic city services (such as water, sewer, etc.)?
Yes. Fees are not included as an exempted item in the statute.
Taxes:
Who should I contact for tax related questions?
- Department of Revenue (for Tax questions)
- Contact: Jeanne Aura, MN Dept. of Revenue, 651-556-6809
Sales Tax Exemption Form (ST3) 
JOBZ Tax Exemptions Fact Sheet
Will a business in a JOBZ Zone be required to file a tax return even if they're exempt from taxes?
Yes. Tax forms must be submitted to the Department of Revenue annually.
When can the contractor or qualified business start purchasing materials exempt from sales tax, how does a qualified business get the sales tax exemption and who can exercise the sales tax exemption on construction materials?
The business can start purchasing items exempt from sales tax and upfront sales tax exemptions begin when the building is being constructed for the business who has signed a Business Subsidy Agreement and, if necessary, a relocation agreement. The contractor or qualified business can get the sales tax exemption by filling out and submitting to the vendor the Sales Tax Exemption Certificate ST3 found on the JOBZ web page.
Will taxes on a site with vacant buildings be exempt from tax at the time of zone designation?
No. Tax exemptions do not occur until the site is occupied by a "qualified business".
Are the tax benefits offered under the JOBZ program a menu or are businesses eligible for all types of tax exemptions?
JOBZ exemptions are not a menu. Qualified businesses are eligible for all of the tax exemptions listed in the statute. Tax exemptions, however, are based on business activity in the zone. Many businesses, trucking or construction for example, conduct most of their activities away from their main headquarters or offices. For these businesses, JOBZ benefits, particularly sales and income tax exemptions, are limited to activities that occur in the zone.
What goods and services are exempt from sales tax?
Goods and services primarily used or consumed in the zone that are purchased and used by a qualified business.
What are the corporate tax benefits?
There are three exemptions. They are the corporate franchise tax exemption, the corporate alternative minimum tax exemption, and the Minimum fee exemption.
What is a Zone Percentage and what is it used for?
The Zone Percentage is that percentage of Minnesota income of a qualified business that is attributed to Zone activities. Zone Percentage is figured as follows.
| ( | Zone payroll amount Total MN payroll |
) | + | ( | Value of zone property Value of business' Total MN property |
) | ÷ | 2 |
When does the income of a qualified business start becoming exempt from corporate taxes and how does the business take the corporate tax benefits?
Income starts becoming exempt when the business has signed the Business Subsidy Agreement and, if necessary, a relocation agreement, and starts operating in the zone. The business will take the subtraction on the Corporate Tax form. Businesses calculate the JOBZ benefits using schedule JOBZ.
What are the individual income tax benefits and how does an individual take the tax exemptions?
They are business income, rental income, and capital gain income. Businesses take the subtraction on the individual income tax form. The individual might need to complete schedule JOBZ to determine the benefits.
Who is eligible for the Jobs Credit and how is the Jobs Credit claimed?
Generally, those qualified businesses that pay an average wage to employees working in the zone of at least $30,000. The refundable jobs credit will be claimed on the Minnesota income tax or corporate tax return. The credit is calculated on schedule JOBZ.
What property is eligible for property tax exemption and when will property become exempt?
Commercial or industrial property, as defined in M.S.273.13,subdivision 24, occupied by a qualified business by July 1st of the assessment year. The Business Subsidy Agreement must by signed by July 1st. Thus, if a property is occupied by July 1 of Year 1 by a business that has signed a Business Subsidy Agreement before July 1 of Year 1, the property is exempt from property taxes payable in Year 2 and beyond. Please note that the commercial/industrial classification is a statutory tax classification, not a local zoning classification.
What part of the tax is property still subject to and is the value of land ever exempt from tax?
The property is still subject to tax on the value of the land, voter approved school operating levies approved before January 1, 2004 , general obligation bond levies, and the non-commercial/industrial portion of mixed-use properties or for buildings not occupied by a qualified business. Taxes on land value are never exempt. Only the commercial and industrial improvements occupied by a qualified business are eligible for tax exemptions.
How is the property tax exemption established?
The subzone administrator submits a copy of the signed Business Subsidy Agreement and, if applicable, the signed relocation agreement to the county assessor (or, in the case of St. Cloud and Duluth, the city assessor).
Does a property leased to a qualified business qualify for tax exemptions?
Yes. The exemption applies to commercial-industrial property used in a Zone by a qualified business. Actual ownership of the property is irrelevant.
If I am the owner of a building who leases the building to a qualified business, do I qualify for tax exemptions?
Yes. Besides the property tax exemptions, you are also eligible for an exemption from income tax for the rental income attributable to the Zone property but only if the zone is occupied by a qualified business.
What is the claw back provision and how many years of tax benefits must be repaid?
If a business ceases to meet the definition of a "qualified business" or fails to meet its goals under a Business Subsidy Agreement, two years of taxes will have to be repaid. There is room for negotiation regarding the repayment of taxes due to extenuating circumstances. JOBZ claw back provisions are not the same as those listed in the business subsidy law. Where the two laws conflict, the JOBZ statute supersedes the business subsidy statute.