Software is becoming a bigger part of incentives analysis as clients increasingly want to use this tool. Many clients are building the internal capabilities to perform initial credits and incentives and site location analyses. They want to do some of that research on their own with their internal team prior to pulling in an advisor, or maybe they have an internal team that can handle the project from start to finish. Unless they have the ability to go to all the various jurisdictions under consideration and understand all their programs, the team’s software, depending on its capabilities, provides them with one place to research the available credits and incentives for a particular jurisdiction and allows them to understand the statutes and how they may apply to their project. These internal teams will now have the capability to perform the incentives analysis in-house. The market is asking for this, and Deloitte is working to respond to this need.
Each credits and incentives program, whether it's statutory or discretionary, is going to have various compliance and reporting requirements, and they're all going to be different, depending on the jurisdiction. Imagine a large multinational company that has site location decisions being made all around the country — and all around the world (there are global applications to this as well.) They're going to have potentially hundreds of different programs with different reporting requirements at the state and local levels, and the due dates aren't going to all match up. In the tax world, it can be a busy season all the time related to complying with these programs. Having software, in its simplest form, can help solve the problem of tracking these deadlines and the commitments made to different jurisdictions, making clear the status of those commitments. That's really the first thing that software can help with.
Why Is Data Collection Essential for Analyzing Incentives Programs?
Depending on the state and the particular program, the compliance could be either as simple as submitting a one-pager, or it could be as extensive as pulling HR data related to such things as position title, position number, start date in current position, start date with the company, termination date, W2 data, wage data, and withholding data. There's a whole host of information, and that's just primarily on the HR side. Then you get into the operations side, the finance side, and what sort of qualifying expenses a company may have. The team can spend a lot of time compiling the information that they would need to submit for one annual report for just one program to maintain the company’s eligibility and to continue to receive benefits from that program. The software will help that internal group, that may be limited on time and resources, to collaborate with colleagues across various departments in capturing that data more efficiently, meeting those deadlines and, ultimately, adhering to the reporting requirements.
Data collection is important because a lot of incentives programs are performance-based, particularly on the discretionary incentives side. Before a community will write a company its state grant, the company must prove that it has met certain job-creation requirements and that the average wage of the project is as it was presented 12 months ago, for example. The amount of support that a state or local jurisdiction has offered for a project is going to be based primarily on investment, jobs, and wages. To ensure that the community and the state are getting the return they expected from supporting the project with an incentives program, they're going to want to verify the commitments that a company has made from that perspective. There may be a retention component, but they're primarily looking at the number of new jobs, what the average wages of those jobs are, and then how much is being invested in the community. That's really the key — communities are really the ones driving a lot of the performance requirements. Once a company meets certain milestones or certain commitments, then it will be eligible to receive a portion of the amount awarded. Sometimes it isn't received until the project is entirely completed, so a company could put a lot of incentive dollars at risk by ignoring some of this data or ignoring some of the deadlines. Data collection is important because a lot of incentives programs are performance-based, particularly on the discretionary incentives side.
The Basics of Evaluating Incentives Programs
State or local economic development websites target all types of industries and all types of companies. The websites feature a menu of 10, 20 or sometimes even more statutory or discretionary incentives programs. There's a whole host of them, and a company doesn’t know which ones are going to apply to its project. The company team may have to visit several different websites with different amounts of information related to the eligibility requirements, the actual benefits, and how the benefits are monetized. For example, if it's a credit, what's the order in which it has to be taken?
Having software can allow internal teams the ability to access information from across many different programs via a single, integrated database. There's essentially a menu where the team could drill down on what programs a certain state offers, whether they involve tax credits, property taxes, etc., and look at those programs. However, it's not the end-all, be-all — the team still needs support and knowledge either from a third party or internally to be able to validate what it finds. While a lot of the information about these programs is updated in as real time as possible, the team will still need that human element to make sure that it's all accurate. Generally speaking, however, by having one resource to access to see a significant majority of the potential credits and incentives that might be available for a specific project will save a company’s location team a lot of time. Disclaimer: This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this presentation.