Incentives Comparison A Southern Perspective: SC-NC-GA

Transcription

1 Parker Poe Adams & Bernstein LLP Consulting Incentives Comparison A Southern Perspective: SC-NC-GA May 2014 Parker Poe Consulting, LLC Mark Simmons Azad Khan 2014 Parker Poe Consulting

2 INTRODUCTION I. Introduction i. What is an incentive? ii. Why do companies ask for incentives? II. Cost and Regulatory Landscapes i. How do SC-NC-GA compare without incentives? ii. Bottom line III. Economic Development Incentives i. Statutory incentives ii. Discretionary incentives iii. Value determination iv. Bottom line IV. Cheat Sheet 2

3 WHAT IS AN INCENTIVE Start Up Costs Grants Speed to Market Expedited Permitting Recurring Operating Cost Corporate Tax Credits Low Cost Loans Infrastructure Improvements Bond Financing Free Land/Building Relocation Assist Waived Permit / Connection Fees Recruitment Assistance Training Assistance Incentive Approval Process Ready Site / Building Relocation Assistance Property Tax Abatements Utility Riders Sales Tax Exemptions Incumbent Training 3

4 WHY COMPANIES ASK FOR INCENTIVES Needed to close gap between preferred site and frontrunner Stakeholders expect it Internal approval process requires an ROI that is unattainable without the incentive Need to feel loved Team member s need to demonstrate value brought to site selection 4

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6 CORPORATE INCOME Apportionment: Single-Sales Factor in SC and GA. Double-Weighted Sales Factor in NC (Payroll, Property, Sales) GA 6% Throwback Rule: Neither SC, GA, nor NC issue throwback rule SC 5% In SC and GA, Corporate Income Tax is negligible if the company does not have sales in-state. NC 6% 6

7 PROPERTY TAXES Average Tax Rates per $1,000 FMV: SC $ $47.25 GA = $14.10 NC = $6.215 Depreciation: Rates vary in GA and NC by industry, as in SC. Key differences lie in depreciation schedules, maximum allowed depreciation and real property treatment. Inventory Tax: Exempt in SC & NC; exemption varies by County in GA. 7

8 SALES TAXES 6.90% 6.90% 7.19% 6.97% NC = 4.75% (state) % (local avg.) SC = 6.0% (state) % (local avg.) GA = 4.0% (state) % (local avg.) 8

9 WORKFORCE New Employer UI Taxes: SC: 2.01% on first $12,000 of wages GA: 2.62% on first $9,500 of wages NC: 1.20% on first $21,400 of wages Workers Compensation: SC = $2.04 (per $100 in payroll) GA = $1.88 (per $100 in payroll) NC = $1.90 (per $100 in payroll) $23.00 $22.00 $21.00 $20.00 $19.00 $18.00 $17.00 $16.00 $15.00 $14.00 $13.00 US = $22.33 $21.17 $20.39 $18.75 Avg. Wage SC GA NC 9

10 UTILITIES Electricity 1 : SC = 6.27 per kilowatthour GA = 5.74 per kilowatthour NC = 6.30 per kilowatthour Natural Gas 1 : SC = $5.72 per Mcf GA = $5.70 per Mcf NC = $7.68 per Mcf 1. Source: Energy Information Administration, Industrial Sector, December Sales Tax: Exempt in SC and NC; currently being phased-in in GA (currently the avg. rate is 6.97%). 10

11 BOTTOM LINE 1. South Carolina compares favorably against North Carolina and Georgia in terms of corporate income taxes and workforce costs. 2. In terms of utilities and sales taxes the three states are almost equivalent. Natural Gas costs are higher in North Carolina. 3. South Carolina loses any cost savings or advantages it has over North Carolina and Georgia when property tax liabilities are compared. 11

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13 CORPORATE INCOME TAX CREDITS South Carolina Georgia North Carolina Job Tax Credit Investment Tax Credit R&D Tax Credit HQ Tax Credit Port Tax Credit Job Tax Credit Port Tax Credit Bonus Quality Jobs Credit R&D Tax Credit Port Tax Credit Mega Projects Tax Credit Article 3J Expired Renewable Energy Tax Credit Recycling Tax Credit R&D Tax Credit Interactive Digital Media Tax Credit 13

14 SALES TAX EXEMPTIONS Exemption South Carolina Georgia North Carolina Mfg. Equipment Exempt Exempt Partial Pollution Control Equip. Exempt Exempt Taxable Utilities Exempt Phase Out Exempt Computer Software Depends Depends Exempt Construction Material Depends Exempt Taxable Packaging Materials Exempt Exempt Exempt Raw Materials Exempt Exempt Exempt 14

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16 WORKFORCE TRAINING South Carolina readysc Georgia Quick Start North Carolina Workforce Development Network SC DEW GDOL Division of Workforce 16 Technical Colleges 25 Technical Colleges 58 Technical Colleges 16

17 PROPERTY TAX INCENTIVES South Carolina Georgia North Carolina Incentive FILOT & SSRC Bonds for Title Property Tax Grants Value Reduces tax liability by 42% - 62% Reduces tax liability by 10% - 100% Grant based on percentage of taxes paid Term years years 3 10 years Other Property taxes are already 50% - 235% higher than GA & NC Cannot fix millage rate Value varies dramatically by county 17

18 WITHHOLDING REBATES South Carolina Georgia North Carolina Incentive JDC Most Tax Credits JDIG Value Up to $3,250 per job per year Up to $5,250 per job per year Up to $6,500 per job per year Term 10 years 5 years (10-year carry forward) 12 years Other $4,000 application fee + annual filing fee Available by statute $10,000 application fee + annual filing fee 18

19 CASH GRANTS Incentives Value Other South Carolina Georgia North Carolina GCF Set Aside Fund RIA Grant Port Grants County Grants Utility Grants Generally limited to $10,000 per job Eligible expenditures vary by grant REBA EDGE Port Grants County Grants Utility Grants Generally limited to $750,000 per project Can purchase personal property One NC Fund Ind. Dev. Utility Economic Infrastructures Fund Building Renovations Fund DOT Funds Typically $1,000 - $3,000 per job One NC Fund requires local match 19

20 VALUE DETERMINATION Competitiveness can generally be equated with the monetary value of the incentive, but not to the face value of the incentive. Value determination does begin with face value, but must also consider: Ability to qualify Net present value (NPV) Usability Flexibility Difficulty / Cost / Speed of the Application Process Difficulty / Cost of Administration Reasonableness of Penalties Reliability 20

21 BOTTOM LINE 1. If you don t have a suitable building/site, adequate infrastructure, available and skilled workforce, incentives do not matter. 2. South Carolina has an arsenal of statutory and discretionary incentives at it s disposal, but so do Georgia and North Carolina. 3. Each state s incentives are truly project specific; determining which state has a better incentives landscape for all types of projects is impossible. 21

22 THANK YOU Mark Simmons, Principal Phone: (803) Azad Khan, Consultant Phone: (803) Websites: Address: 1201 Main St., Suite 1410 Columbia, SC