Executive Order Impacts Louisiana Industrial Ad Valorem Tax Exemption Program

Many states throughout the U.S. have mechanisms to offset personal property tax burdens. Some states have policies in place that fully exempt either all tangible personal property or limit it to manufacturing personal property, while others use economic incentive tools such as property tax abatements, industrial development bonds, tax increment financing, etc. to reduce this tax burden. These property tax incentives can last for various terms, such as five years or up to 40 years depending on the jurisdiction. Property tax abatements are vital to compete for capital-intensive projects, and Louisiana is an example of a state keenly aware of this by utilizing its Industrial Ad Valorem Tax Exemption Program (ITEP) to attract and encourage investments by manufacturers.

Louisiana’s ITEP overview

Louisiana’s ITEP provides a property tax abatement for up to 10 years on an eligible manufacturer’s new investment in Louisiana. The program is available to new and existing manufacturers. Historically, the property tax abatement was 100%, but in 2016, then Gov. John Bel Edwards reduced the abatement percentage to 80%, required local approval and added job creation requirements. Undoubtedly one of the largest incentive programs in the country, the state is now finding ways to make the incentive more expeditious.

New executive order

On February 21, 2024, newly elected Gov. Jeff Landry signed an executive order to revise the popular ITEP by eliminating job requirements and local approval. The objective is to expedite the process and eliminate the existing multistep process for seeking various local jurisdictions’ consent, such as the parish school board, parish council or parish sheriff. The new system will create a consolidated parish industrial development board with members from the affected local government bodies. The outcome will be a full approval or denial of the benefit, rather than the potential for piecemeal approvals among the taxing entities.

Opponents argue that requiring a company to seek approval from the localities forgoing tax revenue is not too much to ask; moreover, most ITEP applications are approved, and some localities may not even require public meetings. Nonetheless, with the change in 2016 by Gov. Edwards’ administration requiring local consent, property tax revenue increased by $260 million annually, according to a study performed by the Institute for Energy Economics and Financial Analysis, as reported by Louisiana Illuminator. The value of ITEP awards in 2023, as reported by Good Jobs First, was approximately $867 million for 41 announced projects.  

Conclusion 

Under the new administration, the Louisiana Board of Commerce and Industry would remain the first step in the process to approve and recommend an ITEP application and then the relevant parish industrial board is required to hold a public hearing within 45 days. While it remains to be seen how a consolidated parish industrial development board will affect the approval of ITEP applications, it seems that Gov. Landry may have final approval regardless of the industrial development board’s decision.