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When drafting a TIF plan or communicating its content to the county or the Office of the State Auditor (OSA), there are potential pitfalls to avoid regarding duration language and whether or not the election to delay first receipt of increment is being used.

Most TIF plans include both the year in which first receipt of tax increment is expected and the corresponding decertification year for the maximum duration. After the district has been approved, the actual year of first receipt of tax increment (and therefore the duration limit) can differ from expectations. Therefore, authorities sometimes elect to use a provision that allows them to specify the year for first receipt of increment. (For more information about this provision, see the OSA’s Statement of Position on Election to Delay Receipt of First TIF Revenues.)

The following examples of TIF plan language illustrate issues to keep in mind.

Examples:

A. “The City elects, pursuant to M.S. §469.175, subd. 1(b), to receive first distribution of tax increment in 2020.”

Example A is a very clear example of TIF plan language for making the election. However, not all authorities remember to identify the election on TIF Plan Collection Forms sent to the OSA or Certification Request Supplements sent to the county, and it may get missed.

B. “The City expects to receive first increment in 2019 and elects to have the first collection year be 2019.

Example B is less explicit but does elect a year for first receipt of increment. Authorities, however, sometimes mark “No” on the forms for the questions asking about the existence of an election to delay first increment. Perhaps some do so because the elected year matches the expected year and they do not see it as a delay. Although commonly referred to as an “election to delay” provision, the delay aspect is not important when communicating its use.

C. “The City will receive increment beginning in 2019.”

Example C would likely not hold up as an election. It may be perceived as an estimate or expectation and would be a poor choice of wording if intended to be an actual election to receive first increment in 2019.

Published: August 2017

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