HF 4404

as introduced - 93rd Legislature (2023 - 2024) Posted on 02/28/2024 04:35pm

A bill for an act
relating to taxation; property; tax increment financing; expanding eligible uses of
increment from tax increment financing districts to include transfers to local housing
trust funds; imposing requirements on use of transferred increment; amending
Minnesota Statutes 2022, section 469.1763, by adding a subdivision; Minnesota
Statutes 2023 Supplement, section 469.1763, subdivision 2.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2023 Supplement, section 469.1763, subdivision 2, is
amended to read:

Subd. 2.

Expenditures outside district.

(a) For each tax increment financing district,
an amount equal to at least 75 percent of the total revenue derived from tax increments paid
by properties in the district must be expended on activities in the district or to pay bonds,
to the extent that the proceeds of the bonds were used to finance activities in the district or
to pay, or secure payment of, debt service on credit enhanced bonds. For districts, other
than redevelopment districts for which the request for certification was made after June 30,
1995, the in-district percentage for purposes of the preceding sentence is 80 percent. Not
more than 25 percent of the total revenue derived from tax increments paid by properties
in the district may be expended, through a development fund or otherwise, on activities
outside of the district but within the defined geographic area of the project except to pay,
or secure payment of, debt service on credit enhanced bonds. For districts, other than
redevelopment districts for which the request for certification was made after June 30, 1995,
the pooling percentage for purposes of the preceding sentence is 20 percent. The revenues
derived from tax increments paid by properties in the district that are expended on costs
under section 469.176, subdivision 4h, may be deducted first before calculating the
percentages that must be expended within and without the district.

(b) In the case of a housing district, a housing project, as defined in section 469.174,
subdivision 11, is an activity in the district.

(c) All administrative expenses are considered to be expenditures for activities outside
of the district, except that if the only expenses for activities outside of the district under this
subdivision are for the purposes described in paragraph (d), administrative expenses will
be considered as expenditures for activities in the district.

(d) The authority may elect, in the tax increment financing plan for the district, to increase
by up to deleted text begin ten deleted text end new text begin 15 new text end percentage points the permitted amount of expenditures for activities located
outside the geographic area of the district under paragraph (a). As permitted by section
469.176, subdivision 4k, the expenditures, including the permitted expenditures under
paragraph (a), need not be made within the geographic area of the project. Expenditures
that meet the requirements of this paragraph are legally permitted expenditures of the district,
notwithstanding section 469.176, subdivisions 4b, 4c, and 4j. To qualify for the increase
under this paragraph, the expenditures must:

(1) be used exclusively to assist housing that meets the requirement for a qualified
low-income building, as that term is used in section 42 of the Internal Revenue Code; and

(2) not exceed the qualified basis of the housing, as defined under section 42(c) of the
Internal Revenue Code, less the amount of any credit allowed under section 42 of the Internal
Revenue Code; and

(3) be used to:

(i) acquire and prepare the site of the housing;

(ii) acquire, construct, or rehabilitate the housing; or

(iii) make public improvements directly related to the housing; or

(4) be used to develop housing:

(i) if the market value of the housing does not exceed the lesser of:

(A) 150 percent of the average market value of single-family homes in that municipality;
or

(B) $200,000 for municipalities located in the metropolitan area, as defined in section
473.121, or $125,000 for all other municipalities; and

(ii) if the expenditures are used to pay the cost of site acquisition, relocation, demolition
of existing structures, site preparation, and pollution abatement on one or more parcels, if
the parcel contains a residence containing one to four family dwelling units that has been
vacant for six or more months and is in foreclosure as defined in section 325N.10, subdivision
7, but without regard to whether the residence is the owner's principal residence, and only
after the redemption period has expired; deleted text begin or
deleted text end

(5) new text begin be used new text end to assist owner-occupied housing that meets the requirements of section
469.1761, subdivision 2 new text begin ; or
new text end

new text begin (6) be used for transfer to a housing trust fund established pursuant to section 462C.16
for expenditure in accordance with subdivision 7 new text end .

(e) The authority under paragraph (d), clause (4), expires on December 31, 2016.
Increments may continue to be expended under this authority after that date, if they are used
to pay bonds or binding contracts that would qualify under subdivision 3, paragraph (a), if
December 31, 2016, is considered to be the last date of the five-year period after certification
under that provision.

(f) For purposes of determining whether the minimum percentage of expenditures for
activities in the district and maximum percentages of expenditures allowed on activities
outside the district have been met under this subdivision, any amounts returned to the county
auditor as excess increment, as returned increment under subdivision 4, paragraph (g), or
as remedies under section 469.1771, subdivision 2, shall first be subtracted from the total
revenues derived from tax increments paid by properties in the district. Any other amounts
returned to the county auditor for purposes other than a remedy under section 469.1771,
subdivision 3, are considered to be expenditures for activities in the district.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2022, section 469.1763, is amended by adding a subdivision
to read:

new text begin Subd. 7. new text end

new text begin Increment transferred to a housing trust fund. new text end

new text begin (a) A city making a transfer
under subdivision 2, paragraph (d), clause (6), must allocate the transferred increment in
conformity with the city's ordinance or policy establishing the division of funds for rental
and homeownership distributions. Funds distributed under this subdivision must follow the
following income requirements:
new text end

new text begin (1) for funds used for rental housing purposes, the funds must benefit households at or
below 60 percent of area median income; and
new text end

new text begin (2) for funds used for homeownership housing purposes, the funds must benefit
households at or below 120 percent of area median income.
new text end

new text begin (b) Any increment transferred for use pursuant to this subdivision is no longer considered
increment within the meaning of section 469.174, subdivision 25, and is not subject to the
annual reporting requirements imposed by section 469.175.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end