Forrest County taxpayers may find themselves on the hook to refund nearly $2 million in tax payments to a local manufacturer after a court ruling this week.
In a filing obtained exclusively by The Hattiesburg Post, Special Circuit Judge Larry E. Roberts ruled Monday against Forrest County and the City of Hattiesburg and in favor of Kohler Co. in a dispute that dates back nearly a decade.
Kohler, a Wisconsin company best known for its plumbing products, opened a small engine manufacturing facility in Hattiesburg in 1996 after being courted with city and county tax exemptions via the Area Development Partnership.
In an effort to attract the company to Hattiesburg, a 20-year deal was struck that provided tax exemptions on raw materials and other inventory items used to manufacture small engines for lawn mowers and other small utility vehicles.
Since 1998, the facility has maintained an annual employment base of more than 300 workers at the plant located in the Hattiesburg-Forrest County Industrial Park.
Hattiesburg City Attorney Randy Pope said controversy arose at some point after the first 10 years on what was eligible for the tax exemption – namely personal property, inventory, and work in progress.
After agreeing to the exemptions for tax years 1998 through 2009, the county and city denied Kohler’s application for exemption beginning with the 2010 tax year and have continued with that same policy ever since.
Disagreeing with the governmental interpretation of the agreement, attorneys for Kohler filed a lawsuit in 2014 alleging the city and county were not making good on their original agreement and asked for a full refund of tax monies paid during those same years.
In addition to ruling in favor of Kohler, Roberts also ordered the county and city to immediately refund all tax payments paid by Kohler along with interest.
David Miller, attorney for the Forrest County Board of Supervisors, said the county’s share of the refund amounts to nearly $1 million.
Hattiesburg Mayor Toby Barker said the city’s share is nearly as much.
On Monday, following an executive session by the Forrest County Board of Supervisors, board members voted unanimously to have Miller file an appeal to the ruling.
Members of the Hattiesburg City Council voted to do the same during Tuesday’s regularly-scheduled meeting.
Miller said the appeal process would take a year or more and in the event the county were to lose the appeal, the county would have time to absorb the payout into an upcoming budget,
Because Forrest County schools benefit from the funds generated through these taxes and have received them, they would not be responsible for returning the money.
“The city and county would be responsible for repaying that money,” Miller said.
Board President David Hogan said the board was disappointed about the ruling, which they consider a technical agreement regarding inventory tax.
“We hope to be able to get some clarity, but in the meantime we respectfully disagree with the ruling,” Hogan said. “Board Attorney Miller, Tax Assessor Mary Ann Palmer and the board felt we were on the right side of this. We hope to be able to get this settled. We have the utmost confidence in Miller and Palmer.”
Hogan said Kohler Industries had been a good partner to the county.
“The board knows Kohler is a good business partner with regard to how we handle tax exemptions. We just need to get this inventory tax clarified so we’ll know how to handle in the future with other businesses.”
“We want people to know that Forrest County is business friendly and we want to sustain and expand job creation,” Hogan said. “We have extended other exemptions in their perrier and will continue to do so moving forward. Kohler is a good partner and we appreciate what they have done and will continue to do in the future.”
