A Look Back - and Ahead - at the 2013/2014 Legislative and Incentives Landscape
From what we witnessed in 2013, we can only expect more dynamic developments in state incentive programs and a continued focus on additional transparency.
The state has updated requirements for its Quality Jobs Tax Credit program. These changes include removal of a 400-job cap on credit claims, mandatory pre-approval, a processing fee per job, and an update of timeline definitions to be more flexible in accordance with a company’s schedule.
Governor Jerry Brown’s new budget plan effectively eliminated the Enterprise Zone program, which costs California $700 million in tax revenues each year. The new incentive package includes a manufacturing equipment sales tax exemption, a discretionary income tax incentive program, and a tax incentive for hiring economically disadvantaged California residents if the business is located in a high unemployment and high poverty area of the state. The programs is effective beginning January 1, 2014.
Governor Rick Scott signed into law House Bill 7007 adding oversight to the state’s economic incentives programs. Florida’s incentive programs are now up for review every three years by Florida’s Office of Economic and Demographic Research (EDR) and the Office of Program Policy Analysis and Government Accountability (OPPAGA). The new law mandates the compilation of all state and local tax incentives given to businesses for economic development in an online database. It also adds an accountability clause to applications for economic incentives and has provisions for an independent return-on-investment calculator to analyze taxpayer-funded economic development projects. The bill also creates a sales tax break for equipment purchases by the state’s manufacturers for three years.
Governor Martin O’Malley signed a bill establishing a new job-training fund for targeted industries with high demand for skilled workers. Known as the Maryland Employment Advancement Right Now bill, or EARN, the legislation apportioned $2.5 million in annual grants for strategic industry partnerships of businesses, educational institutions, and government agencies to identify and develop new work force development strategies.
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 shops.
Governor Phil Bryant signed into law several financial incentives for energy-related economic development. These include a sales tax exemption on energy used in manufacturing processes, a 25 percent rebate on energy-related research and development costs, a sales tax reduction on electricity for oil and gas produced in the state using carbon dioxide as a recovery agent, and an energy infrastructure revolving loan fund to finance gas lines and transmission lines.
Governor Jay Nixon signed House Bill 184 and Bill 196 consolidating four of the state’s business incentives into the newly created Missouri Works Program. The new program is similar to the Missouri Quality Jobs (MQJ) program that it is replacing but lowers the job thresholds for businesses to qualify and gives more discretion to the Department of Economic Development (DED). The legislation also consolidates Missouri’s current job training programs.
The New Jersey Economic Opportunity Act of 2013 was passed by the state’s legislature and signed by Governor Chris Christie. The act consolidates five economic development programs into two existing programs: the Grow New Jersey Program and the Economic Redevelopment and Growth Program. The new programs will lower various existing threshold requirements to qualify for incentives and allow more types of businesses and projects to access the incentives. Prevailing wage requirements have also been removed.
The Grow New Jersey Program now offers broader incentives and tax credits for businesses that invest capital and create or retain jobs in the state. The Economic Redevelopment and Growth Program builds on the existing program to close financing gaps and incentivize redevelopment efforts.
Governor Susana Martinez signed legislation to lower corporate income tax rates from 7.6 percent to 5.9 percent over a five-year period, starting in 2014. The corporate income tax rate will be phased in over 15 years, starting in July 2015, with cities over 10,000 allowed to increase their gross receipt tax by 3/8 of a cent to compensate.
Governor John Kitzhaber signed the Economic Impact Investment Act, which allows the Governor’s Office 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 an 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 company per year and will expire on January 1, 2018.
The state has initiated the Wisconsin Fast Forward grant program for work force training. Some $15 million in grants will be available to support employer-led worker training in a competitive application process. These grants will be administered by the new Office of Skills Development (OSD) under the Department of Workforce Development.
A Look Ahead at 2014
Increased attention on transparency is ensuring an effective return on investment for taxpayers, especially in an era of strict budget tightening around the country. Looking toward an even stronger, more confident U.S. economy in 2014, we can only expect these trends to continue as states work to distinguish themselves from one another. Let’s take a look at what’s ahead.
In a speech to the Greater Kansas City Chamber of Commerce, Missouri Governor Jay Nixon called for an end to the “border war” with Kansas on economic incentives, adding that they should be used to attract new businesses to the area rather than simply relocating ones already there. Kansas Governor Sam Brownback has suggested a similar pact, though no formal agreement has been reached.
Senate Bill 127, passed by the North Carolina Senate, created North Carolina “prosperity zones” in place of the partnership structure of economic development. If signed into law, approximately $483,000 in annual funding would be cut from regional partnerships in the state.
Additional incentives above the new Grow NJ Program have been proposed in the Senate under the New Jersey Economic Development Opportunity Act II, specifically addressing affordable housing, movie and television production, and the repurposing of hospital buildings for other uses. However, some of these elements do not have the full support of Governor Christie and passage is far from certain.
Proposal One was passed in New York, allowing for Las Vegas-style casinos in the Empire State. The state will begin to solicit bids from international resort companies to begin the development of these casinos. A fee of $500 per machine would be required to be put into a problem-gambling fund managed by the state. Governor Andrew Cuomo is also aggressively pushing the development of technology companies in upstate New York by creating new income-tax-free zones (for up to five years) around university campuses with other new incentives expected in 2014.
North Carolina is planning to eliminate all tax credits for film production beginning in January 2015.
The Texas Film Commission is planning on extending its film production incentive programs for video game development.
The Utah legislature is poised to introduce economic development legislation related to science, technology, and research. The specific bill has yet to be released, but it is expected to create research and development hubs around state universities and build on existing STEM (science, technology, engineering, and mathematics) education.
Governor Jay Inslee signed into law the “Boeing Incentive Bill” after it was rushed through the Washington legislature. Some have been calling it the largest corporate incentive bill of all time, valued at $9 billion through 2040. Now, an additional $12.3 billion transportation proposal is also being considered in the Washington Senate as the state acts to hold onto Boeing’s 777x production and carbon fiber technology.
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