Can a Mississippi county pair the renewable-energy 50% tax exemption with a fee-in-lieu of ad valorem taxes for the same project?

Plain-English summary

Tunica County's Board attorney asked about a $100M+ renewable energy project. The developer wanted both the 50% Section 27-31-46 exemption (specifically for renewable-energy facilities meeting the capital threshold) and a Section 27-31-104 fee-in-lieu of ad valorem taxes. Four questions:

1. Can the 50% exemption exceed ten years? Only if the Board determines that Article 7, Section 182 of the Mississippi Constitution does not apply (i.e., the project isn't a corporation pursuing manufacturing or public-utility enterprise). The Constitution caps tax exemptions at ten years for those enterprises.
2. When does the exemption period start? If Article 7, Section 182 applies, the exemption starts from the date of completion of the new enterprise. No discretionary flexibility.
3. Can the Board grant the exemption AND the fee-in-lieu concurrently? Yes, no statutory prohibition. But MDA decides whether the project qualifies for the fee-in-lieu under Section 27-31-104.
4. Can the exemption be folded into the fee-in-lieu agreement for MDA approval? No. MDA's authority is limited to approving fee-in-lieu agreements. It cannot approve peripheral agreements like the tax exemption riding along.

The AG also flagged that whether the project qualifies as a "project" under Section 27-31-46 (renewable energy, $100M+ investment) and whether it's a "corporation" pursuing a "manufacture or other new enterprise of public utility" under Article 7, Section 182 are factual determinations for the Board, not legal questions for the AG.

What this means for you

For county attorneys and boards of supervisors

Under the opinion, the Board may grant the 50% Section 27-31-46 exemption and a Section 27-31-104 fee-in-lieu at the same time: the office "finds no statutory prohibition against a party contemporaneously enjoying the benefits" of both. But several questions are factual ones the opinion says only the Board can decide, not the AG: whether the project meets the Section 27-31-46 definition of "project" (a renewable-energy facility using "wind, water, biomass or solar"), whether the $100 million capital-investment requirement is met, whether the project is a "corporation" under Article 7, Section 199, and whether it is a "manufacture or other new enterprise of public utility" under Article 7, Section 182. If the Board determines the project comes within Section 182, the exemption "may not exceed a period of ten years" and "shall commence from the date of completion of the new enterprise," with no discretionary flexibility.

For renewable energy developers

The opinion confirms both incentives can apply to one project, but it stresses that "only the MDA can determine whether the Project is statutorily eligible to qualify for a fee-in-lieu." It also holds that the exemption cannot be folded into the fee-in-lieu agreement for MDA approval: the MDA's authority "is limited to approving a fee-in-lieu agreement only to the extent that it complies with the statute, and it has no authority to approve peripheral agreements incorporated into a fee-in-lieu agreement."

On the exemption period

The opinion answers the duration question conditionally. The Section 27-31-46 exemption may exceed ten years "only if the Board determines that Article 7, Section 182 of the Mississippi Constitution does not apply." If Section 182 does apply, the ten-year cap and the completion-date start are mandatory, though the opinion notes a further ten-year exemption "also may be granted on each addition and expansion thereto."

Common questions

Q: Can a Mississippi county grant the renewable-energy exemption and a fee-in-lieu for the same project?
A: Yes. The opinion says it "finds no statutory prohibition against a party contemporaneously enjoying the benefits of the exemption authorized by Section 27-31-46 and a fee-in-lieu," but adds that the MDA must finally approve any fee-in-lieu and decide whether the project qualifies.

Q: Can the 50% exemption last longer than ten years?
A: Only if the Board determines Article 7, Section 182 of the Constitution does not apply. If the project is a "corporation" pursuing a "manufacture or other new enterprise of public utility," the exemption "may not exceed a period of ten years."

Q: When does the exemption period start?
A: If Section 182 applies, the opinion says the "exemption shall commence from the date of completion of the new enterprise," and "there is no discretionary flexibility."

Q: Who decides whether the project is a "corporation" or a "public utility" enterprise?
A: The Board, not the AG. The opinion calls these "questions of fact on which this office cannot opine," citing Section 7-5-25 and the Barton opinion. Article 7, Section 199 defines "corporation" as "all associations and all joint-stock companies for pecuniary gain having privileges not possessed by individuals or partnerships."

Q: Can the exemption be written into the fee-in-lieu agreement submitted to the MDA?
A: No. The opinion holds the MDA's authority "does not extend beyond approving a fee-in-lieu agreement's compliance with the requirements of Section 27-31-104," and that incorporating "a peripheral agreement such as the tax exemption into a fee-in-lieu agreement" is "outside the scope of the MDA's authority," even though the exemption "may impact the calculation of any potential fee-in-lieu."

Background and statutory framework

The request came from Tunica County, where the Board was discussing a renewable-energy project with more than $100 million in proposed private capital investment, and the developer wanted both a fee-in-lieu and the new Section 27-31-46 exemption.

Section 27-31-46 defines a "project" as a facility "generating energy through the use of a renewable energy source such as wind, water, biomass or solar," and allows a county board, for projects with at least $100 million in private capital investment, to exempt up to 50% of the total assessed value from ad valorem taxation. The opinion notes the statute "makes no mention of how long the exemption lasts or when the exemption commences."

Article 7, Section 182 of the Constitution supplies those limits where it applies: the Legislature "may grant exemption from taxation in the encouragement of manufactures and other new enterprises of public utility extending for a period of not exceeding ten (10) years on each such enterprise," with the time of each exemption commencing "from the date of completion of the new enterprise." The opinion explains that before Section 182 applies, the Board must determine both that the project is a "corporation" (defined in Article 7, Section 199) and that it qualifies as a manufacture or new enterprise of public utility, both questions of fact.

Section 27-31-104 authorizes the fee-in-lieu of ad valorem taxes, but provides that any such grant must be "given final approval by the Mississippi Development Authority as satisfying the requirements of this section." The opinion reads that to confine the MDA to approving the fee-in-lieu's statutory compliance, not any peripheral exemption agreement attached to it.

Citations and references

Statutes:

• Miss. Code Ann. § 7-5-25, scope of AG opinions
• Miss. Code Ann. § 27-31-46, 50% renewable-energy ad valorem exemption ($100M threshold)
• Miss. Code Ann. § 27-31-104, fee-in-lieu of ad valorem taxes; MDA approval

Mississippi Constitution:

• Miss. Const. art. VII, § 182, ten-year cap on exemptions for manufactures and public-utility enterprises
• Miss. Const. art. VII, § 199, definition of "corporation"

Prior AG opinions cited:

• MS AG Op., Barton (May 17, 2021), AG opinions cannot resolve fact questions

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2022/03/J.PerryJr.-January-14-2022-Miss.-Code-Ann.-Section-27-31-46-and-Fee-in-lieu-of-Ad-Valorem-Taxes.pdf

Original opinion text

January 14, 2022

John Keith Perry, Jr.
Attorney, Tunica County Board of Supervisors
5699 Getwell Road, Bldg. G5
Southaven, Mississippi 38672

Re: Miss. Code Ann. § 27-31-46 and Fee-in-lieu of Ad Valorem Taxes

Dear Mr. Perry:

The Office of the Attorney General has received your request for an official opinion.

Background

According to your request, the Tunica County Board of Supervisors (the "Board") and local economic development representatives have entered into discussions with the developer of a renewable energy project (the "Project"). Your request states the developer is interested in locating the Project in Tunica County and spending in excess of $100,000,000.00 in capital investment. The developer wants the Board to grant not only a fee-in-lieu of ad valorem taxes, but also an ad valorem tax exemption under the recently enacted Mississippi Code Annotated Section 27-31-46.

Questions Presented

1. May the 50% exemption granted pursuant to Section 27-31-46 exceed a period of ten years?
2. If the 50% exemption is limited to ten years in duration, does the substantial completion date trigger the beginning of the exemption period, or is there any discretionary flexibility in determining the beginning of the period?
3. May the Board legally approve and grant, if it chooses to do so, the exemption under Section 27-31-46, while simultaneously granting the fee-in-lieu pursuant to Section 27-31-104, or is the Board limited to granting one or the other?
4. If the Board may legally approve and grant both the fee-in-lieu pursuant to Section 27-31-104 and the 50% exemption under Section 27-31-46, may the Board include the agreement for the 50% exemption in the fee-in-lieu agreement, and may the Mississippi Development Authority ("MDA") certify the fee-in-lieu agreement if it contains such 50% exemption agreement in addition to the fee-in-lieu agreement?

Brief Response

1. The exemption granted pursuant to Section 27-31-46 may only exceed ten years if the Board determines that Article 7, Section 182 of the Mississippi Constitution does not apply.
2. If the Board determines that Article 7, Section 182 of the Mississippi Constitution applies, the exemption must commence from the date of completion of the new enterprise.
3. This office is unaware of any prohibition against the Board granting the tax exemption and fee-in-lieu concurrently. However, only the MDA can determine whether the Project is statutorily eligible to qualify for a fee-in-lieu of ad valorem taxes.
4. Section 27-31-46 authorizes the Board to grant an ad valorem tax exemption up to 50% of the total assessed value of the project, and Section 27-31-104 authorizes the Board to negotiate an agreement granting a fee-in-lieu of ad valorem taxes subject to final approval by the MDA. However, the MDA's grant of authority is limited to approving a fee-in-lieu agreement only to the extent that it complies with the statute, and it has no authority to approve peripheral agreements incorporated into a fee-in-lieu agreement.

Applicable Law and Discussion

Section 27-31-46 reads as follows:

(1) As used in this section, "project" means a facility, placed in operation after the effective date of this act, generating energy through the use of a renewable energy source such as wind, water, biomass or solar.

(2) In any project with a capital investment from private sources of not less than One Hundred Million Dollars ($100,000,000.00), all property, whether real, personal or mixed, including fixtures and leaseholds utilized in the project, including, but not limited to, operational and environmental property utilized in the project, may be exempted by the county board of supervisors from ad valorem taxation up to an amount not to exceed fifty percent (50%) of the total assessed value of the project.

As an initial matter, whether the Project meets the definition of "project" in Section 27-31-46 or whether the capital investment requirements of Section 27-31-46 are met are questions requiring factual determinations, which must be made by the Board. Pursuant to Section 7-5-25, official opinions of the Attorney General may only address prospective questions of law; they may not address fact questions. MS AG Op., Barton at *2 n.2 (May 17, 2021) (identifying questions of fact as one of various kinds of questions that cannot be addressed by official opinion).

As noted in your request, Section 27-31-46 makes no mention of how long the exemption lasts or when the exemption commences.

Article 7, Section 182 of the Mississippi Constitution governs tax exemptions granted by the Legislature for the purpose of encouraging development within the state, providing:

The power to tax corporations and their property shall never be surrendered or abridged by any contract or grant to which the State or any political subdivision thereof may be a party, except that the Legislature may grant exemption from taxation in the encouragement of manufactures and other new enterprises of public utility extending for a period of not exceeding ten (10) years on each such enterprise hereafter constructed, and may grant exemptions not exceeding ten (10) years on each addition thereto or expansion thereof, and may grant exemptions not exceeding ten (10) years on future additions to or expansions of existing manufactures and other enterprises of public utility. The time of each exemption shall commence from the date of completion of the new enterprise, and from the date of completion of each addition or expansion, for which an exemption is granted. When the Legislature grants such exemptions for a period of ten (10) years or less, it shall be done by general laws, which shall distinctly enumerate the classes of manufactures and other new enterprises of public utility, entitled to such exemptions, and shall prescribe the mode and manner in which the right to such exemptions shall be determined.

MISS. CONST. art. VII, § 182 (emphasis added).

Before application of Article 7, Section 182, the Board must determine two things: whether the Project is a "corporation" as envisioned by the Constitution, and whether the Project qualifies as a manufacture or other new enterprise of public utility. The Constitution defines corporation as "all associations and all joint-stock companies for pecuniary gain having privileges not possessed by individuals or partnerships." MISS. CONST. art. VII, § 199. These are questions of fact on which this office cannot opine. If the Board determines that the Project comes under the purview of Article 7, Section 182, then the exemption granted by Section 27-31-46 may not exceed a period of ten years. However, an exemption not exceeding ten years also may be granted on each addition and expansion thereto. MISS. CONST. art. VII, § 182.

This constitutional section also dictates the commencement date of the exemption period, which is the subject of your second question. Again, if the Board determines that the Project comes within the purview of Article 7, Section 182, then the "exemption shall commence from the date of completion of the new enterprise," and there is no discretionary flexibility.

Next, you ask whether the Board may grant the tax exemption under Section 27-31-46 at the same time it grants a fee-in-lieu of taxes pursuant to Section 27-31-104. Section 27-31-104 empowers boards of supervisors to enter into fee-in-lieu agreements with certain enumerated categories of enterprises; however, "[a]ny grant of a fee-in-lieu of ad valorem taxes shall be evidenced by a written agreement negotiated by the enterprise and the county board of supervisors and/or municipal authority, as the case may be, and given final approval by the Mississippi Development Authority as satisfying the requirements of this section." Miss. Code Ann. § 27-31-104(3) (emphasis added). While this office finds no statutory prohibition against a party contemporaneously enjoying the benefits of the exemption authorized by Section 27-31-46 and a fee-in-lieu, the MDA has to finally approve any grant of a fee-in-lieu and whether a project comports with the statutory scheme.

Your last question asks whether the Board may include the exemption provided by Section 27-31-46 in a fee-in-lieu agreement submitted to the MDA for its approval, and whether the MDA can certify the fee-in-lieu agreement if it contains the tax exemption. As stated previously, the statute is clear that the MDA's authority does not extend beyond approving a fee-in-lieu agreement's compliance with the requirements of Section 27-31-104. The enterprise and the Board are responsible for negotiating a written agreement evidencing the grant of a fee-in-lieu, but the MDA's final approval rests upon the satisfactory fulfillment of Section 27-31-104's requirements. Miss. Code Ann. § 27-31-104(3). While the tax exemption may impact the calculation of any potential fee-in-lieu, the actual incorporation of a peripheral agreement such as the tax exemption into a fee-in-lieu agreement and submitting such to the MDA for its approval requires action that is outside the scope of the MDA's authority.

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,

LYNN FITCH, ATTORNEY GENERAL

By: /s/ Misty Monroe
Misty Monroe
Special Assistant Attorney General