UtahS.B. 392026 General SessionSenateWALLET

Investment Zones Amendments

Sponsored By: Wayne A. Harper (Republican)

Signed by Governor

CountiesEconomic DevelopmentLand UseHousingWorkforce ServicesMunicipalitiesPolitical Subdivisions (Local Issues)Governor's Office of Economic OpportunityGrant Programs and Incentives

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Bill Overview

Analyzed Economic Effects

59 provisions identified: 24 benefits, 3 costs, 32 mixed.

City homeownership zones add affordable homes

Beginning May 6, 2026, a city may create a home ownership promotion zone of 10 contiguous acres or less. The land must be rezoned to allow at least six homes per acre and cannot have active residential building permits on the creation day. At least 60% of the proposed homes must be affordable. All new homes in the zone must have a deed rule that you live there for at least five years. A city may also limit short‑term rentals in the zone.

First Home zones: dense and affordable

Beginning May 6, 2026, a first home investment zone must put at least 30 homes per acre on over half of the buildable land, and at least half of those homes must be owner‑occupied. At least 25% of all homes must stay owner‑occupied for 25 years, and at least 12% of owner‑occupied homes and 12% of non‑owner‑occupied homes must be affordable; at least 20% of counted homes outside the zone must be affordable. A zone can count some outside homes, but they can be no more than half of the density count, at least 80% must be single‑family detached, and they must be owner‑occupied for 25 years. Each zone must be 10–100 acres. It can capture up to 60% of tax increment for up to 25 straight years (within a 45‑year window) with no more than three collection periods. The committee may pause or end tax‑increment collection if funds are not used for legal purposes, and a city may adjust zone lines to match parcel changes.

Big one-time funding for roads

Beginning July 1, 2026, the law provides $705 million one time for named transportation projects, including I‑15 work, the Vineyard connector, Geneva Road, US‑6 corridor projects, and more. U‑111 construction moves forward only if the required right-of-way is dedicated. The law also sets aside $28 million in pass‑through funds for listed local projects and names added sums, including $13 million to Spanish Fork and $3 million for an I‑15 study. It authorizes up to $300 million for SR‑89 improvements in the fiscal year starting July 1, 2025.

Cities must adopt housing strategies

City general plans must include a moderate income housing element. Cities must pick strategies from a detailed list, with stronger requirements for places with fixed‑guideway stations. Plans must include a five‑year timeline with actions and benchmarks. These rules apply May 6, 2026.

Affordable housing targets in transit zones

Beginning May 6, 2026, a housing and transit reinvestment zone must make at least 12% of homes affordable. Up to 9% can serve households at or below 80% of the county median income, and at least 3% must serve households at or below 60%. "Affordable" means your gross household income is at or below those county‑median thresholds. Zones must set at least 51% of developable land for housing, average at least 50 homes per residential acre, have a mix of unit sizes (at least 25% with more than one bedroom), and adopt a plan to keep units affordable for the zone term.

Transit‑area owners gain development rights

Beginning May 6, 2026, in certain unincorporated counties with a small transit district by January 1, 2022, owners within one‑third mile of a transit hub who filed an entitlement by December 31, 2022 but did not get ordinance approval can build mixed‑use. The project may include up to 30 homes per acre (or 15 per acre under stated conditions). At least 33% of homes must be affordable. Approvals are administrative, and counties may not block projects that meet these rules.

How sales taxes fund transport projects

Starting July 1, 2023, 24% of certain sales and use tax revenue goes to the state Transportation Investment Fund. Starting July 1, 2024, 0.44% of that revenue shifts to the Cottonwood Canyons fund and 1% shifts to a Commuter Rail subaccount. Also starting July 1, 2023, 5% of a defined revenue pool shifts each year to the Active Transportation Fund, capped at $45 million. Beginning July 1, 2026, an added $45 million per year is deposited into the Active Transportation Fund. One year after a housing and transit reinvestment zone sets its boundary, 15% of its 4.7% sales tax increment goes to the Transit Transportation Investment Fund. Each year, $200,000 is deposited as a dedicated credit for the Search and Rescue Financial Assistance Program.

More money for food aid and Medicaid

Each year, the state deposits $533,750 into the Qualified Emergency Food Agencies Fund to help feed households in need. Each year since July 1, 2019, the revenue from a 0.15% sales and use tax rate is transferred into the Medicaid ACA Fund. These steady deposits and transfers support emergency food help and Medicaid coverage.

Counties update plans and housing steps

County planning commissions must notify the public and prepare plans for unincorporated areas. Plans must include land use and transportation, plus resource and water elements. Some counties must add a moderate income housing element with strategies, a five‑year timeline, and measurable benchmarks. Plans must coordinate with agriculture protections and regional transportation plans. Effective May 6, 2026.

State‑local committee reviews zone proposals

Beginning May 6, 2026, a state‑local committee reviews proposals for housing and transit reinvestment zones, convention center zones, and first home zones. Members include GOEO (chair), city reps, a Transportation Commission member, a transit district trustee, the State Treasurer’s designee, lawmakers, county executives, school reps, and a large taxing entity rep. The committee checks that proposals meet legal objectives, can request changes, and may approve or deny them. Before approval, the city or public transit county must zone the area to fit the chapter’s housing and development rules.

Stronger city plans for land, travel, water

Planning commissions must give notice when starting a general plan update. Plans must map where housing, jobs, parks, and public buildings go and show future densities. They must show roads, transit, and active travel routes and link land use to water needs and conservation, including low‑water landscaping. Plans must also protect agricultural areas and coordinate with station area plans. These rules start May 6, 2026.

Sales tax shares for water, wildlife

Starting July 1, 2003, fixed shares of a base amount go each year to key programs: 41% to the Water Resources fund; 20.5% to wastewater loans; 20.5% to drinking water loans; 14% to Wildlife Resources for species protection and grants; 3% to the Division of Conservation; and 1% to the Division of Water Rights for adjudication staff. Any unspent Wildlife and Water Rights allocations split at year end: 50% to Water Resources, 25% to wastewater loans, and 25% to drinking water loans. Beginning July 1, 2026, the commission also deposits set dollar amounts each year, including $7.175 million to Water Resources, $3.5875 million each to wastewater and drinking water loan subaccounts, $2.45 million to Wildlife Resources, $525,000 to the Division of Conservation, $500,000 for watershed rehab, $150,000 for cloud seeding, and $175,000 to Water Rights. Grants to local governments for species work need legislative approval through appropriations.

Zone funds: collection and allowed uses

Beginning May 6, 2026, counties must send property tax increment from a zone to the city or public transit county, up to the committee‑approved limit. Zone money must be kept in a zone fund and managed by a local agency under an interlocal agreement. Funds can pay for income‑targeted housing, parking, land, construction, system improvements, bond or financing costs, and other permitted project costs. A city or agency may pay participants under participation agreements, but only for allowed uses. Admin costs are capped at 2% of total zone funds (plus gap analysis costs), and spending on child care facilities is capped at 1%.

More powers for infrastructure districts

In urban renewal areas with inactive industrial sites, a public infrastructure district can run and maintain infrastructure. It can use fees, assessments, or taxes and issue assessment‑area bonds to pay for operations and upkeep. Districts can also sign interlocal agreements, but cannot expand their powers without the creating entity’s consent. Property owners in these districts may face new assessments or fees.

University area lease tax and split

Beginning January 1 of the year after a development agreement is signed, a lessee using eligible university property for a for‑profit business owes the privilege tax. The county treasurer collects the tax. The county sends 80% of the privilege tax revenue to the eligible university.

How Utah picks and funds transport projects

Starting in 2026, the Transportation Commission must use a written, public process with data and rulemaking to rank new road, bike and pedestrian, and transit capacity projects. Transit projects inside housing and transit reinvestment zones get priority, and transportation projects tied to a reinvestment zone can also get priority when the state participates or the zone benefits the state system. If a city or county is ruled ineligible under housing law, the Department may not program Transportation Investment Fund or Transit Transportation Investment Fund money for projects there until eligibility is restored, with narrow exceptions. The law also narrows what the Transportation Investment Fund can pay for, and it requires each public agency in a transportation reinvestment zone to publish a yearly report and send it to the state auditor.

New transit, trails funds and match

Beginning July 1, 2026, the state creates a Transit Transportation Investment Fund for new transit capacity, oversight, and up to $500,000 per year for studies. To get prioritized funding, a transit district or local government usually must cover at least 30% of project costs; approved State Infrastructure Bank loans may count. The state also creates an Active Transportation Investment Fund for paved pedestrian and nonmotorized trail projects that are Commission-prioritized and in an approved plan. A Cottonwood Canyons transportation fund is created; up to 2% of certain deposits may pay for public safety enforcement contracts, and future sales tax growth starting in the fiscal year that begins July 1, 2025 funds access to a Big Cottonwood transit hub. The Department may swap state transportation money for equal or greater federal funds for allowed projects.

Rules to set and fund local zones

Beginning May 6, 2026, when a city creates a home ownership promotion zone, all affected taxing entities must participate at the same rate set by the city. A stadium-focused project area must be inside the city, include the full stadium property, be contiguous and compact, and be no larger than 100 acres. In a capital city revitalization area, money can fund stadium-related payments, roads (including state roads), safety, land, development, and admin, but admin is capped at 1% of collected revenue and any payment to a participant is capped by the agreement. Two or more public agencies may create a transportation reinvestment zone by agreement that sets the boundaries, a base year, and how to share sales tax and property tax growth, after a public hearing. Within 30 days after a zone is approved, the proposer must record the land details and notify state and local offices with maps and descriptions.

Local sales tax: who can levy and spend

Beginning May 6, 2026, the law updates which counties can impose a local option sales tax and how the money is split. If a whole county is in a large transit district, revenue is shared as 0.10% to the transit district, 0.05% to cities and towns, and 0.05% to the county. If only part of a county is in a transit district, that area’s revenue is split 0.05% to a transit provider, 0.075% to cities and towns, and 0.075% to the county. Areas not in a transit district or with no transit split 0.08% to cities and towns and 0.12% to the county. Local governments must spend these funds only on the listed purposes; a first‑class county may also use some for public safety and for convention center revitalization in a qualifying project area. New tax money may not replace existing General Fund dollars already budgeted for transportation or transit when the tax takes effect, except for older designated capital or reserve accounts.

New rules for tax‑increment zones

The law updates how base value, incremental value, and tax increment are defined and calculated for several reinvestment and project zones. For home ownership promotion zones, it sets the tax‑increment formula and excludes certain levies. Distributed increment is not a city’s general revenue and must stay for zone uses. A first home investment zone may not capture sales and use tax. It also defines transit station dates and transportation reinvestment zones. These rules take effect May 6, 2026.

Tougher zone proposal review and studies

Starting May 6, 2026, a city or public transit county must submit a detailed zone proposal with budgets, maps, base years for tax increments, and a finance pro‑forma. The proposal must include a parking impact study. Within 14 days, the Governor’s Office of Economic Opportunity (GOEO) must notify taxing entities and hire an independent contractor to do a financial gap analysis; the proposer pays for the analysis and GOEO may accept up to $20,000 per proposal to cover it. The gap study must describe the development, compare the market with and without the zone, and judge the needed tax‑increment and public financing. The State Tax Commission must send GOEO a letter on whether it can administer the proposal’s tax rules. For stations not yet running, the proposal must show the station is in phase‑one regional plans and likely to be built soon.

Convention zones capture all tax growth

Starting in 2026, after a zone boundary is set, the state sends 100% of the sales tax growth from transactions inside a convention center zone to its public infrastructure district. The zone may also capture 100% of the property tax growth for 30 years, and all parcels share the same 30‑year window. The county must send that property tax increment to the district. The district runs the funds and may use them to pay project debt and interest.

Housing and transit zones financing limits

A zone must set a sales tax boundary with the State Tax Commission, and the base year starts 90 days after notice. One year after the boundary is set, the state transfers 15% of the zone’s sales tax growth each year into the Transit Transportation Investment Fund. Zone funds can pay bond issuance costs and debt, and can guarantee bonds of a public infrastructure district. Size and time limits apply: for commuter rail, up to a one‑third mile radius or 125 noncontiguous acres, up to 80% property tax capture, and no more than 25 straight years per parcel within 45 years; light rail and BRT have smaller area caps and 15‑year parcel limits within 30 years. Cities can adjust zone boundaries when county parcel lines change.

Zone oversight, notices, and safeguards

After final approval of a project, local governments must impose taxes or other revenue sources for the project area and report to the Revitalization Zone Committee. The proposer must send a start‑of‑collection notice by December 31 of the prior year, and a city must also send notice by January 1 of the start year to listed state and local offices. If a zone overlaps a community reinvestment area, housing zones can capture up to 80% total property tax growth and convention zones up to 100%, and may take the CRA’s share after it expires with base‑year adjustments. The committee may suspend or end property‑tax‑increment collection if funds are not used as required and the zone has no debt.

Cap on correctional sales tax rate

The local correctional facility sales and use tax rate may not be higher than 0.5%. This cap limits how much extra local tax can be added under this provision. Effective May 6, 2026.

Easier alcohol licenses inside project zone

Beginning May 6, 2026, the law defines a specific project area in the city bounded by South Temple, 100 South, West Temple, and 400 West. Inside that area, distance limits do not apply when both the outlet or restaurant and the community location are within the zone. A local authority may also waive distance limits near certain state‑owned parks of at least 12 acres managed by the Point of the Mountain State Land Authority, if the written consent includes the required language.

New Revitalization Zone Committee

Beginning May 6, 2026, the law creates the Revitalization Zone Committee to review and advise on project areas and participation agreements. The five‑member committee includes two senators, two representatives, and one governor appointee. Legislative staff support the committee, and members may receive pay and travel per state law.

Oversight and prosecution backup in zones

Beginning May 6, 2026, the Revitalization Zone Committee approves or rejects project areas and participation agreements. It reviews local reports and the money spent in each project area. The committee and the local government must give in-person updates to the Executive Appropriations Committee at least once a year and around project approvals. If the district attorney in a large county fails to prosecute crimes in a project area, the committee may ask the Utah Supreme Court to appoint a temporary replacement prosecutor.

Stronger rules and timelines for zone deals

Local governments must review complete investment zone applications and can negotiate a project area and participation agreement. Agreements must ban direct subsidies to project participants. By September 1, locals must send notices and copies to their council and the state committee. The council must vote within 14 days, and the committee must decide within 30 days. After final approval, locals must report every six months with detailed budgets, timelines, and financial impacts.

Tighter rules for interlocal agreements

Agreements that create an interlocal entity must spell out purpose, powers, board selection and voting, financing, and exit rules. Utah public agencies must hold a majority of voting power on the board. If no new entity is created, the agreement must name an administrator or joint board, define powers and duties, and set property rules. These requirements apply May 6, 2026.

Cities must plan around transit stations

Beginning May 6, 2026, cities with fixed‑guideway transit stations must adopt a station area plan and land‑use rules to carry it out. Cities with existing stations needed plans by December 31, 2025; cities with more than four stations may phase in two more each year. A city may get one 12‑month extension if it proves it cannot meet the deadline. Plans must grow housing and affordability, support the environment, improve access, and expand travel choices. Cities must involve residents, property owners, transit and planning agencies, and send proof of compliance to the regional planning body and transit district.

Defines convention center projects for zones

Beginning May 6, 2026, the law defines which convention centers and surrounding projects qualify for reinvestment. It covers a convention center owned by a first‑class county within a first‑class city and sets what counts as a revitalization project in that area. These definitions guide eligibility for zone funding and uses.

Conflict and reports for university projects

Beginning May 6, 2026, a university trustee with a direct financial conflict must disclose it in writing and may not take part in a development action. After a designation, the board must send a written report by September 30 each year on development activity and the fund’s deposits and spending. Within 30 days after adopting a designation, the board must deliver the resolution to the city and county officials.

Universities can create 75‑acre development areas

Beginning May 6, 2026 and before January 1, 2035, a university board may designate up to 75 contiguous acres of eligible property as a development area. The board must get Utah Board of Higher Education approval and hold a public hearing with at least seven days Class A notice. A board may not designate more than once and cannot overlap certain zones that existed on January 1, 2025. The university must create a separate fund and deposit all development and lease money from the area to pay development costs, capital projects, operations, or other university uses.

Sales tax for Fairpark and Point

Beginning October 1, 2024, the state sends the 4.7% sales tax component from purchases inside the Fairpark district to that district. For Point of the Mountain state land, the state sends 50% of the 4.7% component to the land authority. Those transfers start the next calendar quarter at least 90 days after a certified map is provided, and they stop after bonds tied to the revenue are fully paid.

New local tax near prisons

A city or town may add a local sales and use tax if a new state correctional facility began construction within its borders on or after May 12, 2015 and has 2,500 or more beds. If the city or town imposes this tax, it must also tax the food portion of a bundle when food is sold together with non‑food items.

Small admin property tax for districts

Beginning May 6, 2026, a convention center public infrastructure district may levy up to 0.0005 per dollar of taxable value on property in the district. The tax can pay only administrative costs, not capital or debt. Yearly tax equals taxable value times 0.0005 at the cap.

Team project participant application rules

From May 6, 2026, a person seeking to be a project participant in a capital city revitalization area must apply and certify they are party to the franchise agreement and operate the team in a qualified stadium in the area. The application must show the stadium location and footprint, list public funds for the applicant or team, and include related plans and agreements.

Clear rules for 'affordable' housing

Beginning May 6, 2026, a for‑sale home counts as “affordable” for cities and counties if its price is 80% or less of the county median for that home type. In transit districts, you qualify for affordable units only if your gross income is at or below 60% of area median income for your household size. These definitions decide who qualifies and which homes count toward local targets.

Sales tax on bundles and essentials

Beginning May 6, 2026, cities and towns cannot apply the correctional facility tax to motor vehicles, aircraft, watercraft, modular, manufactured, or mobile homes. They also cannot tax sales that are already exempt under state law, and food and food ingredients stay exempt except in certain bundled sales. Starting July 1, 2026, a bundled sale is taxed in full unless the seller can show the non‑taxable share using reliable business records. If a bundle mixes items with different rates, the whole sale is taxed at the higher rate unless the lower‑rate items are clearly documented.

Utility tax set by main use

Starting July 1, 2026, when one meter serves more than one use at a location, taxability is set by the location’s main use. Your bill may go up or down based on whether the predominant use at that meter is taxable.

40% taxable on software maintenance

Starting July 1, 2026, if an optional software maintenance contract bundles taxable and non‑taxable items and the invoice does not separate them, 40% of the price is taxed. Sellers can use ordinary business records to show non‑taxable parts of sales, not just special tax records.

When this law takes effect

Most of the law takes effect May 6, 2026. Sections 59-12-103 and 72-2-124 take effect July 1, 2026. This staggers tax and transportation fund changes.

Wildlife funds can’t aid ESA listings

For fiscal years starting July 1, 2003, money transferred to the Division of Wildlife Resources under this allocation may not be used to help list a species under the federal Endangered Species Act.

Night construction allowed with safeguards

The law lets state highway work on roads posted 55 mph or higher and commuter rail work happen at night despite local noise rules. For other projects, the Department may work at night if it gives 48 hours’ written notice, finds a net community benefit, and uses noise-reduction best practices with the city. Local governments must issue nighttime construction permits and may request mitigation. The Department will set appeal and enforcement rules.

Limits on zone size and locations

Beginning May 6, 2026, a housing and transit reinvestment zone must be at least 10 acres. If a parcel touches the allowed station radius, the whole parcel may be included without counting against the radius. Each county may have no more than eight light‑rail station zones. In a first‑class county, no more than three bus rapid transit zones are allowed, and the total of light rail, BRT, and first home zones cannot exceed 11.

Some cities exempt from 12% affordable units

Starting May 6, 2026, a city or public transit county that already meets HUD’s 60% AMI affordable housing guidelines when a housing and transit reinvestment zone is approved is exempt from the 12% affordable‑unit rule.

Transport reinvestment projects skip some local rules

Beginning May 6, 2026, actions under transportation reinvestment zones are not subject to certain city and county land‑use laws. Ordinances and agreements under this title are not treated as land‑use regulations under those statutes. This can speed projects, but it may reduce local approvals and oversight.

Tax increment caps tied to density

Beginning May 6, 2026, the law clarifies that “tax increment revenue” is the extra tax collected above a base value within a defined area. For zones at a transit hub or a bus rapid transit station with proposed housing density between 39 and 49 units per acre, each taxing entity’s maximum property tax increment capture is capped at 60% instead of 80%.

Fairpark district can fund stadium

The Fairpark Area Investment and Restoration District may pay to develop and build a qualified stadium and related public infrastructure. This can support local construction and activity but uses district funds or financing.

New convention center project district

Beginning May 6, 2026, a city with a convention center may form a public infrastructure district by petition. The approved governing document controls how the district runs. The board has five members: three named by the petitioner, one city pick, and one county pick; if a mayor does not choose, the petitioner fills the seat with a non-city and non-county representative. The district must sign an interlocal agreement giving the county mayor approval over how money from a convention center reinvestment zone is spent on revitalization projects, excluding bonds and money already under a participation agreement. A district may contract with its creating entity for administrative services if both agree. When a city files a petition, the Governor’s Office must propose a convention center reinvestment zone within 60 days.

Convention center district funding and limits

The commission transfers 50% of the sales and use tax increment inside a convention center zone to its public infrastructure district. Transfers start no sooner than January 1, 2026, and only after the zone’s tax boundary and proposal timing are set. A district’s boundary is limited to a half‑mile radius from the convention center, though parcels crossed by the line may be included in full. Petitions to create a district must include the governing document. The city recorder has 14 days to certify (or it is deemed certified), and the city must act within 30 days unless a different timeline is agreed.

Transit safety funds and state land deals

A local council can have the commission send part of sales or use tax revenue back to the county, city, or town to pay for fixed‑guideway transit safety oversight, if it sends written notice and the amount. The transportation department may sell or exchange state property to a large transit district when set criteria are met. Surplus property may be sold to state agencies or housing entities at a pre‑entitlement appraised value, with possible deferred payment for owner‑occupied housing. These sales follow appraisal and rulemaking requirements.

More bond tools for project districts

Beginning May 6, 2026, public infrastructure districts can issue bonds to buy land, fund housing‑related and transit capital work, finance public infrastructure, support energy assessment areas, and pay certain remediation costs. Convention center districts can fund public or private improvements, including arenas and convention center revitalization. In a capital city revitalization zone, bonds paid by the revitalization tax for private improvements are limited to the maximum dollar amount in the participation agreement.

Infrastructure districts can buy finished improvements

Beginning May 6, 2026, a public infrastructure district may buy completed or partly completed improvements, designs, or work product at fair market value. Fair market value can be set by the district board, the creating entity if required, or an engaged engineer or surveyor.

County sales tax option and split

Starting May 6, 2026, a county that adopts this option can add 0.2% to the county sales and use tax. The cities’ and towns’ share is split two ways: 50% by each area’s share of county population and 50% by where the sale happened, using state population estimates.

New rules for sharing sales taxes

Starting July 1, 2026, the listed state sales taxes are deposited into the General Fund. The listed local sales taxes go to counties, cities, and towns under the chapter’s rules. The state treasurer sends local sales tax money each month by electronic transfer and can send it directly to a public transit district or eligible subdivision when a local body requests this in writing. Spending from certain taxes is capped at the smaller of the revenue from a 1/16% rate or $17,500,000 per fiscal year. The Tax Commission may keep an administrative fee as allowed by law.

Sales routing inside development zones

Money from Schedule J sales inside qualified development zones goes to the State General Fund or, in some cases, to the jurisdiction that would get it without the zone. For qualifying construction materials delivered to a registered delivery outlet inside a qualified zone and meant to be permanently attached, the state pays the zone a share equal to the sales price times the statute’s percentage. The seller must register the outlet with the commission, report sales to that outlet, and not use a simplified electronic return.

Standard dates for sales tax changes

Starting July 1, 2026, certain sales tax rate repeals or changes take effect on the first day of a calendar quarter. A tax increase applies on the first day of the first billing period that starts on or after the effective date. A repeal or rate drop applies if the billing statement for that period is dated on or after the effective date. For catalogue sales that use printed tax rates, listed rate changes take effect on the first day of a quarter, starting 60 days after the effective date.

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Sponsors & Cosponsors

Sponsor

Wayne A. Harper
Republican • Senate

Cosponsors

Stephen L. Whyte
Republican • House

Roll Call Votes

All Roll Calls

Yes: 103 • No: 27

House vote • 2/19/2026

House/ passed 3rd reading

Yes: 46 • No: 22

House vote • 2/17/2026

House Comm - Favorable Recommendation

Yes: 6 • No: 1

Senate vote • 2/6/2026

Senate/ passed 3rd reading

Yes: 23 • No: 2

Senate vote • 2/5/2026

Senate/ passed 2nd reading

Yes: 23 • No: 1