SF 3608

Introduction - 94th Legislature (2025 - 2026)

Posted on 02/18/2026 10:41 a.m.

A bill for an act
relating to taxation; modifying requirements for return of excess tax increments;
amending Minnesota Statutes 2024, section 469.176, subdivision 2.

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

Section 1.

Minnesota Statutes 2024, section 469.176, subdivision 2, is amended to read:

Subd. 2.

Excess increments.

(a) The authority deleted text begin shall deleted text end new text begin must new text end annually determine the amount
of excess increments for a district, if any. This determination must be based on the tax
increment financing plan in effect on December 31 of the year new text begin being reviewed new text end and the
increments deleted text begin and other revenues deleted text end received as of December 31 of the year. deleted text begin The authority must
spend or return the excess increments under paragraph (c) within nine months after the end
of the year. deleted text end new text begin If the authority determines there are excess increments for a district, within nine
months after December 31, the authority must:
new text end

new text begin (1) return the excess increments to the county auditor; and
new text end

new text begin (2) absent an outstanding qualifying pay-as-you-go contract and note, as defined under
section 469.1763, subdivision 4, paragraph (e), decertify the district.
new text end

new text begin (b) The requirement to decertify under paragraph (a) is deferred if:
new text end

new text begin (1) within nine months after December 31, a modification of the tax increment financing
plan is approved under section 469.175, subdivision 4; and
new text end

new text begin (2) the modification increases the total costs authorized to be paid with increments from
the district by an amount greater than the excess increment determined under paragraph (a).
new text end

new text begin (c) The deferral permitted under paragraph (b) expires nine months following the next
year for which:
new text end

new text begin (1) the authority determines an amount of excess increments exists;
new text end

new text begin (2) there are no further approved modifications to the tax increment financing plan that
increase the total costs authorized to be paid with increments from the district by an amount
greater than the excess increment; and
new text end

new text begin (3) the district has no outstanding qualifying pay-as-you-go contract and note.
new text end

deleted text begin (b) deleted text end new text begin (d) new text end For purposes of this subdivision, "excess increments" equals the excess of:

(1) total increments collected from the district since its certification, reduced by any
excess increments deleted text begin paid deleted text end new text begin returned new text end under paragraph deleted text begin (c), clause (4), deleted text end new text begin (e) new text end for a prior year, over

(2) the total costs authorized by the tax increment financing plan to be paid with
increments from the district, deleted text begin reduced, but not below zero, by the sum of:
deleted text end

deleted text begin (i) the amounts of those authorized costs that have been paid from sources other than
tax increments from the district;
deleted text end

deleted text begin (ii) revenues, other than tax increments from the district, that are dedicated for or
otherwise required to be used to pay those authorized costs and that the authority has received
and that are not included in item (i);
deleted text end

deleted text begin (iii) the amount of principal and interest obligations due on outstanding bonds after
December 31 of the year and not prepaid under paragraph (c) in a prior year; and
deleted text end

deleted text begin (iv) deleted text end increased by the sum of the transfers of increments made under section 469.1763,
subdivision 6, to reduce deficits in other districts made by December 31 of the year.

deleted text begin (c) The authority shall use excess increment only to do one or more of the following:
deleted text end

deleted text begin (1) prepay any outstanding bonds;
deleted text end

deleted text begin (2) discharge the pledge of tax increment for any outstanding bonds;
deleted text end

deleted text begin (3) pay into an escrow account dedicated to the payment of any outstanding bonds; or
deleted text end

deleted text begin (4) return the excess amount to deleted text end new text begin (e) new text end The county auditor deleted text begin who shall deleted text end new text begin must new text end distribute the
excess deleted text begin amount deleted text end new text begin increments returned under paragraph (a) new text end to the city or town, county, and
school district in which the tax increment financing district is located in direct proportion
to their respective local tax rates.

deleted text begin (d) For purposes of a district for which the request for certification was made prior to
August 1, 1979, excess increments equal the amount of increments on hand on December
31, less the principal and interest obligations due on outstanding bonds or advances,
qualifying under subdivision 1c, clauses (1), (2), (4), and (5), after December 31 of the year
and not prepaid under paragraph (c).
deleted text end

deleted text begin (e) deleted text end The county auditor must, prior to February 1 of each year, report to the commissioner
of education the amount of any excess tax increment distributed to a school district for the
preceding taxable year.

deleted text begin (f) For purposes of this subdivision, "outstanding bonds" means bonds which are secured
by increments from the district.
deleted text end

deleted text begin (g) The state auditor may exempt an authority from reporting the amounts calculated
under this subdivision for a calendar year, if the authority certifies to the auditor in its report
that the total amount authorized by the tax increment plan to be paid with increments from
the district exceeds the sum of the total increments collected for the district for all years by
20 percent.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section applies to all districts and is effective for excess
increment determinations for calendar year 2026 and thereafter.
new text end