SPECIAL ADVERTISING SECTION ECONOMIC INCENTIVES PROGRAMS
Highly Discretionary
A common denominator of all Targeted Programs is that they are highly discretionary. Most require certification steps and/or levels of approval that are over and above what is generally accepted for a job creation project. Examples of this can be found in Louisiana and Kentucky.
The Louisiana Industry Assistance Program ("IAP"), effective July 1, 2005, is a tax relief program that was established for financially distressed companies anticipated to close. IAP provides an exemption or reduction of franchise, income, and/or state sales and use taxes to encourage existing manufacturers to maintain, and thereby retain existing jobs.
In addition to working with the Department of Economic Development ("DED"), the following partners are involved in the decision-making process: Board of Commerce and Industry ("Board"), Governor, Legislative Budget Committee ("LBC"), each Legislative member, Local Assessor, the Governing Authority of each political subdivision, and the general public. Securing this incentive requires a five-step process featuring applications and approvals involving all of the above.
The Kentucky Industrial Revitalization Act ("KIRA"), effective July 2004, is a tax relief program that was designed to encourage investments in the rehabilitation of manufacturing or agribusiness operations that are in imminent danger of permanently closing or that have closed temporarily.
In addition to working with the Kentucky Economic Development Finance Authority ("KEDFA"), the following partners are added to the decision-making process: an independent consultant, the general public, and the company's employees. This program too involves a five-step process.
What Should Corporate Real Estate Executives Take Away?
Since many of today's Targeted Programs are new, it is important for real estate executives to remember a few basics:
1. Targeted Programs are increasing in number.
2. Industry eligibility requirements may not be as broad as a states' overall job creation strategy. First, check the statutes to determine if your industry fits the state's retention goals.
3. Because the majority of programs are new, their overall effectiveness is not yet tested.
4. Job retention and/or capital requirements may be higher than job creation requirements.
5. Targeted Programs are highly discretionary. To secure the benefits, the process may require an extended project timeline.
In conclusion, job retention programs appear in form very similar to job creation programs of 15 years ago. If a job retention program is a vital component of a project, it is important to partner with the state economic development organization to ensure that both parties understand the specific retention issue and are working towards the same goal.
Tammy C. Propst is the President of taxadvantagegroup ("tag"), an economic development and business incentive consulting firm. Tammy's experience included serving as the Partner-in-Charge of KPMG's Business Incentives Group. Shaun McCurry is an associate with tag. Shaun's experience included serving as a Master Tax Advisor with H&R Block.