Incentives
available to a company planning an expansion or new facility can be as
straightforward as an investment tax credit to be claimed against corporate
income tax or as complicated as an entire package of benefits negotiated
prior to an expansion.
These more complicated incentives may
require that the company meet goals and benchmark levels of investment
or employment by stated deadlines once a project begins.
When investigating incentives, and comparing
them with those offered by other jurisdictions, companies should begin
with a broad approach.
Look for every incentive that a state
offers. Prepare a checklist of the incentives you are aware of in various
states and investigate those as well as new programs that you turn up.
A starting point for your checklist might
include: investment tax credits, jobs tax credits, enterprise zone credits,
training credits/grants, tax increment financing, property tax abatement,
utility rate assistance, infrastructure assistance and fees in lieu of
taxes.
| Smart
Growth is a concept where a state would no longer use taxpayer dollars
to promote sprawl or the "abandonment" of cities. Rather, public funds
would only be used to revitalize existing communities and preserve open
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The search for incentives
A significant amount of information is
available by contacting state agencies such as departments of revenue,
economic development agencies and commerce departments.
In addition, an overview of incentives
is also available for most states on the Internet simply by accessing the
state’s home page. Most states can be found at www.state.XX.us — where
XX is the two letter state abbreviation.
The glossy brochures issued by the states
and their colorful Web sites are designed to sell them to potential taxpayers.
Most states offer at least some of these benefits to new or expanding companies.
The fine print
Offering an incentive, however, is not
the same as qualifying for the benefits. This significant difference lies
in the details. Once a complete list of available incentives is identified,
getting down to the nitty gritty data will help prioritize those that would
offer the most benefit to a company.
For example, against what tax liability
could an investment tax credit be used and what is the carry- over period
for any unused credit? Generating a $1 million investment tax credit with
a three-year carry forward will not reduce the income tax liability of
a company with an expected net operating loss of five years.
Researching the details of available incentives
will involve up-front time and effort. Many times the details are written
in the tax code and buried behind unrelated sections.
Investing the time early on to investigate
the details of available incentives will save significant headaches once
a project is underway.
Looking for tax incentives is a full-time
job for anyone planning a major expansion, relocation, or new facility.
Hiring a professional firm to assist in identifying incentives may help
to ensure no incentives are overlooked and money is not left on the table.
Your company must complete its research
and prioritize the incentives that are most beneficial. Then it’s time
to approach a state to confirm that nothing has been overlooked and to
begin the process of developing a package of incentives that are beneficial
to the state as well as your company.
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