1.1 A bill for an act
1.2 relating to taxation; tax increment financing; authorizing use of certain increment
1.3 to convert vacant or underused commercial or industrial buildings to residential
1.4 purposes; modifying calculation of certain increment and findings required for a
1.5 district converting vacant or underused property; amending Minnesota Statutes
1.6 2024, sections 469.174, subdivision 10; 469.175, subdivision 3; 469.177,
1.7 subdivision 1.
1.8BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.9 Section 1. Minnesota Statutes 2024, section 469.174, subdivision 10, is amended to read:
1.10 Subd. 10.Redevelopment district.(a) "Redevelopment district" means a type of tax
1.11increment financing district consisting of a project, or portions of a project, within which
1.12the authority finds by resolution that one or more of the following conditions, reasonably
1.13distributed throughout the district, exists:
1.14 (1) parcels consisting of 70 percent of the area of the district are occupied by buildings,
1.15streets, utilities, paved or gravel parking lots, or other similar structures and more than 50
1.16percent of the buildings, not including outbuildings, are structurally substandard to a degree
1.17requiring substantial renovation or clearance;
1.18 (2) the property consists of vacant, unused, underused, inappropriately used, or
1.19infrequently used rail yards, rail storage facilities, or excessive or vacated railroad
1.20rights-of-way;
1.21 (3) tank facilities, or property whose immediately previous use was for tank facilities,
1.22as defined in section 115C.02, subdivision 15, if the tank facilities:
1.23 (i) have or had a capacity of more than 1,000,000 gallons;
1Section 1.
REVISOR MS/EN 25-0482903/12/25
State of Minnesota
This Document can be made available
in alternative formats upon request
HOUSE OF REPRESENTATIVES
H. F. No. 2574
NINETY-FOURTH SESSION
Authored by Hollins03/20/2025
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
2.2 (iii) have been removed or are unused, underused, inappropriately used, or infrequently
2.3used; or
2.4 (4) a qualifying disaster area, as defined in subdivision 10b.; or
2.5 (5) the property consists of vacant, unused, underused, inappropriately used, or
2.6infrequently used property intended or recently occupied for commercial or industrial
2.7purposes, and the property is located within the city of Minneapolis or St. Paul.
2.8 (b) For purposes of this subdivision, "structurally substandard" shall mean containing
2.9defects in structural elements or a combination of deficiencies in essential utilities and
2.10facilities, light and ventilation, fire protection including adequate egress, layout and condition
2.11of interior partitions, or similar factors, which defects or deficiencies are of sufficient total
2.12significance to justify substantial renovation or clearance.
2.13 (c) A building is not structurally substandard if it is in compliance with the building
2.14code applicable to new buildings or could be modified to satisfy the building code at a cost
2.15of less than 15 percent of the cost of constructing a new structure of the same square footage
2.16and type on the site. The municipality may find that a building is not disqualified as
2.17structurally substandard under the preceding sentence on the basis of reasonably available
2.18evidence, such as the size, type, and age of the building, the average cost of plumbing,
2.19electrical, or structural repairs, or other similar reliable evidence. The municipality may not
2.20make such a determination without an interior inspection of the property, but need not have
2.21an independent, expert appraisal prepared of the cost of repair and rehabilitation of the
2.22building. An interior inspection of the property is not required, if the municipality finds that
2.23(1) the municipality or authority is unable to gain access to the property after using its best
2.24efforts to obtain permission from the party that owns or controls the property; and (2) the
2.25evidence otherwise supports a reasonable conclusion that the building is structurally
2.26substandard. Items of evidence that support such a conclusion include recent fire or police
2.27inspections, on-site property tax appraisals or housing inspections, exterior evidence of
2.28deterioration, or other similar reliable evidence. Written documentation of the findings and
2.29reasons why an interior inspection was not conducted must be made and retained under
2.30section 469.175, subdivision 3, clause (1). Failure of a building to be disqualified under the
2.31provisions of this paragraph is a necessary, but not a sufficient, condition to determining
2.32that the building is substandard.
2Section 1.
REVISOR MS/EN 25-0482903/12/25 3.1 (d) A parcel is deemed to be occupied by a structurally substandard building for purposes
3.2of the finding under paragraph (a) or by the improvements described in paragraph (e) if all
3.3of the following conditions are met:
3.4 (1) the parcel was occupied by a substandard building or met the requirements of
3.5paragraph (e), as the case may be, within three years of the filing of the request for
3.6certification of the parcel as part of the district with the county auditor;
3.7 (2) the substandard building or the improvements described in paragraph (e) were
3.8demolished or removed by the authority or the demolition or removal was financed by the
3.9authority or was done by a developer under a development agreement with the authority;
3.10 (3) the authority found by resolution before the demolition or removal that the parcel
3.11was occupied by a structurally substandard building or met the requirements of paragraph
3.12(e) and that after demolition and clearance the authority intended to include the parcel within
3.13a district; and
3.14 (4) upon filing the request for certification of the tax capacity of the parcel as part of a
3.15district, the authority notifies the county auditor that the original tax capacity of the parcel
3.16must be adjusted as provided by section 469.177, subdivision 1, paragraph (f).
3.17 (e) For purposes of this subdivision, a parcel is not occupied by buildings, streets, utilities,
3.18paved or gravel parking lots, or other similar structures unless 15 percent of the area of the
3.19parcel contains buildings, streets, utilities, paved or gravel parking lots, or other similar
3.20structures.
3.21 (f) For districts consisting of two or more noncontiguous areas, each area must qualify
3.22as a redevelopment district under paragraph (a) to be included in the district, and the entire
3.23area of the district must satisfy paragraph (a).
3.24 EFFECTIVE DATE.This section is effective for districts for which the request for
3.25certification was made after June 30, 2025.
3.26 Sec. 2. Minnesota Statutes 2024, section 469.175, subdivision 3, is amended to read:
3.27 Subd. 3.Municipality approval.(a) A county auditor shall not certify the original net
3.28tax capacity of a tax increment financing district until the tax increment financing plan
3.29proposed for that district has been approved by the municipality in which the district is
3.30located. If an authority that proposes to establish a tax increment financing district and the
3.31municipality are not the same, the authority shall apply to the municipality in which the
3.32district is proposed to be located and shall obtain the approval of its tax increment financing
3.33plan by the municipality before the authority may use tax increment financing. The
3Sec. 2.
REVISOR MS/EN 25-0482903/12/25 4.1municipality shall approve the tax increment financing plan only after a public hearing
4.2thereon after published notice in a newspaper of general circulation in the municipality at
4.3least once not less than ten days nor more than 30 days prior to the date of the hearing. The
4.4published notice must include a map of the area of the district from which increments may
4.5be collected and, if the project area includes additional area, a map of the project area in
4.6which the increments may be expended. The hearing may be held before or after the approval
4.7or creation of the project or it may be held in conjunction with a hearing to approve the
4.8project.
4.9 (b) Before or at the time of approval of the tax increment financing plan, the municipality
4.10shall make the following findings, and shall set forth in writing the reasons and supporting
4.11facts for each determination:
4.12 (1) that the proposed tax increment financing district is a redevelopment district, a
4.13renewal or renovation district, a housing district, a soils condition district, or an economic
4.14development district; if the proposed district is a redevelopment district or a renewal or
4.15renovation district, the reasons and supporting facts for the determination that the district
4.16meets the criteria of section 469.174, subdivision 10, paragraph (a), clauses (1) and (2), or
4.17subdivision 10a, must be documented in writing and retained and made available to the
4.18public by the authority until the district has been terminated;
4.19 (2) that, in the opinion of the municipality:
4.20 (i) the proposed development or redevelopment would not reasonably be expected to
4.21occur solely through private investment within the reasonably foreseeable future; and
4.22 (ii) the increased market value of the site that could reasonably be expected to occur
4.23without the use of tax increment financing would be less than the increase in the market
4.24value estimated to result from the proposed development after subtracting the present value
4.25of the projected tax increments for the maximum duration of the district permitted by the
4.26plan. The requirements of this item do not apply if the district is a housing district or if the
4.27district is a redevelopment district determined to meet the criteria of section 469.174,
4.28subdivision 10, paragraph (a), clause (5);
4.29 (3) that the tax increment financing plan conforms to the general plan for the development
4.30or redevelopment of the municipality as a whole;
4.31 (4) that the tax increment financing plan will afford maximum opportunity, consistent
4.32with the sound needs of the municipality as a whole, for the development or redevelopment
4.33of the project by private enterprise;
4Sec. 2.
REVISOR MS/EN 25-0482903/12/25 5.1 (5) that the municipality elects the method of tax increment computation set forth in
5.2section 469.177, subdivision 3, paragraph (b), if applicable.
5.3 (c) When the municipality and the authority are not the same, the municipality shall
5.4approve or disapprove the tax increment financing plan within 60 days of submission by
5.5the authority. When the municipality and the authority are not the same, the municipality
5.6may not amend or modify a tax increment financing plan except as proposed by the authority
5.7pursuant to subdivision 4. Once approved, the determination of the authority to undertake
5.8the project through the use of tax increment financing and the resolution of the governing
5.9body shall be conclusive of the findings therein and of the public need for the financing.
5.10 (d) For a district that is subject to the requirements of paragraph (b), clause (2), item
5.11(ii), the municipality's statement of reasons and supporting facts must include all of the
5.12following:
5.13 (1) an estimate of the amount by which the market value of the site will increase without
5.14the use of tax increment financing;
5.15 (2) an estimate of the increase in the market value that will result from the development
5.16or redevelopment to be assisted with tax increment financing; and
5.17 (3) the present value of the projected tax increments for the maximum duration of the
5.18district permitted by the tax increment financing plan.
5.19 (e) For purposes of this subdivision, "site" means the parcels on which the development
5.20or redevelopment to be assisted with tax increment financing will be located.
5.21 (f) Before or at the time of approval of the tax increment financing plan for a district to
5.22be used to fund a workforce housing project under section 469.176, subdivision 4c, paragraph
5.23(d), the municipality shall make the following findings and set forth in writing the reasons
5.24and supporting facts for each determination:
5.25 (1) the city is located outside of the metropolitan area, as defined in section 473.121,
5.26subdivision 2;
5.27 (2) the average vacancy rate for rental housing located in the municipality and in any
5.28statutory or home rule charter city located within 15 miles or less of the boundaries of the
5.29municipality has been three percent or less for at least the immediately preceding two-year
5.30period;
5.31 (3) at least one business located in the municipality or within 15 miles of the municipality
5.32that employs a minimum of 20 full-time equivalent employees in aggregate has provided a
5Sec. 2.
REVISOR MS/EN 25-0482903/12/25 6.1written statement to the municipality indicating that the lack of available rental housing has
6.2impeded the ability of the business to recruit and hire employees; and
6.3 (4) the municipality and the development authority intend to use increments from the
6.4district for the development of rental housing to serve employees of businesses located in
6.5the municipality or surrounding area.
6.6 (g) The county auditor may not certify the original tax capacity of an economic
6.7development tax increment financing district for a workforce housing project if the request
6.8for certification is made after June 30, 2027.
6.9 EFFECTIVE DATE.This section is effective for districts for which the request for
6.10certification was made after June 30, 2025.
6.11 Sec. 3. Minnesota Statutes 2024, section 469.177, subdivision 1, is amended to read:
6.12 Subdivision 1.Original net tax capacity.(a) Upon or after adoption of a tax increment
6.13financing plan, the auditor of any county in which the district is situated shall, upon request
6.14of the authority, certify the original net tax capacity of the tax increment financing district
6.15and that portion of the district overlying any subdistrict as described in the tax increment
6.16financing plan and shall certify in each year thereafter the amount by which the original net
6.17tax capacity has increased or decreased as a result of a change in tax exempt status of
6.18property within the district and any subdistrict, reduction or enlargement of the district or
6.19changes pursuant to subdivision 4. The auditor shall certify the amount within 30 days after
6.20receipt of the request and sufficient information to identify the parcels included in the district.
6.21The certification relates to the taxes payable year as provided in subdivision 6.
6.22 (b) If the classification under section 273.13 of property located in a district changes to
6.23a classification that has a different assessment ratio, the original net tax capacity of that
6.24property must be redetermined at the time when its use is changed as if the property had
6.25originally been classified in the same class in which it is classified after its use is changed.
6.26 (c) The amount to be added to the original net tax capacity of the district as a result of
6.27previously tax exempt real property within the district becoming taxable equals the net tax
6.28capacity of the real property as most recently assessed pursuant to information reported to
6.29the commissioner under section 270C.85, subdivision 2, clause (4), or, if that assessment
6.30was made more than one year prior to the date of title transfer rendering the property taxable,
6.31the net tax capacity assessed by the assessor at the time of the transfer. If improvements are
6.32made to tax exempt property after the municipality approves the district and before the
6.33parcel becomes taxable, the assessor shall, at the request of the authority, separately assess
6Sec. 3.
REVISOR MS/EN 25-0482903/12/25 7.1the estimated market value of the improvements. If the property becomes taxable, the county
7.2auditor shall add to original net tax capacity, the net tax capacity of the parcel, excluding
7.3the separately assessed improvements. If substantial taxable improvements were made to
7.4a parcel after certification of the district and if the property later becomes tax exempt, in
7.5whole or part, as a result of the authority acquiring the property through foreclosure or
7.6exercise of remedies under a lease or other revenue agreement or as a result of tax forfeiture,
7.7the amount to be added to the original net tax capacity of the district as a result of the
7.8property again becoming taxable is the amount of the parcel's value that was included in
7.9original net tax capacity when the parcel was first certified. The amount to be added to the
7.10original net tax capacity of the district as a result of enlargements equals the net tax capacity
7.11of the added real property as most recently certified by the commissioner of revenue as of
7.12the date of modification of the tax increment financing plan pursuant to section 469.175,
7.13subdivision 4.
7.14 (d) If the net tax capacity of a property increases because the property no longer qualifies
7.15under the Minnesota Agricultural Property Tax Law, section 273.111; the Minnesota Open
7.16Space Property Tax Law, section 273.112; or the Metropolitan Agricultural Preserves Act,
7.17chapter 473H, the Rural Preserve Property Tax Program under section 273.114, or because
7.18platted, unimproved property is improved or market value is increased after approval of the
7.19plat under section 273.11, subdivision 14a or 14b, the increase in net tax capacity must be
7.20added to the original net tax capacity. If the net tax capacity of a property increases because
7.21the property no longer qualifies for the homestead market value exclusion under section
7.22273.13, subdivision 35, the increase in net tax capacity must be added to original net tax
7.23capacity if the original construction of the affected home was completed before the date the
7.24assessor certified the original net tax capacity of the district.
7.25 (e) The amount to be subtracted from the original net tax capacity of the district as a
7.26result of previously taxable real property within the district becoming tax exempt or
7.27qualifying in whole or part for an exclusion from taxable market value, or a reduction in
7.28the geographic area of the district, shall be the amount of original net tax capacity initially
7.29attributed to the property becoming tax exempt, being excluded from taxable market value,
7.30or being removed from the district. If the net tax capacity of property located within the tax
7.31increment financing district is reduced by reason of a court-ordered abatement, stipulation
7.32agreement, voluntary abatement made by the assessor or auditor or by order of the
7.33commissioner of revenue, the reduction shall be applied to the original net tax capacity of
7.34the district when the property upon which the abatement is made has not been improved
7.35since the date of certification of the district and to the captured net tax capacity of the district
7Sec. 3.
REVISOR MS/EN 25-0482903/12/25 8.1in each year thereafter when the abatement relates to improvements made after the date of
8.2certification. The county auditor may specify reasonable form and content of the request
8.3for certification of the authority and any modification thereof pursuant to section 469.175,
8.4subdivision 4.
8.5 (f) If a parcel of property contained a substandard building or improvements described
8.6in section 469.174, subdivision 10, paragraph (e), that were demolished or removed and if
8.7the authority elects to treat the parcel as occupied by a substandard building under section
8.8469.174, subdivision 10, paragraph (b), or by improvements under section 469.174,
8.9subdivision 10, paragraph (e), the auditor shall certify the original net tax capacity of the
8.10parcel using the greater of (1) the current net tax capacity of the parcel, or (2) the estimated
8.11market value of the parcel for the year in which the building or other improvements were
8.12demolished or removed, but applying the classification rates for the current year.
8.13 (g) For a redevelopment district qualifying under section 469.174, subdivision 10,
8.14paragraph (a), clause (4), as a qualified disaster area, the auditor shall certify the value of
8.15the land as the original tax capacity for any parcel in the district that contains a building
8.16that suffered substantial damage as a result of the disaster or emergency.
8.17 (h) For a redevelopment district qualifying under section 469.174, subdivision 10,
8.18paragraph (a), clause (5), as a property with vacant or underused commercial or industrial
8.19buildings, the auditor shall certify the value of the land as the original tax capacity for any
8.20parcel in the district that contains a commercial or industrial building determined to be
8.21vacant or underused.
8.22 EFFECTIVE DATE.This section is effective for districts for which the request for
8.23certification was made after June 30, 2025.
8Sec. 3.
REVISOR MS/EN 25-0482903/12/25