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Pediatric Device Innovation Tax Credit Bill- Final Draft

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Catchwind Innovations
Catchwind Innovations

This bill proposes legislation to establish a pediatric medical device innovation tax credit program in Minnesota. It would provide refundable tax credits of up to $500,000 for qualified businesses engaged in developing pediatric medical devices. To qualify, businesses must meet certain criteria related to location, size, revenues, and years in operation. The bill outlines an application process to be certified for the tax credits and requires annual reporting. Unused credits can be cancelled after two years and reallocated to other applicants. The Department of Employment and Economic Development would administer the program.

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03/17/15 10:06 AM HOUSE RESEARCH SK JM058 A bill for an act1.1 relating to taxation; allowing a pediatric medical device innovation tax credit;1.2 providing for an application and certification process; appropriating money;1.3 amending Minnesota Statutes 2014, sections 13.4967, by adding a subdivision;1.4 290.06, by adding a subdivision; proposing coding for new law in Minnesota1.5 Statutes, chapter 116J.1.6 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:1.7 Section 1. Minnesota Statutes 2012, section 13.4967, is amended by adding a1.8 subdivision to read:1.9 Subd. 9. Pediatric medical device innovation tax credit. Data related to pediatric1.10 medical device innovation tax credit certificates and certification of qualified businesses1.11 and projects are classified in section 116J.8736.1.12 EFFECTIVE DATE. This section is effective the day following final enactment.1.13 Sec. 2. [116J.8736] PEDIATRIC MEDICAL DEVICE INNOVATION TAX1.14 CREDIT.1.15 Subdivision 1. Definitions. (a) For purposes of this section, the following terms1.16 have the meanings given them.1.17 (b) "Pediatric medical device" means a medical device intended for human use, as1.18 defined under section 510 of the federal Food, Drug, and Cosmetic Act, designed to be1.19 used for a pediatric population and requiring approval under section 515A of the federal1.20 Food, Drug, and Cosmetic Act for a pediatric indication.1.21 (c) "Qualified business" means a firm that at end of the taxable year immediately1.22 prior to the taxable year in which the application is filed:1.23 Sec. 2. 1
03/17/15 10:06 AM HOUSE RESEARCH SK JM058 (1) is engaged in the development and intends to pursue federal Food and Drug2.1 Administration approval of a pediatric medical device;2.2 (2) had each of its Minnesota property and payroll factors, as defined in section2.3 290.191, equal to or greater than 50 percent;2.4 (3) had total gross receipts of less than $1,000,000;2.5 (4) had fewer than 25 employees; and2.6 (5) had not been in operation for more than 20 years.2.7 (d) "Qualified expenditures" means the aggregate amount of the costs paid or2.8 incurred by a qualified business for expenses necessary for and directly related to the2.9 conduct of a qualifying pediatric medical device innovation project in this state, but2.10 excluding any of the following costs:2.11 (1) funded with moneys or investments that received a credit under section 116J.8737;2.12 (2) that are not qualified research expenses, as that term is used in section 41 of the2.13 Internal Revenue Code; or2.14 (3) of the type defined under section 48D(b)(3) of the Internal Revenue Code.2.15 (e) "Qualifying pediatric medical device innovation project" or "project" means a2.16 project that is certified by the commissioner under subdivision 3 as qualifying for a credit2.17 under this section.2.18 Subd. 2. Credit allowed. A qualified business is eligible for a refundable tax credit2.19 equal to 25 percent of its qualified expenditures as certified by the commissioner under2.20 subdivision 3, but not to exceed a maximum total credit of $500,000.2.21 Subd. 3. Program established; application process. (a) The commissioner, after2.22 consultation with the commissioner of health, shall establish a pediatric medical device2.23 innovation program to provide state assistance through refundable tax credits under this2.24 section for projects, carried on in this state, that are designed to develop and produce2.25 pediatric devices to diagnose, treat, or prevent diseases or conditions by:2.26 (1) conducting preclinical activities, clinical trials, and clinical studies, or carrying2.27 out research protocols, for the purpose of securing approval of a pediatric device by the2.28 federal Food and Drug Administration; or2.29 (2) developing a product, process, or technology to further the delivery or2.30 administration of a pediatric medical device.2.31 (b) In addition, the commissioner shall establish a process for businesses to apply2.32 for and be awarded certificates of tax credit entitlements under this section. The program2.33 must specify the time, manner, and form for the applications and the information to be2.34 provided with the applications. Applications must include information sufficient to allow2.35 the commissioner to determine that the business is a qualified business that will incur2.36 Sec. 2. 2
03/17/15 10:06 AM HOUSE RESEARCH SK JM058 qualified expenditures for projects and must specify the requested amount of the credit and3.1 be accompanied by an application fee of $150. The commissioner shall certify qualified3.2 businesses for credits in the order in which applications were filed with the department.3.3 The commissioner shall limit certifications each year to the amount available for that fiscal3.4 year under paragraph (c). The commissioner shall:3.5 (1) provide credit certificates indicating the amount of the tax credit under this3.6 section that the qualified business is entitled to; and3.7 (2) notify the commissioner of revenue of each qualified business and the amount3.8 of credits to which it is entitled.3.9 (c) Beginning for fiscal year 2017, the amount available for certification of tax3.10 credits under this section for a fiscal year is limited to $10,000,000, plus the amount of3.11 credits cancelled under subdivision 5 and reallocated to that fiscal year.3.12 Subd. 4. Annual report. (a) By February of each year, a recipient of a credit3.13 certificate under this section in a prior year must annually file a report with the3.14 commissioner and pay a filing fee of $100 as required under this subdivision. Reports3.15 must be made in the form and contain the information required by the commissioner.3.16 The commissioner shall require reports to include sufficient information to allow the3.17 commissioner to determine that the requirements to qualify for the tax credit under this3.18 section have been satisfied.3.19 (b) The requirement to file an annual report under this subdivision ceases when the3.20 qualified business files one annual report after the report detailing that sufficient qualified3.21 expenditures were made to claim the full amount of the certified tax credits for the project.3.22 (c) A recipient of a credit certificate under this section that fails to file an annual3.23 report as required under this subdivision is subject to a $500 fine.3.24 Subd. 5. Cancellation. If the commissioner determines that a recipient of a credit3.25 has not made sufficient qualifying expenditures to claim the full amount of the credit3.26 certified for the qualified business by the end of the second calendar year beginning after3.27 the year the certificate was issued, the commissioner may cancel and revoke all or part of3.28 the remaining amount of the credit certificate. The commissioner shall notify the qualified3.29 business and the commissioner of revenue of this action. Any amount of a certificate3.30 cancelled under this subdivision is added to the amount of the limit on credit certificates3.31 for the succeeding fiscal year under subdivision 3.3.32 Subd. 6. Deposit and appropriation of fees. All filing fees and any fines3.33 collected under this section must be deposited in the small business investment tax3.34 credit administration account in the special revenue fund and are appropriated to the3.35 commissioner for purposes of administering the credit under this section.3.36 Sec. 2. 3
03/17/15 10:06 AM HOUSE RESEARCH SK JM058 Subd. 7. Data privacy. Data contained in an application submitted to the4.1 commissioner under subdivision 3 are nonpublic data, or private data on individuals, as4.2 defined in section 13.02, subdivision 9 or 12, except that the following data items are public4.3 for applications approved and certificates issued by the commissioner under subdivision 3:4.4 (1) the name and mailing address of the qualified business;4.5 (2) the amount of the credit certificate issued under subdivision 3; and4.6 (3) for credits cancelled under subdivision 6, the amount cancelled and the name4.7 of the qualified business.4.8 EFFECTIVE DATE. This section is effective the day following final enactment.4.9 Sec. 3. Minnesota Statutes 2012, section 290.06, is amended by adding a subdivision4.10 to read:4.11 Subd. 37. Pediatric medical device innovation tax credit. (a) The definitions4.12 under section 116J.8736 apply for purposes of this subdivision.4.13 (b) A taxpayer that is a qualified business under section 116J.8736 is allowed a credit4.14 against the tax imposed by this chapter for qualified expenditures paid or incurred in the4.15 taxable year, but not to exceed the credit entitlement on the certificate provided by the4.16 commissioner of employment and economic development under section 116J.8736, less4.17 any amount claimed in a prior taxable year.4.18 (c) If the amount of credit which the taxpayer is eligible to receive under this4.19 subdivision exceeds the taxpayer's tax liability under this chapter, the commissioner shall4.20 refund the excess to the taxpayer. An amount necessary to pay claims for refunds provided4.21 in this subdivision is appropriated from the general fund to the commissioner of revenue.4.22 (d) Notwithstanding the certification of eligibility issued by the commissioner of4.23 employment and economic development under section 116J.8736, the commissioner4.24 may use any audit and examination powers under chapter 270C or 289A, to the extent4.25 necessary to verify that the taxpayer is eligible for the credit and to assess for the amount4.26 of any improperly claimed credit.4.27 EFFECTIVE DATE. This section is effective for taxable years beginning after4.28 December 31, 2014.4.29 Sec. 3. 4

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Pediatric Device Innovation Tax Credit Bill- Final Draft

  • 1. 03/17/15 10:06 AM HOUSE RESEARCH SK JM058 A bill for an act1.1 relating to taxation; allowing a pediatric medical device innovation tax credit;1.2 providing for an application and certification process; appropriating money;1.3 amending Minnesota Statutes 2014, sections 13.4967, by adding a subdivision;1.4 290.06, by adding a subdivision; proposing coding for new law in Minnesota1.5 Statutes, chapter 116J.1.6 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:1.7 Section 1. Minnesota Statutes 2012, section 13.4967, is amended by adding a1.8 subdivision to read:1.9 Subd. 9. Pediatric medical device innovation tax credit. Data related to pediatric1.10 medical device innovation tax credit certificates and certification of qualified businesses1.11 and projects are classified in section 116J.8736.1.12 EFFECTIVE DATE. This section is effective the day following final enactment.1.13 Sec. 2. [116J.8736] PEDIATRIC MEDICAL DEVICE INNOVATION TAX1.14 CREDIT.1.15 Subdivision 1. Definitions. (a) For purposes of this section, the following terms1.16 have the meanings given them.1.17 (b) "Pediatric medical device" means a medical device intended for human use, as1.18 defined under section 510 of the federal Food, Drug, and Cosmetic Act, designed to be1.19 used for a pediatric population and requiring approval under section 515A of the federal1.20 Food, Drug, and Cosmetic Act for a pediatric indication.1.21 (c) "Qualified business" means a firm that at end of the taxable year immediately1.22 prior to the taxable year in which the application is filed:1.23 Sec. 2. 1
  • 2. 03/17/15 10:06 AM HOUSE RESEARCH SK JM058 (1) is engaged in the development and intends to pursue federal Food and Drug2.1 Administration approval of a pediatric medical device;2.2 (2) had each of its Minnesota property and payroll factors, as defined in section2.3 290.191, equal to or greater than 50 percent;2.4 (3) had total gross receipts of less than $1,000,000;2.5 (4) had fewer than 25 employees; and2.6 (5) had not been in operation for more than 20 years.2.7 (d) "Qualified expenditures" means the aggregate amount of the costs paid or2.8 incurred by a qualified business for expenses necessary for and directly related to the2.9 conduct of a qualifying pediatric medical device innovation project in this state, but2.10 excluding any of the following costs:2.11 (1) funded with moneys or investments that received a credit under section 116J.8737;2.12 (2) that are not qualified research expenses, as that term is used in section 41 of the2.13 Internal Revenue Code; or2.14 (3) of the type defined under section 48D(b)(3) of the Internal Revenue Code.2.15 (e) "Qualifying pediatric medical device innovation project" or "project" means a2.16 project that is certified by the commissioner under subdivision 3 as qualifying for a credit2.17 under this section.2.18 Subd. 2. Credit allowed. A qualified business is eligible for a refundable tax credit2.19 equal to 25 percent of its qualified expenditures as certified by the commissioner under2.20 subdivision 3, but not to exceed a maximum total credit of $500,000.2.21 Subd. 3. Program established; application process. (a) The commissioner, after2.22 consultation with the commissioner of health, shall establish a pediatric medical device2.23 innovation program to provide state assistance through refundable tax credits under this2.24 section for projects, carried on in this state, that are designed to develop and produce2.25 pediatric devices to diagnose, treat, or prevent diseases or conditions by:2.26 (1) conducting preclinical activities, clinical trials, and clinical studies, or carrying2.27 out research protocols, for the purpose of securing approval of a pediatric device by the2.28 federal Food and Drug Administration; or2.29 (2) developing a product, process, or technology to further the delivery or2.30 administration of a pediatric medical device.2.31 (b) In addition, the commissioner shall establish a process for businesses to apply2.32 for and be awarded certificates of tax credit entitlements under this section. The program2.33 must specify the time, manner, and form for the applications and the information to be2.34 provided with the applications. Applications must include information sufficient to allow2.35 the commissioner to determine that the business is a qualified business that will incur2.36 Sec. 2. 2
  • 3. 03/17/15 10:06 AM HOUSE RESEARCH SK JM058 qualified expenditures for projects and must specify the requested amount of the credit and3.1 be accompanied by an application fee of $150. The commissioner shall certify qualified3.2 businesses for credits in the order in which applications were filed with the department.3.3 The commissioner shall limit certifications each year to the amount available for that fiscal3.4 year under paragraph (c). The commissioner shall:3.5 (1) provide credit certificates indicating the amount of the tax credit under this3.6 section that the qualified business is entitled to; and3.7 (2) notify the commissioner of revenue of each qualified business and the amount3.8 of credits to which it is entitled.3.9 (c) Beginning for fiscal year 2017, the amount available for certification of tax3.10 credits under this section for a fiscal year is limited to $10,000,000, plus the amount of3.11 credits cancelled under subdivision 5 and reallocated to that fiscal year.3.12 Subd. 4. Annual report. (a) By February of each year, a recipient of a credit3.13 certificate under this section in a prior year must annually file a report with the3.14 commissioner and pay a filing fee of $100 as required under this subdivision. Reports3.15 must be made in the form and contain the information required by the commissioner.3.16 The commissioner shall require reports to include sufficient information to allow the3.17 commissioner to determine that the requirements to qualify for the tax credit under this3.18 section have been satisfied.3.19 (b) The requirement to file an annual report under this subdivision ceases when the3.20 qualified business files one annual report after the report detailing that sufficient qualified3.21 expenditures were made to claim the full amount of the certified tax credits for the project.3.22 (c) A recipient of a credit certificate under this section that fails to file an annual3.23 report as required under this subdivision is subject to a $500 fine.3.24 Subd. 5. Cancellation. If the commissioner determines that a recipient of a credit3.25 has not made sufficient qualifying expenditures to claim the full amount of the credit3.26 certified for the qualified business by the end of the second calendar year beginning after3.27 the year the certificate was issued, the commissioner may cancel and revoke all or part of3.28 the remaining amount of the credit certificate. The commissioner shall notify the qualified3.29 business and the commissioner of revenue of this action. Any amount of a certificate3.30 cancelled under this subdivision is added to the amount of the limit on credit certificates3.31 for the succeeding fiscal year under subdivision 3.3.32 Subd. 6. Deposit and appropriation of fees. All filing fees and any fines3.33 collected under this section must be deposited in the small business investment tax3.34 credit administration account in the special revenue fund and are appropriated to the3.35 commissioner for purposes of administering the credit under this section.3.36 Sec. 2. 3
  • 4. 03/17/15 10:06 AM HOUSE RESEARCH SK JM058 Subd. 7. Data privacy. Data contained in an application submitted to the4.1 commissioner under subdivision 3 are nonpublic data, or private data on individuals, as4.2 defined in section 13.02, subdivision 9 or 12, except that the following data items are public4.3 for applications approved and certificates issued by the commissioner under subdivision 3:4.4 (1) the name and mailing address of the qualified business;4.5 (2) the amount of the credit certificate issued under subdivision 3; and4.6 (3) for credits cancelled under subdivision 6, the amount cancelled and the name4.7 of the qualified business.4.8 EFFECTIVE DATE. This section is effective the day following final enactment.4.9 Sec. 3. Minnesota Statutes 2012, section 290.06, is amended by adding a subdivision4.10 to read:4.11 Subd. 37. Pediatric medical device innovation tax credit. (a) The definitions4.12 under section 116J.8736 apply for purposes of this subdivision.4.13 (b) A taxpayer that is a qualified business under section 116J.8736 is allowed a credit4.14 against the tax imposed by this chapter for qualified expenditures paid or incurred in the4.15 taxable year, but not to exceed the credit entitlement on the certificate provided by the4.16 commissioner of employment and economic development under section 116J.8736, less4.17 any amount claimed in a prior taxable year.4.18 (c) If the amount of credit which the taxpayer is eligible to receive under this4.19 subdivision exceeds the taxpayer's tax liability under this chapter, the commissioner shall4.20 refund the excess to the taxpayer. An amount necessary to pay claims for refunds provided4.21 in this subdivision is appropriated from the general fund to the commissioner of revenue.4.22 (d) Notwithstanding the certification of eligibility issued by the commissioner of4.23 employment and economic development under section 116J.8736, the commissioner4.24 may use any audit and examination powers under chapter 270C or 289A, to the extent4.25 necessary to verify that the taxpayer is eligible for the credit and to assess for the amount4.26 of any improperly claimed credit.4.27 EFFECTIVE DATE. This section is effective for taxable years beginning after4.28 December 31, 2014.4.29 Sec. 3. 4