Louisiana Governor Jeff Landry has issued Executive Order No. JML 24-23 (the “Order”), which makes key changes to the qualifications for participation in the state’s Industrial Ad Valorem Tax Exemption Program (“ITEP”). The Governor signed the order on stage while speaking at the Louisiana Association of Business and Industry Annual Meeting February 21, 2024 in Baton Rouge. The Order partially reverses some requirements that Landry’s predecessor, former Governor John Bel Edwards, put in place in 2016 in his own Executive Order No. JBE 2016-26 (the “Prior Order”).
ITEP is a property tax abatement incentive that the state may grant to encourage capital investment at manufacturing facilities in the state. Historically, ITEP applications were reviewed and approved by the Louisiana Board of Commerce and Industry (the “Board”). Under the Prior Order, former Governor Edwards added a job creation/retention requirement and required the Board to take into account local input from the parish, school board, sheriff, and municipal jurisdictions at an applicant’s plant location. That created challenges for some taxpayers who wanted to invest in Louisiana but were inexperienced in navigating parish political jurisdictions.
While Landry left in place some parts of the Prior Order, his Order makes three important changes. Specifically, it:
- Removes the job creation/retention requirement that former Governor Edwards had added to the program
- Changes the way local governments affected by an ITEP project provide input into the ITEP application
- Shortens the timeline for local input
The Order retains the requirement for local input but provides that it be obtained through a single parish committee—the Local ITEP Committee (“Local Committee”) made up of representatives of:
- Parish president or president of the policy jury
- President or superintendent of the school board
- Sheriff
- Mayor, if located in a municipality
- The Local Committee may also include non-voting committee members from the local assessor’s office and local economic development representation.
Under the new process, when the Board approves an ITEP application, it must forward the application to the Local Committee within three business days. Within 15 days of transmittal, the Local Committee must post a public notice of the ITEP application and set the application on an agenda for a meeting of the Local Committee within no more than 30 days, streamlining the timeline for obtaining local input to 45 days.
Local input is important, and in some situations local input may disagree with the Board’s decision. In such situations, the Board and Governor have final decision-making authority based on what they deem to be in the best interest of the state.
The Order left intact some important components of the Prior Order:
- The abatement remains limited to 80% of the qualifying property value for the first five-year contract and approved renewal
- Miscellaneous capital additions (MCAs) remain excluded from the ITEP program
The Board, in collaboration with the Department of Louisiana Economic Development (“LED”) and other stakeholders, has been tasked with revising the current ITEP rules to align with this Order. However, the Order officially became effective on February 21, 2024, and any ITEP advances filed before that date are subject to the prior rules. New ITEP advances (not applications) filed on or after February 21, 2024 will be guided by the current Order.
Sharon Roberts, Ryan Principal and Practice Leader of the Credits and Incentives practice, has the following observation related to this development: “This is an important signal by Governor Landry of the new administration’s commitment to the ITEP program, which is Louisiana’s most important economic development tool for stimulating major capital investments. The hundreds of millions of dollars of investments that will go through this program strengthen Louisiana communities by extending the business operations of manufacturers, increasing taxable sales that generate increased sales tax collections, and by increasing plant values that will ultimately result in higher property tax collections after the abatement periods end. It’s a real plus for the state.”
With more than 40 Ryan professionals dedicated to Louisiana tax matters, we are here to help you navigate the complexities of Louisiana taxes. Ryan will continue to monitor the progress of rules and applicable guidance issued by the Board and LED over the coming weeks and months. Please contact Sharon Roberts or the other experts listed below to assist you in your dealings with the Louisiana ITEP.
TECHNICAL INFORMATION CONTACTS:
Sharon Roberts
Principal and Practice Leader
Ryan
225.334.0040
sharon.roberts@ryan.com
Susan Bittick
Principal
Ryan
512.476.0022
susan.bittick@ryan.com
Matt Zagotti
Principal
Ryan
225.334.0040
matt.zagotti@ryan.com
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