Regional Report: Tax and Incentives Advantages in Plains States’ Encourage Investment in Renewable Energy and Life Sciences
The Plains States’ low tax environment and plentiful incentives are encouraging investment in renewable energy, life sciences, other R&D.
In its Q3 2014 U.S. Wind Energy Annual Market Report, the American Wind Energy Association ranked Kansas No. 8 in the nation for wind power capacity installations. So far the state has reaped some $7 billion in investments for its wind industry, including project developers and a Siemens nacelle manufacturing plant in Hutchinson.
Kansas also is attracting a host of companies in agricultural, food processing, aviation, and animal science that have relocated or expanded their businesses to the state. Among them, Netherlands-based Unilever Supply Chain expanded its existing plant in New Century by nearly 450,000 square feet and is expected to add 100 new jobs to its current 150. The $152.5 million investment also includes the purchase of new machinery and equipment.
“By creating a world-class manufacturing facility we are further investing in our core food brands, and we’re excited about the growth this will enable,” says Kees Kruythoff, Unilever North America president.
Kansas offers a number of incentives to attract such deals. Among them is its High Performance Incentive Program (HPIP), which offers incentives to businesses that make new capital investments, pay above-average wages, and invest in workforce training. An additional qualifier may be available for nonmanufacturing firms that receive a majority of their revenues from outside of Kansas. HPIP can offer corporate income tax credits and a sales tax exemption on purchases related to a company’s project.
Nebraska is courting the renewable energy sector by offering incentives through its Nebraska Advantage Package to businesses that produce and sell electricity via renewable energy resources. The package is available to other industry sectors as well. Here, businesses may qualify under various “tiers” for tax refunds, credits, or exemptions, depending on the investment and jobs created.
For example, a business making a $1 million investment and adding 10 new jobs is eligible for a Tier 1 refund of one-half of the sales tax paid for qualified capital purchases at the project; the full sliding scale wage credit of 3, 4, 5 or 6 percent depending on wage levels; and a 3 percent investment tax credit. Tier 5, which calls for a $30 million new investment and maintaining all employees, provides a refund of all sales taxes paid on the project’s capital purchases.
Other components are incorporated into the Nebraska Advantage package, such as flexible and discretionary job training grants; the R&D Tax Credit; and Microenterprise Tax Credit.
Low Tax Environment
South Dakota has created one of the nation’s consistently low tax environments, thereby earning it a No. 2 ranking in the Tax Foundation’s 2015 Business Tax Climate Index.
South Dakota’s newest finance program is its Reinvestment Payment Program, the result of 2013 state legislation. Essentially, the program assists companies in offsetting upfront costs associated with relocating or expanding operations and/or upgrading equipment in South Dakota. The program allows for project owners to receive a reinvestment payment, not to exceed the South Dakota sales and use tax paid on project costs, for new or expanded facilities with project costs in excess of $20 million or for equipment upgrades with project costs in excess of $2 million.
So far nine companies have been approved for the program. Among them is Canadian company Marmen Energy, which was approved for a reinvestment payment of up to $600,000 for its expansion into a 150,000-square-foot facility in Brandon, South Dakota. The plant is dedicated to the fabrication of wind towers.
Energy and R&D
At 2.8 percent (October 2014), North Dakota is the state with the nation’s lowest unemployment rate, thanks largely to its oil boom. The U.S. Energy Information Administration now ranks North Dakota the second largest oil-producing state in the nation. Its economic output has more than doubled in just 11 years, according to Bureau of Economic Analysis, reaching $49.8 billion in 2013.
North Dakota is also home to Microsoft, Amazon, and countless other high-tech companies and offers 15 financial assistance and incentive programs. Among them is the Research North Dakota program that was introduced in 2013.
The program consists of Research ND and Research ND BIO and targets North Dakota companies with research, development, or commercialization needs that can be met through partnership with one of North Dakota’s research universities. In addition, companies outside of the state with similar needs and an interest in expanding into North Dakota, or partnering with a North Dakota company, are eligible. Advanced manufacturing, aerospace, value-added agricultural, energy, as well as technology-based businesses are encouraged to utilize the program.
Research ND BIO is limited to research, development, and commercialization of vaccines and antibodies for the prevention or treatment of, or cure for, cancer, virally infectious disease, or other pathogens. Companies that do not fit the criteria of the Research ND BIO program may apply for funding through Research ND.
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