Using Your Capital Investment Budget to Maximize Value From Economic Development Incentives.

• Author: Bowen, Wes
• Position: ASK THE EXPERTS

The Experts: Wes Bowen and Rudy Watkins

Every year, companies invest billions of dollars into property, plant, and equipment for new and existing facilities. Such capital investments are made to meet changing market demands, improve operational efficiencies, enable expansion, and maintain the integrity of existing assets. Federal, state, and local governments offer various economic development incentives to attract such investments to their communities. However, corporations miss sixty to seventy percent of these opportunities each year. The result is cash left on the table. This article will explore how tax executives and CFOs can identify the economic development incentive opportunities in their capital investment budgets that will directly boost the bottom line.

Question: How can you maximize value from economic development incentives?

Local, state, and federal governments (both domestic and international) utilize economic development incentives to retain jobs and operations and to recruit new capital investment and employment to their jurisdictions. This allows them to expand their tax base and improve their communities. Other entities such as utility companies, port authorities, and rail service providers can also make economic incentives available to help support these same initiatives. Note that while job creation often motivates economic development incentives, many states and local communities offer programs to assist with job retention as well.

Awarding jurisdictions secure these jobs and capital investments through statutory and discretionary programs. Each of the tremendous number of awarding jurisdictions has its own method or theology of providing economic development benefits, and each jurisdiction must be researched as an individual opportunity. This task may seem daunting, but your research will typically reveal that economic development incentives take one of these forms:

* cash grants;

* income tax credits (refundable and nonrefundable);

* infrastructure improvements;

* wage rebates;

* property tax exemptions and abatements;

* sales and use tax reductions/exemptions;

* training assistance and workforce recruitment/screening;

* forgivable loans and low-cost financing programs;

* tax increment financing;

* reductions on tax and utility rates; and

* EPA-related programs.

Although economic development incentives should never be the lone deciding factor in an investment strategy, these benefits do directly impact the company's...