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Industrial Facility Exemption
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Do you recommend that a PRD include only the project that is currently being rehabilitated?
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Answer:
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The PTD staff does recommend that a Plant Rehabilitation District (PRD) only
include the project currently being rehabilitated. This is actually a
recommendation which allows applicants to apply for additional replacement
facilities where they otherwise might not be allowed. This is true because, in
order to have a plant rehabilitation district, at least 50 percent of the
properties in the rehabilitation district must be obsolete. This is measured
by dividing the State Equalized Value (SEV) of the obsolete properties in the
district by the SEV of all of the properties in the district and multiplying
the result by 100.
In the case of a district which was created many years ago and encompassed
many separate buildings, many separate IFT certificates would have been issued
over the years. The result is that when the assessor calculates whether 50
percent of the properties in the district are obsolete, there are so many new
and rehabilitated properties in the district which are not obsolete and which
have returned to the ad valorem roll, that the 50 percent requirement cannot
be met.
The following procedure has been utilized to assist all concerned in
identifying the exact perimeter of the project that is being replaced and the
taxable value to be frozen.
- Designate a PRD with a legal description that specifically matches the
description of the replacement portion or project to be rehabilitated
in the application. The legal description of the district will encompass
only the building or portion of the building or machinery and equipment
that is being rehabilitated.
Note: While there is no provision in the Act to dissolve a
district, a local unit may wish to consider writing a sunset clause in
the PRD resolution, with the intent to dissolve the established PRD when
the obsolescence is cured. The rationale behind this recommendation is
that, after the completion of the rehabilitation project, it is likely
that there is no longer 50% obsolescence to meet the requirement for an
existing PRD district. If a district can be dissolved, it would preclude
a company from applying to continue the frozen assessment because it
would be necessary to re-establish the PRD. This would give the local
unit the opportunity to un-freeze the assessment.
If a PRD includes more than the property currently being
rehabilitated, an exemption certificate may be granted in the future to
additional properties even though the local unit objects to it.
- Request that the assessor provide the Taxable Value of all of the real
and/or personal property contained within the boundaries of the
specifically described PRD. This figure becomes the frozen Taxable Value
of the facility.
It has always been the practice of the State Tax Commission to request
that the SEV/TV of the entire PRD for a rehab project be frozen. Many of
the early applications involved projects in large established PRD
districts where the SEVs of the entire PRDs were later found to include
additional buildings/personal property that were contained within the
district and frozen but were not being rehabilitated at the time of the
application. This was sometimes found to be detrimental to both the
company and the local units. The detriment for companies was that there
was no allowance on frozen assessments for the depreciation of buildings
or equipment. In order to correct the frozen assessment, the company
would have to request revocation of the certificate.
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