We see these announcements in the news more often these days – “Multiple states are vying for the opportunity to offer sizable incentives packages to Amazon as they announce plans to open a second headquarter location and expect to spend $5 billion and create 50,000 new jobs” or “Wisconsin plans to offer FoxConn (a major supplier to Apple for their iPhones) $3 billion of incentives of mostly cash incentives over 15 years to open their $10 billion plant in SE Wisconsin”. Although these are examples of some of the more high-profile companies and their “mega” projects, securing incentives from state or local authorities isn’t as farfetched as one may think; while they do require planning and forethought.
Discretionary incentives can include all types of business incentive opportunities such as employment, property and capital investments, research and development, and training. In addition, you may find opportunities that go beyond any published programs. It is not uncommon for a discretionary incentive opportunity to include special tax treatment for a business, cash grants, free or discounted property or financing benefits. As jurisdictions compete for your business, a variety of different benefits may be offered. Discretionary incentives tend to provide the most substantial benefits claimed by businesses.
An important item to note about discretionary incentive programs is that they are only offered if it is reasonably certain that the proposed project or investment will not become a reality “but for” the existence of the incentives available. These incentives will need to be negotiated and secured before the company makes any qualified investments or creates new jobs so planning ahead is very imperative.
It’s important to focus on the business' future to proactively identify the opportunities to capture and act accordingly to secure the available benefits. It is a recommended practice to consider the value of the available incentives as an element/variable in the overall investment decision of the business. Although the incentives will not carry equal weight to other key factors such as availability of staff, logistic considerations, etc., it is a principal factor to consider and to include when calculating the expected return on investment.
Discretionary incentives require a more comprehensive approach to secure since the process often deals with multiple jurisdictions. It is important to identify opportunities that are more relevant to the business such as focusing on above the line benefits such as tax credits, depending on the tax circumstances of the business.
Many eligible businesses overlook these programs simply because they are unaware they qualify or receive only a portion of their eligible benefit by failing to identify all the available programs or fully capturing the benefit for the programs they do identify.
To find out what tax incentive programs are available in your area, find your state below.
