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 negotiating renewable energy deals

You can stack the 50% Section 27-31-46 exemption with a Section 27-31-104 fee-in-lieu, and both can sit on the same project at the same time. The Board needs to make several factual determinations:

1. Does the project meet Section 27-31-46's definition (renewable energy: wind, water, biomass, solar; placed in operation after the act's effective date)?
2. Does it have $100M+ in private capital investment?
3. Is the developer a "corporation" under Article 7, Section 199 (associations, joint-stock companies for pecuniary gain)?
4. Is it a "manufacture or other new enterprise of public utility" under Article 7, Section 182?

If 3 and 4 are yes, the exemption is constitutionally limited to ten years and starts from completion. If either is no, the Board has discretion to set the period (the AG implies, though does not explicitly hold, that the cap could be longer).

Document the Board's factual findings on the minutes. These determinations carry the legal effect.

For renewable energy developers

You can negotiate both incentives. Coordinate with the MDA early on the fee-in-lieu side, since that's where the certification authority sits. Don't try to fold the Section 27-31-46 exemption into the fee-in-lieu paperwork submitted to MDA: that's outside MDA's authority and could complicate certification.

Document each incentive in its own instrument. The Board's ad valorem exemption resolution is one document; the fee-in-lieu agreement is another.

For boards of supervisors

The decision sequence:

1. Make findings about whether Article 7, Section 182 applies (corporation? manufacture/public utility?)
2. If yes, exemption period is capped at ten years from completion
3. If yes to fee-in-lieu eligibility, negotiate the agreement and submit to MDA for certification
4. Keep instruments separate

If the Board determines Article 7, Section 182 does not apply, the AG opinion suggests the ten-year cap doesn't bind, but does not specify a maximum period. Get tax counsel before relying on a longer term.

For economic development professionals

Stacked incentives are real. The state's renewable-energy threshold ($100M) is high but achievable for utility-scale solar, wind, or biomass. Combined with a fee-in-lieu, the cost of property tax for the project's first decade can drop substantially.

Use this opinion as a roadmap when pitching renewable energy projects to your board. Document the "factual determination" steps cleanly.

Common questions

Q: What does "fee-in-lieu of ad valorem taxes" mean?
A: It's a negotiated payment from a qualifying enterprise to the county or municipality in lieu of the standard property tax assessment. Section 27-31-104 authorizes it for certain economic development projects, subject to MDA approval.

Q: What does "manufacture or other new enterprise of public utility" mean under Article 7, Section 182?
A: The Constitution doesn't define it precisely, and Mississippi courts have historically read it to cover a range of industrial and utility enterprises. Whether a renewable energy facility qualifies is a fact-and-law question on which the Board may need outside counsel.

Q: Can the Board grant the exemption to a non-corporation (LLC, partnership)?
A: Article 7, Section 199 defines "corporation" broadly to include "all associations and all joint-stock companies for pecuniary gain having privileges not possessed by individuals or partnerships." Most modern LLCs likely fall within this definition. A traditional partnership might not.

Q: What is MDA?
A: Mississippi Development Authority. It's the state agency that approves fee-in-lieu agreements for compliance with Section 27-31-104.

Q: What if the project is below $100M?
A: Section 27-31-46 doesn't apply. The Board could still consider other ad valorem exemption authorities (like Section 27-31-101 industrial exemption) and/or a fee-in-lieu separately, subject to those statutes' own thresholds.

Q: Can the Board provide additional exemptions beyond Section 27-31-46?
A: Article 7, Section 182 caps "exemption from taxation in the encouragement of manufactures and other new enterprises of public utility" at ten years for corporations within that definition. Other types of relief (fee-in-lieu, infrastructure grants, payment programs) sit on different legal footing.

Q: How does the ten-year cap interact with extensions and additions?
A: Article 7, Section 182 says the Legislature "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." Each phased addition can get its own ten-year exemption.

Background and statutory framework

Mississippi structures its industrial tax incentives across several statutes:

• Section 27-31-46 authorizes county boards to exempt up to 50% of assessed value for renewable energy projects with $100M+ private capital investment. It does not specify duration or commencement.
• Section 27-31-104 authorizes county boards to negotiate fee-in-lieu of ad valorem taxes for certain enterprises, subject to MDA's final approval.
• Section 7-5-25 is the AG's authority statute, which limits AG opinions to prospective questions of law (not facts).
• Article 7, Section 182 is the constitutional cap: the Legislature can grant exemptions for manufactures and public-utility enterprises only for up to ten years from completion.

The AG's analysis turns on whether the constitutional cap binds: if the project meets Article 7, Section 182's scope, the ten-year limit is mandatory. The Board's role is to make the factual findings about the project's nature, then apply the legal framework.

The MDA's authority is narrow: it approves fee-in-lieu agreements for Section 27-31-104 compliance. Tucking other agreements into the fee-in-lieu paper does not extend MDA's authority over them.

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