Industrial expansion in Louisiana - The benefits of ITEP for manufacturers

ITEP

The Louisiana Industrial Ad Valorem Tax Exemption Program – better known as ITEP – offers manufacturing businesses an 80% property tax abatement for up to 10 years on new eligible investment. Given the significant property tax savings offered by the program, ITEP stands to fuel considerable development in Louisiana’s manufacturing sector. What’s more, recent changes to ITEP’s program requirements provide renewable energy businesses more opportunity to participate.

How to qualify for the exemption

To qualify for the program, businesses must be classified as a manufacturer or related to the manufacturing project at the project site, submit a detailed application and receive both State and local ITEP Committee approvals. The program is open to new manufacturers in Louisiana, as well as existing manufacturers with new capital investments to existing facilities. With the recent changes as a result of the Executive Order, the state and local stakeholders have been more clearly defined and the application and approval process has been streamlined. Understanding if a business qualifies and the application and approval process is essential for participation in the ITEP.

Definition of manufacturers

In Louisiana, manufacturing is defined as: “Working raw materials by means of mass or custom production, including fabrication, applying manual labor or machinery into wares suitable for use or which gives new shapes, qualities or combinations to matter which already has gone through some artificial process. The resulting products must be suitable for use as manufactured products that are placed into commerce for sale or sold for use as a component of another product to be placed and placed into commerce for sale.” Renewable energy production, such as wind and solar, are considered manufacturing in Louisiana [1].

Companies no longer must create/retain jobs to qualify for ITEP

ITEP is a discretionary incentive, which formerly required approvals from both the state and all the taxing agencies, such as the city, parish and the school district, prior to the commencement of any project activities. Following recent changes to the program, local taxing authorities no longer review each proposal. Instead, key local stakeholders have been consolidated into an ITEP committee to meaningfully streamline the approval process. Perhaps most noteworthy, however, is the removal of the job creation/retention requirement for the program.

Moving forward, businesses do not have to create/retain jobs to qualify for the incentive, which allows for the participation of renewable energy companies that may have been ineligible prior to the recent updates to the program. While this type of abatement program is not inherently unique, most comparable incentives have investment and industry requirements that prove difficult to qualify for. ITEP benefits form a more inclusive definition of manufacturing, which accounts for companies in the renewable energy space (such as wind and solar). At the same time, these latest changes help to eliminate barriers for new and existing manufacturing companies, making Louisiana a strategic location for industrial investments.

To this effect, last month the Louisiana Board of Commerce and Industry approved $185 million worth of industrial tax breaks under Gov. Jeff Landry’s new rules. Included in this approval round was $127.6 million in tax exemptions awarded to ElementUS Minerals’ industrial waste recycling project, which plans to transform waste at the Atlantic Alumina Co. refinery into critical minerals needed for the national defense sector.

Companies interested in applying for ITEP can benefit from the expertise of Altus Group’s Location & Incentive Strategies team, which has extensive experience working with local stakeholders, as well as a deep understanding of the latest legislation and its requirements. Upon approval, the program requires periodic compliance reporting to ensure the business is meeting its requirements. As these compliance requirements can be somewhat cumbersome, with expert assistance your business can be assured that these compliance requirements will not be missed and therefore benefits will be realized.

Resources:
[1] CI-Agenda-PUBVer-Apr-24-2024-2.pdf (opportunitylouisiana.gov)

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