Mississippi Renewable Energy Projects Poised for Continued Growth as New Tax Incentives Go Forward

Key takeaways:

• On January 14, 2022, the Mississippi Attorney General’s Office issued an official opinion providing clarity concerning a new tax law offering additional ad valorem tax exemptions for renewable projects.
• These new incentives, when combined with existing incentives, as well as abundant, low-cost rural land and transmission availability make Mississippi an attractive state for renewable energy projects.

Pursuing and developing clean, renewable energy continues to play an important role in economic development momentum across the U.S. As states across the Southeast continue to grow their energy independence by prioritizing energy efficiency and renewable energy projects, tax incentives continue to be an important tool to accelerate investment in renewables. 

Recently, Mississippi took key steps toward enhancing incentives to encourage and promote renewable energy development in the state by authorizing increased property tax incentives state-wide. Property taxes often represent the single largest annual operating expense for renewable electric generating facilities, and reducing these costs for operators provides a competitive pricing advantage in the wholesale electric markets.  As a result, Mississippi is now poised to lead the region in new renewable energy development and investment.

In the 2021 Mississippi Legislative Session, legislators passed and the Governor signed Senate Bill 2895, a new law authorizing additional ad valorem tax exemptions to qualifying renewable energy projects.  Specifically, Miss. Code Ann. § 27-31-46  authorizes any county in Mississippi to grant an ad valorem tax exemption up to an amount not to exceed fifty percent (50%) of the total assessed value of any qualifying renewable energy project.  To qualify, the project must (i) have a capital investment from private sources of not less than $100 million; (ii) be placed in operation after April 16, 2021; and (iii) generate energy through the use of a renewable energy source such as wind, water, biomass or solar.

Since passage of the new law, Mississippi county governments, developers and advisors have faced uncertainty with respect to whether this new tax exemption replaces or is supplemental to the existing fee-in-lieu of taxation agreements already made available to qualifying projects.  On January 14, 2022, the Mississippi Attorney General’s Office issued an official opinion  providing some clarity concerning these two incentives by stating in pertinent part: “[T]his 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 . . . .”

This new interpretation now opens the possibility for a new qualifying renewable energy project to enjoy up to an eighty-three percent (83%) reduction in annual property taxes for as long as the first ten years of operation.  These new incentives, when combined with existing incentives to lower overall construction costs through sales tax and contractor tax exemptions as well as abundant, low-cost rural land and transmission availability make Mississippi a prime renewable energy siting target.  The data supports this conclusion; Mississippi is experiencing a renewable energy development boom.  In the past five (5) years, the Mississippi Public Service Commission has approved the construction of eighteen (18) new renewable energy projects representing approximately 1.4 GW of new renewable energy capacity.