The amendment **broadens** the bill's scope from modifying just the "requirements to create" tax increment financing districts to modifying broader "provisions for" such districts, and adds detailed statutory language (§ 10-6-137) that prevents discretionary valuation formulas from being applied to properties within tax increment finance districts. This shifts the bill from a narrow procedural change to a substantive restriction on how properties in these districts can be assessed.
26.992.20 26.992.21 101st Legislative Session 228 2026 South Dakota Legislature Senate Bill 228 SENATE TAXATION ENGROSSED Introduced by: Senator Karr Underscores indicate new language. Overstrikes indicate deleted language. An Act to modify requirements to create provisions for a tax increment financing district. 1 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA: 2 Section 1. That § 10-6-137 be AMENDED: 3 10-6-137. Any Following the construction of any structure classified pursuant to 4 this section, must, following construction, be valued the valuation of the structure for 5 taxation purposes must occur in the usual manner. The board of county commissioners of 6 the county in which the structure is located, may adopt a discretionary formula for 7 assessed value to be used for tax purposes. Except as otherwise provided in § 10-6-137.1, 8 the formula may include, for any or all of the five tax years following construction, all, any 9 portion, or none of the assessed value for tax purposes. Any formula adopted must be 10 equally applied to specifically classified properties pursuant to this section may not be 11 used for any property within a tax increment finance district. 12 The board of county commissioners of the county in which the structure is located 13 may, if requested by the owner of the structure, fully assess the structure without 14 application of the formula. In waiving the formula for the structure of one owner, the 15 board of county commissioners is not prohibited from applying the formula for subsequent 16 new structures. The assessed value during any of the five years may not be less than the 17 assessed value of the property in the year preceding the first year of the tax years 18 following construction. 19 Any structure that is partially constructed on the assessment date may be valued 20 for tax purposes, pursuant to this section, and the value may not be less than the assessed 21 value of the property in the year preceding the beginning of construction. The period that 22 the property is valued for tax purposes under this section may include the years when the 23 property is partially constructed. 24 26.992.21 2 228 Underscores indicate new language. Overstrikes indicate deleted language. Following the five-year period under this section, the property must be assessed 1 at the same percentage as all other property for tax purposes, except as otherwise 2 provided in § 10-6-137.1. 3 Any of the following types of real property may be specifically classified for the 4 purpose of taxation pursuant to this section: 5 (1) Any new industrial or commercial structure, or any addition, renovation, or 6 reconstruction to an existing structure, located within a designated urban renewal 7 area as defined in § 11-8-4, if the new structure, addition, renovation, or 8 reconstruction has a full and true value of thirty thousand dollars or more; 9 (2) Any new industrial structure, including a power generation facility, or an addition 10 to an existing structure facility, if the new structure facility or addition has a full 11 and true value of thirty thousand dollars or more; 12 (3) Any new nonresidential agricultural structure, or any addition to an existing 13 structure, if the new structure or addition has a full and true value of ten thousand 14 dollars or more; 15 (4) Any new commercial structure, or any addition, renovation, or reconstruction to an 16 existing structure, except a commercial residential structure as described in 17 subdivision (5), if the new structure or addition, renovation, or reconstruction has 18 a full and true value of thirty thousand dollars or more; 19 (5) Any new commercial residential structure, or addition to an existing structure, 20 containing four or more units, if the new structure or addition has a full and true 21 value of thirty thousand dollars or more; 22 (6) Any new affordable housing structure containing four or more units, with a monthly 23 rental rate of the units at or below the annually calculated rent for the state's sixty 24 percent area median income being used by the South Dakota Housing Development 25 Authority for a minimum of ten years following the date of first occupancy, if the 26 structure has a full and true value of thirty thousand dollars or more; 27 (7) Any new residential structure, or addition to or renovation of an existing structure, 28 located within a redevelopment neighborhood established pursuant to § 10-6-141, 29 if the new structure, addition, or renovation has a full and true value of five 30 thousand dollars or more. The structure must be, provided the structure is located 31 in an area defined and designated as a redevelopment neighborhood based on 32 conditions provided set forth in § 11-7-2 or 11-7-3; or 33 26.992.21 3 228 Underscores indicate new language. Overstrikes indicate deleted language. (8) Any commercial, industrial, or nonresidential agricultural property that increases 1 more than ten thousand dollars in full and true value, as a result of reconstruction 2 or renovation of the structure. 3 Section 2. That § 10-12-44 be AMENDED: 4 10-12-44. The county auditor having jurisdiction over a school district shall raise 5 additional revenue, for the general fund and special education fund, from real property 6 taxes, to compensate for a tax abatement, a tax increment financing district, or a 7 discretionary formula in accordance with the following: 8 (1) For tax increment financing districts created pursuant to chapter 11-9, the county 9 auditor shall impose an additional tax levy, for an amount not to exceed an amount 10 equal to the sum of the levies in §§ 10-12-42 and 13-37-16 multiplied by the tax 11 increment value, as defined in § 11-9-1 total value of the tax increment financing 12 district less the tax increment base as determined pursuant to § 11-9-19; 13 (2) For property subject to § 10-6-137, 10-6-137.1, or 10-6-144, the county auditor 14 shall impose an additional tax levy, for an amount not to exceed the amount of 15 taxes that were not collected, due to the reduction in value based on the maximum 16 levies, pursuant to §§ 10-12-42 and 13-37-16; and 17 (3) For abated taxes, the county auditor shall impose an additional tax levy, for an 18 amount not to exceed the amount of the school district's portion of the taxes that 19 were abated, pursuant to chapter 10-18, during the previous tax year. 20 The levies in this section are not subject to the referendum provision of § 10-12-21 43 and these levies must maintain the same proportion to each other, as represented in 22 the mathematical relationship at the maximum levies pursuant to § 10-12-42. 23 Section 3. That § 11-9-1 be AMENDED: 3 24 11-9-1. Terms used in this chapter mean: 4 25 (1) "Department," the Department of Revenue; 5 26 (2) "District," a tax increment financing district; 6 district in a contiguous geographic area within 27 a political subdivision, which is defined and created by resolution of the governing 28 body, provided that parcels that are not otherwise adjacent are not contiguous 29 based solely on the existence of an easement, right-of-way, transportation 30 corridor, or waterway connecting the parcels, unless the parcels are: 31 (a) Separated only by the easement, right-of-way, transportation corridor, or 32 waterway; and 33 26.992.21 4 228 Underscores indicate new language. Overstrikes indicate deleted language. (b) Located directly opposite one another; 1 (3) "Financing plan," the intended methods and revenue sources by which the political 7 subdivision will pay for the project costs; 8 (4) "Governing body," the board of trustees, the board of commissioners, the board of 9 2 county commissioners, or the common council of a municipality; 10 (4)(5) municipality a board of 3 commissioners, board of trustees, common council, or other authoritative body by 4 which a political subdivision is controlled; 5 (4) "Grant," the transfer of money or property to a transferee for a governmental 11 6 purpose that is not a related party to or an agent of the political subdivision; 12 (5)(6) 7 (5) "Planning commission," a planning commission created under chapters 11-2 chapter 11-8 2 or 11-13 6, 11-6, a planning committee of a governing body of a political subdivision that 9 does 14 not have a planning commission, or the governing body of a political 10 subdivision 15 that does not have a planning commission or planning committee; 16 (6)(7) 11 (6) "Political subdivision," a municipality, as defined in § 11-6-1, or county of this 17 12 state; 18 (7)(8) 13 (7) "Project plan," the properly an approved plan for the development or 14 redevelopment 19 of a tax increment financing district including and all properly 15 approved 20 amendments to the plan; 21 (8)(9) 16 (8) "Tax increment financing district," a contiguous geographic area within a political 22 17 subdivision defined and created by resolution of the governing body; 23 (9)(10) 18 (9) "Taxable property," all real and personal taxable property located in a tax 24 19 increment financing district; and 25 26.992.20 2 228 Underscores indicate new language. Overstrikes indicate deleted language. (10)(11) 20 (10)(9) "Tax increment valuation," the total value of the tax increment financing district 1 21 minus the tax increment base as determined pursuant to § 11-9-19. 2 22 Section 2. 4. That § 11-9-4 be AMENDED: 23 11-9-4. The planning commission shall designate the boundaries of a district that 24 the planning commission recommends be created. The planning commission shall submit 25 the recommendation to the governing body. The boundaries of a district may not split a 26 whole unit of property that is being used for a single purpose. 27 Section 5. That § 11-9-5 be AMENDED: 3 28 11-9-5. To establish create a district, the governing body must adopt a resolution 4 that is subject to a referendum under the provisions of section 12 of this Act, and which: 5 29 that: 30 (1) Describes the boundaries of a the district with sufficient definiteness to identify 6 31 with ordinary and reasonable certainty the territory included. The boundaries may 7 32 not split a whole unit of property that is being used for a single purpose; 8 33 26.992.21 5 228 Underscores indicate new language. Overstrikes indicate deleted language. (2) Creates the district on a given date; 9 1 (3) Includes a finding that the assessed value of the taxable property in the district 10 2 plus the tax increment base of all other existing districts does not exceed ten five 11 ten: 3 (a) For a district created by a first class municipality, seven and one-half 4 percent of the total assessed value of all taxable property in the political 12 5 subdivision; and 13 6 (b) For all other classes, ten percent of the total assessed value of all taxable 7 property in the political subdivision; 8 (4) Assigns a name to the district for identification purposes. The first district created 14 9 in each political subdivision must be known as "Tax Increment Financing District 15 10 Number One, City (or Town, or County) of __________." Each subsequently 16 11 created district must be assigned the next consecutive number. number; and 12 (5) Demonstrates that the district has been reviewed by all affected taxing districts at 13 a public meeting held pursuant to chapter 1-25, provided that the affected taxing 14 districts may provide input but do not have authority to approve or reject the 15 creation of the district. 16 Section 6. That § 11-9-6 be AMENDED: 17 11-9-6. Subject to any agreement with bondholders, a district may overlap with 18 one or more existing districts if the boundaries of the districts are not identical.Unless 19 otherwise authorized by a joint resolution among the affected political subdivisions, a 20 district established after July 1, 2026, may not overlap with any other existing district. 21 Section 3. 7. That § 11-9-8 be AMENDED: 18 22 11-9-8. The resolution required by § 11-9-5 shall must contain the following 19 23 findings: 20 24 (1) Not less than twenty-five fifty percent, by area, of the real property within the 21 25 district is a blighted area or and not less than fifty percent, by area, of the real 22 property 26 within the district will stimulate and develop the general economic welfare 23 and 27 prosperity of the state through the promotion and advancement of industrial, 24 28 commercial, manufacturing, agricultural, or natural resources development; and 25 29 (2) The improvement of the area is likely to significantly enhance the value of 26 30 substantially all other real property in the district; and 27 (3) The review required by section 13 of this Act indicates that the social or economic 28 benefits of the project exceed its costs to property owners and political subdivisions 29 authorized to impose a property tax within the boundaries of the district. 30 31 26.992.21 6 228 Underscores indicate new language. Overstrikes indicate deleted language. It is not necessary to identify the specific parcels meeting the criteria. No county 31 1 may create a district located, in whole or in part, within a municipality, unless the 32 2 governing body of the municipality has consented to creation of a district by resolution. 33 26.992.20 3 228 Underscores indicate new language. Overstrikes indicate deleted language. Section 4. 8. That a NEW SECTION be added to chapter 11-9: 1 4 No county may create a district located, in whole or in part, within a municipality, 2 5 unless the governing body of the municipality has consented to the creation of the district 3 by resolution. 4 No municipality may create a district unless the board of county commissioners of 5 the county in which the district is located, either in whole or in part, has consented to the 6 creation of the district by resolution. 7 Section 5. 9. That § 11-9-10 be AMENDED: 8 11-9-10. For the purposes of this chapter, the term "blighted area" means an area 9 that substantially impairs or arrests the sound growth of the political subdivision, inhibits 10 housing development, constitutes an economic or social liability, or is a danger in its 11 present condition and use to the health, safety, morals, or welfare of the public because 12 of: 13 (1) The presence of a substantial number of substandard, slum, deteriorated, or 14 deteriorating structures; 15 (2) A predominance of defective or inadequate street layouts; 16 (3) Faulty lot layout in relation to size, adequacy, accessibility, or usefulness; 17 (4) Insanitary Unsanitary or unsafe conditions; 18 (5) The deterioration of site or other improvements land or structures affixed to the 19 land; 20 (6) A diversity of ownership, tax, Tax or special assessment delinquency delinquencies 21 exceeding the fair value of the land; 22 (7) Defective or unusual conditions of title; 23 (8) The existence of conditions which that endanger life or property by fire and other 24 causes; or 25 (9) A predominance of open space with obsolete platting, diversity of ownership, or 26 deterioration of structures or site improvements, provided this subdivision does improvements. 27 not apply to a municipality having fewer than fifteen thousand legal residents. 28 Section 6. 10. That § 11-9-14 be AMENDED: 29 28 11-9-14. For the purposes of this chapter, the term "project costs" are any 30 29 expenditures made or estimated to be made, or monetary obligations incurred or 31 30 estimated to be incurred, by a political subdivision that, which are listed in a project plan 32 26.992.20 4 31 26.992.21 7 228 Underscores indicate new language. Overstrikes indicate deleted language. as grants or costs of public works or improvements within a district, plus any incidental 1 costs diminished by any income, special assessments, or other revenues, other than tax 2 increments, received, or reasonably expected to be received, by the political subdivision 3 in connection with the implementation of the plan. 4 Section 7. 11. That § 11-9-15 be AMENDED: 5 11-9-15. For the purposes of this chapter, the term "project costs" means: 6 (1) Capital costs, including the actual costs of the construction of public works or 7 improvements, buildings, structures, and permanent fixtures; the demolition, 8 alteration, remodeling, repair, or reconstruction of existing buildings, structures, 9 and permanent fixtures; the acquisition of equipment; the clearing, over-10 excavation, and grading of land, including use of engineered fill and soil 11 compaction; and the amount of interest payable on tax increment bonds issued 12 pursuant to this chapter until the positive tax increments to be received from the 13 district, as estimated by the project plan, are sufficient to pay the principal of and 14 interest on the tax increment bonds when due; 15 (2) Financing costs, including all interest paid to holders of evidences of indebtedness 16 issued to pay for project costs, any premium paid over the principal amount thereof 17 because of the redemption of obligations prior to maturity, and a reserve for the 18 payment of principal and interest on obligations in an amount determined by the 19 governing body to be reasonably required for the marketability of obligations; 20 (3) Real property assembly costs, including the actual cost of the acquisition by a 21 political subdivision of real or personal property within a district, less any proceeds 22 to be received by the political subdivision from the sale, lease, or other disposition 23 of property pursuant to a project plan; 24 (4) Professional service costs, including those costs incurred for architectural, 25 planning, engineering, and legal advice and services; 26 (5) Imputed administrative costs, including reasonable charges for the time spent by 27 a municipal or county employee in connection with the implementation of a project 28 plan; 29 (6) Relocation costs; 30 (7) Organizational costs, including the costs of conducting environmental impact and 31 other studies and the costs of informing the public of the creation of a district and 32 the implementation of project plans; and 33 26.992.20 5 26.992.21 8 228 Underscores indicate new language. Overstrikes indicate deleted language. (8) Payments and grants made, at the discretion of the governing body, that are found 1 to be necessary or convenient to the creation of a district, the implementation of 2 project plans, or to stimulate and develop the general economic welfare and 3 prosperity of the state. No, except: 4 (a) No payment or grant may be used for any residential structure pursuant to 5 § 11-9-42; and 6 (b) The amount of payments and grants A recipient for a grant made for a district shall enter into an agreement with 7 the governing body specifying the only purposes for which a grant may not exceed ten 7 percent of the project costs; be 8 used; and 8 9 (9) Incidental costs diminished by any income, special assessments, or other 9 10 revenues, other than tax increments, received, or reasonably expected to be 10 11 received, by the political subdivision, in connection with the implementation of the 11 12 plan. 12 13 Section 8. That § 11-9-20 be AMENDED: 13 11-9-20. Upon receiving an application by the county auditor or municipal finance 14 officer, as applicable, on a form prescribed by the department, the department must 15 determine the aggregate assessed value of the taxable property in the district, which 16 aggregate assessed value, on certification to the county auditor or the municipal finance 17 officer, as applicable, is the tax increment base of the district. 18 The application must be accompanied by a detailed parcel list of the included legal 19 descriptions, property ownership, and value, as provided by the director of equalization 20 office, of the affected corresponding county. For purposes of determining the tax 21 increment base, the value of agricultural property in the district must be determined in 22 the same manner as nonagricultural property. 23 Except as provided in this section and § 11-9-20.1, the department shall use the 24 values, as last previously certified by the department, adjusted for the value to the date 25 the district was created, for any completed buildings or additions and without regard to 26 any reduction pursuant to §§ 1-19A-20, 10-6-137, 10-6-137.1, and 10-6-144. 27 Section 9. 12. That § 11-9-23 be AMENDED: 28 14 11-9-23. If Except as provided in this section, if the municipality adopts an 29 15 amendment to the original project plan for any district that includes additional project 30 16 costs for which tax increments may be received by the municipality, the tax increment 31 17 base for the district shall must be redetermined pursuant to § 11-9-20. The tax increment 32 26.992.20 6 228 Underscores indicate new language. Overstrikes indicate deleted language. 18 base as redetermined under this section is effective for the purposes of this chapter only 1 19 if it exceeds the original tax increment base determined pursuant to § 11-9-20. 2 20 The provisions of this section do not apply if the additional project costs are thirty-3 thirty-21 five fifteen twenty-five percent or less than the amount approved in the original project plan and 22 the 4 additional project costs will be incurred before the expiration of the period specified in 5 23 § 11-9-13. 6 24 Section 10. 13. That § 11-9-32 be AMENDED: 7 25 11-9-32. Moneys may only be paid out of the special fund for the district created 8 26 under § 11-9-31 only to pay project costs or grants of the district, to reimburse the 9 27 political subdivision for the payment of project costs or grants of the district, or to satisfy 10 28 claims of holders of tax increment bonds issued for the district. 11 29 Section 11. 14. That § 11-9-46 be AMENDED: 12 30 11-9-46. The existence of a district shall terminate must be terminated when: 13 31 26.992.21 9 228 Underscores indicate new language. Overstrikes indicate deleted language. (1) Positive tax increments are no longer allocable to a the district under pursuant to 1 § 11-9-25; or 14 2 (2) The governing body, by resolution, dissolves the district, after payment or 15 3 provision for payment of all project costs, grants, and all tax increment bonds of 16 4 the district. 17 5 Within thirty days after the termination of a district, the governing body shall 6 provide to the department a notice, which must include the name of the district and copies 7 of the resolution of dissolution and the district's final financial statement. The final financial 8 statement must account for the distribution of any remaining funds pursuant to § 11-9-9 45. 10 Section 12. 15. That a NEW SECTION be added to chapter 11-9: 11 For any district established after July 1, 2026, a governing body may not approve 12 a project plan unless an independent fiscal feasibility review has been completed and 13 submitted to all political subdivisions. 14 The review must be conducted by a third-party who is a municipal advisor 15 registered with the Municipal Securities Rulemaking Board and the United States Securities 16 and Exchange Commission pursuant to section 15B of the Securities Exchange Act of 1934, 17 15 U.S.C. §§ 78a to 78qq, inclusive (January 1, 2026), a licensed certified public 18 accountant, or another independent third-party reviewer, including a nonprofit or research 19 organization, or attorney, with demonstrated experience in municipal finance and tax 20 increment financing, approved by the governing body. 21 The person conducting the review may be compensated for conducting the review 22 but must be independent of any developer, obligated person, and private entity receiving 23 financial assistance or reimbursement under the project plan. If the tax increment base of review is conducted: 24 (1) By a proposed district is greater than one-half percent of 19 municipal advisor, the total assessed value of all taxable property advisor must: 25 (a) Act in the political subdivision, the governing 20 body creating the district must call a special election capacity of municipal advisor to determine the question of the 21 establishment of the district. The election must be held on a Tuesday between forty-five 22 and sixty days from when the governing body adopted and may not 26 act on behalf of any developer, underwriter, or other private party; and 27 (b) Acknowledge in writing that the resolution establishing the 23 district. 24 If the resolution is adopted within the ninety days prior advisor owes a fiduciary duty to the political subdivision's 25 regular election 28 governing body with respect to any advice provided in the review; 29 (2) By a certified public accountant, the accountant: 30 (a) Must perform the review in accordance with applicable professional 31 standards; 32 26.992.21 10 228 Underscores indicate new language. Overstrikes indicate deleted language. (b) May not prepare, or a primary have prepared, any development feasibility analysis, 1 financial projection, or general election and with sufficient time to comply with 26 valuation study for the subdivision's requirements for publishing notice of the election, the question must be 27 submitted developer or any affiliated 2 entity relating to the voters at district; and 3 (c) Must acknowledge in writing that election. 28 A special election held pursuant to this section must be held upon the same notice 29 and review is conducted for the benefit of 4 the governing body; or 5 (3) By an independent third-party reviewer, including a nonprofit or research 6 organization, or attorney, approved by the governing body, the third-party 7 reviewer may not receive funding or compensation, other than compensation for 8 conducting the review, from the governing body or any developer, underwriter, or 9 other private entity involved in the same manner as a regular election of the political subdivision. 30 project. 10 Section 13. 16. That a NEW SECTION be added to chapter 11-9: 11 A fiscal feasibility review required pursuant to section 15 of this Act: 12 (1) Must contain: 13 (a) A description of the project plan, proposed district boundaries, and 14 estimated project costs; 15 (b) An analysis of the tax increment base and the projected tax increment 16 valuation for the anticipated duration of the district; 17 (c) An evaluation of whether the projected tax increment revenue is sufficient 18 to pay the project costs and any other obligation proposed to be paid from 19 the revenue; 20 (d) An analysis of the timing of projected revenue relative to anticipated 21 expenditures or debt service requirements; 22 (e) A discussion of material financial risks to the feasibility of the project plan; 23 (f) A statement identifying material assumptions, limitations, and reliance on 24 information from other third persons; and 25 (g) A conclusion stating whether, based on the assumptions and analyses 26 described in the report, the project plan is reasonably feasible from a 27 financing standpoint; 28 (2) Is advisory in nature and does not constitute a guarantee of project completion, 29 revenue, or valuation; 30 (3) Does not relieve the governing body of the responsibility to evaluate the project 31 26.992.20 7 plan; and 32 26.992.21 11 228 Underscores indicate new language. Overstrikes indicate deleted language. The (4) Must be completed and made available to the governing body shall submit and the project plan and financing plan for public at 1 least fourteen days prior to the district 1 to an independent, certified public accountant or economist to provide: 2 (1) A cost-benefit analysis governing body's consideration of the project; resolution 2 establishing the district. 3 (2) An estimate for the expected change in the distribution of property taxes over time 4 resulting from the project; and 5 (3) An estimate for the expected effects on employment, housing, and economic 6 output resulting from the project. 7