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Redevelopment in Mississippi
T he
Gulf Opportunity Zone Act of 2005 is federal legislation that
was passed by Congress and signed into law by President Bush in
December of 2005. This legislation provides for Federal Tax
Incentives to areas affected by Hurricanes Katrina, Rita, and
Wilma that were designated as warranting individual or public
and individual assistance. Mississippi counties that are
included in the Zone for individual and public assistance are:
Adams, Amite, Attala, Claiborne, Choctaw, Clarke,
Copiah, Covington, Forrest, Franklin, George, Greene, Hancock,
Harrison, Hinds, Jackson, Jasper, Jefferson, Jefferson Davis, Jones,
Kemper, Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes,
Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River,
Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren,
Wayne, Wilkinson, Winston and Yazoo.
Summary of Incentives
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Expands low-income housing tax credits
within the Zone. The emergency
allocation of low-income housing tax credits is $18 multiplied
by Mississippi’s population in the Zone. (This is up from the
existing allocation of $1.90 per capita.) This allocation is
increased for 2006, 2007, and 2008. Unused allocation amounts
may not be carried forward.
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Increases Rehabilitation Tax Credit to
help restore commercial buildings. The
existing tax credit of 10% of qualified expenditures incurred
for qualified rehabilitated buildings was increased to 13%. For
historic structures, this credit was increased from 20% to
26%. These increases apply to qualifying expenses incurred from
August 28, 2005 through December 31, 2008.
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Allows Employer Provided Housing
Incentives. For a six-month
period, employers are eligible for a 30% tax credit for the cost
of employer-provided housing for employees, with a maximum cost
of $600 per month per employee located in the
Zone. Additionally, up to $600 per month of such costs would be
excluded from the employee’s income.
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Allows 50% Bonus Depreciation within the
Zone.* This incentive allows
businesses to claim an additional first-year
depreciation deduction equal to 50% of the cost of new property
investments made in the Zone. This depreciation allowance applies
to software, leasehold improvements, and certain equipment and
real estate expenditures. All depreciation deductions would be
exempt from Alternative Minimum Taxes. This provision applies to
property placed in service through December 31, 2007, or December
31, 2008 for real property. The provision also provides a one-year
extension of time to place assets in service in the Zone in order
to qualify for the bonus depreciation provided in the Jobs and
Growth Tax Relief Reconciliation Act of 2003. |
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Provides enhanced Section 179 expensing for
Small Businesses.* Eligible small
businesses (businesses with less than $400,000 of annual
investments) may expense $200,000 of investment made in the
Zone. This amount is up from $100,000, and will be allowed on
investments from August 28, 2005 through December 31, 2007. The
phase-out floor for investment is also increased from $400,000 to
$1 million through 2007. |
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Extends Net Operating Loss Carryback.* The
net operating loss (“NOL”) carryback period is extended from two
to five years for losses attributable to:
| New investment and repair of existing investment
damaged by Hurricane Katrina |
| Business casualty losses due to Hurricane Katrina
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| Moving expenses and temporary housing expense for
employees working in areas damaged by Hurricane Katrina.
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Provides for expensing of cleanup costs. Businesses
may expense 50% of cleanup and demolition costs in the
Zone. Brownfield expensing is also extended and expanded to
include sites contaminated by petroleum products. This incentive
expires after December 31, 2007. |
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Provides relief for small timber owners. Timber
owners with less than 500 acres of timber in the Zone may expense
$20,000 of reforestation costs incurred from August 27, 2005
through December 31, 2007. These owners may also elect a five-year
carryback of net operating losses incurred after August 27, 2005
and before December 31, 2007. |
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Expands the Employee Retention Tax Credit. Provides
a tax credit equal to 40% of the first $6,000 of wages paid per
employee to employers that maintain eligible employees on their
payroll. Wages must have been paid prior to January 1, 2006. This
credit is available to employers whose businesses are inoperable
as a result of damage sustained by Hurricane Katrina, and is not
affected if the employee reported to work at another location
while the business was inoperable. |
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Increases New Markets Tax Credits. $1
billion in New Markets Tax Credit authority is provided from 2005
through 2007. This authority is for investment in Community
Development Entities with recovery and redevelopment of the Zone
as a significant mission. |
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Increases Hope Scholarship and Lifetime
Learning Credits. This provision
doubles the Hope Credit dollar amounts so the maximum credit is
$3,000, and doubles the Lifetime Learning Credit percentage to
40%, for a maximum Lifetime Learning Credit of $4,000. Room and
board are considered qualified expenses. |
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Provides additional Bonding Authority.*
To assist in the rebuilding effort, the state is authorized to
issue up to $4,773,000,000 of a special class of private activity
bonds called GO Zone Bonds outside the state volume caps. The
State or municipalities may issue these bonds, with the proceeds
used to pay for acquisition, construction, and renovation of
non-residential real property. Low-income housing rules are
relaxed, so more bond proceeds may be used to rebuild housing in
the Zone. Mortgage revenue bonds may be used to repair homes (up
to $150,000), with the first-time homebuyer rule waived. Interest
payments are not subject to Alternative Minimum Taxes. This
authority expires after December 31, 2010. |
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Allows Mississippi and municipalities to
reduce costs by restructuring outstanding debt. One
additional advance refunding before January 1, 2011 is allowed for
states and municipalities within the Zone, with an additional
authorization for Mississippi of $2.25 billion. This allows the
bond issuer to restructure eligible debt by refinancing at a lower
rate or spreading interest over a longer period of time. Certain
501(c) (3) bonds are also eligible for advance refunding as well.
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Authorizes Gulf Tax Credit Debt Service
Bonds. The state is authorized to
issue debt service tax credit bonds to help devastated communities
meet their debt service requirements as a result of the
hurricane. Bonds must mature no more than two years after
issuance, and must be issued before January 1, 2007. Mississippi’s
allocation is $100 million. |
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Gulf Coast Recovery Bonds. Expresses
the sense of Congress that one or more series of savings bonds
should be designated as “Gulf Coast Recovery Bonds.”
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For Additional information go to
Mississippi Development Authority webpage.
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