MISSISSIPPI LEGISLATURE
2006 Regular Session
To: Finance
By: Senator(s) Dawkins
AN ACT TO PROVIDE AN INCOME TAX CREDIT TO COMPANIES THAT MANUFACTURE NEW PRODUCTS OR THAT SUBSTANTIALLY IMPROVE EXISTING PRODUCTS THAT HAVE A LESSER OR REDUCED ADVERSE EFFECT ON HUMAN HEALTH AND THE ENVIRONMENT OR PROVIDES FOR IMPROVEMENT TO HUMAN HEALTH AND THE ENVIRONMENT WHEN COMPARED WITH EXISTING PRODUCTS OR COMPETING PRODUCTS THAT SERVE THE SAME PURPOSE; TO PROVIDE THAT THE MISSISSIPPI DEVELOPMENT AUTHORITY SHALL EXERCISE CERTAIN POWERS WITH REGARD TO THE CREDIT; TO ESTABLISH CERTAIN ELIGIBILITY CRITERIA FOR THE PROJECT; TO PROVIDE FOR THE AMOUNT OF THE CREDIT; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. As used in this act:
(a) "Activation date" means a date selected by an approved company in the tax incentive agreement at any time within a two-year period after the date of final approval of the tax incentive agreement by the authority.
(b) "Affiliate" means the following:
(i) Members of a family, including only brothers and sisters of the whole or half blood, spouse, ancestors and lineal descendants of an individual;
(ii) An individual, and a corporation more than fifty percent (50%) in value of the outstanding stock of which is owned, directly or indirectly, by or for that individual;
(iii) An individual, and a limited liability company of which more than fifty percent (50%) of the capital interest or profits are owned or controlled, directly or indirectly, by or for that individual;
(iv) Two (2) corporations which are members of the same controlled group, which includes and is limited to:
1. One or more chains of corporations connected through stock ownership with a common parent corporation if:
a. Stock possessing more than fifty percent (50%) of the total combined voting power of all classes of stock entitled to vote or more than fifty percent (50%) of the total value of shares of all classes of stock of each of the corporations, except the common parent corporation, is owned by one or more of the other corporations; and
b. The common parent corporation owns stock possessing more than fifty percent (50%) of the total combined voting power of all classes of stock entitled to vote or more than fifty percent (50%) of the total value of shares of all classes of stock of at least one (1) of the other corporations, excluding, in computing the voting power or value, stock owned directly by the other corporations; or
2. Two (2) or more corporations if five (5) or fewer persons who are individuals, estates or trusts own stock possessing more than fifty percent (50%) of the total combined voting power of all classes of stock entitled to vote or more than fifty percent (50%) of the total value of shares of all classes of stock of each corporation, taking into account the stock ownership of each person only to the extent the stock ownership is identical with respect to each corporation;
(v) A grantor and a fiduciary of any trust;
(vi) A fiduciary of a trust and a fiduciary of another trust, if the same person is a grantor of both trusts;
(vii) A fiduciary of a trust and a beneficiary of that trust;
(viii) A fiduciary of a trust and a beneficiary of another trust, if the same person is a grantor of both trusts;
(ix) A fiduciary of a trust and a corporation more than fifty percent (50%) in value of the outstanding stock of which is owned, directly or indirectly, by or for the trust or by or for a person who is a grantor of the trust;
(x) A fiduciary of a trust and a limited liability company more than fifty percent (50%) of the capital interest, or the interest in profits, of which owned directly or indirectly, by or for the trust or by or for a person who is a grantor of the trust;
(xi) A corporation and a partnership, including a registered limited liability partnership, if the same persons own:
1. More than fifty percent (50%) in value of the outstanding stock of the corporation; and
2. More than fifty percent (50%) of the capital interest, or the profits interest, in the partnership, including a registered limited liability partnership;
(xii) A corporation and a limited liability company if the same persons own:
1. More than fifty percent (50%) in value of the outstanding stock of the corporation; and
2. More than fifty percent (50%) of the capital interest or the profits in the limited liability company;
(xiii) A partnership, including a registered limited liability partnership, and a limited liability company if the same persons own:
1. More than fifty percent (50%) of the capital interest or profits in the partnership, including a registered limited liability partnership; and
2. More than fifty percent (50%) of the capital interest or the profits in the limited liability company;
(xiv) An S corporation and another S corporation if the same persons own more than fifty percent (50%) in value of the outstanding stock of each corporation, S corporation designation being the same as that designation under the Internal Revenue Code of 1986, as amended; or
(xv) An S corporation and a C corporation, if the same persons own more than fifty percent (50%) in value of the outstanding stock of each corporation; S and C corporation designations being the same as those designations under the Internal Revenue Code of 1986, as amended.
(c) "Approved company" means any eligible company for which the authority has granted final approval of its application pursuant to Section 4 of this act.
(d) Approved costs" means one hundred percent (100%) of the eligible skills upgrade training costs and up to twenty-five percent (25%) of the eligible equipment costs approved by the authority that an approved company may recover through the inducements authorized by this act.
(e) Authority" means the Mississippi Development Authority.
(f) "Average hourly wage" means the wage and employment date published by the Department of Employment Security translated into wages per hour based on a two-thousand-eighty-hour work year for the following sectors:
(i) Manufacturing;
(ii) Transportation, communications and public utilities;
(iii) Wholesale and retail trade;
(iv) Finance, insurance and real estate; and
(v) Services.
(g) Eligible company" means any entity that undertakes and environmental stewardship project.
(h) "Eligible costs" means eligible equipment costs plus eligible skills upgrade training costs expended after preliminary approval of the environmental stewardship project.
(i) "Eligible equipment costs" means:
(i) Obligations incurred for labor and to vendors, contractors, subcontractors, builders, suppliers, deliverymen and materialmen in connection with the acquisition, construction, equipping and installation of an environmental stewardship project;
(ii) The cost of contract bonds and of insurance of all kinds that may be required or necessary during the course of acquisition, construction, equipping and installation of an environmental stewardship project which is not paid by the vendor, supplier, deliveryman, contractor or otherwise provided;
(iii) All costs of architectural and engineering services, including estimates, plans and specifications, preliminary investigations and supervision of construction, rehabilitation and installation, as well as for the performance of all the duties required by or consequent upon the acquisition, construction, equipping and installation of an environmental stewardship project;
(iv) All costs required to be paid under the terms of any contract for the acquisition, construction, equipping and installation of an environmental stewardship project;
(v) All costs paid for by the approved company that are required for the installation of utilities, including, but not limited to, water, sewer, sewer treatment, gas, electricity, communications and access to transportation, and including off-site construction of the facilities necessary for implementation of an environmental stewardship project; and
(vi) All other costs of a nature comparable to those described in this subsection.
(j) "Eligible skills upgrade training costs" means:
(i) Fees or salaries required to be paid to instructors who are employees of the approved company, instructors who are full-time, part-time or adjunct instructors with an educational institution, and instructors who are consultants on contract with an approved company in connection with an occupational training program sponsored by an approved company for its full-time employees and specifically relating to an environmental stewardship project;
(ii) Administrative fees charged by educational institutions in connection with an occupational training program sponsored by an approved company for its full-time employees and specifically relating to an environmental stewardship project;
(iii) The cost of supplies, materials and equipment used exclusively in an occupational training program sponsored by an approved company for its full-time employees and specifically relating to an environmental stewardship project;
(iv) The cost of leasing a training facility where space is unavailable at an educational institution or at the premises of an approved company in connection with an occupational training program sponsored by an approved company for its full-time employees and specifically relating to an environmental stewardship project;
(v) Employee wages to be paid in connection with an occupational training program sponsored by an approved company for its full-time employees and specifically relating to an environmental stewardship project;
(vi) Travel expenses paid by the approved company as incurred by its full-time employees resulting directly from the costs of transportation, lodging and meals that are directly related to an occupational training program necessary for the implementation of an environmental stewardship project; and
(vii) All other costs of a nature comparable to those described in this subsection.
(k) "Employee benefits" means nonmandated costs paid by an eligible company for its full-time employees for health insurance, life insurance, dental insurance, vision insurance, defined benefits, 401(k) or similar plans.
(l) "Environmental stewardship product" means any new manufactured product or substantially improved existing manufactured product that has a lesser or reduced adverse effect on human health and the environment or provides for improvement to human health and the environment when compared with existing products or competing products that serve the same purpose. Such products may include, but are not limited to, those which contain recycled content, minimize waste, conserve energy or water, and reduce the amount of toxics disposed or consumed, but shall not include products that are the result of the production of energy or energy-producing fuels.
(m) "Environmental stewardship project" or "project" means:
(i) The acquisition, construction and installation of new equipment and, with respect thereto:
1. The construction, rehabilitation and installation of improvements to facilities necessary to house the new equipment, including surveys;
2. Installation of utilities, including water, sewer, sewage treatment, gas, electricity, communications and similar facilities;
3. Off-site construction of utility extensions to the boundaries of the real estate on which the facilities are located;
All of which are utilized by an approved company or its affiliate to manufacture an environmental stewardship product as reviewed and recommended to the authority by the Environmental and Public Protection Cabinet; and
(ii) The provision of an occupational training program to provide the employees of an approved company or its affiliate with the knowledge and skills necessary to manufacture the new product.
(n) Final approval" means the action taken by the authority designating an eligible company that has previously received a preliminary approval as an approved company and authorizing the execution of an environmental stewardship agreement between the authority and the approved company.
(o) "Full-time employee" means a person employed by an approved company for a minimum of thirty-five (35) hours per week and subject to the state income tax.
(p) "Inducement" means the Mississippi tax credit as authorized by this act.
(q) "Manufacturing" means any activity involving the manufacturing, processing, assembling or production of any property, including the processing that results in a change in the condition of the property and any related activity or function, together with the storage, warehousing, distribution and related office facilities.
(r) "Preliminary approval" means the action taken by the authority designating an eligible company as a preliminarily-approved company, and conditioning final approval by the authority upon satisfaction by the eligible company of the requirements set forth in the preliminary approval.
SECTION 2. The Legislature finds and declares that the general welfare and material well-being of the citizens of the state depends in large measure upon the investment and development of facilities that produce new environmental technologies in the state, and that it is in the best interest of the state to induce the investment for production of new environmental technologies with the state in order to advance the public purposes of relieving unemployment by preserving jobs that might otherwise no longer exist or creating new jobs and by preserving and creating sources of tax revenues for the support of public services provided by the state. The Legislature also finds that the authority prescribed by this act, and the purposes to be accomplished under the provisions of this act are proper governmental and public purposes for which public money may be expended, and that the inducement of the creation of projects is of paramount importance mandating that the provisions of this act be liberally construed and applied in order to advance public purpose.
SECTION 3. (1) The authority may establish standards for the determination and preliminary approval of eligible companies and their projects by the promulgation of administrative regulations.
(2) The criteria for preliminary approval of eligible companies and environmental stewardship projects shall include, but not be limited to, the need for the inducements, the eligible costs to be expended by the eligible company, and the number of employees whose jobs are to be created or retained as a result of the project.
(3) Each eligible company making an application to the authority for the inducement shall, in a manner acceptable to the authority, describe the nature of the product to be manufactured as a result of the project, identify the eligible costs associated with the project, identify the time schedule of the proposed project, set out alternatives that are available to the eligible company, identify the influence this incentive had on the company's decision to locate the project in the state and provide any additional information relating to the project as the authority may require.
(4) The project shall have eligible costs of at least Five Million Dollars ($5,000,000.00).
(5) (a) Within six (6) months after the activation date, the approved company shall compensate a minimum of ninety percent (90%) of its full-time employees whose jobs were created or retained with base hourly wages equal to either:
(i) Seventy-five percent (75%) of the average hourly wage for the state; or
(ii) Seventy-five percent (75%) of the average hourly wage for the county in which the project is to be undertaken.
(b) If the base hourly wage calculated in paragraph (a) of this subsection is less than one hundred fifty percent (150%) of the federal minimum wage, then the base hourly wage shall be one hundred fifty percent (150%) of the federal minimum wage. In addition to the applicable base hourly wage calculated above, the eligible company shall provide employee benefits equal to at least fifteen percent (15%) of the applicable base hourly wage; however, if the eligible company does not provide employee benefits equal to at least fifteen percent (15%) of the applicable base hourly wage, the eligible company may qualify under this section if it provides the employees hired by the eligible company as a result of the economic development project total hourly compensation equal to or greater than one hundred fifteen percent (115%) of the applicable base hourly wage through increased hourly wages combined with employee benefits.
(6) After a review of relevant materials and completion of inquiries, the authority may, by resolution, give its preliminary approval by designating an eligible company as a preliminarily-approved company and authorize a conditional undertaking of the project pursuant to a memorandum of agreement negotiated between the eligible company and the authority.
(7) The preliminarily approved company shall, in a manner acceptable to the authority and at certain times as the authority may require, provide documentation relating to the eligible costs expended or obligated in connection with the project. The authority shall review the preliminarily approved company's progress in connection with the project to determine if the conditions set forth in the memorandum of agreement have been met.
(8) After a review of the documentation relating to the preliminarily approved company's compliance under the memorandum of agreement, the authority, by resolution, may give its final approval to the preliminarily approved company's application for a project and may grant to the preliminarily approved company the status of an approved company.
SECTION 4. The authority, upon adoption of its final approval, may enter into with any approved company an environmental stewardship agreement with respect to its project. The terms and provisions of each agreement, including the amount of approved costs, shall be determined by negotiations between the authority and the approved company, except that each agreement shall include the following provisions:
(a) The agreement shall set forth an activation date chosen by the approved company;
(b) The agreement shall contain a completion date within the provisions of paragraph (e) of this section by which the approved company will have completed the project. Within three (3) months after the completion date, the approved company shall document its expenditures of the eligible costs attributable to the project in a manner acceptable to the authority. The authority may employ an independent consultant or utilize technical resources to verify the cost of the project. The approved company shall reimburse the authority for the cost of a consultant or other technical resources employed by the authority;
(c) In consideration of the execution of the agreement between the authority and approved company, the approved company may be permitted a credit against the tax imposed by the Income Tax Law of 1952 on the income of the approved company generated by or arising out of the project as determined under Section 3 of this act;
(d) The total inducement authorized in the agreement for the benefit of the approved company shall be equal to the lesser of the total amount of the tax credit against the income as determined under this section through the term of the agreement or the approved costs that have not yet been recovered. The inducement shall be allowed for each taxable year of the approved company during the term of the agreement and for which a tax return of the approved company is filed; however, the maximum amount of inducement claimed by the approved company for any single taxable year of the approved company may be up to twenty-five percent (25%) of the total authorized inducement;
(e) The agreement shall provide that the term shall not be longer than the earlier of:
(i) The date on which the approved company has received inducements equal to the approved costs of its project; or
(ii) Ten (10) years from the activation date;
(f) All eligible costs of the project shall be expended by the approved company within three (3) years from the date of final approval by the authority. In the event that all eligible costs of the project are not fully expended by the approved company within the three-year period, the authority is authorized to:
(i) Reduce the inducements; or
(ii) Suspend the inducements; or
(iii) Terminate the agreement.
(g) If the agreement is terminated, the authority may require the approved company to repay the State Tax Commission all or part of any inducements received by the approved company prior to the termination of the agreement;
(h) The agreement shall specify that the approved company shall make available all of its records pertaining to the project, including, but not limited to, records relating to the expenditure of eligible costs, payroll records and any other records pertaining to the project as the authority may require;
(i) The agreement shall not be transferred or assigned by the approved company without the expressed written consent of the authority.
SECTION 5. By October 1 of each year, the State Tax Commission shall certify to the authority, in the form of an annual report, aggregate income tax credits claimed on tax returns filed during the fiscal year ending June 30 of that year by approved companies with respect to their projects under this act and shall certify to the authority, within ninety (90) days from the date an approved company has filed its state income tax return, when an approved company has taken inducements equal to its approved costs.
SECTION 6. This act shall take effect and be in force from and after January 1, 2006.