residential area for TIF

Key 2023 changes in Indiana’s tax increment legislation

Indiana’s 2023 legislative session may be over, but it brought about some noteworthy changes related to tax increment financing (TIF) that redevelopment commissions (RDCs) should be taking into consideration.

The changes range from basic to significant, including expanding permitted TIF expenditures and requiring RDCs submit annual spending plans. Below are the TIF-related highlights of the legislative session.

RDCs are now allowed to spend TIF revenues for police and fire services. This includes capital expenditures and operating expenses.

Effective date: Jan. 1, 2023 (retroactive)

Each year by Dec. 1, an RDC must now file an annual spending plan for the next calendar year with the unit’s executive and fiscal body as well as with the Department of Local Government Finance (DLGF).

The RDC may use money in the TIF allocation fund and any other RDC-maintained fund only according to its annual spending plan.

Before Feb. 1, beginning in 2025, the DLGF is required to submit a report of RDCs that failed to submit a spending plan for distribution to the members of the legislative council.

After the state issues more guidance, it is recommended RDCs work with their municipal advisor and legal counsel to develop their annual spending plan.

Effective date: Jan. 1, 2024

In the past, RDCs had to provide their Gateway TIF Management Report to the fiscal body before April 15, but there was no requirement around how it was shared with the fiscal body. Now, the report must be presented to the unit’s fiscal body at a public meeting.

The law also introduced two new reporting components.

The first is that RDCs must now include the amounts distributed to other taxing units. The second provision is regarding residential housing TIF areas. The report needs to include the number of houses completed under the program and the average sales price of those homes.

Effective date: Jan. 1, 2024

Residential TIF areas are no longer required to pass the 1% test, which restricted the number of homes constructed over the past three calendar years to less than 1% of the total number of single-family residential homes in the area.

Also, the life of a residential TIF area was reduced to 20 years from 25 years from the date that the first obligation is incurred.

Finally, proposed residential TIF areas no longer require the approval of affected school corporations.

Effective date: Immediately

Expiration date: July 1, 2027 (HEA 1454)

To discuss how these new laws affect your community, reach out to your Baker Tilly municipal advisor.

Matt Eckerle
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