Montana Direct Financial Incentives 2010 | Montana Income Tax Capital Credit

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Montana Direct Financial Incentives 2010

Montana’s economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include the Big Sky Economic Development Fund, Montana Department of Commerce Economic Development Finance Program, and the Montana Board of Investments Loan Participation Program.

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Creation of tax increment financing district:
State law provides for the creation of a tax increment financing industrial district for industrial development projects. A local government may issue bonds for a wide variety of development purposes such as financing land acquisition; industrial infrastructure; rail spurs; buildings; and personal property related to the public improvements. The incremental increase in the tax base over the unimproved value before the project was developed can be committed to repayment of the bonds. The bond financing can essentially be considered a grant by the business because taxes paid will directly benefit the district. The actual amount of bond financing available is based on the ability to repay the bonds with the incremental value of the tax increase.

Big Sky Economic Development Fund:
The purpose of the Big Sky Economic Development Fund is to create good-paying jobs for Montana residents and promote long-term, stable economic growth in Montana. Trust fund dollars can be awarded to local governments in the form of grants and loans for economic development projects. In addition, funds can be awarded to Certified Regional Economic Development Corporations and other eligible economic development organizations in the form of grants for economic development planning and capacity building.

Montana Board of Investments:
The Montana Board of Investments (MBOI) may loan funds to a local government for public infrastructure improvements. The local government repays the loan from fees and assessments to the business using the infrastructural improvements. The business may write off up to 100 percent of the related fees and assessments paid to the local government on its Montana income tax as it documents the related job creation. The infrastructure improvements are essentially a grant to the business as a direct reduction of project development costs. The business to be assisted is analyzed by MBOI and the final decision is based on the strength of the business project being financed. The actual benefit to the company is limited by the number and quality of jobs created and the ability of the business to write off the tax credits on its actual income tax liability. Infrastructure loans are limited to $16,666 per job created as a result of the project. The minimum loan amount is $250,000.

Aerospace and technology infrastructure development program:
The State of Montana may issue and sell up to $20 million in general obligation bonds for aerospace transportation and technology infrastructure development projects. The state would own the improvements funded and would lease the infrastructure to the local government tax increment financing district or the business being assisted. The lease amount would be set at a nominal fair value taking into consideration job creation and overall tax revenue generated by the project. The statute provides for the principal and interest payback of the bonds from increased state taxes generated by the projects funded.

Montana Department of Commerce Economic Development Finance Program (CDBG):
Up to $400,000 in grant funds is potentially available for local grant applications involving city and county governments from the Department of Commerce. Depending on the potential size of the project, it is possible to combine grants to the county and the city for a total of $800,000 in potential grant funding in special circumstances. The grant funds may be used for infrastructure and for the direct cost reduction of training expenses incurred by the company. The amount available is limited to $5,000 per employee trained and $15,000 per full-time equivalent employee hired for infrastructure projects. In addition, many localities have local CDBG funds potentially available for projects.

Additionally, loans of up to $400,000 can be made to businesses creating new jobs in Montana. Up to $15,000 is available for each full-time equivalent employee projected to be hired as a result of the business project financed. The current interest rate is a fixed 8 percent and is loaned over variable terms depending on uses of funds. Payment deferrals are negotiable and loans can be subordinate to other lenders if necessary and appropriate for the project to proceed. Local governments would apply on behalf of the business and receive a grant from the Department of Commerce. The local government would provide the granted funds as a loan for the business.

Montana Board of Investments Loan Participation Program:
The MBOI may participate in bank loans up to a maximum of 10 percent of the Permanent Coal Tax Trust or approximately $64 million. For loans 6 percent or less of the trust, the MBOI may participate up to 80 percent of the bank loan. For loans over 6 percent of the trust, the MBOI participation is limited to 70 percent of the loan. MBOI can provide for fixed loan rates as low as approximately 5–6 percent depending on the strength of the borrower and the number of jobs created. Interest rates may be lowered by up to 2.5 percent for the initial $64 million if a business project involves the creation of up to 50 new higher paying jobs. MBOI fixed-rate financing is available for up to 25 years under this program. The bank portion of the loan is priced by the lending institution and may be fixed or variable.

Workforce Training Grant Programs:
There are currently two programs that are principally focused on providing job training grant funds to Montana workers. The Primary Sector Workforce Training Grant (WTG) program is targeted to businesses that are creating at least ten net, new jobs that pay at least the lower of the current county average wage or the state current average wage.

The Montana Department of Labor, through Governor Schweitzer’s WIA Discretionary funds, has provided federal grant funds to the Department of Commerce of which $380,000 will be available for business applications. Montana businesses may apply directly to the Montana Department of Commerce to request Workforce Investment Act (WIA) funds.

Federal guarantee loans:
MBOI may also purchase federal loan guarantees, such as SBA, Rural Development Business, and Industry Guarantees, and provide the same low fixed rate advantages and job creation interest rate reductions to the business as the loan participation program described above. The MBOI may purchase up to 100 percent of the guaranteed portion of the loan for fixed-rate financing up to 30 years.

Value-Added Loan Program:
Businesses producing value-added products and commodities and that project the creation or retention of 10 or more jobs are eligible to apply through a bank for an MBOI 15-year, value-added loan. Businesses creating or retaining 10–14 jobs are eligible for an interest rate of 4 percent for five years after the jobs have been established. Businesses creating or retaining 15 or more jobs are eligible for an interest rate of 2 percent for five years after the jobs have been established. The MBOI loan participation is limited to 75 percent of the total loan up to a maximum participation of 1 percent of the Permanent Coal Trust or approximately $6.4 million. There is no provision for additional job creation-based interest-rate reduction because of the low initial rate.

Local development programs:
All major -- and most smaller -- communities in Montana have local development corporations with local programs that can enhance total finance packages and assist with business location issues. The Department of Commerce regularly works closely with local development corporations to assist with business location projects by combining resources as much as possible.

Montana State Contact:
Governor's Office of Economic Development
P.O. Box 200801
Helena, MT 59620
(406) 444-5634

Incentive and tax information is provided to Area Development by each state’s economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.

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