Is your business planning to expand operations, add employees or relocate within the state? If so, you may want to consider incentive-based programs available from federal, state and local governmental entities.
Incentive programs frequently target economically depressed areas and the unemployed. They include the creation of tax increment financing areas for the development of infrastructure (e.g., streets and utilities), real and tangible personal property tax abatements, new jobs tax credits and low interest loans or grants to cover the cost of infrastructure improvements. They may also grant tax credits to defray employee acquisition and training costs. Most executives know these programs are available, but few understand how a small investment of time and effort can maximize this opportunity and save money.
Creative counsel can consider the nuances of state and local taxation, mold incentives to fit the situation of the taxpayer and draft agreements accordingly. For example, we recently represented a company that saved thousands of dollars by having its incentive begin in one tax year rather than another.
Flexibility in agreements can trigger the incentive when it is most beneficial. Standard agreements can be modified to conform to business or industry practices.
Ensure that various incentives work together, leveraging tax and expenditure savings. Comprehensive incentive deals can provide infrastructure assistance and tax savings in many areas. In addition, some school districts may prefer nontax donations instead of tax dollars. Done correctly, you can improve community relations through donations to schools or other endeavors. If done incorrectly, the community may feel it has given away too much.
In addition to restrictions on programs, local political considerations affect the way they’re handled. Tax abatement programs are hot issues with school districts and local governments. Done without consideration for the priorities of local authorities, distrust can make subsequent amendments difficult to negotiate.
Maximize incentive deals by ensuring that all legal requirements are followed and documented. Executives who would never close a substantial procurement deal without legal review may execute incentive deals without the same considerations. This mistake may result in a forfeiture of incentives, the expenditure of defending the validity of incentives, or both.
Because various political subdivisions are affected by economic development incentives, the General Assembly requires the public be notified of the contents of agreements and of authorizing ordinances. Ensuring such requirements are followed and documented protects you from potential forfeiture of incentive deals.
The opportunities for economic incentive packages vary greatly and depend on the taxpayers, the type of industry and the local political subdivisions. Creative thinking and attention to detail can help maximize an incentive deal that will also withstand scrutiny. J. Thomas Mason is an attorney at Vorys, Sater, Seymour and Pease LLP, where he practices in the area of real estate development. Scott J. Ziance is an attorney at Vorys, Sater, Seymour and Pease LLP, where he practices in the areas of economic development incentives and state and local taxation. They can be reached at (614) 464-6400 or www. vssp.com.