The 2020 Louisiana Legislative Session brought about a great deal of change in many areas of state government. However, one of the more interesting changes that the legislature enacted had more to do with local government. House Concurrent Resolution No. 4 (“HCR4” by Representative Beau Beaullieu) was passed by both the House and Senate during the Regular Session. The resolution amended rules that applied to the state’s Industrial Tax Exemption Program (“ITEP”) administered by Louisiana Economic Development (“LED”) and which has been in the spotlight since Governor Edwards fundamentally changed the program requirements in 2016 .
ITEP is a state business incentive program that offers a property tax abatement to manufacturers looking to build a new facility or expand their existing operations in the state of Louisiana. The program is designed to attract new manufacturing activity and additional investment in the state of Louisiana.
In HCR 4, parishes were given an option of declaring themselves, “ITEP Ready.” The resolution amends the rules pertaining to ITEP and allows for a parish to commit to a period of continuous local governmental entity approval of all ITEP applications submitted to the parish for the duration of one calendar year, essentially sending a message to potential ITEP applicants that they are “open for business.”
The origins of the program reach back to the 1930’s and the 1974 Louisiana Constitution re-affirmed the program’s provision of benefits for manufacturers. The program currently provides participants an 80% ad valorem (property) tax abatement on new manufacturing machinery and equipment for an initial five-year period and the opportunity to renew the contract for an additional five-year period for a total of ten years.
Prior to 2016, the ITEP did not have any requirements with respect to the creation or retention of jobs or the approval of the local taxing jurisdiction in which the manufacturing facility was located. However, Executive Order 16-26 issued by Governor John Bel Edwards in June 2016 changed that. The executive order instituted, among other things, a requirement that the applicant obtain approval from the respective parish by way of resolutions or letters of approval from the Parish Council, Police Jury, Municipal Council, School Board, and Sheriff in order to secure the benefits of the program.
Since the issuance of Executive Order 16-26, the manner in which the local taxing jurisdictions have exercised their authority to approve ITEP Projects has been in a state of continual evolvement. Recently, for instance, the LED’s Board of Commerce and Industry passed a resolution that gives applicants the ability to appeal local decisions to the state in the event that a parish rejects an ITEP applicant’s project based on standards that are not in line with the ITEP rules set forth by Louisiana Economic Development. Currently, the Board of Commerce and Industry is charged with granting the initial approval of the ITEP application on behalf of the state prior to the local governing body’s involvement.
HCR4 provides a new option for local taxing authorities who are still feeling their way through the rigors and challenges of being the de facto ultimate decision maker when it comes to approving ITEP projects within their borders. It is an interesting addition to an already eventful political arena. Only time will tell if parishes are ready to adopt a perpetual position regarding the approval of ITEP applications on an annual basis. However, it is clear that if a parish is looking to send a message to manufacturers who might be considering a new location in which to build or expand their operations, being “ITEP Ready” could certainly be used to drive their point home. Our team of knowledgeable practitioners at Advantous Consulting has years of experience guiding companies through the ITEP process and are ready to assist you through this transition as well. Should you have any questions, please contact Jay Robichaux at email@example.com.