The American Recovery and Reinvestment Act of 2009, better known as the “Stimulus” or “Recovery Act,” and similar federal laws, which are all a part of President Obama’s plan to counter the economic downturn and create jobs, provide various federal tax and other incentives for companies. Many of such incentives have been or will be phased out by the end of the tax year 2011, so companies may be wondering what is available to them to assist with their expansion needs. The answer is state and local government incentives.
As the economy begins to improve, companies (many of which were forced to make drastic budget and employee cuts in the prior couple of years) are increasing production and are looking to expand in the near future. Such companies may be looking for tax and other government incentives to enhance their ability to construct their facility expansion. In this economic climate, state and local governments are being very aggressive to attract and keep jobs. As such, contrary to what many companies think, development incentives may even be available to companies who are ramping up but may still be below their pre-downturn employment levels.
All three states in our Tri-State Area have programs focused on encouraging economic development, attracting or expanding business and creating and retaining jobs. The key areas for many of these state incentive programs seem to be technology, manufacturing, energy/environment and small businesses.
The State of Indiana is committed to attracting and retaining businesses and jobs. While many states are increasing taxes in an effort to ease their budget woes, Indiana Governor Mitch Daniels recently signed HB 1004, which will result in a reduction of Indiana’s corporate income tax rate. Indiana programs place emphasis on the automotive, medical, logistics, energy/environmental, national security industry sectors, advanced manufacturing, technology, and research and development. Indiana also provides financial assistance to small businesses, offering a variety of programs supporting new business start-ups and business expansion and growth.
The Commonwealth of Kentucky offers various financial assistance and tax credit programs to further its goals of long-term economic growth and employment, including bonds, grants, TIF’s (tax increment financing), loans and various tax incentives. In June 2009, “Incentives for the New Kentucky” was signed into law. This “groundbreaking legislation” overhauled Kentucky's existing programs and created new incentive programs.
Indiana and Kentucky’s programs have been so successful that Area Development, an online resource which recognizes states which attract investment projects that result in job creation, awarded a 2011 Gold Shovel Award to the State of Indiana and a Silver Shovel Award to the Commonwealth of Kentucky (see www.areadevelopment.com for more details).
Ohio provides many incentive programs to encourage new business and investment in the state. Ohio offers various tax credits, including tax credits to companies that expand or locate in Ohio, commit to retaining a significant number of full-time jobs, offer training programs, invest in research and development activities, or purchase equipment for manufacturing or research and development. Tax credits may also be available for investment in certain areas such as Enterprise Zones and Community Reinvestment Areas. Ohio also offers direct loan programs, including programs focusing on loans to small businesses and women and minority-owned businesses.
In addition to State incentives, cities and counties in Indiana, Ohio and Kentucky have programs providing various tax abatements, grants and other incentives to businesses. Economic development bonds (tax exempt financing) provide lower-cost financing for locating or expanding facilities for manufacturing and certain other projects. Community Reinvestment Area Tax Abatements are used to reduce the structural taxes on new construction or significant rehabilitation of existing structures. Local governments also have a variety of programs offering business support, such as support through permitting processes.
With the abundance of state and local programs available and state and local governments actively competing for business growth and job creation, businesses should be able to find the programs that fit their expansion needs.