Valuable Economic Incentive Opportunities that Companies Often Overlook
by Kelley Rendziperis, on Sep 26, 2016 12:40:40 PM
Due to the popularity of discretionary and statutory economic incentives, many people are aware of them, but there are other economic incentive programs which often get ignored or overlooked. To help understand what types of hidden economic incentives companies might be missing, Site Selection Group identified some valuable economic incentive programs to consider when evaluating economic incentive availability at existing facilities or new locations. These hidden options should considered during the site selection process for call centers, data centers, distribution centers, headquarters, manufacturing plants, shared service centers and software development centers.
Income tax filing methodologies
A company’s state income tax filing methodology may not be top of mind whenthinking about economic incentives. This is why it is imperative to have the company’s key stakeholders involved in the economic incentive process, including the tax and finance department. A company’s filing strategy can make a huge difference in its annual income tax liability.
Companies should evaluate a separate return versus a combined/consolidated return and alternative apportionment. While these strategies are available outside of the site selection process, oftentimes the leverage that exists while negotiating an overall economic incentive package for a truly competitive project can persuade a state to consent when it otherwise might not.
Location-based economic incentives
By now, many companies are familiar with the concept of state Enterprise Zones. They may not know that companies can sometimes receive these incentives even if they aren’t located in an Enterprise Zone. Some states, including Texas and Louisiana, don’t actually require that a company be physically located in an Enterprise Zone to benefit from the program, but instead might require higher thresholds in order to qualify.
There are several other location-based incentives that should be considered in evaluating potential sites, including Federal Empowerment Zones and Renewal Communities.
In addition, the New Markets Tax Credit incentivizes community development and economic growth through the use of tax credits for private investment in distressed communities. An eligible community for the New Markets Tax Credit is defined as a low-income community, which is a census tract where the individual poverty rate is at least 20% or where median family income does not exceed 80% of the area median. Finally, a wide variety of local, state and federal incentives, such as Historic Rehabilitation Tax Credits, are available for property owners who appropriately repair and rehabilitate historical resources.
Veteran hiring tax credits
The Federal Work Opportunity Tax Credit has recognized certain veterans as qualifying employees for quite some time, but veterans are also continuing to be a favored group of individuals for more and more programs. Aside from being eligible for direct benefits for hiring veterans, the employment of veterans can yield greater economic incentive awards.
Utility economic incentives and rebates
There are many avenues for utility incentives. Companies are generally familiar with and tap into utility rebates for energy efficiency improvements; however, there are also opportunities, depending on the type and size of a project, for energy, gas and/or water rate reductions. Finally, some utilities have economic development programs akin to state and local communities and offer cash grants for job creation and capital investment.
Permit expediting and fee waivers
Fees start to add up once a site has been selected and construction begins. These costs need to be considered from the outset when negotiating an economic incentive package. Impact fees, for example, vary greatly throughout the United States and can be quite substantial. There are also permitting fees, land disturbance fees, utility hook-up fees, and others. It is important to work with the city, county and utility company to offset these costs as much as possible.
Aside from monetary assistance related to these type of fees, do not under-estimate the value of expedited permitting. For some companies, a delay in starting operations could result in a loss of thousands, if not millions of dollars. Keeping the local community involved and apprised of any challenges a project faces, allows them to be nimble and offer assistance.
Unexpected costs related to site preparation or the need for public infrastructure such as road improvements, traffic signals or water/sewer lines are all examples of costs which might be avoided or offset by cash grants, forgivable loans or bonds.
Retention economic incentives
To the extent a company is considering routine capital investments, it should evaluate whether incentives exist to aid such investment. Many communities have programmatic benefits, such as property tax benefits, for existing industries. In addition, if various sites are in competition for company resources, that may be sufficient to tap into discretionary incentives.
For additional information about these overlooked economic incentives, please contact Site Selection Group.