Economic Development Incentives
State and local governments provide a wide range of incentives to compete for corporate site selection projects. Each state’s tax structure and program requirements play a large role in calculating the actual value of an actual incentive proposal. Incentive programs typically include required minimum levels of job creation, capital investment, average wages, and may also be industry specific. Major incentive categories include the following:
- Job creation grant: cash grant per job created. Many states set a minimum wage level and capital investment value to qualify.
- Training grant: reimbursement of employee training expenses and assistance in program creation.
- Cash grant: direct cash grants for a company to use at its discretion.
- Corporate income tax credit: offset against a company’s state income tax liability. Tax credits may be transferable in some cases.
- Property tax abatement: an reduction in property tax liability resulting from new investment. The property tax abatement will typically last up to 10 years.
- PILOT: company will pay a set dollar amount to the taxing authority rather than actual tax liability
- Sales tax exemption: the company is exempt from state or local sales tax liability
- Payroll tax refund: a refund of company and employee payroll taxes
- Tax increment financing: TIFs allow future taxes generated by a new development to pay for the project’s infrastructure costs. Taxes generated by a new project are used to support the project.
- Industrial revenue bond: tax exempt bonds issued in cooperation with the state or local government. The bonds provide below market interest rates and additional property tax reductions.
- Expedited permitting: an expedited process to achieve building occupancy in a timely manner. Includes desired land use approvals and building permits.
- Environmental remediation: the government will manage site cleanup and accept ongoing liability to entice a company considering previously contaminated real estate.