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US LEGISLATIVE & INCENTIVE UPDATEFALL 2017

© 2017 Hickey & Associates. All Rights Reserved. 2

US LEGISLATIVE & INCENTIVE UPDATE

SITE SELECTION &LOCATION ADVISORY

CREDITS &INCENTIVES PRACTICE

INCENTIVE COMPLIANCE & MANAGEMENT

LABOR ANALYTICS

LOGISTICS/SUPPLY CHAIN

FALL 2017

Hickey & Associates (H&A) is a global leader in location strategy, economic development incentive advisory, and workforce analytics with active projects in the Americas, Asia, Europe, Australia, and Africa. Utilizing state-of-the-art tools and techniques, H&A assists businesses in determining the best location to expand, relocate or consolidate anywhere in the world.

Over the past three decades, H&A’s incentive advisory team is a global leader in identifying, negotiating, capturing, and administering economic development incentives for their corporate clients. Offering experience in every major sector, H&A has developed proprietary models, innovative tools, and high-tech resources that streamline the process and delivery, ultimately ensuring clients receive the most value with limited risk.

Our site selection and economic development incentives experts are based in key strategic markets to maximize business goals with enhanced local knowledge and client service. With offices across the U.S., H&A ensures our service is always aligned with each unique local environment. Internationally, our locations in Mexico City, São Paulo, London, Shanghai, Hong Kong, Singapore, and Sydney ensure global site considerations are well covered.

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FALL 2017

Introduction 4State Legislative & Incentive Summary 5

Program Spotlight 13State Income Tax Review 15

Federal View 16


US LEGISLATIVE & INCENTIVE UPDATE FALL 2017

In the United States, we continue to witness an unprecedented time in the nation’s history. The American economy continues to undergo a dynamic evolution following the difficult times over the past decade, evolving to an age of major manufacturing investments and business growth. In our experience, we’ve seen large foreign manufacturers invest in mega-projects, as well as, corporate headquarters move from their generational homes to locations believed to better fit their needs for a new era.

Political leaders and economic development officials from coast to coast are competing for these investments like never before – many with tools and resources provided by their respective legislative bodies to pursue these projects, while others are set to rely on their proven workforces and business friendly environments. Meanwhile, transparency in the overall recruitment and retention process is becoming the new normal, as opposed to policies confined to a few aggressive states.

New to the nation is also the prevalence of public site selection and incentive pursuits from the world’s largest companies and most well-known brand names. Few have been as headlining as Tesla with its gigafactory in the American west, the multi-state search of Foxconn, one of the world’s largest electronic manufacturers, which ultimately set sights on the Badger State. More recently, which as of print of this publication are both in the early stages, a new joint venture of Toyota and Mazda has state officials scrambling to recruit a new automotive production plant, while Amazon has announced a search for a second North American headquarters with the potential for $5 billion in investment and 50,000 new jobs.

The following report reviews this new era in America with a particular focus on the actions in state capitals around the United States, particularly with the development of economic development tools and financial resources.

INTRODUCTION

STATELEGISLATIVE &INCENTIVESUMMARY



ALABAMAAfter extensive discussions in and around Montgomery, a repeal of Alabama’s film incentive appears to be off the docket for the remainder of the year. Currently, under these incentives, known as the Entertainment Industry Incentive Act, qualified media productions could capture income tax rebates and exemptions, up to $20 million annually statewide. However, Rep. Phil Williams had introduced legislation earlier this year in the Alabama House of Representatives which would have effectively abolished the program.

ALASKAAmid tense budget negotiations, the Alaska Legislature voted to cut an incentive for oil and gas producers in the state. The legislation, HB 111, ultimately ends the state’s practice of offering transferrable or cashable tax credit certificates for production work on the North Slope. In lieu of the certificates, legislators intend for producers to carry forward losses until the business can effectively offset state taxes. In all, the new rules are expected to save $200 million within three years.

ARKANSASEstablished by the Arkansas Legislature earlier this year, the Arkansas Tax Reform and Relief Task Force is officially at work. With the mission to evaluate the Natural State’s tax code, the 16-member, bipartisan panel is set to submit a final report by September 2018 for review during the 2019 legislative session. Co-chairs of the task force are State Sen. Jim Hendren and State Rep. Lane Jean.

CALIFORNIAReferred to as the Cap and Trade Re-authorization, lawmakers in California revised and extended the Partial

Sales and Use Tax Exemption on equipment. Originally set to expire in 2022, the program is now to sunset in 2030. The program will begin considering “qualified tangible personal property” to include those that are part of the generation, production, or storage and distribution of electric power. In addition, certain agricultural businesses, who were exempt from the program, are now allowed to participate.

In addition, the California Alternative Energy and Advanced Transportation Financing Authority’s (CAEATFA) Full Sales Use Tax Exclusion program is currently undergoing rule changes. These rules are designed to make the program work more efficiently and to change how applications are evaluated.

COLORADOInitially on a path for elimination, the Colorado General Assembly retained the state’s film incentive, but drastically reduced the program’s budget. The cash rebate program, administered by the Colorado Office of Film, Television & Media (COFTM), has previously had an annual funding level of $3 million for eligible productions. Following budget deliberations, the program has been reduced and now has $750,000 to entice productions for the 2017-2018 year.

CONNECTICUTGov. Dannel Malloy signed legislation this summer establishing new evaluation procedures for state economic development programs. The new legislation creates a statutory requirement for the Department of Economic and Community Development (DECD) to conduct annual reports to the state’s legislature with an economic impact analysis of all state economic development programs, along with a new report assessing the analysis reviewed by auditors. The DECD report must conduct the economic



impact analysis of programs providing financial assistance or tax incentives, along with other state programs with 10 or more recipients or awards in excess of $1 million during the previous year.

DELAWAREGov. John Carney approved a new law restructuring the state’s economic development efforts. The legislation will effectively replace the First State’s Economic Development Office with a new public-private partnership. This new organization, being referred to as the Delaware Prosperity Partnership, will be a 15-member board co-chaired by the governor. Expectations for the new partnership to be in place by the 2018.

DISTRICT OF COLOMBIAWith the aim to make government more transparent, the District of Columbia’s Office of the Deputy Mayor for Planning and Economic Development (DMPED) introduced two new data tools. In order to create a portal for businesses to identify and understand available economic development programs in the city, DMPED released the Business Incentives Wizard tool. Simultaneously, the agency also introduced the DMPED Delivering Tracker, which is set to establish a single location for recent news, accomplishments, and other pertinent activities.

GEORGIAAs many state legislatures target their respective film incentive programs for cuts, experts in the Peach State point towards their incentives as a key part in the booming industry statewide. Known as the Entertainment Industry Investment Act, the state offers an incentive worth up to 30% of production costs. Local governments are also adding to the state’s incentive offering, including Savannah, which now provides an additional 10% rebate for eligible projects.

HAWAIILegislators in the Aloha State are reaching out to their constituents to tackle their ongoing affordable housing challenge. The Joint Legislative Committee on Affordable Housing has held multiple informational hearings, which recently included calls for additional tax credits and community support for developers. A number of policy proposals are expected to be debated in the next legislative session coming out of these hearings, including revisions to the rental housing revolving fund and property tax exemptions for developers.

IDAHOCommunities in the Gem State now have more discretion over property tax incentives thanks to legislation signed into law earlier this year. Previously, county commissioners could only provide property tax exemptions for businesses in manufacturing and for projects with a minimum of $3 million in capital investment. With the new legislation in place, however, local leaders can now offer these incentives for businesses in other industries and set a minimum investment threshold level of $500,000, at their discretion.

ILLINOISFollowing months of debate in Springfield, the Illinois General Assembly approved legislation to revive the Economic Development for a Growing Economy Tax Credit (EDGE) program. Expired since April 30th, the Land of Lincoln has been without this major job creation incentive in the state’s economic development toolbox. With this new law, the EDGE program will be back online through June 30, 2022. The EDGE program still looks very similar to the tax credit that expired earlier this year. However, there are several key changes to the program to note, including the total potential value, priority for underserved areas, and a new clawback provision, among others.



INDIANABeginning in May 2018, the Hoosier State will have direct flights to Paris, France through Delta Airlines. Offering at least three flights per week, this new route will service commercial flights from the Indianapolis International Airport to Charles De Gaulle Airport in Paris. To support the effort, Gov. Eric Holcomb will provide Delta up to $5.5 million in incentives over the next two years. This funding comes from a $30 million allotment provided to the governor in the biennial budget for economic development purposes.

IOWA To entice another major technology company to invest in the Hawkeye State, economic development leaders assembled a comprehensive incentive package for Apple Inc.’s newest data center. With a $1.3 billion investment, Apple joins Alphabet Inc.’s Google and Microsoft Corporation with major data centers in the state. Reportedly, the incentive package for Apple, which is primarily leveraged through the State of Iowa and the City of Waukee, consists principally of a $188.2 million property tax abatement and a $19.65 million investment tax credit. Along with the facility investment, the company has also pledged $100 million to a public fund for the city, reportedly set to first go to a youth sports complex.

KANSASIndividual income tax rates in the Jayhawk State are set to decrease once again for 2018. Beginning in 2013, the tax bracket structure was reduced to two from three, which then employed rates of 3.0 and 4.9 percent, respectively. For 2018, these levels are set to be further reduced to 2.3 and 3.9 percent.

KENTUCKYThe Bluegrass State recently released data on the economic development incentives approved for projects over the previous fiscal year. In Fiscal Year 2016-17, the Kentucky Economic Development Finance Authority (KEDFA) approved $173.6 million in incentives for 334 companies. Of those, 49 companies will be receiving over $1 million. Incentives offered this year were above the previous year total of $136 million.

LOUISIANALegislators in the Pelican State have been in contentious debate for years over the state’s film incentive as budgetary challenges are tackled in Baton Rouge. In June, lawmakers found a compromise to continue the program, which will continue to include an annual $180 million cap. Also, due to a nearly $300 million backlog of unused credits, the state’s economic development is limited to issuing only $150 million on an annual basis. The program is now set to expire in 2025.

MAINETo pave the way for more affordable housing development, the city of Portland recently approved new zoning incentives. These incentives, targeting low-income and affordable housing developments, will ease certain restrictions, including height and density limitations, and revised setback rules. A key reason for these new provisions is to provide developers with more leverage to secure funding from the Maine State Housing Authority.

The Maine Technology Institute has announced the launch of the Lightning Rounds for the Maine Technology Asset Fund 2.0. Grants are available through a competitive process for infrastructure, equipment and technology upgrades. Job growth and job retention are considered. During the Lighting Round (October – December 2017), up to $25 million in grants are available via a simplified pre-qualification process.

MARYLANDEarlier this year, the Maryland General Assembly approved SB137, the More Jobs for Marylanders bill, which targets investing manufacturing businesses. The intent of the legislation is to attract manufacturing operations to economically distressed parts of the Old Line State, and to encourage expansion of existing manufacturing operations. Most of the program benefits will go into effect beginning on January 1, 2018, and shall remain active until June 30, 2020. Eligible businesses may qualify for an Income Tax Credit, Property Tax Credit, and Sales Tax Refund for a ten-year period via this new program.



MASSACHUSETTSInvesting in the future workforce, Massachusetts has expanded their Commonwealth Commitment program. The initiative provides rebates on fees and tuitions for students signing up for the program that start at state community colleges and finish at a state public university. Initially, the program was only available for six majors. Today, the program is now open for 40 different degrees. In order to maintain eligibility for the program, students must be full-time, retain a 3.0 grade point average, finish an associate’s degree in two and half years, and complete a bachelor’s degree in the following two years.

MINNESOTAWith the kickoff of the 2017 football season, the Twin Cities are preparing to host Super Bowl LII next February. Booked as a 10-day event leading up to the championship game, the economic impact of the occasion is often debated. According to host committee officials, the economic impact of Super Bowl LII and the activities before the game are projected to be in excess of $400 million as 1 million people participate. This projection outpaces the state’s previous Super Bowl in 1992, which reportedly delivered an impact of $364 million in 2016 dollars.

MISSOURIAt his recent Governor’s Conference on Economic Development, Gov. Eric Greitens laid out new initiatives for business growth and economic strength in Missouri. A key part of the strategy is a launch of the Skilled Workforce Missouri Program, a new training initiative. The strategy also consists of a new customer service platform for businesses to discover economic development support mechanisms.

MONTANAThe Montana Legislature passed a bill this past session providing new incentives for qualified data centers. Through a new class 17 property tax classification for data centers, facilities may capture a reduced tax rate for land, improvements, furniture, fixtures, equipment and tools. Qualified projects must be at least 300,000 square feet and have a minimum investment of $150 million. Projects must commence between June 30, 2017 and July 1, 2027 to be eligible.

NEBRASKAAs required on an annual basis, the Nebraska Department of Revenue submitted its 2016 report on economic development incentives to the state legislature. When

evaluating strictly on numbers, the report does not show a net positive impact from incentives on the state economy. However, leaders in the state legislature are discounting the methodologies of the report, particularly related to wage growth and quality of life improvements. Debate over incentives in the Cornhusker State are expected to continue into the next legislative session.

NEVADADuring the recent legislative session in the Silver State, the Nevada Legislature approved legislation to expand the state’s film tax incentives. Administered by the Nevada Film Office (NFO), the state now has an additional $10 million per year for transferable tax credits for film and other eligible productions. The NFO is actively sending out applications to prospective productions seeking to film in Nevada.

The Nevada Legislature also modified eligibility requirements for companies pursuing a state tax abatement program. Prior to the legislation, businesses



were required to pay the statewide average wage defined by the County’s unemployment rate, which was a threshold of 6%. The new law increases the minimum rate to 7%. In addition, the partial tax abatement program now requires the business to pay 85% of average wages, while also providing health insurance to all employees.

NEW HAMPSHIRECommenced four and a half years ago, a community in the Granite State is nearing approval of a revitalizing city planning initiative. Initially funded through a $50,000 New Hampshire Community Planning Grant, Keene city planners have been diligently developing a new master plan for a gateway neighborhood project. The new plan envelopes three zoning districts, which was once anchored by a Kingsbury Machine Tool Corp facility, which previously employed more than 1,000 people.

NEW JERSEYOfficials at the New Jersey Economic Development Authority (NJEDA) are reminding businesses about upcoming deadlines for the popular Grow NJ Assistance Program. Businesses seeking an award for a mega project must have their applications presented to the EDA board by December 2017. All other applications must be submitted by June 2019. According to the agency, the job creation and retention incentive program has leveraged $4.32 billion in tax credits for nearly 29,000 new full-time jobs and an estimated net benefit of $13.4 billion through July 2017.

NEW MEXICOGov. Susana Martinez recently credited one of the state’s primary economic development incentives with the creation of over 2,000 jobs already in 2017. Known as

the Job Training Incentive Program (JTIP), the incentive provides reimbursements for classroom and on-the-job training for new employees in the Land of Enchantment. In 2017, 57 companies have leveraged the program for a total of $13.7 million. Over the past seven years, the JTIP program has created approximately 10,000 jobs.

NEW YORKThis summer, the New York State Legislature approved extensions to several expiring economic development programs in the Big Apple. Now set to expire in July 2020, the Relocation and Employment Assistance Program (REAP) is a popular program providing tax credits for industrial and commercial investments and job creation in the “Outerboroughs” of the city. The legislation also extended the Energy Cost Savings Program (ECSP), the Lower Manhattan Energy Program (LMEP), and the Lower Manhattan and Local Sales Tax Exemption programs.

NORTH CAROLINAIn an ultra-competitive environment for economic development, the Tar Heel State now has a new incentive tool to better vie for mega-projects. Approved as part of this year’s $23 billion budget, the North Carolina General Assembly established a new provision to the Job Development Investment Grant (JDIG) for projects investing more than $4 billion and creating at least 5,000 new jobs. Instead of the typical term of 12 years, the new provision allows these mega-projects to capture grants for up to 25 years.

OHIOThe City of Columbus is launching an incentive program for the purchase of electric vehicle (EV) charging ports. Leveraging a $50 million Smart City Challenge grant by



the U.S. Department of Transportation (DOT), the city is set to provide up to $3,500 per plug, with a maximum of up to $25,000 per facility. Columbus has reportedly raised nearly $300 million in additional local matching funds for the smart city efforts.

OKLAHOMA Oklahoma City voters recently approved a new bonding package providing funding for a list of key projects in the state capital. Through the ballot initiative, city residents approved a number of critical investments, including a new combined police-fire training center, $60 million for economic development, $137.7 million for parks, $20.4 million for transit, over $500 million in infrastructure, and $8.9 million for the downtown arena, among other projects.

OREGONLegislators in the Beaver State extended a key production rebate program earlier this year. Known as the Greenlight Oregon Labor Rebate Fund, the program provides a labor rebate of 6.2% of Oregon payroll for workforce development related activities for qualifying media projects whose budgets are at least $1 million. The bill removed sporting events as eligible production projects. Lawmakers also passed legislation limiting individuals employed in any mill, factory, or manufacturing establishment to work no more than 10 hours in any one day, or in sawmills, planing mills, shingle mills and logging camps more than 8 hours.

PENNSYLVANIAThe Pennsylvania General Assembly approved new legislation for entertainment productions in the commonwealth. The legislation, HB 151, created the Entertainment Economic Enhancement Program and transferred the Concert Rehearsal and Tour Tax Credit to this program. This transfer adjusts the language of the previous tax credit program to align it with Title 12, as opposed to the Tax Reform Code. The program also allows expenses which are contractually required to be incurred to count as “Qualified Concert Rehearsal and Tour Expenses,” and allow the tax credit to be sold/transferred. Finally, the legislation places a maximum cap per project at $800,000.

RHODE ISLANDGov. Gina Raimondo recently announced recipients of the second round of the Wavemaker Fellowship. The program, which is administered by the Rhode Island Commerce Corporation, provides a tax credit to college graduates working in STEM and design fields for Rhode Island employers. On average, the annual award is approximately $3,785 per graduate. The core mission of the program is to recruit and retain talent in the Ocean State.

SOUTH CAROLINA The last county in the Palmetto State to have an economic development office is now realizing success from a coordinated approach. Richland County, the second most populous county in South Carolina, has had extensive success since establishment of their recruitment strategy. As of August 2017, the county has had approximately $445 million in investment and 2,275 new jobs over the past 10 months.

SOUTH DAKOTA Lawmakers approved a new law earlier this year offering property tax breaks for landowners that install buffer strips between agricultural land and waterways. To encourage installation of these strips to support environmental conservation, the state will assess the applicable land at 60% of the agricultural income value. Landowners can submit an application for the 2018 tax year until October 15th.

TENNESSEEThis has been the year of home appliances for the Volunteer State as Tennessee lands two major manufacturing facilities. First, South Korea-based LG Electronics announced a new appliance manufacturing



facility to be located in Clarksville. The facility, which has since had an official groundbreaking ceremony, will principally make washing machines and is expected to bring 600 new jobs. More recently, GE Appliances announced a doubling of their workforce in Selmer, a facility focused on upscale refrigeration products. These types of developments are also being seen in other parts of America, as manufacturing production returns to the United States.

TEXASGov. Greg Abbott approved the biennial budget this summer with funding key to the state’s economic development efforts. The Texas Enterprise Fund (TEF) received full funding at $107 million for the budgetary period. The TEF is a discretionary cash grant aimed at highly competitive projects for the Lone Star State. Since 2004, TEF has awarded over $600 million in grant funds. Along with TEF, the legislature also provided funds for the Governor’s University Research Initiative (GURI), which is a matching grant program to support the recruitment of top researchers to Texas universities.

UTAHThe Utah State Legislature enacted a bill to encourage investment in rural regions of the state. Referred to as the Utah Rural Jobs Act, the legislation creates a state nonrefundable rural job creation tax credit for credit-eligible contributions to a rural company that invests in eligible small businesses primarily located in rural counties. Credit-eligible contributions are capped at $24,360,000 spread over at least 4 years.

VERMONTGov. Phil Scott recently announced the allocation of $2.7 million in state tax incentives in the Green Mountain State. The incentives are being spread across 22 projects, leveraging more than $53 million for construction and rehabilitation efforts. Earlier this year, lawmakers provided additional funding, as well as, increased single project award caps to $500,000, up from $300,000, previously. Since 2000, the program has provided $25 million in tax credits to leverage $400 million in private investment.

VIRGINIAAccording to a recent poll conducted by the L. Douglas Wilder School of Government and Public Affairs at Virginia Commonwealth University, Virginians are strong supporters of economic development incentives. Overall, 80 percent of Commonwealth residents participating in the survey supported the use of incentives. However, how they were

provided to companies was important to respondents. Seventy-two percent of those supporting incentives would change their mind if funds were awarded upfront.

WASHINGTONThe Washington State Legislature extended a handful of economic development programs that were set to expire this past legislative session. The Evergreen State’s film production incentive program was renewed as part of the state’s new budget through June 30, 2027. The program has an annual cap of $3.5 million per year with the maximum award being $750,000. The B&O Tax rate for Manufacturers of Solar Silicon Products has also been extended to July 1, 2027. Further, the Main Street Tax Credit received a statewide increase to $2.5 million in available funds.

WEST VIRGINIAWith a mission to deliver economic development funding for coal-impacted communities, the Appalachian Regional Commission (ARC) recently announced an additional $2 million in awards via the Partnerships for Opportunity and Workforce and Economic Revitalization (POWER) Initiative. Of those recent awards, Shepherdstown is set to receive $1.2 million to the Natural Capital Investment Fund, Inc., a local food systems development network, and the Southern Appalachian Labor School in Kincaid secured just over $100,000 for technical assistance to establish a social enterprise focusing on construction and housing. To date, ARC has invested over $94 million through the POWER Initiative.

WISCONSINLawmakers in the Badger State have approved an incentive package worth nearly $3 billion for Foxconn Technology Group. Heralded as a top mega-project of $10 billion and up to 13,000 jobs, legislators worked diligently to develop a package that would be amenable to the Taiwanese company. Groundbreaking is expected next spring, with plant operations commencing in 2020.

WYOMINGA key sales-and-use tax exemption on manufacturing machinery was extended through 2027 earlier this year by the Wyoming State Legislature. The exemption was set to expire at the end of 2017. Lawmakers also created a revolving investment fund for economic development in the Cowboy State. Appropriated with $25 million in the fund, businesses can capture support in the form of loan guarantees or loans for eligible projects.

ARIZONAThe Arizona State Legislature was active this past legislative session passing three bills to extend and revise economic development incentive programs. SB1416 revised the state’s flagship Quality Jobs Tax Credit (QJTC) program by implementing a new tiered model of eligibility. Historically, the QJTC program required business located in an urban area to invest at least $5 million, create 25 new jobs, and pay 100% of the County median wage. The new tiered model approach is a sliding scale, as outlined below.

Among other modifications to economic development tools and policies, the legislature also: reauthorized the Job Training Grant through the end of 2020; authorized $10 million in credits for the Angel Tax Credit Program through 2021; and extended the state’s Research and Development Tax Credit rate through 2022.

SCENARIO B

SCENARIO C SCENARIO D

25 NEW JOBS 25 NEW JOBS

25 NEW JOBS 25 NEW JOBS

SCENARIO A - STATUS QUO

5m INVESTMENTOVER 12 MONTHS$ 2.5m INVESTMENT

OVER 12 MONTHS$

1m INVESTMENTOVER 12 MONTHS$ 500k INVESTMENT

OVER 12 MONTHS$

AVERAGE MEDIAN WAGES

AVERAGE MEDIAN WAGES100% 125%

AVERAGE MEDIAN WAGES

AVERAGE MEDIAN WAGES150% 200%




FLORIDA

During the 2017 Special Legislative Session, the Florida Legislature created the Florida Job Growth Grant Fund, a new program administered by the

state’s Department of Economic Opportunity (DEO). The purpose of the program is to improve public infrastructure and enhance workforce training.

Overall, lawmakers provided an $85 million nonrecurring appropriation for the new program, which may not be used for any single company or business entity, and is intended for public infrastructure projects and workforce training grants. The bill allows any unspent appropriations for the Florida Job Growth Grant Fund to be carried forward and used for up to five years. The program does not have a sunset date.

Florida DEO and Enterprise Florida, Inc. (EFI) can present projects, solicit proposals, and make funding recommendations to the governor. The governor has the ability to approve projects for:

• State or local public infrastructure projects to promote economic recovery in specific regions of the state, economic diversification, or economic enhancement in a targeted industry.

• Infrastructure funding to accelerate the rehabilitation of the Herbert Hoover Dike. DEO and the South Florida Water Management District may enter into agreements with the US Army Corps of Engineers to implement this project.

• Workforce training grants to support programs at state colleges and state technical centers that provide participants with transferable and sustainable workforce skills that are applicable to more than a single employer.

The program has begun accepting applications. Since the program is designed to be community-driven, the applications must be submitted by one of the following:

• EFI;

• DEO;

• Local governments;

• Community colleges;

• Technical centers; or,

• FL Department of Transportation

Michigan Gov. Rick Snyder signed a package of bills earlier this year allowing companies creating new jobs to potentially capture income taxes paid by their

new employees. The Michigan Strategic Fund (MSF), administered by the Michigan Economic Development Corporation (MEDC), the State of Michigan’s primary economic development organization, could strike up to 15 deals per year. No more than $200 million in incentives could be awarded over the life of the program, which as of today, extends to 2019. Retail stores, professional sports stadiums, and casinos would not qualify for the new tax breaks.

Under the new law, referred to as “Good Jobs for Michigan,” a company seeking to relocate to Michigan could be eligible to collect up to 100% of the state income tax withholdings for new employees over a 10-year period. The total value of the incentives is variable based on the number of jobs created and average wages in the respective “local prosperity region”.

To be eligible, a company must create at least 250 new jobs at a salary level at or above 125% of the prosperity region average wage. Businesses hiring

at least 500 new employees must pay wages at least equal to 100% of the prosperity region average wage to qualify. In order to capture the maximum tax incentive amount over a ten-year period, a business must create a minimum of 3,000 qualifying jobs.

Additional program details will be forthcoming, and the application process is still being formulated. In summary:

• Businesses must create at least 250 new jobs that pay 125 percent of the the average regional wage to qualify for incentives.

• If a business creates at least 500 new jobs, the company must pay no less than 100 percent of the average regional wage.

• To capture the maximum incentive amount, a company must create 3,000 jobs that pay at least 100 percent of the average regional wage.

MICHIGAN



FALL 2017

STATE INCOME TAX REVIEWWhen evaluating where to locate business operations in the United States, companies must review the various tax rates in states and localities across the country. Personal income taxes make up approximately 36% of total state revenues, with many states also relying on corporate income taxes for their coffers.

Over 86% of states levy individual income taxes on individuals, with the majority deploying a graduated-rate structure. Corporate income taxes are prevalent in 44 states. Four states instead impose a gross receipts tax, and two others do not levy any tax on corporations.

The following outlines the marginal tax rates for Personal and Corporate levies in the respective states, as of March 2017.

iowa

massachusetts

virginia

maine

arkansas

connecticut

utah

pennsylvania

louisiana

oklahoma

california

alabama

idaho

south carolina

wyoming

minnesota

wisconsin

michigan

delaware

hawaii

rhode island

mississippi

nevada

alaska

nebraska

kentucky

vermont

missouri

kansas

arizona

ohio

district of columbia

tennessee

illinois

georgia

maryland

indiana

montana

colorado

texas

new jersey

new york

oregon

florida

new hampshire

new mexico

west virginia

north dakota

washington

north carolina

south dakota

12%

9.99%

9.8%

9.4%

9%

8.93%

8.84%

8.7%

8.5%

8.25%

8.2%

8%

7.9%

7.81%

7.75%

7.6%

7.5%

7.4%

6.75%

6.5%

6.4%

6.25%

6.2%

5.5%

5%

3%

no levy

gross receipts tax

4.9%

4.63%

4.31%

6%

7%

iowa

massachusetts

virginia

maine

arkansas

connecticut

utah

pennsylvania

louisiana

oklahoma

california

alabama

idahosouth carolina

wyoming

minnesota

wisconsin

michigan

delaware

hawaii

rhode island

mississippi

nevada

alaska

nebraska

kentucky

district of columbia

missouri

kansas

arizona

ohio

vermont

tennessee

illinois

georgia

maryland

indiana

montana

colorado

south dakota

new jersey

new york

oregon

florida

new hampshire

new mexico

west virginia

north dakota

texas

north carolina

washington

13.3%

10.15%

9.9%

9.85%

8.95%

8.98%

8.97%

8.82%

8.25%

7.65%

7.4%

7%

6.99%

6.9%

6.84%

6.6%

6.5%

6%

5.75%

5.499%

5.2%

5.1%

5%

4.997%

4.63%

4.54%

4.25%

3.23%

3.07%

2.9%

no levy

4.95%

4.9%

5.99%

CORPORATE INCOME TAX PERSONAL INCOME TAX

Source: Tax Foundation



Not a day seems to go by without important news resonating from our nation’s capital, whether it is from the White House or Congress. Debates across the spectrum continue in Washington with healthcare, climate change, Russia, race relations, and North Korea representing only a handful of the controversial issues under the microscope.

Of those issues set for contentious debate in the final quarter of 2017, federal spending will certainly be among them. Congress and the White House successfully agreed upon a continuing resolution to fund the government through December 8, 2017, along with a temporary suspension of the debt limit and $15.25 billion in emergency funding following Hurricane Harvey. With the dire impacts of Hurricanes Jose and Maria, additional emergency funds are also expected to be authorized. All sides are digging in for what may prove to be a fiscal battle this winter.

This spring, President Trump released his first budget proposal since entering the White House, which was referred to as “A New Foundation for American Greatness.” The proposed budget sought increases in defense spending and certain infrastructure accounts, but the public focus was much more on those programs placed on the chopping block, which included the elimination of 66 federal programs.

FEDERAL VIEW

The Guardian



In September, the House of Representatives completed the passing of all 12 annual appropriations bills for a total of $1.2 billion in spending. The final bills approved by the legislative body had many significant differences from the budget proposed by the White House, which is not an uncommon direction for Congress to take. According to House Speaker Paul Ryan, this was the first time the lawmakers have been able to approve these bills in entirety through regular order since 2009.

With $1.2 trillion in federal spending approved by the House, there are countless funding streams that are vital for economic development and business growth in the United States. Below are highlights of several key spending items from the approved FY 2018 appropriations legislation:

• $19.3 billion for discretionary Department of Transportation funding, an increase of $681 million for the previous year, yet $6.2 billion less that the administration’s request

• $3 billion for Community Development Block Grants, which is equal to last year’s levels. The program was set for elimination in the president’s budget.

• $176 million for the Economic Development Administration, a decrease of $100 million from current levels, but an increase of $146 million from the White House proposal.

• $2.6 billion for USDA Rural Development programs, many of which target critical infrastructure investments and small business support.

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