Additional State Law Incentives in Mississippi
properly structured, projects financed with tax-exempt GO Bonds can be
exempt from the sales and use tax - generally 7 percent - and, with
proper planning, can avoid a portion of the contractor's tax - the 3
percent tax on component materials and on design services. Also,
projects financed with GO Bonds are eligible to obtain ad valorem tax
exemptions, subject to the discretion of the local governing body where
the project is located. Finally, businesses utilizing tax-exempt GO
Bonds may also be eligible for RED Program state income tax credits.
These three state law incentives can produce significant savings,
especially when combined with the savings of the cost of funds for a
tax-exempt, private activity bond.
Other Benefits Offered by the GO Zone Act
percent deduction for qualifying tangible personal property for small
businesses: The amount small businesses are permitted under Section 179
to expense, rather than depreciate, for investments in qualifying
tangible personal property and computer software placed in service in
the Zone has been increased by $100,000 to $208,000. The placement in
service dates are the same as those that apply to bonus depreciation.
The investment ceiling limit for eligible property has been increased
by $600,000 to $1,030,000.
Demolition and cleanup expenses may
be expensed: Under existing law, the cost of demolition generally is
added to the business owner's basis in the underlying land and cannot
be recovered until the property is sold. The GO Zone Act allows
businesses to expense 50 percent of their demolition and cleanup
expenses incurred through 2007.
Work Opportunity Tax Credit
(WOTC): Employers may claim the WOTC if they hire a new "Hurricane
Katrina employee." This is an individual who, on August 28, 2005, had a
principal place of abode in the "core disaster area" and (1) who was
hired after August 27, 2005 and before August 28, 2007 for a job
located in the core disaster area; or (2) who was displaced by
Hurricane Katrina and was hired after August 27, 2005 and on or before
December 31, 2005 for a job located outside the core disaster area. For
employers outside the GO Zone, the employee must have been hired after
August 27, 2005 and before January 1, 2006. For employers within the GO
Zone, the WOTC is extended for employees hired through August 27, 2007.
Eligible employers are allowed a credit of 40 percent of the first
$6,000 of qualified first-year wages paid to each eligible employee.
Retention Tax Credit: The Employee Retention Tax Credit was expanded to
apply to all employers in the Zone, regardless of the number of
employees. The credit is equal to 40 percent of qualifying wages up to
a subject to a maximum of $6,000 (for a maximum credit of $2,400 per
qualifying employee) and applies to qualifying amounts expended prior
to December 31, 2005.
Other Important Provisions of the GO Zone Act
GO Zone Act contains a number of additional incentives and relief
provisions that are important to businesses considering an investment
in the GO Zone.
• Increase in qualified rehabilitation credit:
The credit for qualified expenditures for a historic structure was
raised to 26 percent and for other qualified structures to 13 percent.
Expensing of qualified environmental cleanup costs: The deductibility
of environmental cleanup costs incurred on qualifying sites was
extended for two years and applies to the cleanup of petroleum
products. To qualify, costs must be incurred from August 27, 2005
through December 31, 2007.
• New market tax credit authority
increased: The allowable credit is equal to 39 percent of qualifying
investments in low-income communities. To qualify, the investment must
be made by an authorized community development entity (CDE). An
additional $1 billion in authority was granted for the years 2005-2007.
Low-income housing: The act authorizes almost $40 million in additional
low-income tax credits for Mississippi. Additional provisions will
increase the credits available to investors for new construction and
• Reforestation incentives for
small timber owners: The cap on the deductibility of reforestation
costs was doubled to $20,000 per year through 2008, and a special
five-year NOL carryback for small timber operations was authorized. To
qualify, the timber owner must own less than 500 acres of timber.
damage caused by Hurricane Katrina is unprecedented. The impact on
individuals and existing business and industry has been catastrophic.
But significant lessons have been learned, and significant efforts are
underway to assist the region in recovery and, more importantly, future
growth. If business and industry response to the GO Zone incentives
reaches the proportion Congressional and regional representatives
expect, undoubtedly the entire Gulf Coast region will be back, better
and stronger than ever.AngelouEconomics
is an economic development consulting firm specializing in the site
selection needs of the technology industry and the communities seeking
to recruit them. The website is www.angeloueconomics.com. Butler, Snow,
O'Mara, Stevens & Cannada is one of the largest law firms in the
mid-South. Contact its attorneys via the company's website, www.butlersnow.com.