A state oversight board approved regulations Friday that codifies Gov. John Bel Edwards’s orders to dial back a lucrative tax break and allow local governments the ability to collect some of the billions of dollars in taxes owed by large corporations.

In issuing two executive orders, Edwards had said the tax exemptions are not closely monitored, require no performance standards and have been given out automatically for decades. The program forgives an average $1.4 billion in property taxes each year and will cost local government about $7 billion over the next five years.

The packet of new rules approved by the Board of Commerce and Industry is the first time the state has ever attempted to define how companies go about applying for and kinds of investments that would qualify for the 80-year-old Industrial Tax Exemption, called ITEP.

The new rules, which still must go through public hearings and legislative committees, would help ensure that the revamp of the tax exemptions system would survive the Edwards administration. Executive orders expire when the governor changes.

Also, the new rules would allow local governments a say in how the state doles tax dollars that rightly belong to them.

“If it’s done right, it’ll be a sea change. This was an important day,” said Jan Moller, a member of the board and director of the Louisiana Budget Project. “The purpose of the rules is to give business more certainty about the process. Businesses don’t like to pay taxes but what they don’t like more is not knowing what’s expected. These rules say that if I do a, b, and c, then I get d.”

Under the new system some of the projects that qualified in the past – such as administrative tasks, routine maintenance and required environmental upgrades – now would be disallowed. An applicant would have to sign a contract, called a cooperative endeavor agreement, which would spell out specifically the number of jobs and payroll created and retained. Conditions would be put in writing for an exemption of up to 100 percent of the taxes for up to five years. The contract also would detail what would be necessary for a renewing the tax break, after the first five years, but limit property tax exclusion to 80 percent of the taxes owed for no more than three years.

Bob Adair, who is the tax committee chairman for the Louisiana Mid-Continent Oil and Gas Association, a trade association that represents large energy companies, said the new system adds another few steps in the process.

“That’s kind of the purpose,” responded Robert Adley, the former state senator and energy operator who is Edwards’ designee to the board.

A majority of state government’s now fairly limited funds goes to subsidize local governments. “That’s because we take their money,” Adley said.

Adley said the new rules set in place a way for local government to influence whether they prefer the tax dollars or the increased economic impact that the incentives attract.

“The governor wants job creation and local support,” Adley said.

Lady Carlson, of Together Louisiana, a coalition of community and church groups, said local input is necessary because a lot of parishes struggle financially and property taxes is a key source of revenues to pay for schools, road maintenance, law enforcement and other services.

Together Louisiana, a coalition of clergy and social groups, earlier this week reported that the industrial tax exemption had cost local government over the past decade about $316.6 million for law enforcement and corrections; $75 million for libraries; $60.5 million for roads; $587 million in tax revenue lost to local school districts.

Officials with business associations asked the board to delay passing the rules in order to give more time to work with wording. Adley flatly refused saying the Edwards administration already made major concessions. For instance, the governor initially had wanted the new system to apply for a second five-year renewal after the first five years. But Edwards was persuaded that over time companies come to believe that automatic renewal had been essentially promised by the state.

Edwards agreed not to challenge the renewals and accept applications, filed before June 24, under the old rules.

Follow Mark Ballard on Twitter, @MarkBallardCnb.