Utah law creates Regionally Significant Development Zone, limits data-center incentives and tightens PID rules

House Bill 507, passed during the 2026 session, overhauled several economic-development tools and created a new state-approved Regionally Significant Development Zone (RSDZ) intended for large projects that require participation by multiple taxing entities. "This bill also sunsets the housing and transit reinvestment zone, the first home investment zone, the home ownership promotion zone, the convention center reinvestment zone, and the municipal energy zone in 2028," Carson Eers, policy director at the Utah League of Cities and Towns, said during a League webinar recapping the session.

The RSDZ is a city- or county-initiated tool that must meet criteria demonstrating regional significance. Local governments must apply to a state tax-increment committee, which will approve parameters contained in a project-area governing document. Eers said the law caps tax-increment collection from RSDZs: "it caps the amount of tax increment that be could be offered at 60% and you it can be collected at up to 25 years out of a 40-year project." The statute allows flexibility for project financing (ongoing collections or upfront bonding) and a broad set of eligible uses including infrastructure, parking, property acquisition and income-targeted housing.

A portion of RSDZ tax increment — set in statute to range between 5% and 25% and negotiable during application — is diverted to a new state reinvestment restricted account. Eers described the account as intended to fund statewide benefits such as generational water infrastructure, regional transit and other state priorities.

The bill also clarifies PID (public infrastructure district) governance and consumer protections. PIDs are established under local ordinances but are legally separate entities; HB507 specifies that the governing document defines how the initial board is appointed, establishes vacancy procedures, requires on-site or public meetings if a building exists in the PID, spells out dissolution after debt repayment and mandates disclosure to property buyers that an extra PID levy may apply.

HB507 restricts tax-increment incentives for "large load" data centers that contract for 100 megawatts of electricity, unless a community locates such a center inside an RSDZ with energy implications. Eers explained the limits: real-property tax-increment incentives are capped at 60%, personal-property diversion at 80% and equivalent energy-related tax incentives at 80%. The restriction is effective May 6, 2027, with prior incentive agreements grandfathered.

Local officials, Eers said, will still be able to propose RSDZs and negotiate participation rates with counties and school districts, but counties retain a process to challenge an RSDZ's "regionally significant" finding and to limit their participation if they demonstrate the project does not meet the statutory threshold. "The burden's on them to convince the tax increment committee that they're actually meeting those goals," Eers said of applicants.

The League said it will produce an implementation summary for local governments and noted additional rulemaking is likely as the state and agencies operationalize the new RSDZ application process. The League also flagged forthcoming guidance and coordination with the state auditor on PID audit and reporting questions.

The RSDZ and PID changes are effective as specified in statute and will require local governments to review governing documents and PID ordinances; jurisdictions with existing HTRZ projects should note grandfathering rules ahead of the 2028 sunset of prior tools.

For more detail, the League plans a follow-up summary document and will notify members as state rules are released.