Isle of Wight County's machinery and tools tax structure is changing, but taxpayers will notice no variation in the amount owed.
The County’s Board of Supervisors voted Thursday evening to raise the tax rate but lower the percentage it’s based on for the remainder of fiscal year 2016-17. The change raises the tax rate from 70 cents to $1.75 but lowers the assessment rate from 100 percent to 40 percent of the original cost. The amount of money being paid to the county would remain the same.
However, offering businesses that 60 percent depreciation rate right off the bat would make the county a more appealing destination, Gerald Gwaltney, the county’s commissioner of the revenue said Tuesday evening.
"The bottom line stays the same as far as the amount of taxes," Gwaltney said. "But for some reason, it means a lot to the businesses coming in, giving 60 percent depreciation up front."
The old structure billed 70 cents per $100 of the original price. This means for a $500,000 purchase, the taxes would amount to $3,500. The new structure charges $1.75 per $100 of 40 percent of the original price. A $500,000 purchase under this new structure would also amount to $3,500.
Creating a tax rate based on less than 100 percent of the original cost looks better to businesses, according to Gwaltney.
Supervisor Dick Grice said the change will align with nearby localities, which allow for depreciation within their machinery tax structure. This means they base the tax rate on a lower percentage of the original cost, either by lowering the percentage as the years go by or by starting out with a depreciated rate.
Suffolk, Hampton and Portsmouth allow for depreciation in their machinery tax rates. For the calendar year 2015, Suffolk based its tax rate — $3.15 per $100 — on 20 percent of original cost for the first five years. Once the equipment reaches six years, the rate is based on 10 percent of original cost. Last year, Hampton’s rate — $3.50 per $100 — was based on 35 percent of original cost. Portsmouth’s rate — $3 per $100 — was based on 50 percent of the original cost for all equipment purchased in 1989 or later.
The amount business owners pay would change if either the new rate or the new assessment level changes.
The county also voted to approve $272,500 in economic incentives to Tak Investments, the lead investor behind the International Paper mill in Franklin.
ST Tissue announced its $35,000,000 expansion of the mill last month, which will include 50 new jobs, the company’s president Sahil Tak said. The county’s performance agreement with Tak Investments, approved Thursday evening, includes an annual repayment from the county of 25 percent of the new machinery and tools tax. The city of Franklin also contributed to the incentives, by only requiring the county to pay the machinery and tools tax based on the reduced amount.
The county’s incentives are dependent on the company making a capital investment of at least $35,000,000 in the facility at 34050 Union Camp Drive, and creating and maintaining at least 50 new full-time jobs by Dec. 31, 2022.
Gov. Terry McAuliffe also contributed a check for $167,500 from the Commonwealth’s Opportunity Fund for the expansion last month.
The performance agreement with Tak Investments, which includes the economic incentives, will begin Jan. 1, 2018 and end Dec. 31, 2022.
Smith can be reached by phone at 757-510-1663.