Minnesota Legislature
SF 4595
as introduced - 93rd Legislature (2023 - 2024) Posted on 03/05/2024 10:07am
Current Version - as introduced
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A bill for an act
relating to taxation; tax increment financing; extending the five- and six-year rules
for certain districts; removing income restrictions for certain housing districts;
amending Minnesota Statutes 2022, section 469.1761, subdivision 1; Minnesota
Statutes 2023 Supplement, section 469.1763, subdivisions 3, 4.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2022, section 469.1761, subdivision 1, is amended to read:
Subdivision 1.
Requirement imposed.
(a) In order for a tax increment financing district
to qualify as a housing district:
(1) the income limitations provided in this section must be satisfiednew text begin if the district is
located in a metropolitan county as defined in section 473.121, subdivision 4new text end ; and
(2) no more than 20 percent of the square footage of buildings that receive assistance
from tax increments may consist of commercial, retail, or other nonresidential uses.
(b) The requirements imposed by this section apply to property receiving assistance
financed with tax increments, including interest reduction, land transfers at less than the
authority's cost of acquisition, utility service or connections, roads, parking facilities, or
other subsidies. The provisions of this section do not apply to districts located in a targeted
area as defined in section 462C.02, subdivision 9, clause (e).
(c) For purposes of the requirements of paragraph (a), the authority may elect to treat
an addition to an existing structure as a separate building if:
(1) construction of the addition begins more than three years after construction of the
existing structure was completed; and
(2) for an addition that does not meet the requirements of paragraph (a), clause (2), if it
is treated as a separate building, the addition was not contemplated by the tax increment
financing plan which includes the existing structure.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for districts for which the request for
certification was made after June 30, 2024.
new text end
Sec. 2.
Minnesota Statutes 2023 Supplement, 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 that are expended on an activity within the district will instead be considered
to have been expended on an activity outside the district for purposes of subdivision 2 unless:
(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 of the district, 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) revenues are spent for housing purposes as described by subdivision 2, paragraph
(b).
(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 any district certified after June 30, 2024, and not located in a metropolitan county,
the five-year periods described in paragraph (a) are extended to ten years after certification
of the district. For purposes of this paragraph, "metropolitan county" has the meaning
provided in section 473.121, subdivision 4.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for districts for which the request for
certification was made after June 30, 2024.
new text end
Sec. 3.
Minnesota Statutes 2023 Supplement, section 469.1763, subdivision 4, is amended
to read:
Subd. 4.
Use of revenues for decertification.
(a) Beginning with the sixth year following
certification of the district, or beginning with the year following the extended period for
districts whose five-year period is extended under subdivision 3, deleted text begin paragraphsdeleted text end new text begin paragraphnew text end (c)
deleted text begin anddeleted text end new text begin ,new text end (d),new text begin or (e),new text end a district must be decertified when the product of the applicable in-district
percentage multiplied by the cumulative revenues derived from tax increments paid by
properties in the district that have been collected through the end of the calendar year, equals
or exceeds an amount sufficient to pay the following:
(1) any costs and obligations described in subdivision 3, paragraphs (a) and (b), excluding
those under a qualifying pay-as-you-go contract and note;
(2) any accrued interest on the costs and obligations in clause (1), payable in accordance
with the terms thereof; and
(3) any administrative expenses falling within the exception in subdivision 2, paragraph
(c).
(b) For districts with an outstanding qualifying pay-as-you-go contract and note, the
required decertification under paragraph (a) is deferred until the end of the remaining term
of the last outstanding qualifying pay-as-you-go contract and note, and the applicable
in-district percentage of cumulative revenues derived from tax increments paid by properties
in the district are sufficient to pay the obligations identified in subdivision 3, paragraphs
(a) and (b), provided that the deferral shall not exceed the district's duration limit under
section 469.176. During the deferral, beginning at the time paragraph (a) would otherwise
require decertification, the authority must annually either:
(1) remove from the district, by the end of the year, all parcels that will no longer have
their tax increment revenue pledged or subject to a qualifying pay-as-you-go contract and
note or other costs and obligations described in subdivision 3, paragraphs (a) and (b), after
the end of the year; or
(2) use the applicable in-district percentage of revenues derived from tax increments
paid by those parcels to prepay an outstanding qualifying pay-as-you-go contract and note
of the district or other costs and obligations described in subdivision 3, paragraphs (a) and
(b), or to accumulate and use revenues derived from tax increments paid by those parcels
as permitted under paragraph (i).
The authority must remove any parcels as required by this paragraph by modification
of the tax increment financing plan and notify the county auditor of the removed parcels by
the end of the same calendar year. Notwithstanding section 469.175, subdivision 4,
paragraphs (b), clause (1), and (e), the notice, discussion, public hearing, and findings
required for approval of the original plan are not required for such a modification.
(c) Notwithstanding paragraph (a) or (b), if tax increment was pledged prior to August
1, 2023, to a bond other than a pay-as-you-go contract and note or interfund loan, and the
proceeds of the bond were used solely or in part to pay authorized costs for activities outside
the district, the requirement to decertify under paragraph (a) or remove parcels under
paragraph (b) shall not apply prior to the bond being fully paid or defeased.
(d) For purposes of this subdivision, "applicable in-district percentage" means the
percentage of tax increment revenue that is restricted for expenditures within the district,
as determined under subdivision 2, paragraphs (a) and (d), for the district.
(e) For purposes of this subdivision, "qualifying pay-as-you-go contract and note" means
a pay-as-you-go contract and note that is considered to be for activities within the district
under subdivision 3, paragraph (a).
(f) For purposes of this subdivision, the reference in paragraph (a) to cumulative revenues
derived from tax increments paid by properties in the district through the end of the calendar
year shall include any final settlement distributions made in the following January. For
purposes of the calculation in paragraph (a), any amounts returned to the county auditor as
excess increment or as remedies under section 469.1771, subdivision 2, shall first be
subtracted from the cumulative revenues derived from tax increments paid by properties in
the district.
(g) The timing and implementation of a decertification pursuant to paragraphs (a) and
(b) shall be subject to the following:
(1) when a decertification is required under paragraph (a) and not deferred under
paragraph (b), the authority must, as soon as practical and no later than the final settlement
distribution date of January 25 as identified in section 276.111 for the property taxes payable
in the calendar year identified in paragraph (a), make the decertification by resolution
effective for the end of the calendar year identified in paragraph (a), and communicate the
decertification to the county auditor;
(2) when a decertification is deferred under paragraph (b), the authority must, by
December 31 of the year in which the last qualifying pay-as-you-go contract and note reaches
termination, make the decertification by resolution effective for the end of that calendar
year and communicate the decertification to the county auditor;
(3) if the county auditor is unable to prevent tax increments from being calculated for
taxes payable in the year following the year for which the decertification is made effective,
the county auditor may redistribute the tax increments in the same manner as excess
increments under section 469.176, subdivision 2, paragraph (c), clause (4), without first
distributing them to the authority; and
(4) if tax increments are distributed to an authority for a taxes payable year after the year
for which the decertification was required to be effective, the authority must return the
amount of the distributions to the county auditor for redistribution in the same manner as
excess increments under section 469.176, subdivision 2, paragraph (c), clause (4).
(h) The provisions of this subdivision do not apply to a housing district.
(i) Notwithstanding anything to the contrary in paragraph (a) or (b), if an authority has
made the election in the tax increment financing plan for the district under subdivision 2,
paragraph (d), then the requirement to decertify under paragraph (a) or remove parcels under
paragraph (b) shall not apply prior to such time that the accumulated revenues derived from
tax increments paid by properties in the district that are eligible to be expended for housing
purposes described under subdivision 2, paragraph (d), equals the lesser of the amount the
authority is permitted to expend for housing purposes described under subdivision 2,
paragraph (d), or the amount authorized for such purposes in the tax increment financing
plan. Increment revenues collected after the district would have decertified under paragraph
(a) or from parcels which otherwise would be subject to removal under paragraph (b), absent
the exception of this paragraph, shall be used solely for housing purposes as described in
subdivision 2, paragraph (d).
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for districts for which the request for
certification was made after June 30, 2024.
new text end