Ad valorem taxes

An ad valorem tax (Latin for “according to value”) is a tax whose amount is based on the value of a transaction or of property. Perhaps the most common form of such a tax is the annual real estate tax collected by the county.

Business owners know, however, that an ad valorem tax is also assessed against the personal property of the business, including inventory and equipment.

To assist counties and municipalities in their effort to entice businesses to move to a particular county or city, the Mississippi Legislature has given them the ability to grant exemptions to certain ad valorem taxes.

Mississippi law creates a number of such exemptions. Today, we will look at the exemption applicable to the establishment or expansion of a business.

The beginning point is Section 27-31-101 of the Mississippi Code. It is there that counties and cities are authorized, in their discretion, to grant exemptions from certain ad valorem taxes.

There are two important take-aways from this statute. First, the decision as to whether to grant an exemption is discretionary with the county or city. They are not required to grant any exemptions.

Second, because the decision is discretionary, the conditions upon which an exemption can be obtained will vary from county to county or city to city.

The statute limits the exemption to a total of 10 years. If the county or city grants an exemption for less than 10 years, however, it has the right to extend the exemption, but only for a total of 10 years.

New Business

Section 27-31-101 lists the following new enterprises that may be granted an ad valorem tax exemption:

(a) Warehouse and/or distribution centers;

(b) Manufacturing, processors and refineries;

(c) Research facilities;

(d) Corporate regional and national headquarters meeting minimum criteria established by the Mississippi Development Authority;

(e) Movie industry studios meeting minimum criteria established by the Mississippi Development Authority;

(f) Air transportation and maintenance facilities meeting minimum criteria established by the Mississippi Development Authority;

(g) Recreational facilities that impact tourism meeting minimum criteria established by the Mississippi Development Authority;

(h) Data/information processing enterprises meeting minimum criteria established by the Mississippi Development Authority;

(i) Technology intensive enterprises or facilities meeting criteria established by the Mississippi Development Authority;

(j) Health care industry facilities as defined in Section 57-117-3; and

(k) Telecommunications enterprises meeting minimum criteria established by the Mississippi Development Authority.

Section 27-31-105 of the Mississippi Code also allows businesses that expand current facilities and/or replace equipment to apply for an exemption.

As noted above, because the ad valorem tax exemption is discretionary, it is understandable that the criteria and process for obtaining the exemption will not be the same from county to county or city to city.

As a result, let us look at one example – – the Madison County, Mississippi, Ad Valorem Tax Exemption Policy. The Policy is lengthy, but here are some of the high points:

The timeline for seeking the exemption is as follows:

The procedure is detailed, but it can result in a significant tax savings.

Panter Law Firm, PLLC, 7736 Old Canton Road, Suite B, Madison, MS 39110.

601-607-3156.

www.craigpanterlaw.com

Craig Painter

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