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Mississippi Economic Impact
This summary of Federal Legislation is intended as a general overview.
The Mississippi Development Authority has no control or influence over
the content or implementation of this legislation, and does not administer
or approve these programs. This document lists only selected
incentives, and does not address all requirements, exclusions, and
limitations outlined in the act. Eligibility and other requirements related to
these incentives should be discussed with the recipient’s tax
professionals.

The 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:

Summary of Incentives:

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.
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.
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.
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.
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.
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
Moving expenses and temporary housing expense for employees
working in areas damaged by Hurricane Katrina.

Taxpayers with losses associated with public utility property
caused by Hurricane Katrina may either carryback a net operating
loss attributable to certain casualty losses 10 years, or treat
certain casualty losses as having occurred five years prior to the
disaster.
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.
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.
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.
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.
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.
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.
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.
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.
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.”

*GO Zone bonus depreciation, section 179 expensing, extended NOL carryback, and bonding
authority will not be allowed for private or commercial golf courses, country clubs, massage
parlors, hot tub facilities, suntan facilities, liquor stores, or gambling or animal racing property.

GOVERNOR
BARBOUR SIGNS
BILL TO AID SMALL
BUSINESS

(Jackson, Mississippi) –
Legislation signed by Governor
Haley Barbour will allow more
small and mid-sized
businesses to qualify for GO
Zone tax-exempt bond
financing as they build new
facilities or expand in
Mississippi.

The legislation, House Bill
1390, became effective
when Governor Barbour
signed it on March 26, 2007.
It changes the Small Enterprise
Development Finance Program
(SED) so that more small-to-
mid-sized businesses can
qualify for low-interest loans of
between $350,000 and $4
million to finance the
construction and renovation of
buildings or the purchase of
new equipment. Prior to this
change, only manufacturing
and industrial projects were
eligible; now, under the SED
Program, most commercial
businesses, including
retail development and service
related businesses, may
qualify for tax-exempt financing.

“The job-creation potential of
this new law is significant
because it extends advantages
of the GO Zone program to
retail and service-related
businesses,” Governor
Barbour said. “The
combination of lower than
market interest rates, a fixed
term and state tax incentives
will make this an attractive
financing option for many
businesses locating or
expanding within
the GO Zone.”

The new law seeks to boost
commercial development under
terms of the federal
Gulf Opportunity Zone Act of
2005, which offers special
rebuilding and recovery
assistance in the 49 counties
in Mississippi most impacted by
Hurricane Katrina.