Economic Incentives for a Remote Workforce
by Kelley Rendziperis, on Mar 23, 2021 2:35:19 PM
While many continue to debate the importance of economic incentives in the site selection process, it may be that incentives are more important than ever. In an unpredictable economy, companies are still poised to spend money; however, they intend do so in the most prudent way possible which means economic incentives are crucial to improving the overall return on investment. This blog aims to describe the overall landscape of economic incentives amid COVID-19 and a changing workforce.
Before diving into the trends around granting incentives for a changing workforce, we would be remiss if we did not readdress the importance of economic incentive compliance. If you have an existing economic incentive portfolio and you have not reviewed each of your incentives and the required project commitments, then you may be squandering an opportunity to renegotiate these incentives. Our blog in September 2020, 5 Actions to Preserve Economic Incentives in Light of COVID-19, provides a good summary of the steps that should be taken to preserve existing economic incentives.
While performing economic incentive compliance services for our clients over the past few months, we have seen state and local communities offering a variety of assistance to help companies, such as extensions of time to meet certain commitments, pushing out performance periods, granting pro-rata awards, and reducing or eliminating claw-backs. In general, most jurisdictions are amenable to helping businesses, but these conversations need to take place as soon as possible.
For companies continuing to invest and grow, traditional project specifications are changing. One such project benchmark is related to human capital as it shifts to a remote workforce. While this shift may lead to less job creation within the boundaries of a particular local jurisdiction, it benefits corporations because they can leverage skilled talent regardless of geography.
Despite the apparent lack of local tax revenue generation from a remote workforce, tax credits and incentives will continue to morph to adapt to current economic growth trends as a necessity to win competitive projects. As an example, many jurisdictions are grappling with how to incentivize remote workers. Some states have already been able to adapt and fold remote workers into their existing programs:
- Georgia Job Tax Credit
- Virginia Economic Development Partnership
- Michigan Business Development Program
- New Jersey Emerge Program
- Kansas Department of Commerce
- Vermont Remote Worker Grant Program
- Tennessee FastTrack Assistance Program
From a state-level perspective, one can understand how net incremental employment within state boundaries is a benefit to the state economy. Thus, accounting for remote employees in economic incentive programs at a state level make sense. However, as mentioned above, if remote employees are spread out among the state with no real center of gravity within a locality, then it is hard to justify local incentives from a cost-benefit perspective. Regardless, localities and regions are enticing remote workers to locate within their borders by offering incentives, such as:
- Tulsa Remote
- Remote Shoals
- Hawaii Movers & Shakas
- Savannah Remote Technology Worker Incentive
- Northwest Arkansas Life Works Here Talent Incentive Program
There are several ways to account for these unique projects, either from a tax policy or an economic incentive standpoint, so it is imperative that jurisdictions are thinking about these issues now while this trend is escalating. This discussion continues to underscore the need for flexibility in tax policies and economic incentive programs.
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Economic development friends, do you have a new policy that addresses remote workers? Please feel free to share in the comments section below.