EconWar




A State-by-State Analysis of Estimated Incentive Packages and Taxes




Table of Contents

Guidelines and Information
Rules and Assumptions
Notables
Tax Rates
Description of Incentives used for the Estimations of Incentive Packages by
General Incentive Category
Project A
Project B
Project C
Project D


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Guidelines and Information

  • The calculation of the incentive package for each state considers the "package" as a whole and therefore includes tax credits that are granted for a number of years. Please note that these calculations are based only on incentive programs at the state level and considers only those programs that are "on the books" and available to most all firms. The estimated incentive packages do not include rewards from special funds or incentives that are sometimes offered to land "trophy" projects.

  • The tax figures for each state are considered the base taxes for one year and do not include the tax credits that were calculated in the incentive packages. The figures do take into account basic exemptions and deductions if the information was available (i.e. business inventories exemption).

  • Figures for investment and job creation were provided by the Business and Industry Division of the North Carolina Department of Commerce.

  • Figures on profits, net worth, total assets, and business receipts were provided by a hypothetical industry profiles from Peat Marwick's study: Comparative Analysis of the Relationship of North Carolina's Tax Structure to Economic Development.

  • Information on individual state's incentive programs and tax rates was taken from both the National Association of State Development Agency's Directory of Incentives for Business Investment and Development in the United States as well as information obtained from the state's promotional literature that is sent to prospective businesses. Some of the tax rates used were derived from Peat Marwick's study: Comparative Analysis of the Relationship of North Carolina's Tax Structure to Economic Development.

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Rules and Assumptions

  • The investment figures do not include cost of land--only construction and equipment
  • Loans were not included when determining rewards
  • Assumed the maximum in terms of grants, etc.
  • Assumed rural projects were locating in distressed counties or enterprise zones
  • Assumed urban projects were not locating in distressed counties or enterprise zones
  • All enterprise zones were considered rural counties except for Georgia, which specifically designates enterprise zones as urban areas
  • For Georgia, assumed that all projects were locating in counties that were participants of a Job Tax Credit Development Authority and thus eligible for an additional $500 credit
  • Job training programs (which all the states have) were not included when determining rewards
  • Industrial Development Bonds (IDB's), either state or locally issued were not included when determining rewards (except for Alabama because of the nature of their program-see section on Alabama for more detail)
  • Programs for small-medium businesses were not considered because the projects in question aren't small-medium businesses
  • If states had similar programs but only one state's program could actually be calculated based on information the incentive was not included (see notables section)
  • Assumed maximum on corporate income tax rates
  • Used an average tax rate when calculating property taxes (i.e. did not decipher between the different property tax rates for equipment, land, etc.)
  • Used only county property tax rates unless only an aggregate rate (city and county) was available
  • Used the mid range (4.12%) for Ohio's personal income tax rate
  • Assumed an hourly wage of $10.00 per hour for all states
  • Because of the lack of information on actual sales, sales taxes and sales tax exemptions were not calculated
  • The tax credit figures do not take into account the fact that some states have limits as to how much of the tax liability can be credited because all of the states have a provision where the unused credit can be carried over


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Notables

Financing
    • Georgia, South Carolina, and Virginia all have Tax Increment Financing (TIF) which was not considered when determining rewards

Tax Abatement
    • Virginia has property tax abatement only for rehabilitation projects
    • Tennessee has property tax abatement only for projects involving historical structures
Other Tax Credits
    • Ohio, South Carolina, and Tennessee have employer child care credits which were not included when determining rewards
    • Georgia has a retraining credit and a basic skills education credit which were not included when determining rewards
    • Tennessee has a Targeted Job Tax Credit for firms that employ economically disadvantaged youth and adults

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Tax Rates

Corporate Income TaxSales Tax Property TaxFranchise Tax
Alabama5%4%Abatement$10 for each $1,000
Georgia6%4%1.24% of 40% of valueN/A
North Carolina7.75%6%$.924 per $100 of 100% of value $1.50 per $1,000
Ohio5.1% of first 50,000 and 8.9% of any additional 5%35% of value at 5.01% (abatement if rural) N/A
South Carolina 5%6%abatementN/A
Tennessee 6%8.75%$2.91 per $100 of 40% value $.25 per $100
Virginia6%6% $1.20 per $100 of 100% of full valueN/A


Note: These are the tax rates that were used for these calculations - they are not necesarily statewide tax rates.


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Description of Incentives used for the Estimations of Incentive Packages by
General Incentive Category


Alabama


Enterprise Zone Credits
$2,500 income tax credit per employee (one time credit)

Site Preparation
Industrial Site Preparation Grant = 1% of total amount for construction and equipment

Community Development Block Grants (CDBG)
$200,000 Economic Development Block Grant (maximum)

Other
Alabama has a Business Incentive Financing Program that is based on Industrial Revenue Bonds. In effect, the company receives a tax credit against its corporate income taxes for the amounts paid as principle and interest on the bonds. Under this option, the entire cost of the project could be financed. General estimates using a 10 year bond results in a tax credit that is equal to approximately 25 percent of the investment.


Georgia


Job Tax Credit
(can't exceed 50% of tax liability-but unused credit can be carried over 10 years)$3000 (2500+500) income tax credit per employee (rural-Tier one counties) [every year for five years] or $1000 (500+500) income tax credit per employee (urban-Tier three counties) [every year for five years] Note: There is also a mid level tax credit

Enterprise Zone Credits
$2500 income tax credit per job created (only for distressed urban areas)

Site Preparation
Appalachian Regional Commission Infrastructure Funds Grant for $200,000

Investment Tax Credit (can't be taken if jobs tax credit is taken)
5% income tax credit for rural or Tier 1 counties
or
1% income tax credit for urban or Tier 3 counties (Note: There is also a mid level tax credit)


North Carolina


Job Tax Credit (can offset up to 50% of the firm's state income tax liability and unused credit can be carried over 5 years)
$2800 income tax credit per job created (only in the 50 designated distressed counties) Note: This is over a four year time period so the credit would be $700 per employee for one year

Site Preparation
Industrial Building Renovation Fund
$2400 per job created or a $250,000 maximum (only in the 50 designated distressed counties)

Community Development Block Grants (CDBG)
CDBG grant funds are available in North Carolina but only for smaller business ventures

Investment Tax Credit
The Qualified Business Investment Tax Credit is available in North Carolina but the eligible businesses are typically smaller firms (those that have not generated more than $5 million in gross revenues as of its last fiscal year or those that have received a grant of other funding from various agencies)


Ohio


Job Tax Credit (up to 100% of tax liability)
An income tax credit based on the state income tax paid by the new employees. The credit can be applied every year for up to ten years.

Enterprise Zone Credits
$1,000 per employee (one time credit)


South Carolina


Jobs Tax Credit (can't exceed 50% of tax liability-but unused credit can be carried over 10 years)
$1000 income tax credit per employee in distressed/less developed county (every year for five years)
or
$300 income tax credit per employee in more developed/economically stable counties (every year for five years)
Note: There is also a mid level tax credit


Other
South Carolina has recently passed legislation that includes a feature known as the job development fee. Qualifying businesses may collect this job development fee by retaining an amount of employee income withholding tax equal to 2%, 3%, 4%, or 5% of the gross wages of each new employee (including employees transferred by the business to SC from another state) who earns $6-$8, $8-$10, $10-$15, or $15 or more per hour, respectively.


Tennessee


Job Tax Credit (any unused credit may be carried forward for up to 15 years)
$2000 franchise tax credit per employee (one time credit)
or
$3000 franchise tax credit per employee--if located in an economically distressed county (one time credit)

Enterprise Zone Credits
Tennessee also has enterprise zone credits and reimbursements but specific information on these was unavailable for calculation

Site Preparation
Tennessee Industrial Infrastructure Program grant for $1 million (maximum)


Virginia


Job Tax Credit
Major Business Facility Job Creation (one time credit)
Tax Credit of $1,000 per job over 100 jobs
Tax Credit of $1,000 per job over 50 jobs (distressed counties)
Note: This is over a three year time period so the credit would be pro-rated to equal $333 per employee for one year

Enterprise Zone Credits
General Income Tax Credit (80% of income tax liability for 1st year and 60% of income tax liability for other 9 years)
Job Grants (can't get if getting job tax credit)
Refundable Real Property Improvements Income Tax Credit ($125,000 maximum)

Site Preparation
Industrial Access Road Program award equals $300,000 (maximum)

Community Development Block Grant (CDBG)
$700,000 (Based on population restrictions this incentive was applied only in rural locations)



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Project A

Location: Rural

SIC: 358 (Refrigeration and service industry machinery)

Investment: $40 million

Jobs Created: 750

Estimated Incentive Packages by State

General Incentive Category AlabamaGeorgiaNorth CarolinaOhioSouth CarolinaTennesseeVirginia
Jobs Tax Credit$0$11,250,000$2,100,000$6,180,000$3,750,000 $2,250,000$700,000
Enterprise Zone Credits$1,875,000$0$0$750,000$0$0$4,154,764
Site Preparation Grant$400,000 $200,000$250,000$0 $0$1,000,000$300,000
CDBG Grants$200,000$0$0$0$0$0 $700,000
Investment Tax Credit$0$0$0$0$0$0$0
Other$10,000,000$0$0$0$600,000$0$0
Total$12,475,000$11,450,000 $2,350,000$6,930,000 $4,350,000$3,250,000$5,854,764


Estimated Taxes (one year only)

Tax CategoryAlabamaGeorgiaNorth CarolinaOhioSouth CarolinaTennesseeVirginia
Corporate Income$541,635$649,962$839,534$962,210$541,635 $649,962$649,962
Sales*
Property abated$173,030$333,084abatedabated $419,599 $432,576
Franchise$426,499N/A$63,975N/AN/A$106,625N/A
Total$968,134$822,992$1,236,593$962,210 $541,635$1,176,185$1,082,538


Note: In reality, the state landed this project and it was most likely incentives driven.

* Sales taxes not calculated due to a lack of information


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Project B

Location: Urban

SIC: 356 (Pumps and Pumping Equipment; Mfg)

Investment: $32 million

Jobs Created: 650

Estimated Incentive Packages by State

General Incentive Category AlabamaGeorgiaNorth CarolinaOhioSouth CarolinaTennesseeVirginia
Jobs Tax Credit$0$3,250,000$0$5,356,000$975,000 $1,300,000$550,000
Enterprise Zone Credits$0$1,625,000$0$0$0$0$0
Site Preparation Grant$320,000$200,000$0$0$0$1,000,000$300,000
CDBG Grants$200,000$0$0$0$0$0$0
Investment Tax Credit$0$0$0$0$0$0$0
Other$8,000,000$0$0$0$0$0$0
Total$8,520,000$5,075,000 $0$5,356,000$975,000$2,300,000$850,000


Estimated Taxes (one year only)

Tax CategoryAlabamaGeorgiaNorth CarolinaOhioSouth CarolinaTennesseeVirginia
Corporate Income$541,635$649,962$839,534$962,210$541,635 $649,962$649,962
Sales*
Property abated$173,030$333,084 $643,457abated$419,599 $432,576
Franchise $426,499N/A$63,975 N/AN/A$106,625N/A
Total$968,134$822,992$1,236,593 $1,605,667$541,635$1,176,185 $1,082,538


Note: The state landed this project and the company was actually given money from the Governor's Competitive Fund.

* Sales taxes not calculated due to a lack of information


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Project C

Location: Rural

SIC: 342 (Hardware; not elsewhere classified)

Investment: $35 million

Jobs Created: 750

Estimated Incentive Packages by State

General Incentive Category AlabamaGeorgiaNorth CarolinaOhioSouth CarolinaTennesseeVirginia
Jobs Tax Credit$0$11,250,000$2,100,000$6,180,000$3,750,000 $2,250,000$700,000
Enterprise Zone Credits$1,875,000$0$0$750,000$0$0$125,000
Site Preparation Grant$400,000 $200,000$250,000$0 $0$1,000,000$300,000
CDBG Grants$200,000$0$0$0$0$0$700,000
Investment Tax Credit$0$0$0$0$0$0$0
Other$8,750,000$0$0$0$600,000$0$0
Total$11,225,000$11,450,000$2,350,000$6,930,000$4,350,000$3,250,000$1,825,000


Estimated Taxes (one year only)

Tax CategoryAlabamaGeorgiaNorth CarolinaOhioSouth CarolinaTennesseeVirginia
Corporate Income$0$0$0$0$0$0$0
Sales*
Propertyabated$351,341$676,331 abatedabated$852,001 $878,352
Franchise$257,330N/A$38,600N/AN/A$64,333N/A
Total$257,330$351,341$714,931 $0 $0$916,334$878,352


Note: It is thought that the wage and benefits package differential caused the state to lose this project.

* Sales taxes not calculated due to a lack of information


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Project D

Location: Urban

SIC: 365 (Audio/Video Equipment Mfg; Household)

Investment: $12.5 million

Jobs Created: 600

Estimated Incentive Packages by State

General Incentive Category AlabamaGeorgiaNorth CarolinaOhioSouth CarolinaTennesseeVirginia
Jobs Tax Credit$0$3,000,000$0$4,944,000$900,000 $1,200,000$500,000
Enterprise Zone Credits$0$1,500,000$0$0$0$0$0
Site Preparation Grant$320,000 $200,000$0$0 $0$1,000,000$300,000
CDBG Grants$200,000$0$0$0$0$0$0
Investment Tax Credit$0$0$0$0$0$0$0
Other$3,125,000$0$0$0$0$0
Total$3,645,000$4,700,000$0$4,944,000$900,000$2,200,000$800,000


Estimated Taxes (one year only)

Tax CategoryAlabamaGeorgiaNorth CarolinaOhioSouth CarolinaTennesseeVirginia
Corporate Income$449,350$539,220$696,493$797,943$449,350 $539,220$539,220
Sales*
Propertyabated$331,709$638,539 $1,233,542abated$804,394 $829,272
Franchise$860,980N/A$129,147 N/AN/A$215,245N/A
Total$1,310,330$870,929$1,464,179 $2,031,485$449,350$1,558,859$1,368,492


Note: It is thought that the wage and benefits package differential caused the state to lose this project.

* Sales taxes not calculated due to a lack of information


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