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Last Updated: 2/1/2017

JOBZ Subtraction and Credit

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The JOBZ program ended December 31, 2015, for most qualified businesses. Most businesses are no longer eligible to receive benefits through the JOBZ program. Qualifying businesses and individuals are eligible for Corporate Franchise and Individual Income Tax benefits on returns for taxable years that began in 2015 or earlier. 

Minnesota allows tax benefits for qualified businesses that operate in Job Opportunity Buildings Zones (JOBZ). The JOBZ program is meant to boost local economies by encouraging businesses to locate or expand in designated areas.

Qualifying self-employed individuals, partners, and shareholders of S corporations that conduct business in a JOBZ zone can subtract this business income from taxable income on their Minnesota return. They also may claim a refundable “jobs credit” if their business adds higher-paying jobs; the average wage per employee in the zone must be $38,690 or more (for 2015).

You may qualify for a JOBZ subtraction or credit if you received any of the following:

  • Income from operating a qualified business in a zone
  • Income for renting real or tangible personal property used by a qualified business in a zone
  • Gains from the sale or exchange of real or tangible personal property used by a qualified business in a zone
  • Gains from the sale of an ownership interest in a qualified business

Claiming the JOBZ Income Subtraction

Qualified businesses calculate the income subtraction by completing Section A of Schedule JOBZ, JOBZ Tax Benefits. To claim the subtraction, individuals carry it over to their Minnesota income tax return as described below.
 
Sole proprietors: Report the income subtraction on the “JOBZ business and investment income exemptions” line of Schedule M1M, Income Additions and Subtractions. Carry it over to the “Other subtractions” line of Form M1, Individual Income Tax.
 
Partners, S corporation shareholders, and beneficiaries of an estate or trust: You’ll receive your prorated share of the income subtraction on Schedule KPI, Schedule KS or Schedule KF. Report this amount on the “JOBZ business and investment income exemptions” line of Schedule M1M. Carry it over to the “Other subtractions” line of Form M1. Schedule KPI, KS, or KF should be included with your return. 
 
Refundable credits and the JOBZ subtraction: The Child and Dependent Care Credit and the Working Family Credit for individuals are based on earned income that is taxable to Minnesota. If you claim the JOBZ income subtraction and qualify for one of these credits, you must adjust (“pro rate”) your credit amount as instructed by the form. (This does not apply to the K-12 Education Credit.)
 

Claiming the JOBZ Jobs Credit

Qualified businesses calculate the refundable credit by completing Section E of Schedule JOBZ, JOBZ Tax Benefits. To claim the credit, individuals carry it over to their Minnesota income tax return as described below.
 
Sole proprietors: Report the credit on the “JOBZ jobs credit” line of Schedule M1B, Business and Investment Credits. Carry over the total from this schedule to the “Business and investments credits” line of Form M1, Individual Income Tax.
 
Partners, S corporation shareholders, and beneficiaries of an estate or trust: You’ll receive your proportional prorated share of the credit on Schedule KPI, Schedule KS or Schedule KF. Report this amount on the “JOBZ jobs credit” line of Schedule M1B. Carry over the total from this schedule to the “Business and investment credits” line of Form M1.Include Schedule KPI, KS or KF with your return.
 

JOBZ Documentation

In addition to a tax return, state law requires businesses in the JOBZ program to file two additional forms with the Department of Revenue each year:
 
Form M500, JOBZ Tax Benefits, is due by Oct. 15. This form reports the taxes you would have paid in the prior year had your business not been in a JOBZ zone. View the statute (M.S. 289A.12, subd. 15).
Form JOBZ1, JOBZ Certification, is due by Dec. 1. This form certifies that your business is complying with the terms of its JOBZ business subsidy agreement. View the statute (M.S. 469.3193).
If you fail to submit these forms as required, you will be removed from the JOBZ program. You also will be required to repay prior JOBZ benefits that you received.(View the statute (M.S. 469.319).
 

JOBZ Program Limitations

The following limitations apply to the JOBZ program:
  • State benefits only: There are no federal tax benefits for operating in a JOBZ zone.
  • No wage exclusion: Employees working in a JOBZ zone do not receive any income tax exemption for their wages. JOBZ benefits apply to the business only.
  • No dividend exclusion: Dividends received from a JOBZ zone business are not tax exempt.  
For more information about JOBZ: