In the pipeline this legislative session is a proposed, five-year pilot income and corporate franchise tax credit program for certain capital-intensive manufacturing projects in Louisiana.
The legislation is billed as an effort to leverage Louisiana’s strategic location as a transport hub to incentivize private businesses to manufacture in-state.
Under the legislation, sponsored by state Rep. Gary Carter, D-New Orleans, Louisiana Economic Development would grant up-to-50% tax credits—not to exceed $1 million per project—to cover construction costs for new manufacturing facilities costing at least $1.5 million that are located in federally designated qualified Opportunity Zones. Tax breaks can’t exceed $10 million over the pilot’s five-year lifespan.
Though this marks the second time Carter will bring the concept before state lawmakers, he’s optimistic the opportunity zone qualification will work in his favor. There are 22 census tracts in East Baton Rouge Parish that are qualified Opportunity Zones.
“The state was in a deficit the last time,” Carter says of his first attempt, which was filed in 2017. “Now that we’re operating in a surplus and we have opportunity zones, I think it’s an excellent time to revisit the legislation. It’s looking promising.”
His effort comes at a time when Louisiana already has the nation’s lowest effective tax rate for capital-intensive manufacturing projects, largely due to the industrial tax exemption program. But the state’s tax competitiveness ranking is likely to drop, considering Gov. John Bel Edwards changed ITEP rules in 2016 and Baton Rouge rejected a pair of ExxonMobil requests earlier this year. Moreover, Louisiana currently has the nation’s best effective tax rate—0.1%—for new projects for petrochemical and oil and gas companies, according to the Tax Foundation.
Still, Carter says he’s intentionally pushing the tax credit program as a pilot so it can be tested out.
“A lot of incentives need to be scrutinized, but these are the sorts of things that work,” he says. “We need to look at incentives that take advantage of Louisiana’s strategic importance.”
The bill has been referred to the House Committee on Ways and Means.