Tax Increment Financing (TIF) is a way for certain districts to use property tax revenue to fund new development. It works by separating taxable value into base and increment values, so that revenue from the base value continues to go to the regular taxing jurisdiction, but as taxes increase over the years, that growth—the increment—go to the TIF to pay for development activities within the TIF district.
The development of TIF districts is authorized by 7-15-4282, MCA.
Tax Increment Financing may be used to pay for a variety of development activities within the TIF district including:
- land acquisition;
- demolition and removal of structures;
- relocation of occupants;
- infrastructure costs;
- construction of publicly owned buildings and improvements;
- administration of urban renewal activities; and
- payment of bonds issued to fund such costs.
(See 7-15-4288, MCA for more details)
Upon expiration of the TIF, the increment is released back to the local governments and the state. State and local governments use the released increment as newly taxable property for 15-10-420, MCA purposes. Schools treat the released increment as an increase in their tax base and adjust their mill levies accordingly.
TIF districts expire on the the 15th year following its adoption, or upon the full payment of all bonds for which tax increment revenue have been pledged, whichever is later. TIFs may extend their expiration date by securing bonds that pledge post-15th-anniversary-increment as repayment. No term extensions are allowed for bonds secured after the 15th anniversary of tax increment provisions. For example, if a TIF was authorized January 1, 2000, it has until January 1, 2015 (its 15th anniversary) to pass bonds secured by future increment to extend the expiration date. Additional bonds may be passed after the 15th anniversary but these would not extend the life of a TIF.
Please Note:
TIF districts collect the incremental tax revenue from all the local and state mills except the statewide six-mill levy that is used to fund the university system.
Due Dates for Local Governments
- August 1
- Local governments must notify the department of the name of the proposed TIF district, its contact person, its desired base year, and a preliminary legal description. This must be accompanied by a map illustrating the proposed boundaries of the district if the local government wants the department to provide them with a list of the affected real property, separately assessed improvements, and personal and centrally assessed properties within the district.
- December 1
- Local governments must notify the department of the name of the proposed TIF district, its contact person, its desired base year and a preliminary legal description. This must be accompanied by a map illustrating the proposed boundaries of the district if the local government does not need the department to provide them with a list of the affected real property, separately assessed improvements, and personal and centrally assessed properties within the district.
- February 1st
- Local governments must submit formal notification and supporting documentation for the creation or amendment of any TIF district on or before February 1 of the calendar year following the creation or amendment of the district. The required supporting documentation can be found in ARM 42.19.1403 for an Urban Renewal District (URD) and in ARM 42.19.1404 for a Targeted Economic Development District (TEDD).
Please Note:
All notification and documentation for the creation or amendment of an URD or TEDD must be emailed to DORTIFinfo@mt.gov or mailed to the following address:
Department of RevenueProperty Assessment Division
P.O. BOX 8018
Helena, MT 59604-8018
General questions regarding TIF districts can be directed to:
Recommended TIF District Setup in a County System
A Tax Increment Finance district is always set up as one or more distinct levy districts.
The department recommends setting up TIF districts through a process similar to applying a special district flat fee. Calculate the base and increment percentage for the district as a whole and then apply the base or increment percentage globally to all of the records in the affected TIF levy districts.
Administering the TIF in this way would avoid tax bills with negative increments. It would also ensure that all properties within the TIF district contribute proportionally to the TIF fund.
The following tables demonstrate this concept.
Base Taxable Value is the taxable value from the year designated as the base year in the TIF district documentation.
| Current Taxable Value | Base Taxable Value | Increment Taxable Value | |
|---|---|---|---|
| TIF Levy District 1 | Current Year Taxable Value | Taxable Value from the Base Year | Current Taxable Value minus Base Taxable |
| TIF Levy District 2 | Current Year Taxable Value | Taxable Value from the Base Year | Current Taxable minus Base Taxable |
| Total TIF District | Sum of TIF Levy 1 & TIF Levy 2 Current Taxable Value | Sum of TIF Levy 1 & TIF Levy 2 Base Taxable Value | Sum of TIF Levy 1 & TIF Levy 2 Increment Taxable Value |
- Increment Percent to TIF
- Remaining Percent to Base
- The Increment Percent is applied to each TIF Levy District’s Current Taxable Value
- The Total TIF Increment should also equal
from the table above.
Example:
| Tax Increment Finance District | Levy District Code | Current Taxable | Base Taxable | Increment Taxable |
|---|---|---|---|---|
| TIF Levy District 1 | T1 | 7,980,687 | 4,581,568 | 3,399,119 |
| TIF Levy District 2 | T2 | 3,201,196 | 2,464,904 | 736,292 |
| Entire TIF District | T1/T2 | 11,181,883 | 7,046,472 | 4,135,411 |
- Increment % to TIF
- Remaining % to Base
- TIF Levy District 1 Increments
- TIF Levy District 2 Increments
- Total TIF Increment
General setup process:
- Enter the Base Percent into a custom field.
- Apply the Base Percent globally to the records in the affected TIF levy districts.
- At the property record level, calculate:
- Taxable Value × Base Percent
- The taxes levied against the result would receive normal distribution to all affected taxing jurisdictions.
- Remaining Taxable Value
- The taxes levied against the result would be distributed to the TIF district fund except for the six university mills.
TIF Increment Example
Base taxable value is the total taxable value in the TIF district in the year prior to the existence of the district. Incremental taxable value is the taxable value that exceeds the base taxable value for the district in any year. For example, if in the year a TIF is created, the base year and current year taxable value are equal to $1 million, there would be no incremental taxable value and no TIF revenue.
| TIF Taxable Value | Base Year |
|---|---|
| TIF Revenue | $0 |
| Current Year Taxable Value | $1,000,000 |
| Base Taxable Value | -$1,000,000 |
| Increment Taxable Value | $0 |
| Millage Rate | ×0.500 |
If in the second year of existence of a TIF district, its taxable value grew by $100,000, then the incremental value in that year would be $100,000. If the total millage rate in the TIF was 0.500, the taxes generated from the increment (TIF revenue) would be $50,000.
| TIF Taxable Value | Base Year | Year 2 |
|---|---|---|
| TIF Revenue | $0 | $50,000 |
| Current Year Taxable Value | $1,000,000 | $1,100,000 |
| Base Taxable Value | ($1,000,000) | ($1,000,000) |
| Increment Taxable Value | $0 | $100,000 |
| Millage Rate | ×0.500 | ×0.500 |
If in the third year of the TIF district, the taxable value shrinks to $800,000, due to property devaluation, demolition or removal of structures, or the like, then the incremental value would be negative ($200,000), meaning there would be no incremental value for the third year. When a TIF district’s incremental value is less than zero, no revenue is provided to the district.
| TIF Taxable Value | Base Year | Year 2 | Year 3 |
|---|---|---|---|
| TIF Revenue | $0 | $50,000 | $0 |
| Current Year Taxable Value | $1,000,000 | $1,100,000 | $800,000 |
| Base Taxable Value | ($1,000,000) | ($1,000,000) | ($1,000,000) |
| Increment Taxable Value | $0 | $100,000 | ($200,000) |
| Millage Rate | ×0.500 | ×0.500 | ×0.500 |
If in the fourth year the taxable value of the TIF grows from $800,000 to $1,200,000, due to redevelopment or the like, then the increment would increase to $200,000. If the millage rate was 0.500, the district’s revenue would be $100,000 in this year.
| TIF Taxable Value | Base Year | Year 2 | Year 3 | Year 4 |
|---|---|---|---|---|
| TIF Revenue | $0 | $50,000 | $0 | $100,000 |
| Current Year Taxable Value | $1,000,000 | $1,100,000 | $800,000 | $1,200,000 |
| Base Taxable Value | ($1,000,000) | ($1,000,000) | ($1,000,000) | ($1,000,000) |
| Increment Taxable Value | $0 | $100,000 | ($200,000) | $200,000 |
| Millage Rate | ×0.500 | ×0.500 | ×0.500 | ×0.500 |
How Taxes Collected are Allocated Example
Whether a property is in a TIF district should not affect the property tax bill, only the distribution of the tax dollars when they are received.
The example shows two properties of equal value belonging to the same set of taxing jurisdictions, one located within the TIF district and one outside. This illustrates how the TIF district would get applied at the individual property level. The taxes collected are allocated differently, but both properties pay the same amount.
| Taxing Jurisdiction | Mills Levied |
|---|---|
| Total | 500 Mills |
| Local Elemntary | 75 Mills |
| Local High School | 100 Mills |
| City | 99 Mills |
| County | 125 Mills |
| State Wide | 95 Mills |
| University | 6 Mills |
| Property A - In the TIF District | ||
|---|---|---|
| Total Taxes | $1,500.00 | |
| Taxable Value | Base to Taxing Jurisdictions (Taxable Value × Base %) | Increment Value to TIF Fund (Taxable Value - Base) |
| 3,000 | 1,891 | 1,109 |
| Local Elementary | $141.83 | $83.18 |
| Local High School | $189.10 | $110.90 |
| City | $187.21 | $109.79 |
| County | $236.38 | $138.63 |
| State Wide | $179.65 | $105.36 |
| University | $18.00 | $0.00 |
| Total | $952.15 | $547.85 |
| Property B - Not in the TIF District | |
|---|---|
| Total | $1,500.00 |
| Taxable Value | All to Taxing Jurisdictions |
| 3,000 | 3,000 |
| Local Elementary | $225.00 |
| Local High School | $300.00 |
| City | $297.00 |
| County | $375.00 |
| State Wide | $285.00 |
| University | $18.00 |
Related Laws
- Title 7 Chapter 15 Part 42, MCA
- Urban Renewal Districts and Targeted Economic Development Districts
- ARM 42.19.1403
- Notification requirements for the creation or amendment of an Urban Renewal District (URD) with a Tax Increment Financing Provision
- ARM 42.19.1404
- Notification requirements for the creation or amendment of a Targeted Economic Development District (TEDD) with a Tax Increment Financing Provision
