Investing tax-credit extension weighed
Nucor Steel cites pandemic delays
Sen. David Wallace, RLeachville, said Monday that he wants the Legislature to extend a tax credit to help Nucor Steel Arkansas.
Senate Revenue and Taxation Committee Chairman Sen. Bill Sample, R-Hot Springs, said the committee will delay action on Wallace’s amended version of Senate Bill 566 until Wednesday.
The bill would change the date by which a company must incur a project cost for a retention tax credit through InvestArk program under the Consolidated Incentive Act of 2003, according to the state Department of Finance and Administration. Under current law, project costs must be incurred within four years of the approved incentive agreement to be eligible.
Wallace told the tax committee that Nucor Steel’s projects had been scheduled to be completed before the sunset of the InvestArk program, but the company froze the projects because of covid-19 and kept every worker employed.
“We only need 24 months to finish these projects,” he said. “The important part about this is that no credits will be
claimed until this work is completed and none of it before 2024.”
Major projects that were underway at Nucor’s Arkansas steel mills when the pandemic hit have been disrupted and delayed, said David Reinhart, the company’s controller. To protect the health and safety of its teammates during the pandemic, Nucor has limited travel and access to its steel mills by outside vendors and contractors and implemented physical distancing at its facilities, he said.
Before any tax credit can be used, the Arkansas Economic Development Commission must show a positive impact on the state under his bill, Wallace said. Nucor has paid $57 million in sales tax to Arkansas since 2017 when these projects were approved, he said.
Under the amended version of SB566, the retention tax credits earned between 49 and 72 months after the Economic Development Commission approved the financial incentive may be taken on or after July 1, 2023, under certain conditions.
These conditions include that the commission’s director has determined that the applicant’s investment, in the part of the qualified project to be completed within 49 and 72 months after the commission approved the incentive agreement, will generate a return likely to be equal or greater than the amount of the retention tax credits, and that the application was filed with the commission between June 22-28, 2017.
The maximum of retention tax credits that may be used in any fiscal year by a qualified applicant is $750,000 under the amended version of the bill.
Paul Gehring, an assistant revenue commissioner for the state Department of Finance and Administration, said that “we do not see that there will be a fiscal impact” for fiscal 2022 or for fiscal 2023.
“We will be issuing a fiscal impact statement based
upon the amendment and we will have that ready during the next 24 hours for the committee,” he told the Senate tax committee.
Nucor’s Reinhart said the company’s 2,000 employees in Arkansas want to thank Wallace for sponsoring the bill.
The bill will help Nucor and similarly situated companies by extending the InvestArk project deadline by 24 months, he said The program has provided a sales tax credit for major construction, expansion and modernization projects of more than $5 million for manufacturers and other qualifying businesses, he said.
“We have qualifying projects that were approved prior to June 2017’s cutoff date, but … we cannot meet the four-year deadline,” Reinhart said.
The bill would provide qualifying projects submitted before the 2017 deadline 24 more months to complete these investments in Arkansas and still realize the tax credits tied to sizable investments,
“These credits already have been approved, but because of the pandemic we need some additional time to finish these projects,” Reinhart said.
Nucor’s two steel-making facilities in northeast Arkansas are a major reason why Mississippi County is now the No. 2 steel-producing county in the United States, he said.
While Nucor remains committed to more than $500 million of capital projects that it has recently undertaken at its Arkansas facilities, “like many businesses, Nucor has been and continues to be impacted by the pandemic,” Reinhart said.
He said supply chains for critical materials have been severely affected during the pandemic, and that delayed delivery of products needed to complete projects at its mills.
“Despite our best efforts, the pandemic continues to prevent projects from being completed on schedule,” Reinhart said.