Is COVID, hurricanes enough reason for companies to miss ITEP requirements?

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Manufacturing companies that utilize Louisiana’s Industrial Property Tax Exemption Program but don’t hit their employment and payroll targets will be asked to justify keeping their exemptions. 

Business representatives are worried that many companies that otherwise would be in compliance will lose their benefits or have to pay penalties because the recent storms and the COVID-19 pandemic have upended their businesses’ expectations. 

How many companies are at risk of losing benefits right now is unclear. Louisiana Economic Development Undersecretary Anne Villa has told the state Board of Commerce and Industry to expect a handful of non-compliant companies to be on their Oct. 27 agenda. 

For decades, participating companies received exemptions from local property taxes without input from local officials and without having to publicly justify why the deal was worthwhile for taxpayers. Gov. John Bel Edwards has ordered companies to seek local input and to justify the tax break by promising job growth when they apply for the program. 

Edwards issued his executive order five years ago. Now, the first batch of agreements approved post-order are starting to come up for their five-year renewals. 

Further complicating matters is that recent economic uncertainty, whether caused by the pandemic and related restrictions, hurricanes or other factors, has made it more difficult for companies to hit their metrics, business representatives say. 

ITEP rules call for a provision in the paperwork companies must present that addresses the penalty for failing to create the required number of new jobs or payroll at the facility subject to the exemption. A company that is not in compliance faces the following process, according to the state economic development department:

  1. LED notifies the company and the relevant local governmental entities of a company’s noncompliance in any given project year. 
  2. LED gives the locals an opportunity to make a recommendation to the board whether and to what extent each local entity suggests a company should be penalized.
  3. LED presents to the board those ITEP contracts that are out of compliance and the locals’ recommended penalty.
  4. Alternatively, the locals and the company may forgo this process if the local entities and the company can agree on, and the company pays a default payment, in which case the company is deemed to be back in compliance.

At its regularly scheduled meetings beginning this month, the C&I board will be presented with ITEP contracts that are not in compliance for one or more of the following reasons:

  • Failure to maintain or create required jobs;
  • Failure to maintain or create required payroll;
  • Failure to properly report on required jobs or payroll. 

Companies will have the opportunity to appear before the board to explain their circumstances. This is when the arguments about unforeseen circumstances will come into play.