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Major Changes to the Louisiana Industrial Tax Exemption Program

by DMA Staff | Jul 06, 2016
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On June 24, the Governor of Louisiana delivered an order on the 65–70-year-old Industrial Tax Exemption Program (ITEP) that led to hostility between the Governor and new Board of Commerce & Industry (BCI) and the Industry representatives and staff of the LED.

 The following is a summary of the Governor’s order by DMA’s Bruce Fatheree:

  1. The Governor has potentially canceled any pending MCA that did not create jobs. It was my understanding when I left the meeting that all pending contracts on the docket, which included last month’s deferrals, would be approved. The BCI did approve all the applications; however, the language in the order says that the Governor will not consider a job-less MCA, and that he is the final signatory.

  2. Only applications accompanied by advance notifications will be considered by the Governor from this point forward. MCA applications for miscellaneous projects, repairs, environmental upgrades, and new replacements for existing equipment will not be considered.

  3. Each ITEP application must include two new documents. Exhibit A will be a “Cooperative Endeavor Agreement” and it specifically relates to job creation or retention and default penalties should the application be eventually approved by the Governor. Exhibit B must be secured in advance and will consist of the resolutions from each of the relevant Parish Council or Police Jury, Municipal Council, School Board, and Sheriff indicating their approval or rejection of the application. Failure to include exhibits A & B are grounds for denial.

  4. The BCI will carefully review each application to ensure the facility specifically meets the constitutional definition of manufacturing. Exemptions for new facilities are preferred while expansions or additions, especially if no jobs are created or clearly retained, are not. The Board grilled a number of applicants about their projects and a question that was asked repeatedly was whether or not the project resulted in a loss of jobs. In addition, tardy applications, repeated requests for additional time or failure to appear at the meeting were singled out for ridicule and criticism.

  5. The DOR and LED will develop procedures to annually review each contract for compliance.

  6. The second 5-year term is no longer “automatic” and will be determined by compliance with Exhibits A and B.

  7. Future events may be cause to revoke a contract.

The new outline looks a lot like the Texas system of securing tax abatements – the negotiation of exemption terms and approvals from taxing jurisdictions must be secured prior to the start of construction. In Louisiana, historically, a taxpayer built the project first then secured the exemption but now that process is reversed. The historic ITEP program was about bringing manufacturing to Louisiana but has now been turned into a jobs creation program. It will be interesting to see how the changes mesh with other jobs programs such as the Quality Jobs Program.

All new rules will have to be written, so as the details become available, I will keep you updated.

Please do not hesitate to contact your local DMA office should you have specific questions or requests.

Additional Resources: 2016 ITEP Executive Order; ITEP The Facts 10-2006