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Louisiana - New Restrictions on Industrial
Property Tax Exemptions

by Tony Klein, Houston, October 2016

 

Changes are coming for Louisiana manufacturing companies that receive property tax breaks as part of a statewide program.

 

About $15 million in tax exemptions have been stalled by Board of Commerce and Industry, awaiting approval from the Governor.

 

The Program

 

Louisiana's Industrial Tax Exemption Program has been in effect since the 1970s. It allows property tax abatements for up to ten years on a manufacturer's new investment. The exemption applies to all improvements to land, buildings, machinery, equipment, and any other property, that is part of the manufacturing process. The land itself is not eligible for tax exemption.

 

Most states have an industrial tax exemption, but Louisiana is the only state that handles the grants without the approval of local governments. A statewide public interest group called Together Louisiana charges that the program is giving manufacturers an average of $1.6 billion annually with little oversight and little return.

 

The Governor Weighs In

 

Governor John Bel Edwards issued an executive order linking the tax exemption to job creation and requiring more input from local government agencies.

 

"I have been concerned about the industrial tax exemption for a while," Edwards said. "For decades, it has been on autopilot. It is not even tied to jobs, job creation or job preservation."

 

Specifically, the Governor's program requires that:

 

  • Priority be given to projects that are new manufacturing plants. Additions to any existing plant will only be considered if they provide for new jobs or present compelling reasons for the retention of existing jobs.

  • All contracts will include an Exhibit A consisting of a Cooperative Endeavor Agreement between the State of Louisiana, the Louisiana Department of Economic Development, and the Applicant. This Exhibit will document the creation or retention of jobs.

  • All contracts will also include an Exhibit B, consisting of approvals, to the extent applicable, of the governing Parish Council, Police Jury, Municipal Council, School Board, and Sheriff by resolution signifying whether each of those authorities is in favor of the project.

Officials are looking at possibly lowering the industrial tax exemption. Reducing it from 100% to 80% would cost manufacturers about $600 million annually. But even if the exemption is cut back to 30%, experts say Louisiana would still have the most generous industrial tax exemption in the nation.