Key Considerations for EV Projects
The Southeast has already landed a significant number of new EV projects from both OEMs and their suppliers, and it is very likely to win even more. Like many competitive economic development projects, key factors for EV projects include logistics and supply chain, available and trained workforce, real estate, utilities, and incentives. When OEMs and their suppliers weigh these factors in their location decisions, the Southeast emerges as an ideal location. Moreover, southeastern states are making a concerted effort to land these projects as they represent the next generation of major domestic automotive manufacturing.
Many OEMs — such as Toyota, Volvo, Honda, Nissan, BMW, Mercedes, Volkswagen, Mazda, Kia, and Hyundai — have an existing presence in the Southeast and accordingly have existing suppliers nearby. As both OEMs and suppliers make new investments in electrification, the pre-existing relationships between OEMs and suppliers suggest that the OEMs would ideally like to expand or open new plants within the Southeast rather than relocating to another region of the United States and uprooting their existing supplier relationships and supply chains. The same is true for OEM and supplier imports and exports. Absent capacity limitations or poor service by existing logistics providers for trucking, rail, and port, OEMs and suppliers would ideally like to expand or open new facilities in relatively close proximity to their existing facilities in order to streamline their logistics operations.
Finally, workforce availability and training are also major considerations for OEMs and suppliers as they determine where to locate. The Southeast region of the United States has been targeting manufacturing for several decades, including in the automotive sector, and as a result there is a significant existing workforce that has been trained on automotive manufacturing or in a transferrable manufacturing environment.
Available Incentives in the Southeast
The following is a summary of some of the key incentives potentially available to EV projects in each of the southeastern states. This is not an exhaustive list of all potentially available incentives, so it is paramount that companies consult with qualified counsel to ensure that they do not leave any additional funding on the table. Also below is a listing of key state initiatives in the Southeast and recent wins that demonstrate the potential impact of these incentive programs.
ALABAMA
- Jobs Credit — Annual cash refunds of up to 3 percent (4 percent in a targeted county) of the previous year’s gross payroll (not including benefits) for new eligible employees may be available. An additional 0.5 percent can be claimed for projects located within a former active-duty military installation closed by the Base Realignment and Closure (BRAC) process and another 0.5 percent for companies employing at least 12 percent veterans in their eligible workforce. The annual refund may be claimed for up to 10 years.
- Investment Credit — Alabama’s investment credit is a tax credit of up to 1.5 percent of qualified capital investment. The credit may be claimed for up to 10 years (15 years if located in a targeted county) and may be applied against Alabama income tax, financial institution excise tax, insurance premium tax, utility tax, and/or utility license tax liability. Unused credits may be carried forward for five years. If approved by the governor, the first three years of the credit may be transferred to another Alabama taxpayer for at least 85 percent or more of face value. Like many competitive economic development projects, key factors for EV projects include logistics and supply chain, available and trained workforce, real estate, utilities, and incentives.
- Port Credit — This discretionary program offers a one-time tax credit for increased usage of Alabama public ports. Shippers must be engaged in manufacturing, warehousing, or distribution of goods. The credit is up to $50 per TEU (twenty foot equivalent unit), $3 per net ton, $0.04 per net kilogram, or $2.91 per VEU (vehicle equivalent unit). The port credit is calculated on new cargo above 105 percent of the prior year’s cargo. The credit may be taken against Alabama income tax liability and can be carried forward for five years. New distribution or warehouse shippers investing at least $20 million and creating at least 75 net new jobs are eligible to receive up to $100 per TEU over a three-year period if entering into a project agreement with the state.
- Enterprise Zone Credit/Exemption — Businesses that locate in an Enterprise Zone may receive a tax credit or five-year tax exemption for new job creation (up to $2,500 per permanent job), investment tax credits, training grants of up to $1,000 per new employee, and an exemption of sales and use tax on purchases of construction materials. Employers with existing facilities in an Enterprise Zone that create at least five new jobs may also receive incentives.
- State Industrial Development Grant (Site Prep) — Grant funds provided to a grantee for use in the preparation of a project site may be utilized for (1) preparation of a means of access to the site; (2) provision for adequate drainage of the site to prevent the accumulation of excess natural waters thereon; (3) boundary and topographical surveying, clearing and grubbing, and excavating; (4) the reasonable rehabilitation of buildings and other structures; and (5) other work relative to site preparation deemed necessary or appropriate.
- Investment Tax Credit — Georgia has an investment tax credit available to existing companies seeking to expand in the state. The value of the credit ranges from 1–5 percent of the qualifying investment expenses. To qualify, a company must have operated a manufacturing facility in Georgia for the last three years and must make a minimum of $50,000 investment in a new or existing facility. Qualified expenses can include land acquisition, improvements, and machinery and equipment.
- Georgia Job Tax Credits — Georgia provides a statewide job tax credit for any business or headquarters of any such business creating net new jobs for Georgia and engaged in manufacturing or distribution center activity. The amount of the per-job tax credit depends on the community’s designated tier.
Companies must create between two and 25 net new jobs per year to qualify for Georgia’s basic job tax credit depending on the tier of the county. For each year (up to five years) the jobs are maintained, qualified companies can claim a tax credit with a value of $750–$4,000 per job per year. Buildings or properties in state designated opportunity zones or military zones also enjoy Tier 1 status for job tax credit incentives.
If a company creates at least 50 qualifying jobs over a two-year period, it may be eligible for a Quality Jobs Tax Credit, which is paid out in amounts of $2,500–$5,000 per job per year depending on the amount by which the wages for such jobs exceed the average wage in the county. - Port Job Tax Credit — Businesses or the headquarters of any such businesses that meet the eligibility requirements for the job tax credit and that have increased their port traffic tonnage through Georgia ports during the previous 12-month period by more than 10 percent over 75 net tons, five containers or 10 TEUs may qualify for increased job tax credits. The “port bonus” amounts to an additional $1,250 per job credit and can be added to the job tax credit.
- Property Tax Exemption — Specific year-to-year schedule of property tax exemption amounts and “payment in lieu of taxes” or PILOT amounts are an additional incentive provided by local community economic development organizations. This incentive is often of significant value to the company, lowering property taxes for 20 to 30 years for the company by locking in a fee “in lieu of” property taxes for the real and personal property of the company.
- Job Development Investment Grant — There are two major discretionary programs available for competitive projects considering relocating or expanding in North Carolina. The first is the Job Development Investment Grant (JDIG). There are four different categories of JDIGs: traditional, high-yield project, transformative, and transitional.
- One North Carolina Fund — The second major discretionary program available for competitive projects considering relocating or expanding in North Carolina is the One North Carolina Fund (OneNC). This is a discretionary cash grant that is administered by North Carolina’s Department of Commerce.
- Job Development Credits — The Job Development Credit (JDC) is a discretionary incentive that allows entities, typically businesses, to obtain a refund of employee withholding taxes to use for, or reimburse the cost of, certain approved business expenditures. JDCs are awarded by the South Carolina Coordinating Council for Economic Development (CCED).
Entities eligible for JDC consideration include taxpayers that operate manufacturing, tourism, processing, distribution, research and development, and other facilities. The entity must be planning to create at least 10 new full-time jobs in South Carolina over a five-year period to be eligible for JDCs.
Absent capacity limitations or poor service by existing logistics providers……OEMs and suppliers would ideally like to expand or open new facilities in relatively close proximity to their existing facilities in order to streamline their logistics operations.
- State Grants — South Carolina created an Economic Development Set-Aside Fund and the governor’s closing fund that allocates grant funding to local governments to provide incentives for economic development projects. Those governments then approve grant applications for organizations that propose a significant economic benefit to the state as displayed through a cost-benefit analysis. The goal of an economic development grant is to incentivize and to attract new business and expansion of existing businesses into various South Carolina localities. These grants can exceed $1 million.
- Property Tax Incentives — A fee in lieu of tax (FILOT) is a discretionary incentive arrangement provided by counties in South Carolina that provides for payments of annual fees in place of ad valorem real and personal property taxes. FILOT agreements are used to lower the property taxes of companies locating in a South Carolina county. Once a FILOT agreement has been executed, the FILOT agreement governs the responsibilities of the county and the entity making capital investment in the state.
Counties may also provide companies with Special Source Revenue Credits (SSRCs) to further offset a company’s annual FILOT payments under a FILOT agreement. The terms of the SSRCs are documented in the FILOT agreement, and SSRCs are used for the purpose of paying the cost of acquiring, constructing, or improving (1) infrastructure serving the county, municipality or project, or (2) improved or unimproved real estate and personal property including machinery and equipment used in the operation of a manufacturing or commercial enterprise.
- State Grants — Tennessee’s FastTrack Infrastructure Program grant provides for public infrastructure improvements benefitting one or more companies committed to creating new jobs and/or making new capital investment. This grant covers infrastructure including rail, public roadway, site, water, sewer, gas, and telecommunication, and requires a payment in lieu of tax for at least five years on real property.
Tennessee’s FastTrack Economic Development Fund provides the State with the ability to offset costs that companies incur when expanding or locating a business operation in Tennessee. Proceeds from this program can be used for a variety of purposes, including retrofitting buildings, acquiring real property, relocating equipment, and covering other expenditures not otherwise eligible under the Fasttrack Infrastructure Program. - Job Tax Credits — Standard job tax credit provides $4,500 per job to offset up to 50 percent of franchise and excise (F&E) taxes in any given year with a carry forward for up to 15 years. To be eligible, the company must create at least 25 net new full-time positions within a 36-month period and invest at least $500,000 in a qualified business enterprise.
Enhanced job tax credits allow for an additional annual credit for locations/expansions in designated Tier 2, Tier 3, and Tier 4 Enhancement Counties. Enhanced JTC can offset up to 100 percent of F&E tax liability. Enhanced job tax credits are claimable for additional years and have less stringent job creation and investment requirements depending on the tier of the county in which the project is located. - PILOT Program — Tennessee allows for companies to enter into payment in lieu of tax agreements to reduce their property tax burdens. This incentive is often of significant value, lowering property taxes for 20 to 30 years for the company by locking in a payment “in lieu of” property taxes for the real and personal property of the company.
- Commonwealth Development Opportunity Fund — Virginia’s Commonwealth Development Opportunity Fund (COF) is a discretionary incentive that offers a cash grant to offset/reimburse qualified project-related expenditures. Eligibility is dependent upon the locality in which the project is going to be located.
- Virginia Investment Performance Grant — The Virginia Investment Performance Grant (VIP Grant) is available for manufacturing or research and development entities that have a preexisting presence in the state of Virginia (for a minimum of three years) and are planning on investing at least $25 million.
- Major Eligible Employer Grant Program — The Major Eligible Employer Grant Program (MEE) is a program that awards up to $25 million to eligible companies. To be eligible, the company must invest $100 million and either 1,000 new net jobs or 400 new net jobs (if the pay is at least double the locality’s average wage).
- Virginia Economic Development Incentive Grant — The Virginia Economic Development Incentive Grant (VEDIG) offers cash grants to companies looking to locate significant headquarters, administrative, or service sector opportunities.