Jonathan L. Sangster, Senior Managing Director, CB Richard Ellis (Feb/Mar 10)
retention incentive program in Indiana is also called EDGE. It rewards
job creation and recognizes retention. The EDGE Program is a
discretionary incentive program that awards corporate income tax
credits equal to up to 100 percent of withholding taxes for up to 10
years. The percentage of withholding taxes and term of the incentive
are dependent on the number of jobs and average wage compared to the
county average wage.
Retention incentive offers are tied to
manufacturing, business services, and R&D only. An eligible company
must retain at least 35 jobs and pay an average wage equal to at least
105 percent of the county average. Companies receiving EDGE tax credits
will be required to maintain operations and retain a pre-determined
number of jobs for two years beyond the term of the EDGE award.
Kentucky Reinvestment Act
retention incentive program in Kentucky is called the Kentucky
Reinvestment Act (KRA). The KRA program is a discretionary incentive
program that awards corporate income tax credits up to 10 years and
equal to (a) not more than 50 percent of approved capital costs and (b)
not more than 100 percent of training costs to upgrade the skills of
existing employees. The approved tax credit benefits are dependent on
the number of jobs and average wage compared to the county average wage.
incentive offers are tied to manufacturing and related operations. An
eligible company must retain at least 85 percent of the employment
level in the previous year and incur at least $2.5 million in new
capital investment. Companies receiving KRA tax credits will be
required to maintain operations and retain a pre-determined number of
jobs for a negotiated retention period. Clawbacks are negotiable.
Michigan MEGA Retention Tax Credit Program
Michigan Economic Growth Authority (MEGA) program is a discretionary
incentive program of corporate income tax credits equal to up to 100
percent of withholding taxes for up to 20 years. This program is
dependent on the number of jobs and average wages as well as the
economic impact of the company on the state and community. Offers are
tied to key industry sectors including manufacturing, mining, film and
digital media, and office operations. Projects must maintain 50 jobs
and pay 150 percent of federal minimum wage with an investment of at
least $50,000 per retained jobs. Clawbacks are negotiable.
New Jersey BRRAG
Retention and Relocation Assistance Grant (BRRAG) is a discretionary
incentive program with corporate income tax credits equal up to $1,500
per retained job. Eligible companies must maintain 50 jobs and pay at
least county average wages. Companies receiving tax credits must
maintain operations and retain a predetermined number of jobs for five
years. Clawbacks include 100 percent recapture of tax credits if job
retention is not met.
Ohio Job Retention Tax Credit Program
Ohio JRTC (Job Retention Tax Credit) program is a discretionary tax
credit program equal to up to 75 percent of withholding taxes for up to
10 years. The percentage is dependent on the number of jobs and average
Retention is tied to jobs in key clusters and projects
must retain at least 500 jobs with an investment of $50 million for
manufacturing facilities and $20 million for headquarters/
Clawbacks are negotiable.
Show Me the Money.Maybe
2007-2009 recession has revealed structural problems with state and
regional economies and, thus, tax revenue stability. Strategically
maintaining existing industries and attracting high-quality prospects
should be given equal attention. Economic conditions of a state or
community are not static and require re-evaluation of economic
development strategy including incentive programs.
and economic development policy should provide long-term benefits to a
community and state's residents through new job creation and retention,
enhancement of the overall tax base, expansion and diversification of
the state's economic base, and increase in tax revenue to the state.
Incentives and economic development policy should increase the economic
competitiveness of a state in attracting and retaining industries and
jobs relative to other states that have historically defined and
carried out business assistance more aggressively.
and community approaches the retention incentive discussion and
decision based upon their circumstances and economic environment. In
doing so, the following best practices should be considered and
recognized by companies considering those locations:
incentives should be connected with specific industries and projects
that align with the state and community's economic development policies.
• Incentives should be performance-based with penalties/clawbacks negotiated to protect the stakeholders and taxpayers.
Retention incentives should be discretionary - funded by programs like
withholding taxes, with governing agencies having flexibility to reward
amounts based upon the strength of the project and its economic impact
on the state and community
• If tax credits are utilized, programs that can be monetized or converted to cash should be created.
decision to withdraw an operation from a community and state is not an
easy one for companies. Creating a business case and solution to retain
the jobs and investment should be a collaborative effort between the
company and the economic development community.