After local taxing authorities around the state have spent months trying to establish a set of criteria for awarding property tax breaks to manufacturers under the state’s Industrial Tax Exemption Program, or ITEP, Gov. John Bel Edwards’ administration has stepped in and is working on a new set of guidelines that would be uniform across all 64 parishes.
The ITEP rule changes in the works come more than 18 months after Edwards upended what had been one of industry’s most lucrative tax incentives for 80 years by giving local governing authorities more say so over whether to grant the abatements.
“What we’re trying to do is to make it easier not only on the local taxing authorities but on the companies so they know what they’re eligible to get when they’re applying,” Edwards told Daily Report in brief comments before a speech at the State Capitol. “This would bring them more predictability and certainty.”
Though Edwards said more details will be forthcoming at a later time, he confirms the proposed ITEP rules would establish a cap on the tax break. It would also include a standard formula enabling local taxing authorities to calculate the return on investment they can expect if awarding an ITEP incentive.
Edwards says he hopes the new rules will be in place by the start of the fiscal year, July 1, which is also the beginning of the third quarter for most businesses.
Sources familiar with the process say Louisiana Economic Development has been working on the rule changes for more than three months, largely in response to concern from industry that Louisiana was losing any competitive advantage it might have because local governing authorities were not moving fast enough to establish clear, predictable rules governing ITEP applications.
Among those local governments is East Baton Rouge Parish, which has been grappling with the issue since early this year. A committee representing the parish’s three taxing authorities was set to meet Thursday to possibly vote on a set of criteria for ITEP applications. But it postponed the meeting indefinitely in light of learning about the state’s work on the issue.
Chief Administrative Officer Darryl Gissel, who sits on the committee, says he was not made aware of the state’s efforts until Tuesday, but he does not feel the work of his committee has been in vain.
“Ultimately, local taxing authorities will have the right to vote up or down on awarding ITEPs,” he says. “So the work we’ve done so far has helped us all understand the issue a lot better.”
Economic development and industry officials applaud the move by the state to establish rules that they say will make the whole program more predictable for business. Baton Rouge Area Chamber President and CEO Adam Knapp says “all along we have said this is about certainty, predictability and transparency so anything they can do to provide for those things is positive.”
In March, ExxonMobil said it is looking at a major capital expansion in the hundreds of millions of dollars at its East Baton Rouge Parish chemical plant and that the fate of the investment hinges on what the parish does with ITEP.
Today, ExxonMobil spokesperson Stephanie Cargile said the decision won’t be made on the project until the third quarter and that waiting for the state to come out with more streamlined, predictable ITEP guidelines will not hurt the parish’s chances of landing the project.
“Having a predictable program and assessment tool in place is important to help us make this decision,” Cargile says. “But we don’t need a decision in the next few weeks.”
