ND Renaissance Zone Legislation
General Description of a Renaissance Zone
- The Renaissance Zone was created by North Dakotas Legislature in 1999 under North Dakota Century Code chapter 40-63 (pdf) and amended in 2001. It is an innovative way to spur development and increase investor confidence in downtown Fargo. Approved development and investment activity that takes place in a designated Renaissance Zone will become eligible for a variety of tax exemptions and/or credits.
- To create a Renaissance Zone, the city must develop a plan to describe the overall redevelopment strategy for the proposed Renaissance Zone and submit it to the Division of Community Services (DCS) for review.
- The city may designate a Zone Authority to promote, develop, and manage the zone.
- Each project must be approved by a majority of the Zone Authority and the Fargo City Commission in order to be eligible for the incentives outlined in this act.
- Maximum duration of the Renaissance Zone is 15 years.
- This act is effective as of January 1, 1999 and consequently does not apply to investments or activities that occurred prior to that date.
Definition of Zone Boundary
- Boundary of zone must be adopted by City Commission and DCS (See Attachment A)
- Cannot encompass more than 20 square blocks
- All blocks in zone must be contiguous
- Zone boundary must be continuous
- Land usage must include both commercial and residential property
Fargo Renaissance Zone
The boundary of the Fargo Renaissance Zone is contained within the boundaries of the Fargo Central Business District as defined in the 1996 Fargo Downtown Area Plan. The zone was established for a period of up to 15 years; however, the city makes periodic changes to the boundary. The intent of a boundary change would be to replace blocks where no activity has occurred or is likely to occur, with blocks that have exhibited greater potential. The most recent changes were made in 2006.
Vision for Downtown
Downtown Fargo is an economically vital, culturally rich mixed-use district where there are well-designed public and private spaces for residents, visitors, employees, and employers, and where an appreciation for the district's historic character and natural amenities is paramount.
The Zone Authority is charged with three primary responsibilities: economic development, promotion of the zone, and administration of the zone incentives. The City Commission has appointed the Zone Authority to coordinate the process and to review all proposed projects. All Zone Authority decisions that have budgetary implications will go to the City Commission for final approval. The Zone Authority will carry out its duties with the assistance of the following agencies and organizations:
Greater Fargo Moorhead Economic Development - Primary sector economic development and management of the Renaissance Fund Corporation
- Downtown Community Partnership - Zone promotion and non-primary sector economic development assistance
- Tax Exempt Review Committee - Individual project review for incentives
- Department of Planning and Development - Project planning, administration, and coordination
Incentives: Tax Exemptions and Credits
- The city's Renaissance Zone Plan establishes standards that each project must meet in order to be eligible to receive incentives.
- Exemptions transfer to the new owner if a property is sold during the 5-year exemption period (exemption is pro-rated based on use of property).
- If a pass-through entity (partnership, S-corporation, limited partnership, LLC, etc.) is eligible for an exemption or credit, the amount must be determined at the pass-through entity level and distributed to partners, shareholders or members in proportion to their respective interests in the pass-through entity.
- The secrecy provisions of the income tax code do not apply when a local zone authority inquires about exemptions or credits claimed in its renaissance zone.
Income Tax Exemption
- An individual taxpayer that purchases a single-family residence as primary residence may qualify for a credit of up to $10,000 in income tax liability each year for 5 taxable years, starting with date of occupancy. Single-family residence includes single-family detached homes and single units in a duplex, townhouse, and condominium.
- Any taxpayer that purchases, leases, or rehabilitates residential or commercial property for any business or investment purpose, as a zone project, is exempt from any tax on income derived from the business or investment locations within the zone for five taxable years, beginning with the date of purchase, lease, or completion of rehabilitation.
- The exemptions provided in this program do not eliminate any duty to file a return or to report income as required under chapter 57-35.3 or 57-38.
- A municipality may grant a partial or complete exemption from ad valorem taxation of 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 individuals primary place of residence as a zone project.
- 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.
- All exemptions are determined by the municipality and may be partial or complete. Maximum length of exemption is 5 years from date of investment.
Historic Preservation and Renovation Tax Credit
- A state credit of 25% of an investment is allowed for the preservation and renovation of eligible historic property that is part of a zone project up to a maximum of $250,000.
- A historic property is defined as property that is:
- listed on the National Register of Historic Places;
- a contributing structure within a National Register Historic District or a certified state or local historic district; or
- eligible for listing in the National Historic Register of Historic Places.
- Excess credit may be carried forward for a period of up to 5 taxable years from date of investment and may be applied to an applicants total state income tax liability (not limited to liability incurred at the zone property).
Renaissance Fund Corporation
- Renaissance Fund Corporation is a for-profit corporation. A board of directors will govern the fund corporation.
- The purpose of the corporation is to raise funds to be used to make investments in zone projects and to make investments in businesses within the Renaissance Zone to encourage capital investment and residency in downtowns and central cities.
- What can the fund invest in?
- Corporation may invest in any residential, commercial or infrastructure project in the zone
- Financing of zone projects may include any combination of equity investments, loans, guarantees and commitments for financing
- Amount of financing is not limited by the legislation
- Each petition for investment of corporation funds must include a plan for sale or refinancing that results in proceeds equal to or in excess of the proportional investment made by the corporation
- Tax Credit to Investors in the Fund
- Credit against state tax liability is allowed for investments in the corporation.
- Value of tax credit is 50% of investment made in taxable year; excess credit may be carried forward for up to 5 taxable years .
- Total credits allows in North Dakota may not exceed $2.5 million (total fund investment of $5 million.)
- If an investor in the corporation wishes to redeem his or her investment within 10 years of the initial investment, that investor will not be eligible for the tax credit that is allowed in this section and will be responsible for repaying any past credits received.
For a complete explanation of the Renaissance Zone Fund organization and administration, refer to the North Dakota Renaissance Zone Program.