Federal and State Legislative Moves to Boost Competitiveness & Business Climate
Understanding the competitive economic climate across the United States, Congress and state legislatures continue to propose new legislation to compete in today’s economic environment.
Q1 / Winter 2013
Federal Incentive Programs
With the passage of the American Taxpayer Relief Act of 2012 or “Fiscal Cliff Bill,” this summary also includes federal incentive programs that have been extended or modified as outlined below:
Work Opportunity Tax Credit: The American Taxpayer Relief Act of 2012 extended a provision allowing businesses to receive a tax credit for new hires from certain targeted groups. The tax credit extended through 2013 equals 40 percent of the first $6,000 of wages paid to new hires.
Returning Heroes and Wounded Warriors Work Opportunity Tax Credits: In addition to the above Work Opportunity Tax Credit extension, the legislation also extends a provision allowing businesses to claim a tax credit for hiring qualified veterans in certain target groups through 2013.
New Markets Tax Credit: The federal New Market Tax Credit (NMTC) program, which provides a mechanism for indirect financial support for businesses in low-income communities, was extended through 2014.
Empowerment Zone Tax Incentives: The legislation extended Empowerment Zone authority by which certain economically depressed census tracts are eligible for special tax incentives through 2013.
Production Tax Credit for Qualified Renewable Energy Facilities: To avoid a fiscal cliff for developers of wind energy, the legislation extended their production tax credit through 2013. The existing credit had expired on December 31, 2012. Congress did not extend the popular Section 1603 program from the American Recovery and Reinvestment Act, which allowed for a grant in lieu of a tax credit for certain renewable energy facilities.
Biofuel Incentive Tax Credit: The legislation included tax credits and depreciation rules that support cellulosic ethanol and revived, retroactively, a biodiesel tax credit that had expired at the end of 2011. Algae was also included as a qualifying biofuel.
Film Tax Credit: The tax credit extension allows qualifying productions to write down the first $15 million of expenses from their corporate tax bill through 2014.
Alabama voters passed a constitutional amendment that allows the state to refinance existing bonds that were used to provide industrial incentives through the Alabama Capital Improvement Trust Fund. This effectively allows the government to borrow more money to pay for economic development incentives, as long as the total debt does not exceed $750 million.
A bill prefiled for the 2013 legislative session would require the state to track its spending on economic development projects to reveal the effectiveness of funds used to attract business to Alabama. A version of the legislation had been introduced in 2008, 2009, and 2010 as well, but faces strong opposition from Secretary of Commerce Greg Canfield.
Governor John Hickenlooper announced the Advanced Industries Accelerator Act bill, which is designed to create new high-skill jobs, increase exports, create stronger partnerships between educational institutions and industry, and promote Colorado’s research and development activities. The act will provide grants to advanced industries that are looking for funding for proof of concept research and development, early-stage capital and retention, and infrastructure. The program would be managed by the Colorado Office of Economic Development and International Trade.
A task force set up to examine Colorado Enterprise Zones is expected to introduce a reform bill changing the current program. These changes include adding a $1 million cap on annual capital-investment tax credits, investing 50 percent of the money saved in enhanced Enterprise Zone tax credits for companies that hire workers in the zones, train new workers, and offer healthcare, adding the other 50 percent to the legislature’s general fund, and a reexamination of all current Enterprise Zone boundaries by 2014, with a schedule to update boundaries every 10 years. Governor Hickenlooper is expected to back the recommendations of the task force.
District of Columbia
Mayor Vincent Gray signed the Technology Sector Enhancement Act of 2012 that provides enhanced tools for the District’s tech industry and expands existing incentives to provide benefits to all qualifying technology businesses. Local start-ups will qualify for five years of corporate income tax abatement starting when they become profitable.
The Florida Department of Economic Opportunity (DEO) has created a compliance unit within the Division of Strategic Business Development (SBD) that will serve as a single point of contact to manage tax-refund and grant-performance review responsibilities.
Incoming Governor Mike Pence is planning to separate the leadership of the Department of Commerce and the Indiana Economic Development Corporation (IEDC). The Governor’s intention is to deploy both agencies in an effort to lure more jobs to the state. Victor Smith has been named the state’s new Commerce Secretary and Eric Doden has been appointed CEO of the IEDC.
Governor Rick Snyder signed the Workplace Fairness and Equity Act making Michigan the 24th state to approve right-to-work legislation. The legislation makes it illegal to require financial support of a union as a condition of employment. The bill covers all public and private workers, with the exception of police and firefighters, who are allowed to maintain closed union shops.
Governor Chris Christie announced the release of $26 million in support of three economic recovery initiatives to assist businesses and workers affected by Hurricane Sandy and to invest in New Jersey’s future growth. Recovery4Jersey, Skills4Jersey, and Opportunity4Jersey involve the investment of training dollars to connect the unemployed to job opportunities for Hurricane Sandy recovery and to also build the skills of existing workers. Information on applying for the programs can be found through the New Jersey Business Action Center.
Assembly Commerce and Economic Development Chairman Albert Coutinho has introduced new economic development legislation that would revamp and streamline the state’s economic development tax incentives. The bill would merge five state tax-incentive programs into two, with one focused on economic development and the other on job creation.
State lawmakers have introduced a jobs package including new tax credits for green energy programs and a repeal of the annual $50 million cap on film incentives for in-state movie and television productions.
Governor Andrew Cuomo proposed many economic development initiatives during his 2013 State of the State address. These initiatives included promoting technology transfer from higher education to business, reforming workers’ compensation and unemployment insurance for businesses and workers, making New York the leader in the clean-tech economy, improving the work force, and marketing New York to focus on upstate economic development.
Governor John Kitzhaber signed the Economic Impact Investment Act, which allows the Governor to enter into qualifying investment contracts with companies committing to a minimum of 500 jobs and $150 million in capital investment over a five-year period.
Governor Tom Corbett signed the Keystone Works bill which will help connect unemployed Pennsylvania residents with employers who are looking to fill open positions. Unemployed workers have the opportunity to receive training with an employer while continuing to receive unemployment compensation benefits. The law also provides employers incentive to hire trainees once the training is complete.
Governor Corbett also signed the Promoting Employment Across Pennsylvania Act, which allows companies that create a minimum of 250 new jobs to keep 95 percent of the personal income tax paid by employees. The job creation must take place within a five-year period, with 100 jobs being created in the first two years. The employer may also pay the personal income tax withheld from its employees and then receive a rebate of that personal income tax from the state. The program allows a maximum of $5 million per year and will expire on January 1, 2018.
Governor Lincoln Chafee established a $1 million emergency loan fund to assist businesses that have been negatively affected by Hurricane Sandy. The loans are made available through the Rhode Island Economic Development Corporation Small Business Loan Fund, with the funding set aside specifically for storm assistance.
South Dakota House Minority Leader Bernie Hunhoff says they expect to see a lot of economic development proposals during the 2013 legislative calendar. Last November a large project development fund was defeated by voters.
A Wyoming Senate legislative committee passed a bill pushing for more natural gas filling stations in the state. The bill offers a state-backed loan of up to $1 million to build the filling station and allots a maximum of $5 million for the program. The goal of the bill is to incentivize business and the public to buy vehicles powered by natural gas.
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