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Industrial Tax Exemption and Its Effect on the Construction Industry

commercial construction project

Louisiana has been soliciting for state-wide industrial investment since the 1930s. The state’s Industrial Ad Valorem Tax Exemption Program, commonly referred to as the ITEP, was created in 1936 to stimulate expansion into Louisiana markets. By providing tax incentives for in-state growth, the ITEP hopes to beat out neighboring states and make Louisiana the most attractive jurisdiction for new construction.

Tax Exemption Basics

The ITEP provides manufacturers with property tax abatements for up to ten years if they build or expand into the state. The program is not a subsidy; contractors receive no money from the government. It is a tax-saving measure that allows for even more growth, spurs job creation, and improves the standard of living for Louisiana residents.

Industry Concerns

The ITEP has been under fire in recent years. Small grassroots organizations like Together Louisiana are actively working to dismantle the long-running program. Unfortunately, their arguments against the program very rarely mention how beneficial the construction industry has been for Louisiana’s gross regional product. According to a recent report by the Bureau of Economic Analysis (a division of the U.S. Department of Commerce), Louisiana’s manufacturers deliver almost a fifth of the state’s total economic output and employ nearly seven percent of the workforce, both of which exceed national industry averages.

Interestingly, the grassroots organizations have made headway. Just last year, legislation was passed by the Louisiana Board of Commerce and Industry that requires local parishes to approve or disapprove of expansion projects into their jurisdictions. They must “yea” or “nay” the project within 60 days. Local taxing authorities are uncertain of their role in the ITEP process, and they are struggling to develop approval processes that can function within this strict timeline. As the clock ticks down, applications are sitting in wait, and would-be investors are considering alternative markets.

The Future

Prior to these recent changes, Louisiana was admired around the globe for its ability to win large energy and construction projects, in large part due to the success of the ITEP. Without the ITEP, Louisiana is at risk for losing many large-scale construction projects that might otherwise have come to the state.

If you have questions about ITEP, please contact a member of LaPorte’s Construction Industry Group.