Industrial behemoths—like ExxonMobil, which officials say is considering an expansion of its Baton Rouge operations—are paying close attention to how the ITEP issue is resolved.
In late April, Gov. John Bel Edwards’ administration released a set of proposed changes to the rules governing the state’s Industrial Tax Exemption Program, or ITEP. The changes are intended to clear up confusion and ease concern that has been mounting in the 18 months since Edwards scaled back the popular tax break and gave local governments more say so over whether to grant it. But at the April 26 meeting of the state Board of Commerce and Industry, which oversees the program, it was apparent there are still a lot of questions about the proposed changes and what they mean. Business Report has attempted to answer some of them.
What’s the most significant change the administration is proposing?
Currently, a manufacturer seeking a property tax break under ITEP first applies to the local taxing authorities in the parish where it wants to expand. Those bodies then decide whether to grant an abatement and, if so, at what level. If approved, the application goes to the state.
The proposed rules flip that order, giving the state—first, staff at Louisiana Economic Development and then the Board of Commerce and Industry—authority to vet an ITEP application and decide whether to grant it. If approved by the state, a local government will have, essentially, veto authority. If the local government takes no action, the abatement automatically goes into effect.
Can local governments set the level of the abatement?
No. Under the proposed rules, the state sets the level at up to 80% for five years with a five year renewal. Under the current rules, eligible manufacturers can receive a maximum abatement of 100% for five years and then 80% for three more years, but local governments can give away less if they choose.
Why do the new rules say “up to 80%?” Isn’t the whole idea behind the changes to alleviate uncertainty?
The phrase “up to” in the proposed rules is causing concern among some in industry, who fear it gives local governments wiggle room to adjust the abatement levels. LED Secretary Don Pierson says that’s not the case, however. He says the rules were written that way because if not all taxing entities in a particular parish agree to grant the incentive, the amount the manufacturer receives will not total 80%.
Do all taxing authorities within a parish have to agree on ITEP?
No. If they don’t, a manufacturer would only receive a partial abatement (see above). The local assessor would have to figure out the correct millage.
What about the applications currently in the pipeline?
They will be evaluated and processed under the current rules put in place after Edwards’ executive orders in 2016.
When will this all get straightened out?
The Board of Commerce and Industry will hold two public hearings on May 22 and June 25. The earliest it can vote on the changes is at its next regular meeting on June 27. If approved then, the new rules go into effect by the end of August. If not, the entire process is delayed indefinitely.
Why wasn’t this done sooner?
Had the rule changes been proposed in 2016 when Edwards overhauled the 80-year-old program, a lot of confusion and wasted effort might have been alleviated. But Pierson says hindsight is 20-20. “Like any version of software or a new car, until you’ve actually tested it, you can’t recognize where you can make improvements,” he says.