State Tax Incentives: Structuring Activities to Take Advantage of Capital Investment, Hiring and Negotiated Credits

Description

As states work to expand their tax base, programs that encourage companies to expand or relocate within a given state have become a competitive arena with the targeted companies being the clear winners. While each state has its own goals and unique ways of encouraging companies towards those goals, three main categories have emerged: statutory credits for hiring of employees and capital investment, negotiated credits based on proposed activity and discretionary credits that are project by project based. Because nearly 50% of available state incentives go unclaimed, tax advisers must keep fully up to date on state tax programs.

States use hiring credits to persuade companies to hire individuals that traditionally face barriers to employment, whether geographic, economic or societal. Capital investment incentives are generally used to encourage companies to place capital investment in service within the state. These incentive programs vary in scope from expansive to targeted and provide significant opportunities for bottom-line tax savings as well as offsetting ROI of capital and operating costs for eligible companies.

Negotiated incentives, also called discretionary incentives, can take the form of tax credits, grants, abatements, low-interest financing, and utility rate reductions, among other forms. As the name suggests, these are negotiated agreements between the state and local governments and the company attempting to receive the incentive. This category, while subject to negotiation, generally requires a substantial combination of both capital investment and hiring activity within the state but can be the most lucrative category.

Listen as our experienced panel of state tax incentive experts provides a thorough exploration of available state tax incentive programs.