# Title 40 — Municipal Government

## Chapter 40-63 — Renaissance Zones

### § 40-63-01. Definitions.

As used in this chapter:
1. "Boundary" means the boundary established by vote of the city governing body and
approved by the department of commerce division of community services.
2. "Development plan" means a written plan that addresses the criteria in subsection 1 of
section 40-63-03 and includes the following:
a. A map of the proposed renaissance zone which indicates the geographic
boundaries and blocks, a description of the properties and structures on each
block, identification of those properties and structures to be targeted for potential
zone projects, and a description of the present use and conditions of the targeted
properties and structures.
b. A description of the existing physical assets, in particular natural or historical
assets, of the zone and a plan for the incorporation and enhancement of the
assets within the proposed development.
c. An outline of goals and objectives and proposed outcomes, including major
milestones or benchmarks, by which to gauge success resulting from the
designation of the zone.
d. A description of the types of projects the city would encourage in the city's
targeted properties.
e. A description of the promotion, development, and management strategies to
maximize investment in the zone.
f. A plan for the development, promotion, and use of a renaissance fund
organization, if one is desired to be established. If a city is not ready to commit to
establishing a renaissance fund organization, the city may indicate in the
renaissance zone application the city's desire to submit a plan for approval at a
later date.
g. Evidence of community support and commitment from residential and business
interests. Evidence of community support must include letters of support from the
governing bodies of each county and school district that contain property located
within the boundaries of the proposed renaissance zone.
3. "Investor" means the individual, partnership, limited partnership, limited liability
company, trust, or corporation making an investment in a renaissance fund
organization.
4. "Lease" means the lease of space in a building in a designated renaissance zone by a
new business moving into the zone or by an existing zone business expanding in the
zone, and the continuation of a lease of an existing zone tenant in a building
rehabilitated as an approved zone project. For existing zone tenants expanding in the
zone, the term does not include existing leased space.
5. "Local zone authority" means the city or the entity designated by the city to promote,
develop, and manage the zone and may include any nonprofit incorporated entity such
as an economic development corporation, community development corporation, main
street organization, or chamber of commerce.
6. "Original principal amount" means the funds invested in a renaissance fund
organization after designation of the renaissance zone and before the sunset of that
zone.
7. "Rehabilitation", as used in sections 40-63-04 and 40-63-05, means the repair or
remodeling of a building or public utility infrastructure at a cost that is equal to or
exceeds:
a. For an income tax or property tax exemption under this chapter which exceeds
five taxable years, seventy-five percent of the current true and full value for
residential property, excluding owner-occupied single-family residential property,
or commercial property for a business or investment purpose.

b. For an income tax or property tax exemption under this chapter of five taxable
years or less, fifty percent of the current true and full value for residential
property, excluding owner-occupied single-family residential property, or
commercial property, for a business or investment purpose.
c. Fifty percent of the current true and full value for public utility infrastructure.
d. Twenty percent of the current true and full value for owner-occupied single-family
residential property.
8. "Taxpayer" means an individual, corporation, or trust subject to the taxes imposed by
chapter 57-38 and includes a partnership, subchapter S corporation, limited
partnership, limited liability company, or any other passthrough entity.
9. "Zone" means a renaissance zone proposed by a city and designated by the
department of commerce division of community services.
10. "Zone project" means the purchase, lease, rehabilitation, or historical preservation or
renovation of a building or space in a building approved for zone incentives by a
majority vote of the city governing body or zone authority.
### § 40-63-02. Eligibility - Local zone authority designation.

Any incorporated city may apply to the department of commerce division of community
services to designate a portion of the city as a renaissance zone. Any individual, partnership,
limited partnership, limited liability company, trust, or corporation may apply for a tax credit or
exemption under sections 40-63-04 through 40-63-07. The governing body of a city may
designate a local zone authority to implement a development plan on behalf of the city.
### § 40-63-03. Renaissance zones.

1. A city may apply to the department of commerce division of community services to
designate a portion of that city as a renaissance zone if the following criteria are met:
a. The geographic area proposed for the renaissance zone is located wholly within
the boundaries of the city submitting the application.
b. The application includes a development plan.
c. The proposed renaissance zone is not more than thirty-four square blocks,
except in a city with a population of greater than five thousand the renaissance
zone may exceed thirty-four square blocks at the rate of one additional block for
each additional five thousand population to a maximum size of forty-nine blocks.
(1) Population is based upon the most recent federal decennial census or
federal census estimate.
(2) If a city finds that renaissance zone projects have satisfactorily completed
one or more blocks within the renaissance zone, the city may apply for and
the department of commerce division of community services may approve
withdrawal of those blocks from the renaissance zone and replacement of
those blocks with other blocks that otherwise meet the requirements of this
chapter.
d. Except as provided under subdivision g, the proposed renaissance zone has a
continuous boundary and all blocks are contiguous.
e. The proposed land usage includes both commercial and residential property.
f. The application includes the proposed duration of renaissance zone status, not to
exceed fifteen years.
(1) Upon application by the city, the department of commerce division of
community services may extend the duration of renaissance zone status in
increments of up to ten years.
(2) If a renaissance zone designated under this chapter expires, a city may
reapply for a subsequent renaissance zone in the same manner an original
renaissance zone is formed under this section.
(3) If a renaissance zone designated under this chapter expires, a city may
reapply for renewal of the formerly expired renaissance zone in the current
manner a renewal extension is granted by state law.

g. The proposed renaissance zone may have up to two exceptions to the
continuous boundary and contiguous block requirements under subdivision d if
the areas of the excepted noncontiguous blocks do not exceed three square
blocks each.
2. The department of commerce division of community services shall:
a. Review all applications for renaissance zone designation against the criteria
established in this section and designate zones.
b. Approve or reject the duration of renaissance zone status as submitted in an
application.
c. Approve or reject the geographic boundaries and total area of the renaissance
zone as submitted in an application.
d. Promote the renaissance zone program.
e. Monitor the progress of the designated renaissance zones against submitted
plans in an annual plan review.
f. Report on renaissance zone progress to the governor and the legislative
management on an annual basis until all designated zones expire.
3. The department of commerce division of community services shall consider the
following criteria in designating a renaissance zone:
a. The viability of the development plan.
b. The incorporation and enhancement of unique natural and historic features into
the development plan.
c. Whether the development plan is creative and innovative in comparison to other
applications.
d. Public and private commitment to and other resources available for the proposed
renaissance zone, including the provisions for a renaissance fund organization.
e. How renaissance zone designation would relate to a broader plan for the
community as a whole.
f. How the local regulatory burden, in particular that burden associated with the
renovation of historic properties and that burden associated with mixed use
development, will be eased for developers and investors in the renaissance zone.
g. The strategies for the promotion, development, and management of the zone,
including the use of a local zone authority if designated.
h. Any other information required by the office.
4. The department of commerce division of community services may not designate a
portion of a city as a renaissance zone unless, as a part of the application, the city
provides a resolution from the governing body of the city that states if the renaissance
zone designation is granted, persons and property within the renaissance zone are
exempt from taxes as provided in sections 40-63-04 through 40-63-07.
5. A city may not propose or be part of more than one renaissance zone.
6. a. A parcel of property may be exempted from property taxes under section
from property taxes under section 40-63-05, the property tax exemption transfers
with the transfer of the property to a qualifying user. A parcel of property which
previously received a property tax exemption under section 40-63-05 may not be
eligible for a subsequent property tax exemption under section 40-63-05 until
thirty years have lapsed from the completion date of the most recent project on
the property.
b. The ownership or lease of, or investment in, a parcel of property may qualify for
exemption or credit under section 40-63-04 more than once. During the taxable
years of eligibility for an exemption or credit under section 40-63-04, the
exemption or credit transfers with the transfer of the property to a qualified user
and with respect to the year in which the transfer is made must be prorated for
use of the property during that year.
c. Taxpayers eligible for a property or income tax incentive under this chapter for
zone projects that are incomplete immediately preceding the expiration of the
renaissance zone designation in the area in which the zone project is located

may continue to receive the incentive for the time period during which the
taxpayer was originally eligible to receive the incentive.
d. For purposes of this subsection, the renaissance zone designation is considered
expired when the proposed duration of renaissance zone and any subsequently
granted extensions have lapsed.
7. A city may apply to the department of commerce division of community services at any
time during the duration of a zone to expand a previously approved renaissance zone
that is less than the maximum size allowed under subdivision c of subsection 1. If the
expansion is approved by the department of commerce division of community
services, the blocks in the expansion are eligible for up to fifteen years of renaissance
zone status.
8. The use of grant funds as the sole source of investment in the purchase of a building
or space in a building does not qualify a taxpayer for any tax exemption or credit
available under the chapter, and grant funds may not be counted in determining if the
cost of rehabilitation meets or exceeds the current true and full value of the building.
9. If a portion of an approved renaissance zone is not progressing, the city may request
the department of commerce division of community services to permit deleting that
portion and to make an adjustment of the boundaries to add another equal, contiguous
area to the original zone.
10. If within a renaissance zone there is property that is included in a tax increment
financing district, the city in which the property is located shall provide the department
of commerce an annual report regarding any such property at the time requested by
the department of commerce. The report required under this subsection must identify
the property, provide the expected duration of inclusion of the property in the tax
increment financing district and the renaissance zone, and identify any property and
income tax benefits of the property and the expected duration of those benefits. The
department of commerce shall deliver an annual report compiling the information
required under this subsection to the legislative management interim committee on
taxation issues or upon request of any other interim committee of the legislative
management.
### § 40-63-04. Income tax exemptions.

1. An individual taxpayer who purchases or rehabilitates single-family residential property
for the individual's primary place of residence as a zone project is exempt from up to
ten thousand dollars of personal income tax liability as determined under section
completion of rehabilitation.
2. A taxpayer that purchases, leases, rehabilitates, or makes leasehold improvements to
residential, public utility infrastructure, or commercial property for any business or
investment purpose as a zone project is exempt from tax on income derived from the
business or investment locations within the zone for up to eight taxable years,
beginning with the date of purchase, lease, or completion of rehabilitation.
a. The maximum amount of income that a taxpayer may exempt from tax under this
subsection for any taxable year is five hundred thousand dollars. The limitation in
this subdivision applies to the sum of the exempt income derived from the
taxpayer's business and investment interests in all zone projects.
b. If a zone project consists of a physical expansion of an existing building owned
and used by the taxpayer for business or investment purposes, the amount of
income exempt from tax under this subsection is limited to an amount equal to
the income derived from the business, or from the investment use of the building,
during the taxable year multiplied by a ratio equal to the square footage added by
the expansion divided by the total square footage of the building after expansion.
3. If the cost of a new business purchase, leasehold improvement, or expansion of an
existing business, approved as a zone project, exceeds seventy-five thousand dollars,
and the business is located in a city with a population of not more than two thousand
five hundred, an individual taxpayer may, in lieu of the exemption provided in

subsection 2, elect to take an income tax exemption of up to two thousand dollars of
individual income tax liability as determined under section 57-38-30.3. The election
must be made on the taxpayer's return as originally and timely filed. The election is
irrevocable and binding for the duration of the exemptions provided in subsection 2 or
this subsection. If an election is not made on the original return, the taxpayer is only
eligible for the exemption provided in subsection 2.
4. If a property owner not participating in a renaissance zone project is required to make
changes in utility services or in a building structure because of changes made to
property that is part of a zone project, the owner of the nonparticipating property is
entitled to state income tax credits equal to the total amount of the investment
necessary to complete the required changes. The credit must be approved by the local
renaissance zone authority. The credit must be claimed in the taxable year in which
the related project was completed. The credit may not exceed the taxpayer's tax
liability, and an unused credit may be carried forward up to five taxable years.
5. The exemptions provided by this section do not eliminate any duty to file a return or to
report income as required under chapter 57-38.
### § 40-63-05. Property tax exemptions.

1. A municipality may grant a partial or complete exemption from ad valorem taxation on
single-family residential property, exclusive of the land on which it is situated, if the
property was purchased or rehabilitated by an individual for the individual's primary
place of residence as a zone project. An exemption granted under this subsection may
not extend beyond eight taxable years following the date of acquisition or completion
of rehabilitation.
2. A municipality may grant a partial or complete exemption from ad valorem taxation on
buildings, structures, fixtures, and improvements purchased or rehabilitated as a zone
project for any business or investment purpose. The state board of equalization may
grant a partial or complete exemption from ad valorem taxation on public utility
infrastructure rehabilitated as a zone project. An exemption under this subsection may
not extend beyond eight taxable years following the date of purchase or completion of
rehabilitation.
### § 40-63-06. Historic preservation and renovation tax credit.

A credit against state tax liability as determined under sections 57-38-30 and 57-38-30.3 is
allowed for investments in the historic preservation or renovation of property within the
renaissance zone. The amount of the credit is twenty-five percent of the amount invested, up to
a maximum of two hundred fifty thousand dollars. The credit may be claimed in the year in
which the preservation or renovation is completed. Any excess credit may be carried forward for
a period of up to five taxable years.
### § 40-63-07. Renaissance fund organization - Exemption from taxation.

1. Each city with a designated renaissance zone may establish a renaissance fund
organization, if the detailed plan for such an organization is clearly established in the
development plan and approved with the plan, or is submitted at a later date to the
department of commerce division of community services for approval after the
designation of a renaissance zone.
2. The purpose of a renaissance fund organization is solely to raise funds to be used to
finance zone projects and other projects located in designated renaissance zones. A
renaissance fund organization may provide financing to projects undertaken by
individuals, partnerships, limited partnerships, limited liability companies, trusts,
corporations, nonprofit organizations, and public entities. The financing may include
any combination of equity investments, loans, guarantees, and commitments for
financing. The amount of financing is not limited by this chapter.
3. A renaissance fund organization is exempt from any tax imposed by chapter 57-38. An
exemption under this section may be passed through to any shareholder, partner, and

owner if the renaissance fund organization is a passthrough entity for tax purposes. A
corporation entitled to the exemption provided by this subsection shall file required
returns and report income to the tax commissioner as required by the provisions of
chapter 57-38 as if the exemption did not exist. If an employer, this subsection does
not exempt a renaissance fund organization from complying with the income tax
withholding laws.
4. A credit against state tax liability as determined under section 57-38-30 or 57-38-30.3
is allowed for investments in a renaissance fund organization. The amount of the credit
is fifty percent of the amount invested in the renaissance fund organization during the
taxable year. Any amount of credit which exceeds a taxpayer's tax liability for the
taxable year may be carried forward for up to five taxable years after the taxable year
in which the investment was made.
5. The total amount of credits allowed under this section may not exceed, in the
aggregate, ten million five hundred thousand dollars for investments in renaissance
fund organizations. A renaissance fund organization that has received investments that
qualify for the credits under this subsection shall use those investments to finance
projects within a renaissance zone. If the total amount of credits allowed under this
section have been claimed, the renaissance fund organization allowance must
terminate and additional credits may not be made available for investments in a
renaissance fund organization.
6. Income to a renaissance fund organization derived from the sale or refinancing of zone
properties financed wholly or in part by the organization may be disbursed as annual
dividends equal to the income, minus ten percent, derived from all sources and
proportional to the investment. In the event of a loss to the fund resulting in a
temporary diminishment of the fund below the original principal amount, no annual
dividend may be paid until the fund is restored.
7. Income to a renaissance fund organization derived from interest or the temporary
investment of its funds in certificates of deposit, bonds, treasury bills, or securities may
be used for administration.
8. If an investment in a renaissance fund organization which is the basis for a credit
under this section is redeemed by the investor within ten years of the date it is
purchased, the credit provided by this section for the investment must be disallowed,
and any credit previously claimed and allowed with respect to the investment must be
paid to the tax commissioner with the appropriate return of the taxpayer covering the
period in which the redemption occurred. When payments are made to the tax
commissioner under this section, the amount collected must be handled in the same
manner as if no credit had been allowed.
9. A renaissance fund organization shall secure an annual audit of its financial records,
prepared by an independent certified public accounting firm in accordance with
generally accepted auditing standards. The audit report must include a statement of
the percentage of annual investments received by the organization which have been
invested by the organization in investments permitted under this chapter, including the
use of investments, distinguishing between organization investments made in
renaissance zones and outside renaissance zones. A renaissance fund organization
shall file a copy of each audit of its financial records under this subsection with the
governing body of the city in which it was established, the department of commerce
division of community services, and the tax commissioner. The department of
commerce division of community services shall provide an annual report to the budget
section of the legislative management showing the conclusions of audit reports filed
under this subsection.
10. Renaissance fund organization officers and employees may be actively involved in the
enterprises in which the renaissance fund organization invests but the renaissance
fund organization may not invest in any enterprise if any one renaissance fund
organization officer or employee owns more than forty-nine percent of the ownership
interest in the enterprise. A renaissance fund organization may not invest in an
enterprise if renaissance fund organization officers and employees collectively own

more than forty-nine percent of the ownership interests, either through direct
ownership or through ownership of interest in a passthrough entity.
### § 40-63-08. Contributions - Use.

Repealed by S.L. 2001, ch. 359, § 11.
### § 40-63-09. Rules and administration - Income tax secrecy exception.

The tax commissioner shall administer this chapter with respect to an income tax exemption
or credit and has the same powers as provided under section 57-38-56 for purposes of this
chapter. The secrecy provisions of section 57-38-57 do not apply to exemptions or credits
received by taxpayers under sections 40-63-04, 40-63-06, and 40-63-07, but only when a local
zone authority inquires of the tax commissioner about exemptions or credits claimed under
sections 40-63-04, 40-63-06, and 40-63-07 with regard to that local zone authority or to the
extent necessary for the tax commissioner to administer the tax exemptions or credits.
### § 40-63-10. Passthrough of tax exemption or credit.

A partnership, subchapter S corporation, limited partnership, limited liability company, or any
other passthrough entity that purchases or leases property in a renaissance zone for any
business purpose, invests in a historic preservation or renovation of property within a
renaissance zone, or invests in a renaissance fund organization must be considered to be the
taxpayer for purposes of any investment limitations in sections 40-63-04, 40-63-06, and
40-63-07, and the amount of the exemption or credit allowed with respect to the entity's
investments must be determined at the passthrough entity level. The amount of the total
exemption or credit determined at the entity level must be passed through to the partners,
shareholders, or members in proportion to their respective interests in the passthrough entity.
### § 40-63-11. Tax benefits not available to delinquent taxpayer.

A taxpayer may not be delinquent in payment of any state and local tax liability to be eligible
for a tax benefit under this chapter.
