Minnesota 2025-2026 Regular Session

Minnesota House Bill HF2574 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	1.1 A bill for an act
2	2	1.2 relating to taxation; tax increment financing; authorizing use of certain increment
3	3	1.3 to convert vacant or underused commercial or industrial buildings to residential
4	4	1.4 purposes; modifying calculation of certain increment and findings required for a
5	5	1.5 district converting vacant or underused property; amending Minnesota Statutes
6	6	1.6 2024, sections 469.174, subdivision 10; 469.175, subdivision 3; 469.177,
7	7	1.7 subdivision 1.
8	8	1.8BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
9	9	1.9 Section 1. Minnesota Statutes 2024, section 469.174, subdivision 10, is amended to read:
10	10	1.10 Subd. 10.Redevelopment district.(a) "Redevelopment district" means a type of tax
11	11	1.11increment financing district consisting of a project, or portions of a project, within which
12	12	1.12the authority finds by resolution that one or more of the following conditions, reasonably
13	13	1.13distributed throughout the district, exists:
14	14	1.14 (1) parcels consisting of 70 percent of the area of the district are occupied by buildings,
15	15	1.15streets, utilities, paved or gravel parking lots, or other similar structures and more than 50
16	16	1.16percent of the buildings, not including outbuildings, are structurally substandard to a degree
17	17	1.17requiring substantial renovation or clearance;
18	18	1.18 (2) the property consists of vacant, unused, underused, inappropriately used, or
19	19	1.19infrequently used rail yards, rail storage facilities, or excessive or vacated railroad
20	20	1.20rights-of-way;
21	21	1.21 (3) tank facilities, or property whose immediately previous use was for tank facilities,
22	22	1.22as defined in section 115C.02, subdivision 15, if the tank facilities:
23	23	1.23 (i) have or had a capacity of more than 1,000,000 gallons;
24	24	1Section 1.
25	25	REVISOR MS/EN 25-0482903/12/25
26	26	State of Minnesota
27	27	This Document can be made available
28	28	in alternative formats upon request
29	29	HOUSE OF REPRESENTATIVES
30	30	H. F. No. 2574
31	31	NINETY-FOURTH SESSION
32	32	Authored by Hollins03/20/2025
33	33	The bill was read for the first time and referred to the Committee on Taxes 2.1 (ii) are located adjacent to rail facilities; and
34	34	2.2 (iii) have been removed or are unused, underused, inappropriately used, or infrequently
35	35	2.3used; or
36	36	2.4 (4) a qualifying disaster area, as defined in subdivision 10b.; or
37	37	2.5 (5) the property consists of vacant, unused, underused, inappropriately used, or
38	38	2.6infrequently used property intended or recently occupied for commercial or industrial
39	39	2.7purposes, and the property is located within the city of Minneapolis or St. Paul.
40	40	2.8 (b) For purposes of this subdivision, "structurally substandard" shall mean containing
41	41	2.9defects in structural elements or a combination of deficiencies in essential utilities and
42	42	2.10facilities, light and ventilation, fire protection including adequate egress, layout and condition
43	43	2.11of interior partitions, or similar factors, which defects or deficiencies are of sufficient total
44	44	2.12significance to justify substantial renovation or clearance.
45	45	2.13 (c) A building is not structurally substandard if it is in compliance with the building
46	46	2.14code applicable to new buildings or could be modified to satisfy the building code at a cost
47	47	2.15of less than 15 percent of the cost of constructing a new structure of the same square footage
48	48	2.16and type on the site. The municipality may find that a building is not disqualified as
49	49	2.17structurally substandard under the preceding sentence on the basis of reasonably available
50	50	2.18evidence, such as the size, type, and age of the building, the average cost of plumbing,
51	51	2.19electrical, or structural repairs, or other similar reliable evidence. The municipality may not
52	52	2.20make such a determination without an interior inspection of the property, but need not have
53	53	2.21an independent, expert appraisal prepared of the cost of repair and rehabilitation of the
54	54	2.22building. An interior inspection of the property is not required, if the municipality finds that
55	55	2.23(1) the municipality or authority is unable to gain access to the property after using its best
56	56	2.24efforts to obtain permission from the party that owns or controls the property; and (2) the
57	57	2.25evidence otherwise supports a reasonable conclusion that the building is structurally
58	58	2.26substandard. Items of evidence that support such a conclusion include recent fire or police
59	59	2.27inspections, on-site property tax appraisals or housing inspections, exterior evidence of
60	60	2.28deterioration, or other similar reliable evidence. Written documentation of the findings and
61	61	2.29reasons why an interior inspection was not conducted must be made and retained under
62	62	2.30section 469.175, subdivision 3, clause (1). Failure of a building to be disqualified under the
63	63	2.31provisions of this paragraph is a necessary, but not a sufficient, condition to determining
64	64	2.32that the building is substandard.
65	65	2Section 1.
66	66	REVISOR MS/EN 25-0482903/12/25 3.1 (d) A parcel is deemed to be occupied by a structurally substandard building for purposes
67	67	3.2of the finding under paragraph (a) or by the improvements described in paragraph (e) if all
68	68	3.3of the following conditions are met:
69	69	3.4 (1) the parcel was occupied by a substandard building or met the requirements of
70	70	3.5paragraph (e), as the case may be, within three years of the filing of the request for
71	71	3.6certification of the parcel as part of the district with the county auditor;
72	72	3.7 (2) the substandard building or the improvements described in paragraph (e) were
73	73	3.8demolished or removed by the authority or the demolition or removal was financed by the
74	74	3.9authority or was done by a developer under a development agreement with the authority;
75	75	3.10 (3) the authority found by resolution before the demolition or removal that the parcel
76	76	3.11was occupied by a structurally substandard building or met the requirements of paragraph
77	77	3.12(e) and that after demolition and clearance the authority intended to include the parcel within
78	78	3.13a district; and
79	79	3.14 (4) upon filing the request for certification of the tax capacity of the parcel as part of a
80	80	3.15district, the authority notifies the county auditor that the original tax capacity of the parcel
81	81	3.16must be adjusted as provided by section 469.177, subdivision 1, paragraph (f).
82	82	3.17 (e) For purposes of this subdivision, a parcel is not occupied by buildings, streets, utilities,
83	83	3.18paved or gravel parking lots, or other similar structures unless 15 percent of the area of the
84	84	3.19parcel contains buildings, streets, utilities, paved or gravel parking lots, or other similar
85	85	3.20structures.
86	86	3.21 (f) For districts consisting of two or more noncontiguous areas, each area must qualify
87	87	3.22as a redevelopment district under paragraph (a) to be included in the district, and the entire
88	88	3.23area of the district must satisfy paragraph (a).
89	89	3.24 EFFECTIVE DATE.This section is effective for districts for which the request for
90	90	3.25certification was made after June 30, 2025.
91	91	3.26 Sec. 2. Minnesota Statutes 2024, section 469.175, subdivision 3, is amended to read:
92	92	3.27 Subd. 3.Municipality approval.(a) A county auditor shall not certify the original net
93	93	3.28tax capacity of a tax increment financing district until the tax increment financing plan
94	94	3.29proposed for that district has been approved by the municipality in which the district is
95	95	3.30located. If an authority that proposes to establish a tax increment financing district and the
96	96	3.31municipality are not the same, the authority shall apply to the municipality in which the
97	97	3.32district is proposed to be located and shall obtain the approval of its tax increment financing
98	98	3.33plan by the municipality before the authority may use tax increment financing. The
99	99	3Sec. 2.
100	100	REVISOR MS/EN 25-0482903/12/25 4.1municipality shall approve the tax increment financing plan only after a public hearing
101	101	4.2thereon after published notice in a newspaper of general circulation in the municipality at
102	102	4.3least once not less than ten days nor more than 30 days prior to the date of the hearing. The
103	103	4.4published notice must include a map of the area of the district from which increments may
104	104	4.5be collected and, if the project area includes additional area, a map of the project area in
105	105	4.6which the increments may be expended. The hearing may be held before or after the approval
106	106	4.7or creation of the project or it may be held in conjunction with a hearing to approve the
107	107	4.8project.
108	108	4.9 (b) Before or at the time of approval of the tax increment financing plan, the municipality
109	109	4.10shall make the following findings, and shall set forth in writing the reasons and supporting
110	110	4.11facts for each determination:
111	111	4.12 (1) that the proposed tax increment financing district is a redevelopment district, a
112	112	4.13renewal or renovation district, a housing district, a soils condition district, or an economic
113	113	4.14development district; if the proposed district is a redevelopment district or a renewal or
114	114	4.15renovation district, the reasons and supporting facts for the determination that the district
115	115	4.16meets the criteria of section 469.174, subdivision 10, paragraph (a), clauses (1) and (2), or
116	116	4.17subdivision 10a, must be documented in writing and retained and made available to the
117	117	4.18public by the authority until the district has been terminated;
118	118	4.19 (2) that, in the opinion of the municipality:
119	119	4.20 (i) the proposed development or redevelopment would not reasonably be expected to
120	120	4.21occur solely through private investment within the reasonably foreseeable future; and
121	121	4.22 (ii) the increased market value of the site that could reasonably be expected to occur
122	122	4.23without the use of tax increment financing would be less than the increase in the market
123	123	4.24value estimated to result from the proposed development after subtracting the present value
124	124	4.25of the projected tax increments for the maximum duration of the district permitted by the
125	125	4.26plan. The requirements of this item do not apply if the district is a housing district or if the
126	126	4.27district is a redevelopment district determined to meet the criteria of section 469.174,
127	127	4.28subdivision 10, paragraph (a), clause (5);
128	128	4.29 (3) that the tax increment financing plan conforms to the general plan for the development
129	129	4.30or redevelopment of the municipality as a whole;
130	130	4.31 (4) that the tax increment financing plan will afford maximum opportunity, consistent
131	131	4.32with the sound needs of the municipality as a whole, for the development or redevelopment
132	132	4.33of the project by private enterprise;
133	133	4Sec. 2.
134	134	REVISOR MS/EN 25-0482903/12/25 5.1 (5) that the municipality elects the method of tax increment computation set forth in
135	135	5.2section 469.177, subdivision 3, paragraph (b), if applicable.
136	136	5.3 (c) When the municipality and the authority are not the same, the municipality shall
137	137	5.4approve or disapprove the tax increment financing plan within 60 days of submission by
138	138	5.5the authority. When the municipality and the authority are not the same, the municipality
139	139	5.6may not amend or modify a tax increment financing plan except as proposed by the authority
140	140	5.7pursuant to subdivision 4. Once approved, the determination of the authority to undertake
141	141	5.8the project through the use of tax increment financing and the resolution of the governing
142	142	5.9body shall be conclusive of the findings therein and of the public need for the financing.
143	143	5.10 (d) For a district that is subject to the requirements of paragraph (b), clause (2), item
144	144	5.11(ii), the municipality's statement of reasons and supporting facts must include all of the
145	145	5.12following:
146	146	5.13 (1) an estimate of the amount by which the market value of the site will increase without
147	147	5.14the use of tax increment financing;
148	148	5.15 (2) an estimate of the increase in the market value that will result from the development
149	149	5.16or redevelopment to be assisted with tax increment financing; and
150	150	5.17 (3) the present value of the projected tax increments for the maximum duration of the
151	151	5.18district permitted by the tax increment financing plan.
152	152	5.19 (e) For purposes of this subdivision, "site" means the parcels on which the development
153	153	5.20or redevelopment to be assisted with tax increment financing will be located.
154	154	5.21 (f) Before or at the time of approval of the tax increment financing plan for a district to
155	155	5.22be used to fund a workforce housing project under section 469.176, subdivision 4c, paragraph
156	156	5.23(d), the municipality shall make the following findings and set forth in writing the reasons
157	157	5.24and supporting facts for each determination:
158	158	5.25 (1) the city is located outside of the metropolitan area, as defined in section 473.121,
159	159	5.26subdivision 2;
160	160	5.27 (2) the average vacancy rate for rental housing located in the municipality and in any
161	161	5.28statutory or home rule charter city located within 15 miles or less of the boundaries of the
162	162	5.29municipality has been three percent or less for at least the immediately preceding two-year
163	163	5.30period;
164	164	5.31 (3) at least one business located in the municipality or within 15 miles of the municipality
165	165	5.32that employs a minimum of 20 full-time equivalent employees in aggregate has provided a
166	166	5Sec. 2.
167	167	REVISOR MS/EN 25-0482903/12/25 6.1written statement to the municipality indicating that the lack of available rental housing has
168	168	6.2impeded the ability of the business to recruit and hire employees; and
169	169	6.3 (4) the municipality and the development authority intend to use increments from the
170	170	6.4district for the development of rental housing to serve employees of businesses located in
171	171	6.5the municipality or surrounding area.
172	172	6.6 (g) The county auditor may not certify the original tax capacity of an economic
173	173	6.7development tax increment financing district for a workforce housing project if the request
174	174	6.8for certification is made after June 30, 2027.
175	175	6.9 EFFECTIVE DATE.This section is effective for districts for which the request for
176	176	6.10certification was made after June 30, 2025.
177	177	6.11 Sec. 3. Minnesota Statutes 2024, section 469.177, subdivision 1, is amended to read:
178	178	6.12 Subdivision 1.Original net tax capacity.(a) Upon or after adoption of a tax increment
179	179	6.13financing plan, the auditor of any county in which the district is situated shall, upon request
180	180	6.14of the authority, certify the original net tax capacity of the tax increment financing district
181	181	6.15and that portion of the district overlying any subdistrict as described in the tax increment
182	182	6.16financing plan and shall certify in each year thereafter the amount by which the original net
183	183	6.17tax capacity has increased or decreased as a result of a change in tax exempt status of
184	184	6.18property within the district and any subdistrict, reduction or enlargement of the district or
185	185	6.19changes pursuant to subdivision 4. The auditor shall certify the amount within 30 days after
186	186	6.20receipt of the request and sufficient information to identify the parcels included in the district.
187	187	6.21The certification relates to the taxes payable year as provided in subdivision 6.
188	188	6.22 (b) If the classification under section 273.13 of property located in a district changes to
189	189	6.23a classification that has a different assessment ratio, the original net tax capacity of that
190	190	6.24property must be redetermined at the time when its use is changed as if the property had
191	191	6.25originally been classified in the same class in which it is classified after its use is changed.
192	192	6.26 (c) The amount to be added to the original net tax capacity of the district as a result of
193	193	6.27previously tax exempt real property within the district becoming taxable equals the net tax
194	194	6.28capacity of the real property as most recently assessed pursuant to information reported to
195	195	6.29the commissioner under section 270C.85, subdivision 2, clause (4), or, if that assessment
196	196	6.30was made more than one year prior to the date of title transfer rendering the property taxable,
197	197	6.31the net tax capacity assessed by the assessor at the time of the transfer. If improvements are
198	198	6.32made to tax exempt property after the municipality approves the district and before the
199	199	6.33parcel becomes taxable, the assessor shall, at the request of the authority, separately assess
200	200	6Sec. 3.
201	201	REVISOR MS/EN 25-0482903/12/25 7.1the estimated market value of the improvements. If the property becomes taxable, the county
202	202	7.2auditor shall add to original net tax capacity, the net tax capacity of the parcel, excluding
203	203	7.3the separately assessed improvements. If substantial taxable improvements were made to
204	204	7.4a parcel after certification of the district and if the property later becomes tax exempt, in
205	205	7.5whole or part, as a result of the authority acquiring the property through foreclosure or
206	206	7.6exercise of remedies under a lease or other revenue agreement or as a result of tax forfeiture,
207	207	7.7the amount to be added to the original net tax capacity of the district as a result of the
208	208	7.8property again becoming taxable is the amount of the parcel's value that was included in
209	209	7.9original net tax capacity when the parcel was first certified. The amount to be added to the
210	210	7.10original net tax capacity of the district as a result of enlargements equals the net tax capacity
211	211	7.11of the added real property as most recently certified by the commissioner of revenue as of
212	212	7.12the date of modification of the tax increment financing plan pursuant to section 469.175,
213	213	7.13subdivision 4.
214	214	7.14 (d) If the net tax capacity of a property increases because the property no longer qualifies
215	215	7.15under the Minnesota Agricultural Property Tax Law, section 273.111; the Minnesota Open
216	216	7.16Space Property Tax Law, section 273.112; or the Metropolitan Agricultural Preserves Act,
217	217	7.17chapter 473H, the Rural Preserve Property Tax Program under section 273.114, or because
218	218	7.18platted, unimproved property is improved or market value is increased after approval of the
219	219	7.19plat under section 273.11, subdivision 14a or 14b, the increase in net tax capacity must be
220	220	7.20added to the original net tax capacity. If the net tax capacity of a property increases because
221	221	7.21the property no longer qualifies for the homestead market value exclusion under section
222	222	7.22273.13, subdivision 35, the increase in net tax capacity must be added to original net tax
223	223	7.23capacity if the original construction of the affected home was completed before the date the
224	224	7.24assessor certified the original net tax capacity of the district.
225	225	7.25 (e) The amount to be subtracted from the original net tax capacity of the district as a
226	226	7.26result of previously taxable real property within the district becoming tax exempt or
227	227	7.27qualifying in whole or part for an exclusion from taxable market value, or a reduction in
228	228	7.28the geographic area of the district, shall be the amount of original net tax capacity initially
229	229	7.29attributed to the property becoming tax exempt, being excluded from taxable market value,
230	230	7.30or being removed from the district. If the net tax capacity of property located within the tax
231	231	7.31increment financing district is reduced by reason of a court-ordered abatement, stipulation
232	232	7.32agreement, voluntary abatement made by the assessor or auditor or by order of the
233	233	7.33commissioner of revenue, the reduction shall be applied to the original net tax capacity of
234	234	7.34the district when the property upon which the abatement is made has not been improved
235	235	7.35since the date of certification of the district and to the captured net tax capacity of the district
236	236	7Sec. 3.
237	237	REVISOR MS/EN 25-0482903/12/25 8.1in each year thereafter when the abatement relates to improvements made after the date of
238	238	8.2certification. The county auditor may specify reasonable form and content of the request
239	239	8.3for certification of the authority and any modification thereof pursuant to section 469.175,
240	240	8.4subdivision 4.
241	241	8.5 (f) If a parcel of property contained a substandard building or improvements described
242	242	8.6in section 469.174, subdivision 10, paragraph (e), that were demolished or removed and if
243	243	8.7the authority elects to treat the parcel as occupied by a substandard building under section
244	244	8.8469.174, subdivision 10, paragraph (b), or by improvements under section 469.174,
245	245	8.9subdivision 10, paragraph (e), the auditor shall certify the original net tax capacity of the
246	246	8.10parcel using the greater of (1) the current net tax capacity of the parcel, or (2) the estimated
247	247	8.11market value of the parcel for the year in which the building or other improvements were
248	248	8.12demolished or removed, but applying the classification rates for the current year.
249	249	8.13 (g) For a redevelopment district qualifying under section 469.174, subdivision 10,
250	250	8.14paragraph (a), clause (4), as a qualified disaster area, the auditor shall certify the value of
251	251	8.15the land as the original tax capacity for any parcel in the district that contains a building
252	252	8.16that suffered substantial damage as a result of the disaster or emergency.
253	253	8.17 (h) For a redevelopment district qualifying under section 469.174, subdivision 10,
254	254	8.18paragraph (a), clause (5), as a property with vacant or underused commercial or industrial
255	255	8.19buildings, the auditor shall certify the value of the land as the original tax capacity for any
256	256	8.20parcel in the district that contains a commercial or industrial building determined to be
257	257	8.21vacant or underused.
258	258	8.22 EFFECTIVE DATE.This section is effective for districts for which the request for
259	259	8.23certification was made after June 30, 2025.
260	260	8Sec. 3.
261	261	REVISOR MS/EN 25-0482903/12/25