Logistics and access to major markets are major factors in deciding where to build a new facility. However, another issue to consider is state and local tax incentives.
Today, more states than ever are offering lucrative incentives in hopes of attracting new businesses.
In addition to incentive packages negotiated prior to the commencement of construction, there are many tax incentives that require no negotiating other than meeting the criteria set forth by the statutes.
| Today, more states than ever are offering lucrative incentives in hopes of attracting new businesses. |
Following are examples of incentives offered from several states.
Louisiana offers benefits for qualified businesses seeking to build or expand within a designated enterprise zone and increase employment by at least five net new full-time employees or increase their present work force by 10 percent.
Enterprise Zone credits include:
* A $2,500 credit for each net new employee ($5,000 per job in the aerospace industry).
* A refund of sales and use tax on qualified property.
Other credits expanding companies may quality for include:
* A 10-year property tax exemption.
* A credit for local property taxes paid on inventory held for resale.
* New jobs credit and a credit for employing previously unemployed individuals.
In North Carolina, incentives offered depend on the location of the facility. Benefits are greater for those companies locating in a rural county and/or in an economically depressed county.
Credits Include:
* A jobs credit ranging from $500 to $12,500 is available. An extra $4,000 credit per employee if a facility is located within development zones.
* A credit for machinery and equipment.
* A research and development credit.
* Exemption of qualified business inventory from property tax.
* A training expenditures credit up to $1,000 per employee.
Meanwhile, Texas offers benefits for businesses located within an Enterprise Zone and/or within a Defense Economic Readjustment Zone that are considering expanding their present operations or building a new facility. Both programs require precertification.
Enterprise Zone benefits include:
* Franchise tax deductions.
* A sales tax refund of tax paid on qualified investments. The refund is equal to $2,000 for each new job for up to $250,000 per year.
* A one-time sales tax refund of up to $5,000 of taxes paid for machinery and equipment for retaining at least 10 jobs in the zone.
* A one-time franchise tax refund of up to $5,000 for creating at least 10 jobs in the zone. This is limited to three qualified businesses per year that are nominated by an enterprise zone governing body.
Defense Economic Readjustment Zone benefits include:
* Franchise tax deductions.
* A sales tax refund of tax paid on qualifying property. The refund is equal to $2,500 for each new job retained during the seven-year designation period for up to $250,000 per year.
Other incentives include:
* Smart Jobs Fund (Training Grants): An application and precertification are necessary to obtain a grant for training funds. The employer must provide a matching contribution.
* Property tax exemptions for investments in a reinvestment zone.
Opportunities abound
These states were selected as examples because the opportunities they offer are lucrative. Strong incentive programs can be found nationwide and internationally.
For more specific information on how these and other incentive programs apply to your project, contact the appropriate state or the author.
Robert M. Bortnick is tax manager for tax incentive programs at Mintax, an East Brunswick, N.J., economic development consulting firm specializing in incentives. You can reach him at b.bortnick@mintax.com
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