Can a Mississippi county grant both manufacturing and free port warehouse tax exemptions to related entities?
Plain-English summary
Two related entities in Tishomingo County had received various manufacturing and free port warehouse exemptions. Raw materials transferred between them during manufacturing. The county wanted to know whether it could grant both kinds of exemption.
The AG: yes, if the entities qualify. Both exemptions are discretionary; both can be granted; eligibility is a fact question for the Board.
Section 27-31-101 (manufacturing exemption): Authorizes county boards to grant ad valorem tax exemptions to manufacturers and other new entities for a specified period, subject to limitations. Discretionary.
Section 27-31-51 et seq. (free port warehouse exemption): Free port warehouses must be licensed. Personal property in transit qualifies under one of four scenarios in Section 27-31-53. The exemption is "in addition to all other exemptions heretofore granted" (Section 27-31-61).
The 2020 Miller opinion clarified the "not more than one (1) other location in this state" requirement: a processing/production facility at the same physical address as the warehouse, but in a separate facility/structure/place/area as determined by the governing authority, can count as a separate location. So an integrated manufacturing/warehouse complex on one parcel can qualify, if the Board finds the production and storage are separate facilities.
Procedure: Board makes factual findings on the entities and property, spreads them on the minutes, and exercises discretion on whether to grant each exemption.
The 2000 Gamble opinion stresses that the Board "must review the factual situation as it relates to the goods in question being stored during the manufacturing process, determine if these goods meet one of the [four] requirements set forth in the statute, and then make its decision whether to grant the exemption after such review."
The AG declined to opine on past actions of the Board (Section 7-5-25; Magee 2008).
What this means for you
For county attorneys
When entities apply for both manufacturing and free port exemptions:
- Verify eligibility under each statute separately
- Walk the Board through factual findings (what's the property, what's it used for, does it meet statutory requirements)
- Get findings on the minutes
- Document the Board's exercise of discretion (granting one, both, or neither)
The exemptions stack: nothing prohibits granting both to the same entity. But each requires its own analysis and findings.
For free port warehouses with adjacent processing facilities (the Miller scenario), examine whether the production facility is "completely separate" from the storage facility. Same parcel is fine; the Board determines separateness based on facts.
For boards of supervisors
You have discretion to grant or deny these exemptions. Even if an entity qualifies, you can choose not to grant. Even if the entity barely meets the statutory framework, you can grant if the public-interest analysis supports it.
Document your reasoning. Why are you granting (or not)? Job creation, capital investment, tax base growth, alternative locations, retention factors all support the analysis.
For free port warehouses, ensure the warehouse is properly licensed under Section 27-31-51 before granting the in-transit exemption.
For manufacturing and warehouse business owners
You can apply for both exemptions if your operation involves manufacturing AND warehousing of in-transit personal property. The exemptions are not mutually exclusive.
The application process:
- Apply to the county (or municipality) where the operation is located
- Apply for each exemption separately with supporting documentation
- Provide the Board with information sufficient for findings
- Be prepared for the Board to ask follow-up questions
A favorable opinion from the Board in advance of capital investment is helpful but not legally binding. Get the formal grant after the Board's findings.
For free port warehouse operators
Section 27-31-53 has four scenarios for in-transit property eligibility:
- Property destined for shipment to one other Mississippi location for processing
- Property in transit to a destination outside Mississippi
- Property received in Mississippi and held briefly before out-of-state shipment
- Other categories specified in the statute (verify current statutory language)
Confirm your operation fits one of the scenarios. Document the in-transit nature of property.
For economic development district attorneys
These exemptions are tools in your toolkit when recruiting industry. Know the framework:
- Manufacturing exemption: time-limited, discretionary, applies to manufacturers and new entities
- Free port warehouse exemption: in-transit personal property; warehouse must be licensed; four eligibility scenarios
- Both can be granted concurrently
- Both stack with other exemptions (per Section 27-31-61)
Combine with fee-in-lieu agreements (Section 27-31-104) for major projects to create comprehensive incentive packages.
Common questions
Q: What's the manufacturing exemption (Section 27-31-101)?
A: An ad valorem tax exemption for manufacturing and certain other new enterprises, granted by county boards (and municipalities). Time-limited (typically up to 10 years) per Article 7, Section 182 of the Mississippi Constitution if the project qualifies as a "manufacture or other new enterprise of public utility."
Q: What's the free port warehouse exemption?
A: An ad valorem tax exemption for personal property in transit through Mississippi, held in a licensed free port warehouse. Authorized by Section 27-31-51 et seq.
Q: What does "in transit" mean?
A: Property moving toward another destination, not permanently stored. Section 27-31-53 has four specific scenarios. The classic case is goods received in Mississippi and held briefly before shipment to another state or to another Mississippi location for processing.
Q: Can a manufacturer also have a free port warehouse?
A: Yes. The 2020 Miller opinion confirmed that a manufacturing/processing facility and a separate warehouse on the same parcel can qualify the warehouse for the in-transit exemption. The Board determines whether the facilities are "completely separate."
Q: Does the Board have to grant the exemption if the entity qualifies?
A: No. Both exemptions are discretionary. The Board can decline even when statutory criteria are met, based on public-interest considerations.
Q: Can the Board impose conditions on the exemption?
A: The exemptions are typically granted in full or denied; conditions are limited. But the Board can structure the grant period (e.g., 7 years instead of 10), and free port licenses can have terms and conditions.
Q: What's the role of the Mississippi Development Authority (MDA)?
A: For fee-in-lieu agreements (separate framework), MDA approves. For these direct exemptions under Sections 27-31-51 et seq. and 27-31-101 et seq., the Board acts directly without MDA approval (unless other procedures apply).
Q: Can a city grant the manufacturing exemption?
A: Yes. Section 27-31-101 applies to municipalities and counties. Both can grant. If the property is in a city within a county, both jurisdictions might consider exemptions.
Q: How long does the manufacturing exemption last?
A: Typically up to 10 years, subject to Article 7, Section 182 of the Mississippi Constitution. The Board can grant a shorter period.
Q: How long does the free port warehouse exemption last?
A: Annual exemption; renewable. The warehouse license must be maintained.
Background and statutory framework
Mississippi's ad valorem exemption framework for industrial development:
Manufacturing exemption (Section 27-31-101 et seq.):
- Applies to manufacturers and certain other new enterprises
- Discretionary by county or municipal governing authority
- Time-limited
- Subject to constitutional cap (Article 7, Section 182) for corporations in manufacturing or public-utility enterprises (typically 10 years)
Free port warehouse exemption (Section 27-31-51 et seq.):
- Applies to personal property in transit
- Warehouse must be licensed (Section 27-31-51)
- Personal property must fit one of four scenarios (Section 27-31-53)
- Granted by county or municipal authority
- "In addition to all other exemptions heretofore granted" (Section 27-31-61)
Fee-in-lieu of ad valorem taxes (Section 27-31-104, separate framework):
- For larger projects
- Negotiated with the local body, MDA approval
Discretion and findings:
- Board determines factual eligibility based on the entity's operation
- Findings on the minutes
- 2000 Gamble opinion: "review the factual situation . . . determine if these goods meet [the] requirements . . . and then make its decision"
- 2020 Miller opinion: separate facilities at same address may qualify
AG limits:
- Section 7-5-25: AG opinions are prospective; cannot validate or invalidate past actions
- Magee 2008: same point
Citations and references
Statutes:
- Miss. Code Ann. § 7-5-25, AG opinion authority
- Miss. Code Ann. § 27-31-51 et seq., free port warehouse framework
- Miss. Code Ann. § 27-31-53, four scenarios for in-transit property eligibility
- Miss. Code Ann. § 27-31-61, free port exemption in addition to other exemptions
- Miss. Code Ann. § 27-31-101 et seq., manufacturing tax exemption
Prior AG opinions cited:
- MS AG Op., Magee (Aug. 29, 2008), AG opinions are prospective
- MS AG Op., Gamble (Oct. 20, 2000), Board reviews factual situation
- MS AG Op., Miller (May 13, 2020), separate facility at same address
Source
- Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
- Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2022/08/P.Whitehead-August-2-2022-Ad-Valorem-Tax-Exemptions-for-Manufacturing-and-Free-Port-Warehouses.pdf
Original opinion text
August 2, 2022
Phillip M. Whitehead, Esq.
Attorney, Tishomingo County Board of Supervisors
Post Office Box 38
Tishomingo, Mississippi 38873
Re: Ad Valorem Tax Exemptions for Manufacturing and Free Port Warehouses
Dear Mr. Whitehead:
The Office of the Attorney General has received your request for an official opinion.
Background
According to your request, two related entities with operations in Tishomingo County have previously been granted various manufacturing and free port warehouse tax exemptions. During the manufacturing process, raw material assets are ultimately transferred between entities. You state that neither entity's inventory has been subject to ad valorem taxes because it is held in a free port warehouse before shipping to one other location within the state for production into a compound part that is ultimately shipped out of state.
Question Presented
May Tishomingo County grant the manufacturing exemption pursuant to Mississippi Code Annotated Sections 27-31-101 et seq. and the free port warehouse exemption for personal property in transit through the state pursuant to Mississippi Code Annotated Sections 27-31-51 et seq. to the entities in question?
Brief Response
Whether an entity is eligible for the manufacturing exemption under Sections 27-31-101 et seq. and the free port warehouse exemption under Sections 27-31-51 et seq. is a question of fact for the governing authorities of Tishomingo County. If an entity is eligible, the governing authorities of Tishomingo County have the discretionary authority to grant both exemptions.
Applicable Law and Discussion
As an initial matter, this office cannot opine on past actions of the Tishomingo County Board of Supervisors (the "Board"). Pursuant to Section 7-5-25, this office may only opine on prospective questions of law. An Attorney General's Opinion can neither validate nor invalidate past action. MS AG Op., Magee at *1 (Aug. 29, 2008). We offer the following opinion on the question of future action of the Board in granting potential ad valorem tax exemptions.
You ask about two different potential tax exemptions, the first one being Section 27-31-101, which authorizes the governing authorities to grant exemptions from ad valorem taxation to certain manufacturers and other new entities for a specified period of time, subject to certain limitations. Id. at (1). Ultimately, whether the entities qualify for tax exemption pursuant to Section 27-31-101 for property at various stages of the manufacturing process is for the Board to decide, and it has the discretion to determine whether to grant the exemption.
You also ask whether the two entities and their respective property are eligible for tax exemptions under Section 27-31-53, which pertains to free port warehouses. Free port warehouses must be licensed by the governing authorities of the county or municipality where the warehouse or storage facility is located. Miss. Code Ann. § 27-31-51. Personal property which is in transit in this state is eligible for the exemption if it falls under one of four distinct scenarios specified in the statute. Even if the personal property at issue fits under one of the four scenarios, the granting of the exemption is discretionary, and the governing authorities "must review the factual situation as it relates to the goods in question being stored during the manufacturing process, determine if these goods meet one of the [four] requirements set forth in the statute, and then make its decision whether to grant the exemption after such review." MS AG Op., Gamble at *1 (Oct. 20, 2000).
The free port warehouse exemption "shall be in addition to all other exemptions heretofore granted by the laws of the State of Mississippi." Miss. Code Ann. § 27-31-61.
One of the entities about which you inquire has a separate on-site production facility in addition to its warehouse. This office recently opined that a processing or production facility located at the same physical address as the storage facility or warehouse, which the governing authority determines to be a completely separate facility, structure, place, or area from the storage facility or warehouse, may qualify as "not more than one (1) other location in this state" as required by Section 27-31-53. MS AG Op., Miller at *2 (May 13, 2020). Miller reiterates that it is within the sole discretion of the governing authority of the county where the storage facility or warehouse is located to determine whether to grant an exemption to personal property being stored therein.
The questions you present require the Board to make factual determinations about the two entities' facilities and personal property, with such findings spread upon its minutes. Whether to grant exemptions under Sections 27-31-101 et seq. and 27-31-51 et seq. is left to the sole discretion of the Board.
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
Assistant Attorney General