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HF 4774

Tax reduction authority modified, and restrictions removed.

2025-2026 Regular Session Introduced by Paul Anderson and 4 co-sponsors

The bill expands and extends border city tax reductions (sales tax on construction, hiring, debt, and property taxes) to spur zone development, with new restrictions.

Authors added Anderson, P. H., and Backer
#taxation
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Bill Summary · HF 4774

Summary of HF 4774 (2025-2026) — Tax Reduction Authority Modified, and Restrictions Removed

Purpose and Intent

HF 4774 aims to modify Minnesota’s border city enterprise zone program by expanding permissible tax reduction types, increasing certain credits, and clarifying restrictions. The bill also extends ongoing authority for additional border city allocations and designations of new development zones in specific cities. The overarching goal is to bolster economic development, job creation, and investment within designated border-area zones.

Key Provisions

Section 1 — Authorized Types of Tax Reductions ( Minnesota Statutes 469.171, subdivision 1)

  • Allows a border city enterprise zone to approve the following tax reductions for businesses within the designated zones (areas totaling up to 400 acres, with zones of at least 100 acres):
    1) Exemption from the general state sales tax (chapter 297A) on purchases of construction materials or equipment used in the zone, if purchased after the zone application date.
    2) Employee income tax credit for additional workers employed in the zone (excluding construction workers), with a cap of $3,000 per employee per year (note: the bill shows a potential increase to $5,000 per employee per year in brackets; the enacted amount in the text is $5,000).
    3) Income tax credit for a percentage of debt financing costs to construct new or expanded facilities in the zone.
    4) State-paid property tax credit for a portion of property taxes paid by a new commercial/industrial facility or expansion of an existing facility in the zone.
    5) Reimbursement of land acquisition costs for business expansion within the zone if expansion is deemed necessary to prevent relocation outside the state.

  • Application eligibility conditions: The governing body must determine that construction/improvements are unlikely to shift existing state employment to another location within the state and that the facility complies with municipal licensing and regulatory requirements.

  • Effective date: Applies to taxable years beginning after December 31, 2025.

Section 2 — Restrictions (Minnesota Statutes 469.171, subdivision 4)

  • Prohibits tax reductions for facilities whose primary purpose is recreational/entertainment (e.g., golf courses, private clubs, spas, racetracks, skating facilities, etc.), certain utility properties, financial-institution properties, property owned by fraternal or veterans’ organizations, or retail food/beverage facilities operating under a state-franchise agreement requiring state location.
  • Effective date: Day after final enactment.

Section 3 — Additional Border City Allocations (Minnesota Statutes 469.171, subdivision 6a)

  • Authorizes $2,000,000 in allocations for tax reductions under subdivision 9 to border city zones, allocated on a per-capita basis.
  • Restrictions parallel those in Section 2: may not be allocated to disqualified property types (recreational/entertainment facilities, public utility properties, financial-institution properties, fraternal/veterans’ organization properties, or certain franchise-restricted retail operations).
  • Effective date: Day after final enactment.

Section 4 — Designation of Development Zones (Minnesota Statutes 469.1731, subdivision 1)

  • Authorizes designated Minnesotan border cities to designate specific zones after a public hearing (30 days’ notice):
    • Breckenridge: may designate all or part of the city as a zone.
    • Dilworth: 1–6 zones, each up to 100 acres total.
    • East Grand Forks: may designate all or part as a zone.
    • Moorhead: 1–6 zones, each up to 100 acres.
    • Ortonville: 1–6 zones, each up to 100 acres.
  • Effective date: Day after final enactment.

Affected Parties and Impacts

  • Businesses located in designated border city zones: potential eligibility for sales tax exemptions on construction materials, income tax credits for new hires and debt financing, and property tax credits.
  • Employers and developers: potential tax savings and reduced costs for expansion and relocation within Minnesota border cities.
  • Local governments: new or expanded zones may require designation actions, public hearings, and compliance with licensing/regulatory requirements.
  • Restrictions: limitations on tax reductions for entertainment/recreational facilities and certain other property types, ensuring not all facilities qualify.

Procedural and Timeline Notes

  • Effective for taxable years beginning after December 31, 2025 ( Sections 1 and 2).
  • Additional allocations and zone designations would follow enactment and local designation processes (public hearings, resolutions).
  • The bill was introduced and referred to the House Taxes Committee (as of March 2026).

Compiled from official sources — confirm details with the bill’s official record.

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