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What’s up with the neighbors?

What’s up with the neighbors?. MEDC Meeting May 19th, 2006. Overview. Arkansas Illinois Iowa Kansas Targeted Industries Cash versus Tax Credits Tax Credits Requirements Benefits Uses. Incentives. Incentives are designed to motivate companies to action.

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What’s up with the neighbors?

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  1. What’s up with the neighbors? MEDC Meeting May 19th, 2006

  2. Overview Arkansas Illinois Iowa Kansas Targeted Industries Cash versus Tax Credits Tax Credits Requirements Benefits Uses

  3. Incentives • Incentives are designed to motivate companies to action. • What county in central Missouri (one of six) won a major business in 1839 by offering the greatest incentives? They offered free land and $117,921.25 in cash.

  4. Arkansas Tier concept (4 Tiers) Based on: • Poverty rate • Population growth • Per capita income • Unemployment Changes annually

  5. Arkansas Targeted Industries • Manufacturers • Corporate Headquarters NAICS 551114 • Commercial, Physical and Biological research NAICS 541710 Greater than 75% of sales must be from out of state • Distribution • Software development • Motion Picture production • Office Sector • Scientific and Technical sector (also 150% of wage standard) Right to work state

  6. Arkansas Cash: Sales Tax: State 6% plus Local up to 4% = TOTAL 10% • Sales tax refunds Tax Back:refund under Advantage Arkansas must make at least $100,000 of investment & commit to job creation • Sales Tax and Use Tax Credit InvestArk:credit against sales taxes - Must invest $5,000,000 in plant or equipment • Other cash Create Rebate: (Discretionary):3.9% to 5% refund of payroll taxes depending on Tier - minimum payroll of $2,000,000 annually

  7. Arkansas Cash (continued): Non-Profit Incentive Act (Discretionary) Requirements: National or Regional Headquarters $1,000,000 in payroll Average wage needs to exceed 110% of state or county > 75% of revenue must be from out of state Benefits: 4% of payroll for up to five years Sales & Use tax refund

  8. Arkansas Cash (continued): Targeted Businesses (Discretionary) Requirements: Start up < 5 years old Payroll between $100,000 & $1,000,000 150% of state or county’s current wage Meet payroll threshold Benefits: Tax credit = to 10% of payroll for 5 years Refund of sales and use taxes Tax credit of 33% for research & development Use: Transferable Sellable

  9. Arkansas Cash(continued): Training Funds Existing Workforce Training Program (EWTP) Covers up to 50% of costs paid to school or $60 per hour for full time instructors $50 per instructional hour for part time instructors $35 per hour for safety training $15 per hour (tax credit) if internal training Funding can not exceed $50,000 per calendar year Industry Training Program (ITP)

  10. Arkansas Tax Credits: State Income Tax 1 to 6.5% ArkPlus (Discretionary) Requirements: 2 to 5 million of investment in plant construction Payroll of $800,000 to $2,000,000 in full time employees Benefits: 10% Investment Tax Credit Use: Can be used against 50% of annual tax liability 9 year carry forward Not Sellable

  11. Arkansas Tax Credits(continued): Advantage Arkansas (Statutory) Requirements: Create jobs Benefits: 1-4% of new payroll for 5 years based on what Tier the county is in Use: Can be used against 50% of annual tax liability 9 year carry forward Not Sellable

  12. Illinois • Targeted Industries • Incentives are open to all businesses - except for retail, doctors and attorneys (the state leans more toward businesses that export products or services) • In Enterprise Zones – the local government decides the targets Not a right to work state

  13. Illinois Cash: Sales Tax: State 6.25% plus Local up to 2.5% = 8.75% • Retail occupation tax exemption on building materials

  14. Illinois Cash (continued): Training funds Employer Training Inv. Program (ETIP) • Reimbursed up to 50% of the training costs • The Company can apply directly to the state; they do not need to go through the community college • Once approved they are paid up front

  15. Illinois Tax Credits: Corporate Income Tax 7.3% Economic Development for a Growing Economy Tax Credit (EDGE) (Discretionary) Requirements: • Must be competing with another state or have multi-state options • Will make an investment of 5 million in capital improvements • Will create 25 new full time jobs; or • 2.5 million and 50 jobs

  16. Illinois Tax Credits(continued): Economic Development for a Growing Economy Tax Credit (EDGE) (Discretionary) If less than 100 employees (worldwide) Requirements: 1 million in investment and 5 new full time job Benefits: Calculated on a case by case basis – can be as much as the income taxes withheld by the new or retained employees Use: Can use for up to 10 years for each project Can be carried forward for five years

  17. Illinois Enterprise Zones (95 zones) Requirements: • Local communities set targets and other requirements Benefits: • Retailer occupation tax exemption on building materials • Investment tax credit of .5 percent of qualified property • Job tax credit for disadvantaged employees • Local incentives

  18. Illinois Tax Credits(continued): High Impact Business (HIB) Requirements: • 12 million of investment and 500 jobs • 30 million of investment and the retention of 1500 jobs Benefits: • Exemption from state gas and electric tax • Investment tax credit • Sales tax exemption on manufacturing repair and replacement parts

  19. Iowa Targeted Industries: • Biosciences • Advanced Manufacturing • Information Solutions/Financial Services Right to work state

  20. Iowa Cash: State Sales tax 5% plus Local 1% = Total 6% Sales Tax • Manufacturing machinery and computers used in production are exempt

  21. Iowa Cash (continued): Training Funds Iowa Industrial New Jobs Training Program (260E) • 50% of gross payroll costs are reimbursed for OJT (1 yr) • 1.5 to 3% of withholding set aside to pay bonds for 10 years • 3 year time frame • Pays for college tuition, travel costs, book fees and instructional costs Iowa jobs Training Program (260F) • $25,000 per project (maximum) • $50,000 during a 3 year period • 25% match if project is >$5,000

  22. Iowa Tax Credits: State Income Tax 6% to 12% • 6% of the first $25,000 • 8% of the next $75,000 • 10% of the next $150,000 • 12% on all over $250,000 50% Federal deductibility – Single factor formula

  23. Iowa Tax Credits(continued): Enterprise Zone Requirements: • Be in a zone • $500,000 in capital investment over 3 years • 10 new jobs • Must provide insurance and pay 80% • Must pay 90% of county wages Benefits: • 100% of real property tax abatement for 10 years • Refund of sales tax • 10% Investment Tax Credit • R&D credit doubled Use: • Must maintain the jobs for 10 years • Carry forward 7 years • Against 100% of liability • Not sellable

  24. Iowa Tax Credits(continued): High Quality Job Creation Program (HQJC) Requirements: A business must meet at least four of the following: • Offer a pension or profit sharing plan • Be in one of 11 targeted industries • Provide medical and dental and pay 80%of the premium • Offer child care services • Invest at least 1% of pre-tax profits in research and development • Invest at least 1% of pre-tax profits in worker training • Have active worker safety and productivity training • Purchase and occupy a 20,000 Sq ft. vacant building • Must meet wage thresholds

  25. Iowa Tax Credits(continued): High Quality Job Creation Program (HQJC) Benefits: • Up to 100% - 20 year real property tax abatement • Sales and Use tax refund • 1% investment credit • R & D credit is doubled

  26. Kansas Targeted Industries: • Manufacturing • Distribution • Headquarters – regional, national and multi-national • Most business that generate at least 50% of their revenue from outside the state Right to work state

  27. Kansas Cash: Sales Tax: State 5.3% plus Local up to 2% = 7.3% Under the Enterprise Zone and under the High Performance Incentive Program the company can receive sales tax exemption for building materials and equipment purchases and leases. Cash KS Economic Opportunity Initiatives Fund (KEOIF) (Discretionary) Requirements: • New or retained jobs Locating in Kansas or major expansion Use: • Site and facility construction, improvements & equipment purchases

  28. Kansas Cash(continued): Employer Health Insurance Contribution Credit (Statutory) Requirements: • 2 - 50 employees • less than 2 year old • not currently providing health insurance Benefits: • $840 the first year, $600 the second year and $420 the third year (per employee) Use: • Refundable

  29. Kansas Cash(continued): Business & Machinery equipment tax credit Requirements: • Pay personal property taxes timely Benefits: • 20% of personal property taxes are refunded to the company – will raise to 25% in 2007 Use: • Refundable Kansas recently voted to do away with business personal property taxes.

  30. Kansas Cash(continued): Training Funds The following expenses can be reimbursed: *Instructors salaries (both internal & external) *Minor equipment *Cost of courses and curriculum development *Facility Rental *Travel, meals and lodging

  31. Kansas Tax Credits: Income tax 4% to 7.35% High Performance Incentive Program (HPIP) (Statutory) Requirements: • Pay higher than average wages in the county or region • Invest in training • Generate > 50% of revenue from outside of the state Benefits: • Sales & use tax savings on building materials and equipment • 10% investment tax credit • $50,000 training tax credit for excessive training Use: • 10 year carry forward • Good against 100% of income tax liability

  32. Kansas Enterprise Zone Business & Job Development Credit (Statutory) The entire state is a zone - difference is between metro and non-metro area Requirements: • The creation of jobs • Manufacturing 2 • Non-manufacturing – non-retail 5 • Headquarters, Ancillary support 20 • Investment in capital (no minimum) Benefits: • $1,500 - $2,500 per net new job (Metro vs. non-metro) • $1,000 per $100,000 of capital investment Use: • Has an indefinite carry forward • Good against 100% of the company’s income tax liability

  33. Summary • Missouri is competitive with Quality Jobs and Enhanced Enterprise Zone • One common program that the surrounding states have that Missouri does not is a sales tax exemption or rebate • Promote Missouri’s low cost of doing business • Refer prospects to their tax preparer for advice and form preparation

  34. Question???????? • Boone County is the answer to the question and University of Missouri - Columbia is the business. • Columbia has recently been ranked the 8th best city to live in the United States.

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