🔒Use government tax incentives to save cash and stimulate growth

Let’s set the scene. A Central Massachusetts company has remained competitive during the COVID-19 pandemic and seeks to expand – growth resulting in real estate investment, the creation of new jobs, and a positive impact on the local and surrounding communities. But between uncertainty about the state’s and nation’s fiscal future, rising inflation, and a myriad of other economic concerns, the company may be hesitant to move forward.

However, with government tax incentives for real estate expansion projects available under the Massachusetts Economic Development Incentive Program, growing businesses can save thousands – even millions – of dollars. The EDIP has become a foremost economic development tool in the commonwealth and can best be described as a partnership between the state, a municipality, and a company.

A variety of tax incentives are available to businesses with a proposed real estate expansion project, meaning the project is considered if it will result in job creation and a renovation or new construction at a Massachusetts site.

Municipal tax-increment financing is the most widely known tax incentive available to eligible businesses. In brief, a TIF is a negotiated local property tax exemption of up to 20 years based on the increased value of the project property as a result of new construction or other significant improvements. Over the past several years, a number of Central Massachusetts companies have applied for and received TIF approval, including WuXi Biologics in Worcester, SMC Ltd, in Devens, and IPG Photonics in Oxford. The best-suited projects for TIF incentives are those to increase tax revenue at the property.

While TIFs have received the lion’s share of news coverage, there are other options that can result in significant savings for an expanding business. These include:

• State EDIP Credit based on job creation and other criteria

• State 10% Abandoned Building Tax Deduction for costs associated with renovating an abandoned building at least 75% vacant for two years

• Municipal Personal Property tax Exemption, a negotiated local personal property tax exemption of up to 20 years with all TIFs

• Municipal Special Tax Assessment, a negotiated local property tax exemption of up to 20 years on the total base value of the project property

Due to the complexity of the incentives process, it is critical participating companies possess strong communication and negotiating skills. The ability to present the project to government officials and resident voters at numerous municipal meetings and community sessions is essential to achieving a positive outcome. Getting the green light is not a simple process. Once available incentives have been identified, the company must garner approval from various municipal boards and committees, the city council or town meeting, and eventually the state Economic Assistance Coordinating Council.

Timing of the project is another vital element. If a company has already made a commitment to a property, it is unlikely tax incentives would be available for the proposed project, with the unfortunate result of the company leaving cash on the table.

Taking the time to learn about, apply for, and secure government tax incentives for projects can not only pay off financially for companies planning to grow, but for the communities and residents who now have a stimulated local economy with new tax revenue, jobs, and other benefits.