This fall we asked Stephanie Yarbrough, then a Charleston-based partner at the law firm of Womble Bond Dickinson (US) LLP, to share with readers her analysis and updates of state incentives policies across the Southeast. Below is the analysis she put together with summer associate Taylor Conley. Yarbrough in December announced her move to King & Spalding LLP to practice in the same area of law. —Ed.
Alabama
Alabama’s primary economic development incentive, authorized by the Alabama Jobs Act, provides qualified projects tax credits for capital investment and payroll rebates for job creation. Alabama Governor Kay Ivey recently signed four bills into law that bolster Alabama’s economic development incentives. Notably, one of the bills extended the Alabama Jobs Act’s sunset for another five years and increased the cap on incentives from $350 million to $475 million. It also introduced new incentive funding for tourism projects. Alabama’s incentive offerings have attracted significant projects to the state, including Hyundai’s Genesis GV70 SUV manufacturing plant in Montgomery, Mercedes Benz’s manufacturing plant in Vance and Airbus’s manufacturing plant in Mobile.
Florida
The state offers a few incentives to compete with other states including the Governor’s Job Growth Grant fund, the Rural Infrastructure Fund, and the High Impact Performance Incentive. Governor Ron DeSantis recently dissolved Enterprise Florida, Inc., the primary economic development private-public agency in the state, when he signed House Bill 5 into law on May 31, 2023. The bill effectively transferred all the economic development activities from Enterprise Florida to the Department of Commerce to streamline economic development. Two years ago, Florida also eliminated its Qualified Target Industry Tax Refund Program. These shifts reflect the state’s hesitancy to fund businesses and its reliance on its existing economy, business-friendly climate and school systems to sufficiently attract projects from businesses such as Amazon.com and Lockheed Martin.
Georgia
Georgia has a highly developed economic development incentive program that implements an approach different from other southeastern states. Rather than offering large cash grants to projects, Georgia invests in the site locations on the front end (i.e., improvements to water, sewer, power, grading a site and building/reinforcing roads). While competitive, it still causes Georgia to lose site selections to large cash offerings from other states. To remain competitive with those states, Georgia offers a Regional Economic Business Assistance (“REBA”) grant to highly competitive projects, such as the recent Hyundai “metaproject” near Savannah, to close large deals.
The most recent updates include passing House Bill 408, which extended the sunset for exemptions of sales and use tax for tangible personal property use for and in the construction of competitive projects of regional significance. Key leaders in Georgia, including Governor Brian Kemp, have begun to conduct further reviews of all the state’s tax credits and exemptions.
Mississippi
Mississippi includes general state and local incentives including Skills Training Income Tax Credit, a 10-year property tax exemption from local governing authorities, a state-authorized fee in lieu of tax payment for entities investing over $60 million, the Advantage Jobs program (which provides cash rebates for qualified job-creating projects), and on-the-job training reimbursement. Additionally, Mississippi offers numerous industry-specific incentives such as the Energy Efficiency Revolving Loan Fund, the Reduced Severance Tax Rate for Horizontally Drilled Wells, rebates on R&D costs, and sales and use tax exemptions for headquarters. Mississippi effectively leverages these programs, on top of their already low cost of living and low tax burdens, to attract major projects including the $2.5 billion investment by Steel Dynamics, Inc. in 2022 for a low-carbon, aluminum flat rolled mill and a biocarbon production facility and Nissan’s Canton plant in Madison County. Mississippi continues to plan for a bright economic development future with Governor Tate Reeves’s infrastructure proposal and site development investments that would result in a $1.3 billion investment throughout the state.
North Carolina
North Carolina’s strategy for discretionary incentives revolves around performance-based grant funding. The two most extensive programs include Job Development Investment Grant and One North Carolina Fund; however, numerous other grant opportunities include the NC Biotech grant, workforce grants, public infrastructure funds, building or site funds, rural transformation grants and technology funds. Additionally, North Carolina offers a competitive 2.5% corporate income tax rate and public-private partnerships, such as NC Biotech, to help attract numerous economic development projects, including ProKidney Corp.’s biomanufacturing facility in Greensboro, Bosch’s power tools manufacturing facility in Lincolnton and Apple’s $1 billion Research Triangle Park campus.
South Carolina
South Carolina has a comprehensive economic development incentive program. It authorizes counties to enter into Fee In Lieu of Tax (“FILOT”) agreements and offer Special Source Revenue Credits to offset the cost of local ad valorem property tax. It also provides discretionary state grant funds to competitive projects that will contribute high capital investment and new net full-time jobs in the state. While South Carolina has a corporate income tax of 5%, it offers numerous tax incentives to help eliminate those costs; it even provides a corporate income tax moratorium, available for up to 15 years, to companies that create net new jobs in economically distressed counties. These incentives help South Carolina compete with states with lower or no corporate income tax.
This approach has been highly successful in attracting numerous competitive economic development projects. South Carolina offered $1.3 billion of funding to Scout Motors for its electric pickups and SUV manufacturing facility. This incentive package, signed by Governor Henry McMaster in March 2023, is the largest in the state’s history.
Tennessee
Tennessee prioritizes speed in its economic development program. Its key incentives include its Fasttrack Infrastructure Program (a grant program for public infrastructure improvements), Fasttrack Economic Development Fund (a grant program to offset costs in exceptional cases with a significant impact in a community), and Fasttrack Job Training Assistance Program (a grant to help support the training of net new full-time employees). Tennessee has offered packages that have attracted highly competitive projects, including Ford’s EV plant in Stanton, which committed $5.6 billion in capital investment and will create 6,000 jobs. Among recent updates to Tennessee’s economic development program, House Bill 323 expanded benefits to manufacturers and small businesses. The most recent, announced on September 25, was the rollout of a Transportation Network Growth Opportunity Initiative, which is a tool used to connect and leverage research and innovation assets statewide.
Unique Incentives Offerings for Key Industries
Beyond the states’ general approach regarding economic development incentives, they also attract projects through unique financial and nonfinancial incentives available for specific industries.
Life Sciences
The Georgia Research Alliance (“GRA”) has established a renowned venture development program that includes a GRA Venture Fund for life-science start-ups and a Greater Yield Initiative to support the agriculture technology industry. North Carolina continues its strategy of providing up-front grant funding in its life sciences industry through its public-private partnership NCBiotechnology Center; however, it also offers a specific GoldenLEAF biomanufacturing training and education center. A different strategy that Alabama employs is to leverage generalized incentives into nonprofits that help make the state a more attractive life sciences business location. For example, Alabama leveraged its Growing Alabama Credit Program to Huntsville’s HudsonAlpha Institute for Biotechnology’s AgTech Investment Accelerator.
Technology
Alabama’s Innovation Depot is an incubator and accelerator out of Birmingham. Additionally, some states have technology-specific granting, such as North Carolina’s One NC Small Business Program, which offers businesses in capital-intensive, high-risk industries in science, technology, engineering and math.
Electric Vehicles
Electric vehicle and related battery manufacturing plants are increasingly competitive megaprojects, and states have offered historically high-value packages to attract them to their sites. In 2022 Georgia offered Hyundai an incentive package valued at $1.8 billion. South Carolina offered Scout Motors an incentive package valued at $1.3 billion. Additionally, Tennessee offered an incentive package worth $884 million, including a $500 million cash grant, to Ford’s EV manufacturing plant, the state’s largest economic development package in its history.
Manufacturing
One of the most prevalent concerns is access to and efficient use of supply chains. Often southeastern states will highlight port access and even offer credits to companies that will increase the port’s usage, such as South Carolina’s Port Increase Tax Credit. Other offerings to incentivize manufacturers include industrial machinery tax credits (provided by Tennessee) and front-end infrastructure improvements (offered by Georgia).