03.17.15 |
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In the Know: How to Negotiate a Tax Incentive for your Business

ApprovedThere are many different types of tax incentives currently offered by the federal and state governments to incentivize businesses to locate or expand in targeted areas.  Many are part of government programs designed to stimulate job growth and economic development.  Others are supplemental tax incentives where eligibility is contingent upon participation in other programs.

However, there is another category of tax incentives available to businesses that is negotiable or discretionary because the program can be customized for a particular situation or need at the discretion of the economic development department managing the process.


What is a negotiable incentive?

States, cities, or enterprise zones within cities may experience varying levels of economic distress ranging from a low employment rate to limited economic growth to a high poverty level.  Economic development departments offer tax incentives to help stimulate economic progress in various categories.  Such incentives can take many forms, but some of the common types are training, investment, or hiring incentives. They may be offered in the form of a cash grant, percentage of investment expenses or tax credit to offset tax liability.

If a business can offer more economic benefits in an area of need that is not covered by common tax incentives, it may be in the best interest of both the business and the government to negotiate a supplementary incentive that can be applied at the discretion of the government agency with jurisdiction over the area.

A few examples of discretionary incentives:

When should your business try to negotiate?

Negotiable or discretionary incentives for which a business may be eligible can vary widely. Below are a few situations that can drive businesses to negotiate discretionary tax incentives:

  • A business is looking to implement significant new technology or upgrades, a new process or invest in a significant expansion by purchasing new equipment or acquiring new property
  • A business is going through a hiring boom in an identified area of economic need
  • A business is relocating as part of another discretionary incentive program previously granted by the state to which it is relocating, and the costs ended up being greater than initially anticipated

Knowing what, when and how

Anytime your business is undergoing a change that could stimulate economic growth or job creation, as a best practice you should research your company’s eligibility for negotiable discretionary incentives.  Whether it is a designated discretionary fund, enterprise fund or strategic growth fund, government agencies are consistently looking for ways to stimulate economic growth.

Below are five common ways that businesses are able to realize the benefits of these incentives:

  • Cash grants
  • Tax credits
  • Wage subsidies
  • Training grants
  • Property tax abatements

In order to benefit from negotiable incentives, a business must stay abreast of what incentives are available, when they’re eligible and how to help offset costs of continued business growth. Making the effort to be well-informed can help your business make the most of negotiable tax incentives.

Consider learning more about how ADP® can help businesses capture tax credits and incentives for which they may be eligible.


Learn More About ADP SmartCompliance® Tax Credits




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