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South DakotaSB 228101st South Dakota Legislature (2026)Senate

modify provisions for a tax increment financing district.

Sponsored By: Karr, Chris (Republican)

Signed by Governor

Ballot MeasuresPlanning, Zoning and Housing ProgramsTax Increment Financing Districts

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Bill Overview

Analyzed Economic Effects

7 provisions identified: 0 benefits, 4 costs, 3 mixed.

Extra property taxes support school funds

County auditors must add a property tax levy for school general and special education funds to offset revenue diverted to tax increment financing districts. The maximum equals the combined statutory school levy rates times the district's value above its tax increment base. These levies are excluded from referendum and must preserve the required proportions between levy rates. Affected property taxpayers can face higher bills; individual costs depend on local rates and property values.

Development district boundaries face new limits

A tax increment financing district cannot split a whole property unit used for one purpose. Parcels do not count as connected just because a road, waterway, easement, or other listed corridor lies between them. To count as connected across that feature, the parcels must be directly opposite and separated only by that feature.

Added development costs trigger tax-base review

Municipalities generally must recalculate a district's tax increment base when an amended plan adds costs eligible for tax increment financing. The recalculated base applies only when it exceeds the original base. No recalculation is required when added costs are 25% or less of the original approved amount. That exception also requires the costs to be incurred before the district's financing period expires.

District properties lose assessment phase-in option

Counties cannot use the discretionary post-construction assessment formula for property inside a tax increment financing district. Outside those districts, counties can phase in assessed value for up to five tax years after construction. Assessed value cannot fall below its pre-construction level, and owners can request immediate full assessment instead.

Development grants come with spending limits

District project plans can cover construction, land preparation and assembly, financing, professional services, administration, relocation, and setup costs. Local officials can also approve payments or grants for district creation, plan implementation, or the state's economic development. Grant recipients must sign agreements stating permitted uses, and grants cannot fund residential structures covered by the law's residential restriction. A district's special fund can pay only its project costs or grants, reimburse the local government, or satisfy district bondholders' claims. The law does not provide a set grant amount or direct household payment.

Housing barriers count toward development eligibility

An area that blocks housing development can count as blighted, but it must still meet the definition's broader public-welfare criteria. At least 50% of a proposed district's land area must meet either the blight test or the specified economic-development test. Officials must also find that improvements are likely to significantly raise values across nearly all other property in the district. These findings allow consideration for financing; they do not guarantee new homes or lower housing costs.

Local development districts face stricter approval

A new district's taxable assessed value plus existing districts' tax increment bases cannot exceed a share of local taxable value. The cap is 7.5% in first-class municipalities and 10% in other political subdivisions. Counties need municipal consent by resolution for districts located partly or wholly within a municipality. Districts established after July 1, 2026, cannot overlap existing districts without a joint resolution from affected local governments. All affected taxing districts must review proposals at public meetings; they can give input but do not approve or reject creation.

Sponsors & Cosponsors

Sponsor

  • Karr, Chris

    Republican • Senate

Cosponsors

  • Andera, Bobbi L.

    Republican • House

  • Muckey, Erik

    Democratic • House

  • Perry, Carl

    Republican • Senate

  • Voita, Mykala

    Republican • Senate

  • Weisgram, Mike

    Republican • House

Roll Call Votes

All Roll Calls

Yes: 116 • No: 2

House vote • 3/4/2026

Do Pass Amended

Yes: 67 • No: 0

House vote • 3/3/2026

Do Pass

Yes: 9 • No: 2

Senate vote • 2/24/2026

Do Pass Amended

Yes: 33 • No: 0

Senate vote • 2/20/2026

Do Pass Amended

Yes: 7 • No: 0

Actions Timeline

  1. Signed by the Governor

    3/12/2026Senate

  2. Delivered to the Governor

    3/10/2026Senate

  3. Signed by the Speaker

    3/9/2026House

  4. Signed by the President

    3/5/2026Senate

  5. Do Pass Amended

    3/4/2026House

  6. Do Pass

    3/3/2026House

  7. Scheduled for hearing

    3/3/2026House

  8. First read in House and referred to

    2/25/2026House

  9. Do Pass Amended

    2/24/2026Senate

  10. Certified uncontested, placed on consent

    2/20/2026Senate

  11. Do Pass Amended

    2/20/2026Senate

  12. Motion to amend

    2/20/2026Senate

  13. Scheduled for hearing

    2/20/2026Senate

  14. First read in Senate and referred to

    2/4/2026Senate

Bill Text

  • Introduced

    2/4/2026

    PDF

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