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Tax Credits, Incentives, and
Economic Development
July 11, 2013
Presented at M & J University
Lake Lanier Islands, Georgia
Peter Floyd
Michael Giovannini
Alston & Bird LLP
Atlanta, GA
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Strong practices in infrastructure and energy
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Tax Expertise (Intl., Fed., State & Local)
Represent: Ga. state and local governments,
public and private owners, accounting firms, engineering
and design firms, contractors and subcontractors.
Extensive Experience with: public finance, commercial
construction, tax, grants and incentives, energy regulation,
hospital-medical office building projects, college and
university projects, retail and hospitality projects, sporting
venues, industrial plants and facilities.
Michael Giovannini’s Practice
Member of Alston & Bird’s State and Local Tax practice group and Unclaimed
Property team. Represents clients in disputes with state agencies, under audit, and in
a planning/advisory capacity.
My areas of expertise:
Multistate sales and use tax;
Unclaimed property;
Economic development.
Disclaimer – Nothing in this presentation should be interpreted as the formal position
of A&B or any of its clients
Disclaimer – Very high level summary and not intended as legal advice re: a particular
 Overview of State Tax Credits
 State-Specific Tax Credits – Georgia, Florida,
 Federal Tax Credits
 Government and Economic Incentives
Purpose of State Tax Credits
 Entice business to the state
 Targeted businesses, e.g. film production, life sciences,
 Encourage additional investment in the state
 Targeted industries, e.g. green energy
 Reward job creation/retention in the state
 Localities may also incent through credits or incentives
available within a state’s development zone
Types of Credits
 Statutory Tax Credits
 Jobs Tax Credits
 Many variations throughout states, generally maintain new,
quality full-time jobs
 Credit is per job and often over a several year period
 May be tied to other factors to obtain greater and more desired
Location (benefits can vary by tier)
Type of job (generally full-time, permanent, state residents)
High wage jobs
Job retention
 May be capped or allowed against withholding or sales/use tax
 Credits with other names may really be jobs tax credits, e.g.
headquarters credits
Types of Credits
 Statutory Credits (cont’d)
 Capital Investment Credits
 Focus is on the amount of qualifying investment, either capital, jobs or
 Credit is measured by percentage of investment
 Research & Development Credits
 Ports Credits
 Targeted Credits
 Film
 Green/renewable energy
Building envelope/ LEED
Hybrid vehicles
Products – energy star
 Low income housing
 Life Sciences
 High Tech
Types of Credits
 Statutory Credits (cont’d)
 Credits based on other taxes paid
 Inventory tax credits – LA, MS
 Property tax paid – CT
Types of Credits
 Negotiated Credits and Incentives
 Quasi-Negotiated Credits and Incentives
Identifying State Tax Credits
 Resources
 Green incentives and renewable energy credits
 Commercial on-line databases
 Publications
 State websites
 Departments of revenue
 Departments of economic development
 Other state-sponsored websites (e.g.,;,
Identifying State Tax Credits
 Understand the parameters of the credits and
whether you qualify
 Statutes, regulations, rulings, case law
 How are key terms defined in the statute or contract? Read the
small print.
 How is full-time defined?
 How are wages defined?
 Are your employees employed by the entity making the
investment? Does it matter? Sometimes it does
 Are you leasing employees or using temps? Do they
 Are home-based jobs included?
 Don’t over commit to investment and jobs.
 Tax credits are audited as part of the corporate income
tax audit.
 DOR will hold you to statutory/regulatory rules generally
regardless of what the Department of Commerce
Identifying State Tax Credits
 Understand the parameters of the credits and whether
you qualify (cont’d)
 Contact local authorities
 Local economic development, chamber of commerce, department of
community affairs, state tax commissioner
 Initial conversations can be anonymous
 Determine the role each local agency plays in the
 Make sure that the effort is coordinated among the departments
Obtaining Credits and Incentives
 Leverage interest in or from other states or localities to
obtain the best benefit
 Document the benefits you will receive or seek written
guidance from the governing authority if necessary
 Confirm these numbers. Based on your tax situation and legal
entity structure, you may not reap full benefits.
 Determine timelines, application deadlines, filing
deadlines, required documentation
 Determine whether credits will be bought or sold
 Understand the clawback provisions
Obtaining Credits and Incentives
 Outline the requirements in a spreadsheet or checklist
and attach the timing references; determine action items
 Assemble the team of persons responsible for these
action items or oversight of the requirements
 Teams may be small for some credits
 Others may require larger teams with personnel from tax,
accounting, legal, HR, public relations and operations
Obtaining Credits and Incentives
 Things to keep in mind:
 Some statutory credits require pre-approval, preauthorization, or some form of letter of intent prior to
the start of the project.
 Public announcements need to be timed.
 Purchase of land, construction materials, equipment, entering into
contracts need to be timed.
 Understand the value of the tax credit package
Are you in NOLs?
What is the carry forward period?
Can the credits be sold or assigned?
Tax credits can be limited by apportionment formulas.
 Confidentiality
 Some states disclose information publicly regarding taxpayers who
receive tax credits.
Maintaining Credits and Incentives
 Many credits and incentives have commitments to be
tracked or reporting that must be made
 Assign responsibility and accountability for
 Create a compliance calendar, set up reminders, put quality review
in place
 Track job creation and investment commitments
regularly, if you will not meet these, renegotiation may
be necessary
 Reporting and compliance can be required for 20 or
more years depending on the program.
Maintaining Credits and Incentives
 Establish regular meetings of the team to review
requirements and deadlines
 Make sure the right hand knows what the left hand is
 Maintain required supporting documentation
 For filings, audits, transfers
 Plan/negotiate for contingencies (exit strategy)
 Claw-backs and recaptures
 Acquisition or restructuring
Common Pitfalls
 Over-commitment
 Confidentiality/Publicity Concerns
 What is the Package Really Worth?
 Selecting a Consultant
 Responsibility for Compliance
 Data Issue and Interdepartmental Cooperation
 Overview of State Tax Credits
 State-Specific Tax Credits – Georgia, Florida,
 Federal Tax Credits
 Government and Economic Incentives
Georgia-Specific Credits
 Jobs tax credit
 Quality jobs tax credit
 Mega project tax credit
 Investment tax credit
 Research and development tax credit
 Retraining tax credit
 Film tax credit
Georgia-Specific Credits
 Jobs tax credit (OCGA § 48-7-40)
 Available in amount up to $4,000 per new job to businesses in
certain sectors, such as manufacturing, telecommunications,
broadcasting, tourism, and research and development (but not
 Jobs must be new, full-time, and pay at or above average
 Amount based on which “tier” the business is located; tiers are
based on relative economic prosperity
 The lower the tier, the more credit is available (and the less jobs
are required to earn the credit)
 New job threshold must be maintained in order to receive credit
in a year
 Tier 1 and 2 – 100% of a taxpayer’s liability; other tiers are 50%
 Credit is available for 5 years, with 10-year carryforward
 Excess credit may be used to offset withholding tax
Georgia-Specific Credits
 Quality jobs tax credit (OCGA § 48-7-40.17)
 Must create at least 50 jobs in the company’s first 12-month
period of Georgia employment
 Jobs must pay wages that are at least 10% higher than the
county average for wages
 Credit ranges from $2,500 per job to $5,000 depending on how
much wages are higher than county average (e.g., $5,000 if
200% more)
 New job threshold must be maintained to receive credit in a year
 Credit is available for 5 years, with 10-year carryforward
 Excess credit may be used to offset withholding tax
 Note: cannot obtain both jobs tax credit and quality jobs tax
credit for same job
Georgia-Specific Credits
 Mega project tax credit (OCGA § 48-7-40.24)
 Available to companies that employ a minimum of 1,800 net new
employees; and
 Have either a minimum annual payroll of $150 million or make a
minimum $450 million investment in Georgia
 Credit is equal to $5,250 per job per year for the first five years of
each net new job position
 Excess credit may be carried forward for 10 years
 Can also use excess credit to offset withholding tax liability
Georgia-Specific Credits
 Investment tax credit (OCGA § 48-7-40.30)
 Provides a credit for 35% of the amount invested in a “qualified
business” in the 2011-2015 calendar years
 A “qualified business” is one that registers as such, and:
 Is located in Georgia;
 Was organized no more than 3 years prior to the year in which the
investment was made;
 Has a headquarters in the state, which it maintained;
 Employs 20 or fewer people in Georgia at the time of registration;
 Had $500,000 or less in gross annual revenue in any year prior to
 Has not obtained more than $1 million in gross cash proceeds from
the issuance of equity or debt;
 Has not utilized the film tax credit;
 Is primarily engaged in manufacturing, processing, online and digital
warehousing, online and digital wholesaling, software development,
information technology services, research and development, or in
an industry that is NOT retail sales, professional/financial services,
Georgia-Specific Credits
 Research and development tax credit (OCGA § 48-740.12)
 Allows a credit equal for research expenses incurred in Georgia
in a year
 The amount is 10% of the excess of such expenses over a “base
 The company must have received the federal research and
development credit in the year
 Amount of credit may not exceed 50% of the company’s tax
liability for the year; excess amounts may be carried forward
 Beginning for credits created in 2012, excess may be applied
against withholding tax liability
Georgia-Specific Credits
 Retraining tax credit (OCGA § 48-7-40.5)
 Businesses can receive a tax credit of 50% of their direct
retraining expenses, up to $500 per full-time employee, per
retraining program.
 Retraining program must be approved by Technical College of
 $1,250 per employee is the annual maximum
 Eligible expenses include:
 costs of instructors and teaching materials
 employee wages during retraining
 reasonable travel expenses
 Can be used to offset up to 50% of a company’s Georgia
corporate income tax liability
 Excess credit can be carried forward for up to 10 years
Georgia-Specific Credits
 Film tax credit (OCGA § 48-7-40.26)
 Provides 20% credit for companies that incur $500,000 or more
in production and post-production expenditures in Georgia,
either in a single production or on multiple projects
 An additional 10% credit is granted if the finished project
includes a promotional logo provided by the state, or if the
project promotes Georgia in some substantive way
 The maximum amount is $5 million for a company
 Applies not just to film, but also to video and other digital
projects, including TV shows, movies, commercials, music
videos, and interactive entertainment
 A company can transfer or sell its film credits once per year
 Excess credit can be carried forward for 5 years, or can be used
against withholding
Florida-Specific Credits
 Enterprise Zone Jobs/Property Tax Credit
 Rural Job Tax Credit
 Urban High-Crime Area Job Tax Credit
 Entertainment Industry Tax Credit
 Capital Investment Tax Credit
 Community Contribution Tax Credit
 Contaminated Site Rehabilitation Tax Credit
 Hazardous Waste Facility Tax Credit
 Qualified Target Industry Tax Refund incentive
Tennessee-Specific Credits
 Jobs Tax Credit
 Rural Opportunity Initiative Enhanced Job Tax Credit
 Jobs Tax Super Credit
 Integrated Supplier and Integrated Customer Tax Credit
 Industrial Machinery Tax Credit
 Headquarters Tax Credit
 Sales and Use Tax Credit for Qualified Facility to Support an
Emerging Industry
 Data Center Tax Credit
 Overview of State Tax Credits
 State-Specific Tax Credits – Georgia, Florida,
 Federal Tax Credits
 Government and Economic Incentives
Federal Tax Credits
 Work Opportunity Tax Credits
 Awarded to companies that hire individuals who have
consistently faced significant barriers to employment
 Range between $1,200 and $9,000 per new hire, depending on
the specific group being targeted (e.g., veterans, recipients of
social security income, etc.)
 Qualifying Advanced Energy Project Credit
 Available to businesses which establish, expand or re-equip a
manufacturing facility for the production of energy efficient
technology/property (e.g., building a factory to manufacture solar
 Credit is 30% of investment
Federal Tax Credits
 Manufacturers' Energy Efficient Appliance Credit
 May be claimed on each qualifying energy efficient appliance produced by the
 The amount of the credit is based on the type of appliance, its energy efficiency,
and for dishwashers and clothes washers, the amount of water it consumes (up
to $225 per appliance)
 A company can claim a maximum of $25 million in a year or 4% of gross receipts
 Research Credit
 Generally, a credit is available for 20% of a taxpayer’s research expenses over a
base amount (similar to Georgia)
 Unused research credit can be carried back 1 year and forward 20 years
 The credit for any taxable year cannot exceed the excess of the taxpayer’s net
income tax over the greater of (A) the tentative minimum tax for the taxable year,
or (B) 25% of so much of the taxpayer’s net regular tax liability as exceeds
 Also available for amounts paid by a company to an energy research consortium
for energy research
Federal Tax Credits
 Plug-In Electric Drive Vehicle Credit
 A credit is available for qualified plug-in electric drive motor
vehicles including passenger vehicles and light trucks
 For vehicles acquired after December 31, 2009, the credit is
equal to $2,500 plus, for a vehicle which draws propulsion
energy from a battery with at least 5 kilowatt hours of capacity,
$417, plus an additional $417 for each kilowatt hour of battery
capacity in excess of 5 kilowatt hours (the total amount of the
credit allowed for a vehicle is limited to $7,500)
 Must be acquired for use or lease and not resale
 Note: the credit phases out for a manufacturer’s vehicles over
the 1-year period beginning with the second calendar quarter
after the calendar quarter in which at least 200,000 qualifying
vehicles manufactured by that manufacturer have been sold for
use in the U.S.
Peter Floyd’s Practice
Leader of A&B’s Government and Economic Incentives Team and is counsel to
Location Georgia (a nonprofit providing economic and commercial development
services to local governments), local governments and private incentive seekers
Also, represents (a) Electric Cities of Georgia, MEAG Power, the Municipal Gas
Authority of Georgia, Public Gas Partners, a nonprofit with government members in AL,
GA, SC, TN, FL and and a number of other local government utilities (electric/
gas/water/telecom) providers and related entities in Georgia and (b) private entities in
public private partnerships and utility customers (e.g., customers of Georgia Power or
EMCs) and traditional and renewable independent power providers (IPP) in Georgia and
My areas of expertize:
Economic Incentives;
Energy and Utilities (transactions and regulatory (Ga. PSC)); and
Public Finance
Disclaimer – Nothing in this presentation should be interpreted as the formal position of A&B or any of its clients
Disclaimer – Very high level summary and not intended as legal advice re: a particular project
 Overview of State Tax Credits
 State-Specific Tax Credits – Georgia, Florida,
 Federal Tax Credits
 Government and Economic Incentives
Purpose of Government & Economic Incentives
 To encourage economic development and employment,
most governments (federal, state and local) and some
private entities (e.g., utility providers) offer employers
and project developers various types of incentives to
locate or expand operations within their respective
 Parties:
 (a) businesses seeking incentive packages;
 (b) governments and utilities offering such packages; and
 (c) consultants, lenders, investors or other parties
Types of Government & Economic Incentives
 Most incentives fall into the two categories:
 Statutory incentives
 Negotiated incentives.
Types of Government & Economic Incentives
Statutory incentives
Incentives that—by law—a party is entitled to if they qualify and
follow the correct rules and procedures. We frequently advise
clients regarding what statutory incentives are available and how to
qualify for and receive tax incentives (credits and exemptions),
applicable grants and incentivized financing.
Tax Credits
Some Grants
Job assistance programs
Types of Government & Economic Incentives
Negotiated Incentives
Most governments (particularly state and local) and utilities
have the limited power to negotiate incentive packages (both
monetary- and infrastructure-based), the various forms of
which and limitations related thereto differ by location.
Types of Government & Economic Incentives
Frequently negotiated incentives include:
 property tax reductions
 transactional tax abatements
 energy/utility rate and fee waivers or reductions
 state or local grants
 “Quick Start” job training program
Types of Government & Economic Incentives
Frequently negotiated incentives include (cont.):
 site acquisition/improvement incentives
 road, utility and other infrastructure
 tax-exempt bond financing for manufacturing projects
 public-private partnerships (PPP)
 tax increment financing/community improvement districts
Types of Government & Economic Incentives
Negotiated Incentives
Careful consideration must be given to the incentives sought
or offered, as effecting some incentives requires legal
structures or elections that preclude or severely limit the
ability to receive or offer other incentives and may make
future financing arrangements and ongoing operations more
Identifying Government & Economic Incentives
 Resources
 State Websites
 Departments of revenue
 Departments of economic development
 Other state-sponsored websites (e.g.,
 Local Government Websites
 Chamber and Development Authority Websites
 Utility Websites
 Note: in my experience, none are comprehensive
Implementing Incentives
 Good understanding of industry, infrastructure and
operational needs of incentivized activity
 Many complex considerations in site selection, e.g.,
labor, infrastructure (transportation, data, energy,
commodity, permitting and incentives)
 Leverage interest in or from other states or localities to
obtain the best benefit
 Understand the clawback provisions and long term
potential issues with operations and financing
Government and Economic Incentives
 Who are the other players?
 State Officials:
Department of Economic Development
Department of Industry, Trade and Tourism
Department of Revenue
Department of Community Affairs
Department of Technical and Adult Education
 Local Officials
 Chamber of Commerce
 Industrial Development Authority
 Tax Assessors
 Utility Providers
Government and Economic Incentives
 Why do state and local governments want to play?
Expansion of Tax Base
Increase/Retain Employment
New Development Multiplier Effect
Political/Cultural Support
 Why do utilities want to play?
 Large energy and water users provide a steading base of sale
 Potential for unique transactions that help utility operations
 Time of use
 Interruptible service
Government and Economic Incentives
 Property Tax Reduction Bonds
 Direct Tax Reduction Agreements
 Prohibited Indirect Approach Required
 Bifurcation of Property Interests/Use of Local Development
 “Fee” or “Remainder” Interest vs. Leasehold Interest
 “Reasonable Basis” Standard –
 Wide Variance among Local Governments
 Project type may dictate desirability of offering incentive
(solar/depreciation example)
Government and Economic Incentives
 Property Tax Reduction Bonds (cont’d)
 Leasehold Valuation Agreement (“LVA”)
 Enforceability Issue
 Phantom Bonds or Bonds for Title
Government and Economic Incentives
Bond Purchase Agreement
Lease &
Paying Agent
Denotes Agreement
Denotes Payment(s)
Denotes Pledge
Denotes Optional Assignment or Transfer
Government and Economic Incentives
 How to get your client in the game
Identify Developer Clients
New Construction/Expansion Projects
Clients Relocating Headquarters
Clients in Favored Businesses:
High Technology
Research and Development
Back Office Services (call centers, customer service, sales, etc.)
Government and Economic Incentives
 How to get your client in the game (cont’d)
 Clients that May Use Tax-Exempt Debt
 Small Manufacturing Facilities
 Multifamily Housing
 Gas/Electric/Water Companies
 Solid Waste Disposal
 Airports/Docks/Wharves
Government and Economic Incentives
 How to get your client in the game (cont’d)
 Clients that are particularly attractive to utilities
 Large loads
 Facilities that are the first in a growth target territory
 Flexible usage
 Steady load
 Large employers
Government and Economic Incentives
Take aways
 Be proactive and comprehensive
 Have a multidisciplinary team
 Think long term
A&B Resources
 Advisories
 Economic Development Advisory: Several Economic
Development Bills Pass as the Georgia General Assembly Wraps
Up Its 2013 Regular Session – April 8, 2013
 Economic Development Advisory: Georgia General Assembly
Passes Economic Development-Friendly Bills During 2012
Session – April 10, 2012
 Energy & Sustainability Advisory: Energy Efficiency and
Conservation – Successful Legislative Session in Georgia – Nov.
10, 2010
 Public Finance Advisory: Certain Governmental Issuer’s TaxExempt Bonds Questioned by IRS Regarding Post-Issuance Tax
Compliance – Jan. 30, 2009
 A&B’s Tax Blog:
 Government and Economic Incentives Blog: coming soon
A&B Resources
 Other presentations and events
 Alternative-Fueled Vehicle Roadshow on Transportation and Clean Fuels –
Georgia Local Government Financing Options - June 3-21, 2013
 Natural Gas Vehicle Fleet & Infrastructure Summit – Utility Perspective- June 6,
 2013 City Attorneys § CLE Seminar & Annual Business Meeting – Energy and
Operational Savings Finance Opportunities - June 23, 2013
 APPA Legal Seminar – Model Municipal Service Terms and Charter Provisions October 21, 2013
 Solar Programs in Georgia and Proposed Amendments to the Georgia
Cogeneration and Distributed Generation Act and Electric Territorial Act - March
18, 2013
 Finance 101 Forum for Utility Managers - May 2, 2012
 GAWP Workshop – Energy and Operational Savings Finance Opportunities –
July 30, 2013
Peter K. Floyd, Esq.
Phone: 404-881-4510
E-mail: [email protected]
Michael M. Giovannini, Esq.
Phone: 404-881-7957
E-mail: [email protected]
Alston & Bird LLP
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