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New county ordinance outlines business property tax exemption

Commission declares investment incentive possibilities

Idaho County Courthouse

Photo by David Rauzi
Idaho County Courthouse



Ordinance Criteria

New business that meets these criteria may be eligible for property tax exemptions:

Level I Investment

Investment $500,000 to $3,000,000

Net new job creation—10 or more

Exemption—up to 40 percent for up to three years

Level II Investment

Investment $3,000,001 or more

Net new job creation—20 or more

Exemption—up to 55 percent for up to five years

New investment in existing business – not including replacement equipment – may be eligible for property tax exemptions:

Level I Investment

Investment $500,000 to $3,000,000

Exemption—up to 25 percent for up to three years

Level II Investment

Investment $3,000,001 or more

Exemption—up to 30 percent for up to five years

— Aiming to boost economic development, the Idaho County Commission has adopted a new ordinance under which the county may provide property tax breaks to new businesses. A 2017 state law allows counties to establish criteria, and the ordinance – No. 62, published in full on the idahocounty.org website – states how the local board has drawn the lines.

The law on which the ordinance is founded – state code 63-602NN – says the exemption is allowed for “plant or building facilities…for nonretail purposes that are either commercial or industrial.”

The commissioners held discussions at their Nov. 21, Nov. 28 and Dec. 5 public meetings, and all three – Skip Brandt, Mark Frei and Denis Duman – voted in favor of the new ordinance Dec. 12.

“Nothing in this ordinance shall be interpreted or construed as creations of, or an acknowledgment of, any right or entitlement to receive property tax exemptions,” the new ordinance reads in part. “The board of county commissioners is the sole authority for determining the benefits of a proposed investment and retains exclusive authority to determine whether a property tax exemption under Idaho Code 63-602NN is an appropriate incentive in any event.”

The stated purpose of the ordinance is to provide “objective criteria for determing the amount of incent tax relief that is proportional to the significant economic benefits produced by a proposed project.”

The ordinance is composed of 13 sections and requires those who would take these incentives to submit a report and certification of compliance. The report would have to contain the average number of full-time employees during the previous calendar year, a schedule of the employee positions, together with salaries paid, and employee benefit costs listed separately, together with copies of each Employer Quarterly Unemployment Insurance Tax Report for the previous calendar year, an itemized list of all new equipment and the cost and capitalization of each, and a statement as to whether the recipient is in compliance with the terms and conditions of the exemption.

When considering whether to grant the property tax exemption, the underlying state law says the board may consider trade secrets in executive session.

“Because property tax incentives effectively shift the tax burden to other taxpayers, it is important that significant benefits accrue to the public good, primarily in the form of high-paying jobs and increased property values,” the commissioners wrote in the ordinance. “As a result, exemptions should not be granted unless the board finds that a combination of direct and indirect benefits to the community from a proposed project substantially exceeds the projected cost of the tax shift.”

Because the ordinance contemplates exempting as much as 40 percent of property value – while adding 60 percent of the value to the rolls – no tax shift would result from a new business coming to town.

That’s according to Idaho County assessor James Zehner, who explained what would happen if a new business making a $500,000 investment received the exemption. Here’s how he put it in e-mail to the Free Press:

“There would still be $300,000 in ‘new construction’ value added to the assessment roll instead of the full $500,000 if a 40 percent exemption was granted,” Zehner wrote. “If the business was located in Grangeville the tax savings would be about $2,600 for the business, but there would still be about $3,900 of new tax dollars collected from the new construction that wasn’t previously being collected. Taxes from new construction is calculated outside of the three percent budget increase each taxing district is allowed, so there wouldn’t be a tax shift. There would just be a smaller portion of taxes generated by the new construction going back to the taxing districts the investment was located in.”

If a new business investment of $10,000,000 in property came to Grangeville – and brought 20 or more net new jobs with it – it could qualify for a five-year, 55 percent exemption worth about $71,000 to the business each year. About $58,000 in new property tax dollars would be collected from the business for local districts each year. After the exemption expired, the tax bill on such a property would be roughly $129,000.



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