Growing companies can unlock valuable tax credits and incentives to support their strategic expansion or new location projects.
When a company considers adding new jobs or making new investments in their company, many state and local authorities offer tax incentives to support that growth. However, many companies don’t possess the knowledge or resources to explore all the tax-saving options available.
States across the United States offer incentives to help growing companies expand within their boundaries. States often compete for projects, offering incentives to induce a project to increase jobs and make investments in their state versus another. By offering incentives, states provide a short-term “break” on the taxes that would have otherwise been owed, for the long-term goal of “winning” businesses and their lasting establishment or expansion within the state.
State incentives come in many forms, from corporate income tax credits (the most common form) to wage-withholding refunds to cash grants for job training and upskilling employees. Incentives are complex, often requiring many hoops to jump through. Incentives frequently require applications, supporting documentation, negotiation on incentives, public meetings, and final documentation of the formalized acceptance of incentive benefits. These steps are necessary, and missing a step or making project decisions too early (before incentives are secured) could jeopardize the receipt of incentives. A trusted advisor with expertise in state and local credits and incentives will know how to maximize the incentive benefit from all of these different programs.
Ultimately, most states offer discretionary incentives, meaning they do not have to provide incentives to companies. Navigating all of the options available, and not just taking the first offered program, is how a trusted advisor can ensure no dollars are left on the table. An incentive expert evaluates the different programs available and gauges the scope of a “good” incentive offer and a “not good” incentive offer. This approach to credits and incentives ensures growing companies receive the most valuable incentives for their particular growth project.
Local incentives
Some companies attempt to research incentive programs on their own and feel like they understand the process. A quick internet search of a community’s available incentive programs will likely provide insight into the titles of programs. However, these searches do not give the complete picture of what it takes to achieve these incentives, which include applications, negotiations, timing and the documentation process.
Similarly, established companies often have good relationships with their local community leaders. Chambers of commerce, community festivals and school organization events pull the business community into community activities. As such, business leaders may believe they can have a quick call to secure incentives for their project. This is often not true. A good relationship with a city council member or the mayor’s office is a valuable connection. However, this relationship does not guarantee the incentive process will be smooth nor effective. Many local incentives must go through multiple rounds of local public meetings, which take time and open the company to public scrutiny.
Local incentive applications may require additional documentation, and companies may not want to make that documentation public record. Additionally, local communities may require companies to fulfill specific job creation goals, maintain average wage standards, and/or make minimum investments to qualify for incentives. These goals could seem like simple checklist items during the application process. Yet, commitments to goals that are not realistic could lead to the loss of the incentive program or, worse, clawbacks of any received incentive value later down the road.
Further, collaboration on incentives at one level, from state or local officials, does not guarantee that all incentives noted will be offered. Local leaders often do not possess the insight or authority to provide state incentives, therefore they don’t (or unfortunately cannot) help secure those incentives. Similarly, state officials don’t typically support the growth project at the local level, other than nominal letters of support.
Additionally, clients must note that incentives are not isolated to city officials and governor’s offices; utility providers may be able to offer discounts and savings for particular growth projects; regional organizations may have funds available to support specific initiatives within their target areas; and higher education systems often have ways of supporting new job training demands that utilize their campuses and resources.
Having a trusted advisor to navigate all of the layers of state and local incentive programs will ensure that growing clients maximize available incentives and don’t leave dollars on the table. Incentive experts will also align available programs with the client’s needs, sifting through programs that may not be as tax-effective for a client and negotiating toward programs that deliver the best and highest value. By connecting with an incentive expert early in the growth planning process, growing companies create the best chance of securing the most valuable tax incentives at every level of economic development.
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