HF 1284

as introduced - 93rd Legislature (2023 - 2024) Posted on 02/06/2023 11:00am

A bill for an act
relating to taxation; extending the five-year and six-year rules for tax increment
financing districts located in nonmetropolitan counties; amending Minnesota
Statutes 2022, section 469.1763, subdivisions 3, 4.

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

Section 1.

Minnesota Statutes 2022, section 469.1763, subdivision 3, is amended to read:

Subd. 3.

Five-year rule.

(a) Revenues derived from tax increments paid by properties
in the district are considered to have been expended on an activity within the district under
subdivision 2 only if one of the following occurs:

(1) before or within five years after certification of the district, the revenues are actually
paid to a third party with respect to the activity;

(2) bonds, the proceeds of which must be used to finance the activity, are issued and
sold to a third party before or within five years after certification, the revenues are spent to
repay the bonds, and the proceeds of the bonds either are, on the date of issuance, reasonably
expected to be spent before the end of the later of (i) the five-year period, or (ii) a reasonable
temporary period within the meaning of the use of that term under section 148(c)(1) of the
Internal Revenue Code, or are deposited in a reasonably required reserve or replacement
fund;

(3) binding contracts with a third party are entered into for performance of the activity
before or within five years after certification of the district and the revenues are spent under
the contractual obligation;

(4) costs with respect to the activity are paid before or within five years after certification
of the district and the revenues are spent to reimburse a party for payment of the costs,
including interest on unreimbursed costs; or

(5) expenditures are made for housing purposes as permitted by subdivision 2, paragraphs
(b) and (d), or for public infrastructure purposes within a zone as permitted by subdivision
2, paragraph (e).

(b) For purposes of this subdivision, bonds include subsequent refunding bonds if the
original refunded bonds meet the requirements of paragraph (a), clause (2).

(c) For a redevelopment district or a renewal and renovation district certified after June
30, 2003, and before April 20, 2009, the five-year periods described in paragraph (a) are
extended to ten years after certification of the district. For a redevelopment district certified
after April 20, 2009, and before June 30, 2012, the five-year periods described in paragraph
(a) are extended to eight years after certification of the district. This extension is provided
primarily to accommodate delays in development activities due to unanticipated economic
circumstances.

(d) For a redevelopment district that was certified after December 31, 2017, and before
June 30, 2020, the five-year periods described in paragraph (a) are extended to eight years
after certification of the district.

new text begin (e) For a district located in a nonmetropolitan county, the five-year periods described
in paragraph (a) are extended to ten years after certification of the district.
new text end

Sec. 2.

Minnesota Statutes 2022, section 469.1763, subdivision 4, is amended to read:

Subd. 4.

Use of revenues for decertification.

(a) In each year beginning with the sixth
year following certification of the district new text begin if the district is located within a metropolitan
county as defined by section 473.121, subdivision 4 new text end , or beginning with the ninth year
following certification of the district for districts new text begin located within a metropolitan county new text end whose
five-year rule is extended to eight years under subdivision 3, paragraph (d), new text begin or beginning
with the 11th year following certification of the district if the district is located within a
nonmetropolitan county, new text end if the applicable in-district percent of the revenues derived from
tax increments paid by properties in the district exceeds the amount of expenditures that
have been made for costs permitted under subdivision 3, an amount equal to the difference
between the in-district percent of the revenues derived from tax increments paid by properties
in the district and the amount of expenditures that have been made for costs permitted under
subdivision 3 must be used and only used to pay or defease the following or be set aside to
pay the following:

(1) outstanding bonds, as defined in subdivision 3, paragraphs (a), clause (2), and (b);

(2) contracts, as defined in subdivision 3, paragraph (a), clauses (3) and (4);

(3) credit enhanced bonds to which the revenues derived from tax increments are pledged,
but only to the extent that revenues of the district for which the credit enhanced bonds were
issued are insufficient to pay the bonds and to the extent that the increments from the
applicable pooling percent share for the district are insufficient; or

(4) the amount provided by the tax increment financing plan to be paid under subdivision
2, paragraphs (b), (d), and (e).

(b) The district must be decertified and the pledge of tax increment discharged when
the outstanding bonds have been defeased and when sufficient money has been set aside to
pay, based on the increment to be collected through the end of the calendar year, the following
amounts:

(1) contractual obligations as defined in subdivision 3, paragraph (a), clauses (3) and
(4);

(2) the amount specified in the tax increment financing plan for activities qualifying
under subdivision 2, paragraph (b), that have not been funded with the proceeds of bonds
qualifying under paragraph (a), clause (1); and

(3) the additional expenditures permitted by the tax increment financing plan for housing
activities under an election under subdivision 2, paragraph (d), that have not been funded
with the proceeds of bonds qualifying under paragraph (a), clause (1).