In a surprising turn of events, Bill HB 5, proposed by Rep. Hunter, made its way through the legislative process despite initial doubts. The bill, which has sparked significant controversy, effectively eliminates final benefits for school districts and greatly reduces their involvement in the tax incentive process.
Eliminating School District Benefits:
The final version of Bill HB 5 brings about a seismic shift in how school districts will be impacted by tax incentives. It completely removes revenue protection payments, supplemental payments, and any other forms of financial support to school districts. It’s important to note that previously signed Ch. 313 Agreements remain unaffected.
Shifting Application Process:
Under the new legislation, the responsibility of reviewing applications is shifted from the school district board of trustees to the Comptroller’s office. Applicants will now submit their proposals directly to the Comptroller, who will conduct a thorough review. The Comptroller will then notify the Governor and the affected school district for final approval of the proposed form agreement.
Limited Scope and Exclusion of Renewable Energy:
Bill HB 5 establishes a 10-year corporate tax break, limiting the M&O (Maintenance and Operations) taxable value of a qualified project. However, the bill controversially excludes renewable energy, such as wind and solar, and battery storage projects from participating in these incentives. The qualifying projects include constructing or expanding facilities for manufacturing, providing utility services, developing natural resources, conducting high-tech research and development, and constructing critical infrastructure.
Incentive Percentages and Opportunity Zones:
Qualified projects will be eligible for a 50% tax incentive, while those located in opportunity zones will receive a higher incentive of 75%. These percentages aim to encourage businesses to invest in certain areas and promote economic growth. However, the exclusion of renewable energy projects raises questions about the state’s commitment to sustainable and clean energy solutions.
School Districts’ Limited Role:
The most significant change brought about by HB 5 is the near elimination of school districts’ involvement in the tax incentive process. Once the Comptroller and Governor approve the form agreement, school districts are left with a binary choice: either grant the 10-year tax incentive without considering M&O incentives or reject it.
Bill HB 5’s passage marks a notable departure from the traditional role of school districts in tax incentive programs. By removing benefits for school districts and shifting the application process to the Comptroller’s office, the bill significantly alters the dynamics of tax incentives. While proponents argue that this will attract businesses and drive economic development, critics worry about the financial implications for school districts and the exclusion of renewable energy projects. As the new program takes effect, the impact on local communities and educational funding will become clearer.
Read the full bill HB 5 here.