Planning For Expansion or Relocation in 2019?

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Given the strength of today’s economy, business relocations and expansions that were once few and far between are now much more common. Businesses considering significant investments or relocations in 2019 will consider the cost and availability of workforce, logistics, cost of short- and long-term occupancy, and much more when looking for the ideal project site. There needs to be a good community fit as well.

While these are all critically important factors to the success of a potential expansion or relocation project, in 2019, workforce will likely be the driving factor in many location decisions.

The biggest challenge in prioritizing workforce cost and availability is that the right workforce dynamics can be quite elusive. What appears to be the right decision today may look like the wrong decision down the line.

As workforce realities change, what remains constant is that companies with healthy after-tax profit margins are the most capable of adjusting, surviving and thriving in any labor dynamic. Healthy margins and cash flow ensure that rising wages will not cripple a business.

Credit and incentive opportunities provide a tremendous advantage in this area and not just for large corporations.

With stark differences in taxes between both states and municipalities, the location of your business can make a tremendous difference to your bottom line and your ability to compete for labor in 2019.

Given the right situation and an attractive regulatory environment, many taxes can be reduced, deferred or even used to fund a project. These extra dollars can be reinvested in machinery, equipment, technology and workforce to ensure the future viability of your operation.

Regardless of what is driving your location decision in 2019, future profit and cash flow will allow you to weather any unforeseen challenges. For this reason, incentives deserve consideration throughout your location evaluation process.

Before you consult a professional for incentive assistance – highly recommend in order to maximize your investment – it’s helpful to have an understanding of possibilities.

What are credits and incentives?

Credits and incentives include both statutory and discretionary incentives that municipalities and states can provide to entice businesses and desirable economic activity. Common incentives are investment tax credits, job creation tax credits, training grants, real and personal property tax abatements, tax increment (TIF) financing and revenue bonds.

Incentives help even the playing field between locations and, in ideal circumstances, help businesses to reduce tax liabilities, increase cash flows, train and maintain a workforce, and as previously stated, even finance projects.

Add these all together, and you have a tremendous amount of value available to growing businesses—value that state and local governments want to deliver to support job creation and economic expansion in their areas.

In fact, you’re likely reading expansion, jobs and incentive announcements on a weekly basis just on this website. Businesses are being courted and incentivized to expand all around you.

A tool for companies large and small.

Fortune 500 companies often require cities and states to provide massive incentive packages as a part of strategic plan to minimize state and local taxes and keep more money in the company. Amazon HQ2 is only the latest example. But can closely held businesses do the same?

Many can, but few do.

A common misconception is that incentives are only available for large companies looking at new locations and large capital expenditures. However, the reality is that growing businesses of all sizes bring value to their communities, and economic development officials have plenty of incentives to motivate closely held businesses to expand and invest in their communities.

Traditionally, CPAs do not actively work with clients to negotiate and procure state and local incentives. These incentives don’t work like federal tax incentives, and so the mechanisms of benefit and process to obtain the credits are fundamentally different.

Additionally, discretionary state and local incentives vary greatly from city to city, county to county and state to state. Incentives also tend to change significantly over time. If you aren’t aware and taking advantage of these opportunities, you’re losing real money.

Timing is everything.

Most state and local incentives must be negotiated before expansion plans are announced, leases are signed or purchases are made.

Unlike many federal tax incentives, which can be documented and claimed after the fact, local incentives are typically discretionary and awards are negotiated. Growing businesses must understand available incentives and pursue them at the right time.

On a daily basis, you’re thinking or speaking about where your business is and what it needs to thrive in the future. Taking a proactive approach to economic incentives is low-hanging fruit you that can save your company thousands, hundreds of thousands or even millions of dollars.

Maximize your investment, and ensure your next expansion comes even sooner. 

Steve Brunson is a principal at Indianapolis-based McGuire Sponsel.

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