While highly publicized and touted, tax credits and other incentives have a reputation of being difficult to obtain. Incentives are generally specific and designed to attract certain types of businesses. Being aware of the different types of available credits goes a long way in being able to take advantage of them. Credits and incentives can be grouped into five categories: Job creation/retention, worker training, capital investment, research and development, and sustainability initiatives.
- Job creation and retention are important to driving economic growth. Many states will structure incentive programs toward targeting hiring, job creation and even job retention. Job creation generally refers to full-time equivalent employees, with a specified minimum number of new jobs.
- Most companies have worker training programs to improve employee skills and knowledge. Worker training programs are developed to assist companies with their training program and in doing so companies are able to stay competitive in their industry.
- Companies constantly evaluate capital investment strategies. Growing businesses must consider adding on to a current facility or relocating to a larger facility. Capital investments are closely tied with job creation and retention, and governments encourage businesses to remain in the area by offering capital investment incentives.
- Research and development is essential retaining a competitive advantage. In addition to the federal tax credit for increasing research activities, several states offer a credit for expenses in connection with research and development activities that take place in the state. If a company’s activity qualifies for the federal credit, it will most likely qualify for a state credit as well.
- Sustainability initiatives, such as environmental sustainability and energy efficiency, are becoming more and more important to investors and consumers. Many state and local jurisdictions have programs to assist businesses looking for cost-effective ways to improve sustainability.
Operating in local and global competitive markets, businesses need every advantage they can get, and state and local governments know that business growth and retention are crucial to their local economy. Identifying relevant incentives, including credits, grants and subsidies, can be the solution to keeping costs down and a business moving forward.