La. House OKs Expanding Biz Tax Breaks For Virus Recovery

By Paul Williams
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Law360 (June 16, 2020, 8:39 PM EDT) -- Louisiana's House of Representatives approved Republican-backed bills Tuesday designed to help retailers, restaurants and hotels recover from the novel coronavirus pandemic by making them eligible for certain tax incentive programs, despite Democratic objections that the measures were misguided.

The House, mostly along partisan lines, approved H.B. 13 and H.B. 19, which seek to allow the state's retail, food service and hospitality sectors to participate in existing job-creation tax incentive programs available to other industries. The bills will move to the Senate for consideration.

Republicans touted the measures as vehicles to aid small businesses that the pandemic hit the hardest, while some Democrats argued that they would allow large retailers to reap most of the benefits.

H.B. 13, which passed by a 62-32 vote, would allow retailers, restaurants and hotels to participate in Louisiana's Enterprise Zone incentive, which offers one-time tax credits of $1,000 or $3,500 per qualifying job created in designated areas. The program also offers a choice of a sales tax rebate on qualifying expenditures or a 1.5% refundable credit on qualifying capital expenditures, according to a fiscal note on the bill.

H.B. 19, which passed by a 68-26 vote, offers to make those industries eligible for the state's Quality Jobs Program, which allows payroll subsidies for qualifying businesses that create new jobs that pay at least $18 an hour, as well as a sales tax rebate or 1.5% refundable credit similar to the Enterprise Zone program. Both bills would allow restaurants, retailers and hotels to enter into the programs between July 1 and Dec. 31, 2021, with the benefits awarded to them through June 30, 2025.

"Our businesses are in dire need right now, especially the industry that this will hit," Rep. Lance Harris, R-Alexandria, said in support of H.B. 19. "This will create good-paying jobs with health insurance."

Harris also said the bill cured some of Democratic Gov. John Bel Edwards' concerns about a similar bill, H.B. 846, that he vetoed Monday. Edwards objected to the bill because businesses would have been eligible for incentives for creating minimum-wage jobs.

The state's Revenue Estimating Conference determined in May that the pandemic would slash state general fund revenue by about $868 million for fiscal year 2021. Fiscal notes on the bills were unable to peg an exact estimate of how much the measures would cost the state, but the note on the Quality Jobs Program expansion cautioned that "a material state revenue loss exposure is possible."

Rep. Ted James, D-Baton Rouge, who voted against the bills, told Law360 that he doesn't think the Legislature should change its incentive programs solely because of the onset of COVID-19, the respiratory illness caused by the virus.

"Continuing to give out money in the name of the pandemic is irresponsible," said James, who was hospitalized with the illness.

James added that he thinks the bills would have the state subsidize larger businesses that already received federal aid or state grant money instead of targeting relief toward smaller companies that are financially struggling.

On the House floor, James also said the Legislature removed retailers and restaurants from the Enterprise Zone program several years ago because Louisiana was providing an incentive for low-paying jobs through that initiative.

Rep. Mark Wright, R-Covington, who sponsored the Enterprise Zone bill, responded that it made sense in the long term for the state to exclude those industries from the program but that the bill would help create jobs in those sectors in the short term.

Many retailers, restaurants and hotels around the nation were ordered to close or scale back their services as states sought to contain the spread of COVID-19. The legislation was offered at the behest of a business-heavy task force that Louisiana's legislative leaders created to offer solutions to help the state's economy recover from the pandemic.

Edwards has created his own commission to explore ways that the state can support its economy as it recovers from the pandemic. His office referred questions about the bills to Kimberly Lewis Robinson, the state's revenue secretary. Robinson told Law360 that the governor's administration has concerns about the measures' return on investment potential for the state.

Robinson said lawmakers pared down the types of businesses that are eligible for the Enterprise Zone incentives because the number of jobs that some businesses created were small in comparison with the large rebates they received for projects with high capital expenditures.

"We would prefer to have a targeted approach to recovery ... as opposed to long-term tax policy changes that we just moved away from," said Robinson, who is also a member of Edwards' commission.

Robinson said the administration supports a small-business grant program that the Legislature created to help businesses weather the pandemic, and would prefer to see the state focus on maximizing that initiative. The commission also backs an active bill that would prolong the duration of a tax credit for rehabilitating historic structures, she said, because that would provide a better return on investment for the state than expanding the tax incentive programs.

Meanwhile, Stan Harris, president and chief executive of the Louisiana Restaurant Association, told Law360 that the group supports the Enterprise Zone and Quality Jobs Program bills as ways of "getting people back to work."

The offices of several Republicans, including House Speaker Clay Schexnayder, R-Gonzales, who has championed his task force's suggestions, did not respond to requests for comment.

--Editing by Neil Cohen.

For a reprint of this article, please contact reprints@law360.com.

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