Incentives Available in the Midwest

Research compiled by Zethmayr featured in Midwest Manufactured magazine

Carrie Zethmayr, President, Zethmayr LLC

August 13, 2018

Most incentives today come in the form of tax credits, exemptions, abatements, low-interest financing or infrastructure improvements. Cash grants are rare, but look for a refundable or transferable tax credit that can be either monetized through sale of the credit or claimed as a refund.

Below is a comparison of the “premier” incentive programs offered throughout the Midwest. Each has strict qualification requirements, so don’t get too excited. Also remember to properly weight the value of the incentive with long-term operating costs of any given location.

Illinois

Program Name: Economic Development for a Growing Economy (EDGE)

Description: Corporate income tax credit for 50% of payroll tax paid to new employees for 10 years

How to Calculate: 
Net new employees x 50% x Payroll Tax Rate of 4.95% x Average Salary x 10 years

Can it be monetized? The credit is not refundable or transferable

For more info: www.illinois.gov/dceo

 

Indiana

Program Name: Economic Development for a Growing Economy (EDGE) (Yes, it has the same exact name as Illinois’ program)

Description: Credit against corporate income tax equal to a percentage (not to exceed 100%) of the amount paid in payroll tax on new employees for up to 10 years

How to Calculate: The percentage of payroll tax awarded as a credit depends on the project’s value, competitiveness and economic impact; could be up to 3.23% (IN’s withholding tax rate) x payroll on new employees x 10 years

Can it be monetized? Credits are refundable

For more info: iedc.in.gov

 

Iowa

Program Name: High Quality Jobs

Description: Includes loans, forgivable loans, tax credits, exemptions and refunds

How to Calculate: Packages vary depending on need, project and type of incentive used; the program is very flexible

Can it be monetized? Credits are refundable

For more info: www.iowaeconomicdevelopment.com

 

Minnesota

Program Name: Job Creation Fund

Description: Up to $1 million in grants to approved businesses after specified job creation and capital investment goals are achieved; minimum requirements: 10 jobs created and $500,000 capital investment; actual job creation and capital investment rebates are based on project parameters

How to Calculate: Scaled between $1,000 – $3,000 per job created, depending on the wage level

Can it be monetized? Yes, following proof of performance

For more info: mn.gov/deed

Missouri

Program Name: Missouri Works

Description: Offers the retention of withholding tax on new jobs and/or state corporate income tax credits

How to Calculate: Depending on project size (ranging from 2 new jobs, to 100+ new jobs), and depending on average wages and other variables, benefits range from retention of all withholding taxes on new employees for 5 or 6 years, up to a credit of 7% of new payroll for 5 or 6 years

Can it be monetized? Credits are refundable and transferable

For more info: ded.mo.gov

Wisconsin

Program Name: Manufacturing and Agriculture Credit

Description: Credit for 7.5% of a manufacturers total corporate income tax; Wisconsin’s corporate income tax rate is 7.9%, so this brings the effective rate to 0.4%

How to Calculate: Value is equal to 7.5% x corporate income

Can it be monetized? No, but Wisconsin also has a refundable Business Development Tax Credit program which they often on top of this program

For more info: wedc.org

Financial incentives are changing, and predictions as to what will be available in five years is a topic for another day. One trend is that incentives are coming under increasing political scrutiny as taxpayers demand more transparency and clear articulation as to the economic impact of financial incentives. While practitioners of economic development can often clearly demonstrate the financial return provided to economies from these incentives, governments are coming under increasing financial pressure, causing them to decrease services and putting further pressure on these programs.

When considering incentives, keep these key things in mind:

Click here to download a PDF of the infographic.

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