SB 228

26.992.22  101st Legislative Session  228
                                   2026 South Dakota Legislature
                                               Senate Bill 228
                                                     ENROLLED
                                               AN ACT
ENTITLED An Act to modify provisions for a tax increment financing district.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section 1. That § 10-6-137 be AMENDED:
            10-6-137. Following the construction of any structure classified pursuant to this
   section, the valuation of the structure for taxation purposes must occur in the usual
   manner. The board of county commissioners of the county in which the structure is located
   may adopt a discretionary formula for assessed value to be used for tax purposes. Except
   as otherwise provided in § 10-6-137.1, the formula may include, for any or all of the five
   tax years following construction, all, any portion, or none of the assessed value for tax
   purposes. Any formula adopted pursuant to this section may not be used for any property
   within a tax increment finance district.
            The board may, if requested by the owner of the structure, fully assess the
   structure without application of the formula. In waiving the formula for the structure of
   one owner, the board is not prohibited from applying the formula for subsequent new
   structures. The assessed value during any of the five years may not be less than the
   assessed value of the property in the year preceding the first year of the tax years
   following construction.
            Any structure that is partially constructed on the assessment date may be valued
   for tax purposes, pursuant to this section, and the value may not be less than the assessed
   value of the property in the year preceding the beginning of construction. The period that
   the property is valued for tax purposes under this section may include the years when the
   property is partially constructed.
            Following the five-year period under this section, the property must be assessed
   at the same percentage as all other property for tax purposes, except as otherwise
   provided in § 10-6-137.1.
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            Any of the following types of real property may be specifically classified for the
   purpose of taxation pursuant to this section:
   (1)      Any new industrial structure, or any addition, renovation, or reconstruction to an
            existing structure, if the new structure, addition, renovation, or reconstruction has
            a full and true value of thirty thousand dollars or more;
   (2)      Any new industrial structure, including a power generation facility, or an addition
            to an existing facility, if the new facility or addition has a full and true value of
            thirty thousand dollars or more;
   (3)      Any new nonresidential agricultural structure, or any addition to an existing
            structure, if the new structure or addition has a full and true value of ten thousand
            dollars or more;
   (4)      Any new commercial structure, or any addition, renovation, or reconstruction to an
            existing structure, except a commercial residential structure as described in
            subdivision (5), if the new structure or addition, renovation, or reconstruction has
            a full and true value of thirty thousand dollars or more;
   (5)      Any new commercial residential structure, or addition to an existing structure,
            containing four or more units, if the new structure or addition has a full and true
            value of thirty thousand dollars or more;
   (6)      Any new affordable housing structure containing four or more units, with a monthly
            rental rate of the units at or below the annually calculated rent for the state's sixty
            percent area median income being used by the South Dakota Housing Development
            Authority for a minimum of ten years following the date of first occupancy, if the
            structure has a full and true value of thirty thousand dollars or more;
   (7)      Any new residential structure, or addition to or renovation of an existing structure,
            located within a redevelopment neighborhood established pursuant to § 10-6-141,
            if the new structure, addition, or renovation has a full and true value of five
            thousand dollars or more, provided the structure is located in an area defined and
            designated as a redevelopment neighborhood based on conditions set forth in § 11-
            7-2 or 11-7-3; or
   (8)      Any commercial, industrial, or nonresidential agricultural property that increases
            more than ten thousand dollars in full and true value, as a result of reconstruction
            or renovation of the structure.
Section 2. That § 10-12-44 be AMENDED:
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            10-12-44. The county auditor having jurisdiction over a school district shall raise
   additional revenue, for the general fund and special education fund, from real property
   taxes, to compensate for a tax abatement, a tax increment financing district, or a
   discretionary formula in accordance with the following:
   (1)      For tax increment financing districts created pursuant to chapter 11-9, the county
            auditor shall impose an additional tax levy, for an amount not to exceed an amount
            equal to the sum of the levies in §§ 10-12-42 and 13-37-16 multiplied by the total
            value of the tax increment financing district less the tax increment base as
            determined pursuant to § 11-9-19;
   (2)      For property subject to § 10-6-137, 10-6-137.1, or 10-6-144, the county auditor
            shall impose an additional tax levy, for an amount not to exceed the amount of
            taxes that were not collected, due to the reduction in value based on the maximum
            levies, pursuant to §§ 10-12-42 and 13-37-16; and
   (3)      For abated taxes, the county auditor shall impose an additional tax levy, for an
            amount not to exceed the amount of the school district's portion of the taxes that
            were abated, pursuant to chapter 10-18, during the previous tax year.
            The levies in this section are not subject to the referendum provision of § 10-12-
   43 and these levies must maintain the same proportion to each other, as represented in
   the mathematical relationship at the maximum levies pursuant to § 10-12-42.
Section 3. That § 11-9-1 be AMENDED:
            11-9-1. Terms used in this chapter mean:
   (1)      "Department," the Department of Revenue;
   (2)      "District," a tax increment financing district in a contiguous geographic area within
            a political subdivision, which is defined and created by resolution of the governing
            body, provided that parcels that are not otherwise adjacent are not contiguous
            based solely on the existence of an easement, right-of-way, transportation
            corridor, or waterway connecting the parcels, unless the parcels are:
            (a)    Separated only by the easement, right-of-way, transportation corridor, or
                   waterway; and
            (b)    Located directly opposite one another;
   (3)      "Governing body," a board of commissioners, board of trustees, common council,
            or other authoritative body by which a political subdivision is controlled;
   (4)      "Grant," the transfer of money or property to a transferee for a governmental
            purpose that is not a related party to or an agent of the political subdivision;
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   (5)      "Planning commission," a planning commission created under chapter 11-2 or 11-
            6, a planning committee of a political subdivision that does not have a planning
            commission, or the governing body of a political subdivision that does not have a
            planning commission or planning committee;
   (6)      "Political subdivision," a municipality, as defined in § 11-6-1, or county of this
            state;
   (7)      "Project plan," an approved plan for the development or redevelopment of a district
            and all approved amendments to the plan;
   (8)      "Taxable property," all real and personal taxable property located in a district; and
   (9)      "Tax increment valuation," the total value of the district minus the tax increment
            base as determined pursuant to § 11-9-19.
Section 4. That § 11-9-4 be AMENDED:
            11-9-4. The planning commission shall designate the boundaries of a district that
   the planning commission recommends be created. The planning commission shall submit
   the recommendation to the governing body. The boundaries of a district may not split a
   whole unit of property that is being used for a single purpose.
Section 5. That § 11-9-5 be AMENDED:
            11-9-5. To create a district, the governing body must adopt a resolution that:
   (1)      Describes the boundaries of the district with sufficient definiteness to identify with
            ordinary and reasonable certainty the territory included;
   (2)      Creates the district on a given date;
   (3)      Includes a finding that the assessed value of the taxable property in the district
            plus the tax increment base of all other existing districts does not exceed:
            (a)      For a district created by a first class municipality, seven and one-half
                     percent of the total assessed value of all taxable property in the political
                     subdivision; and
            (b)      For all other classes, ten percent of the total assessed value of all taxable
                     property in the political subdivision;
   (4)      Assigns a name to the district for identification purposes. The first district created
            in each political subdivision must be known as "Tax Increment Financing District
            Number One, City (or Town, or County) of __________." Each subsequently
            created district must be assigned the next consecutive number; and
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   (5)      Demonstrates that the district has been reviewed by all affected taxing districts at
            a public meeting held pursuant to chapter 1-25, provided that the affected taxing
            districts may provide input but do not have authority to approve or reject the
            creation of the district.
Section 6. That § 11-9-6 be AMENDED:
            11-9-6. Unless otherwise authorized by a joint resolution among the affected
   political subdivisions, a district established after July 1, 2026, may not overlap with any
   other existing district.
Section 7. That § 11-9-8 be AMENDED:
            11-9-8. The resolution required by § 11-9-5 must contain the following findings:
   (1)      Not less than fifty percent, by area, of the real property within the district is a
            blighted area or not less than fifty percent, by area, of the real property within the
            district will stimulate and develop the general economic welfare and prosperity of
            the state through the promotion and advancement of industrial, commercial,
            manufacturing, agricultural, or natural resources development; and
   (2)      The improvement of the area is likely to significantly enhance the value of
            substantially all other real property in the district.
            It is not necessary to identify the specific parcels meeting the criteria.
Section 8. That a NEW SECTION be added to chapter 11-9:
            No county may create a district located, in whole or in part, within a municipality,
   unless the governing body of the municipality has consented to the creation of the district
   by resolution.
Section 9. That § 11-9-10 be AMENDED:
            11-9-10. For the purposes of this chapter, the term "blighted area" means an area
   that substantially impairs or arrests the sound growth of the political subdivision, inhibits
   housing development, constitutes an economic or social liability, or is a danger in its
   present condition and use to the health, safety, morals, or welfare of the public because
   of:
   (1)      The presence of a substantial number of substandard, slum, deteriorated, or
            deteriorating structures;
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   (2)      A predominance of defective or inadequate street layouts;
   (3)      Faulty lot layout in relation to size, adequacy, accessibility, or usefulness;
   (4)      Unsanitary or unsafe conditions;
   (5)      The deterioration of land or structures affixed to the land;
   (6)      Tax or special assessment delinquencies exceeding the fair value of the land;
   (7)      Defective or unusual conditions of title;
   (8)      The existence of conditions that endanger life or property by fire and other causes;
            or
   (9)      A predominance of open space with obsolete platting, diversity of ownership, or
            deterioration of structures or site improvements.
Section 10. That § 11-9-14 be AMENDED:
            11-9-14. For the purposes of this chapter, the term "project costs" are any
   expenditures made or estimated to be made, or monetary obligations incurred or
   estimated to be incurred, by a political subdivision, which are listed in a project plan as
   grants or costs of public works or improvements within a district.
Section 11. That § 11-9-15 be AMENDED:
            11-9-15. For the purposes of this chapter, the term "project costs" means:
    (1)     Capital costs, including the actual costs of the construction of public works or
            improvements, buildings, structures, and permanent fixtures; the demolition,
            alteration, remodeling, repair, or reconstruction of existing buildings, structures,
            and permanent fixtures; the acquisition of equipment; the clearing, over-
            excavation, and grading of land, including use of engineered fill and soil
            compaction; and the amount of interest payable on tax increment bonds issued
            pursuant to this chapter until the positive tax increments to be received from the
            district, as estimated by the project plan, are sufficient to pay the principal of and
            interest on the tax increment bonds when due;
    (2)     Financing costs, including all interest paid to holders of evidences of indebtedness
            issued to pay for project costs, any premium paid over the principal amount thereof
            because of the redemption of obligations prior to maturity, and a reserve for the
            payment of principal and interest on obligations in an amount determined by the
            governing body to be reasonably required for the marketability of obligations;
    (3)     Real property assembly costs, including the actual cost of the acquisition by a
            political subdivision of real or personal property within a district, less any proceeds
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            to be received by the political subdivision from the sale, lease, or other disposition
            of property pursuant to a project plan;
    (4)     Professional service costs, including those costs incurred for architectural,
            planning, engineering, and legal services;
    (5)     Imputed administrative costs, including reasonable charges for the time spent by
            a municipal or county employee in connection with the implementation of a project
            plan;
    (6)     Relocation costs;
    (7)     Organizational costs, including the costs of conducting environmental impact and
            other studies and the costs of informing the public of the creation of a district and
            the implementation of project plans;
    (8)     Payments and grants made, at the discretion of the governing body, that are found
            to be necessary or convenient to the creation of a district, the implementation of
            project plans, or to stimulate and develop the general economic welfare and
            prosperity of the state, except:
            (a)     No payment or grant may be used for any residential structure pursuant to
                    § 11-9-42; and
            (b)     A recipient for a grant made for a district shall enter into an agreement with
                    the governing body specifying the only purposes for which a grant may be
                    used; and
    (9)     Incidental costs diminished by any income, special assessments, or other
            revenues, other than tax increments, received, or reasonably expected to be
            received, by the political subdivision, in connection with the implementation of the
            plan.
Section 12. That § 11-9-23 be AMENDED:
            11-9-23. Except as provided in this section, if the municipality adopts an
   amendment to the original project plan for any district that includes additional project
   costs for which tax increments may be received by the municipality, the tax increment
   base for the district must be redetermined pursuant to § 11-9-20. The tax increment base
   as redetermined under this section is effective for the purposes of this chapter only if it
   exceeds the original tax increment base determined pursuant to § 11-9-20.
            The provisions of this section do not apply if the additional project costs are twenty-
   five percent or less than the amount approved in the original project plan and the
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   additional project costs will be incurred before the expiration of the period specified in
   § 11-9-13.
Section 13. That § 11-9-32 be AMENDED:
            11-9-32. Moneys may be paid out of the special fund for the district created under
   § 11-9-31 only to pay project costs or grants of the district, to reimburse the political
   subdivision for the payment of project costs or grants of the district, or to satisfy claims
   of holders of tax increment bonds issued for the district.
Section 14. That § 11-9-46 be AMENDED:
            11-9-46. The district must be terminated when:
   (1)      Positive tax increments are no longer allocable to the district pursuant to § 11-9-
            25; or
   (2)      The governing body, by resolution, dissolves the district after payment or provision
            for payment of all project costs, grants, and all tax increment bonds of the district.
            Within thirty days after the termination of a district, the governing body shall
   provide to the department a notice, which must include the name of the district and copies
   of the resolution of dissolution and the district's final financial statement. The final financial
   statement must account for the distribution of any remaining funds pursuant to § 11-9-
   45.
Section 15. That a NEW SECTION be added to chapter 11-9:
            For any district established after July 1, 2026, a governing body may not approve
   a project plan unless an independent fiscal feasibility review has been completed and
   submitted to all political subdivisions.
            The review must be conducted by a third-party who is a municipal advisor
   registered with the Municipal Securities Rulemaking Board and the United States Securities
   and Exchange Commission pursuant to section 15B of the Securities Exchange Act of 1934,
   15 U.S.C. §§ 78a to 78qq, inclusive (January 1, 2026), a licensed certified public
   accountant, or another independent third-party reviewer, including a nonprofit or research
   organization, or attorney, with demonstrated experience in municipal finance and tax
   increment financing, approved by the governing body.
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            The person conducting the review may be compensated for conducting the review
   but must be independent of any developer, obligated person, and private entity receiving
   financial assistance or reimbursement under the project plan. If the review is conducted:
   (1)      By a municipal advisor, the advisor must:
            (a)    Act in the capacity of municipal advisor to the governing body and may not
                   act on behalf of any developer, underwriter, or other private party; and
            (b)    Acknowledge in writing that the advisor owes a fiduciary duty to the
                   governing body with respect to any advice provided in the review;
   (2)      By a certified public accountant, the accountant:
            (a)    Must perform the review in accordance with applicable professional
                   standards;
            (b)    May not prepare, or have prepared, any development feasibility analysis,
                   financial projection, or valuation study for the developer or any affiliated
                   entity relating to the district; and
            (c)    Must acknowledge in writing that the review is conducted for the benefit of
                   the governing body; or
   (3)      By an independent third-party reviewer, including a nonprofit or research
            organization, or attorney, approved by the governing body, the third-party
            reviewer may not receive funding or compensation, other than compensation for
            conducting the review, from the governing body or any developer, underwriter, or
            other private entity involved in the project.
Section 16. That a NEW SECTION be added to chapter 11-9:
            A fiscal feasibility review required pursuant to section 15 of this Act:
   (1)      Must contain:
            (a)    A description of the project plan, proposed district boundaries, and
                   estimated project costs;
            (b)    An analysis of the tax increment base and the projected tax increment
                   valuation for the anticipated duration of the district;
            (c)    An evaluation of whether the projected tax increment revenue is sufficient
                   to pay the project costs and any other obligation proposed to be paid from
                   the revenue;
            (d)    An analysis of the timing of projected revenue relative to anticipated
                   expenditures or debt service requirements;
            (e)    A discussion of material financial risks to the feasibility of the project plan;
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            (f)    A statement identifying material assumptions, limitations, and reliance on
                   information from other third persons; and
            (g)    A conclusion stating whether, based on the assumptions and analyses
                   described in the report, the project plan is reasonably feasible from a
                   financing standpoint;
   (2)      Is advisory in nature and does not constitute a guarantee of project completion,
            revenue, or valuation;
   (3)      Does not relieve the governing body of the responsibility to evaluate the project
            plan; and
   (4)      Must be completed and made available to the governing body and the public at
            least fourteen days prior to the governing body's consideration of the resolution
            establishing the district.
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An Act to modify provisions for a tax increment financing district.
                                                      Received at this Executive Office
 I certify that the attached Act originated in        this _____ day of _____________,
 the:
                                                      2026 at ____________M.
 Senate as Bill No. 228
                                                      By
                       Secretary of the Senate  for the Governor
                                                                       The attached Act is hereby
                                                                   approved this ________ day of
                       President of the Senate  ______________, A.D., 2026
 Attest:
                                                                                         Governor
                       Secretary of the Senate
                                                      STATE OF SOUTH DAKOTA,
                                                                                                ss.
                                                      Office of the Secretary of State
                          Speaker of the House
                                                                     Filed ____________, 2026
 Attest:  at _________ o'clock __M.
                     Chief Clerk of the House  Secretary of State
 Senate Bill No. 228  By
 File No. ____  Asst. Secretary of State
 Chapter No. ______
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