LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: SB 246 SLS 22RS 173
Bill Text Version: ENGROSSED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: April 13, 2022 8:42 AM Author: ALLAIN
Dept./Agy.: Economic Development
Subject: Constitutional local option for permanent 80% ITEP Analyst: Deborah Vivien
TAX/AD VALOREM EG SEE FISC NOTE GF RV See Note Page 1 of 1
Constitutional amendment to authorize parishes to exempt inventory from ad valorem taxation. (2/3 - CA13s1(A))
Current law subjects all inventory to a local ad valorem tax (AVT). The state provides a refundable income and franchise tax credit to the
taxpayer for 75% of the amount of the AVT on inventory (100% below $10,000) with a 5 year carryforward of the remaining 25%. Current
law also allows for an Industrial Tax Exemption Program (ITEP) exemption of AVT for certain manufacturing (and distribution center)
entities with state (or economic development authority) approval for 5 years with a 5-year renewal. An Executive Order allows local
approval of ITEP exemptions and lowers the exemption to 80% of the AVT. The Executive Order expires in January, 2024, after which the
provisions will revert to current law or the parameters of a new Executive Order.
Proposed constitutional amendment authorizes local governing authorities to consider codifying a manufacturing ITEP exemption of 80%
for 5 years with a 5-year renewal (and no exemption for distribution centers) with no local approval, if the local government exempts
100% of the inventory tax for all taxpayers. Locals may adopt the inventory tax exemption by ordinance along with approval of all
municipalities in the parish or voter approval. Once approved, the inventory tax exemption can only be revoked by a two-thirds vote of the
legislature. All adoption timelines are at the discretion of local governing authorities. Requires voter approval at the Nov. 8, 2022 election.
EXPENDITURES 2022-23 2023-24 2024-25 2025-26 2026-27 5 -YEAR TOTAL
State Gen. Fd. $0 $0 $0 $0 $0 $0
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 SEE BELOW SEE BELOW SEE BELOW $0
Annual Total $0 $0 $0
REVENUES 2022-23 2023-24 2024-25 2025-26 2026-27 5 -YEAR TOTAL
State Gen. Fd. $0 $0 SEE BELOW SEE BELOW SEE BELOW $0
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 SEE BELOW SEE BELOW SEE BELOW $0
Annual Total $0 $0 $0
EXPENDITURE EXPLANATION
Upon passage of a parish ordinance along with either municipal government approval or voter approval, local tax collectors would no
longer be required to administer the provisions of the inventory tax as all entities would be fully exempt and local approval of ITEP
exemptions will no longer be required. It is assumed that any savings from adoption of the exemption changes would be redirected to
other areas of the mission of the entity. Local pursuit of the bill’s provisions is at the discretion of the local governing authority. Secretary
of State may face additional expenses if more than 10 Constitutional amendments are on the ballot.
REVENUE EXPLANATION
The bill offers an optional trade-off between exempting the inventory tax and receiving a permanent 80% ITEP exemption
without local approval. The ITEP exemption is currently 80% with local approval by Executive Order JBE 2016-26, which will
expire in January, 2024. If a new Executive Order is not put in place, the ITEP will revert to current law at 100% with no
local control.
Parishes approving this trade-off will no longer receive revenue from the inventory tax but will lock in the 20% AVT revenue
from existing and future ITEP projects (though without local control). Parishes not approving the inventory tax exemption
will continue to receive inventory tax revenue but may be subject to a 100% ITEP exemption without local control for
projects going forward. Individual parishes and municipalities will be impacted in different ways based on size and location of
firms paying the inventory tax and receiving the ITEP exemption. Without knowing how the ITEP program will change, the
impact of the bill cannot be calculated and the adoption by locals cannot be predicted.
To the extent that parishes approve an inventory tax exemption, state general fund will increase as the refundable income
and franchise tax credit for inventory taxes paid will have a value of $0 for those parishes. According to the Tax Exemption
Budget, the total Inventory Income Tax Credit reduces the state general fund by about $295 M annually. If a parish adopts
the Inventory Tax Exemption, state general fund will increase by the amount of the inventory tax credit that would have
been paid out under current law. The earliest impacts, if any, would not be expected until FY 25 from taxes owed in 2024
once more policy decisions have been finalized.
Senate Dual Referral Rules House
13.5.1 >= $100,000 Annual Fiscal Cost {S & H} 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
Alan M. Boxberger
13.5.2 >= $500,000 Annual Tax or Fee 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} Interim Legislative Fiscal Officer
or a Net Fee Decrease {S}