In the Near-Term, State and Local Considerations are Key

March 2017

Looking beyond slow-moving federal and international tax reforms, tax executives turn to state and local incentives to reduce their tax burden, as states themselves try to balance gathering revenue with attracting growth. When asked what programs they take advantage of in the U.S. market, 91 percent of respondents cited income or franchise tax credits and exemptions. Eighty-eight percent use sales tax refunds and exemptions, and 86 percent rely on property tax abatements and exemptions. Just over half (52 percent) benefit from training grants, and 37 percent take advantage of financing programs.

The new administration espouses policies that promise to put “America first,” and following the General Election, that sentiment of reinvestment in America has spread. Five states lowered their corporate income tax rates for 2017, and states like North Carolina and Arizona are contemplating rate-reducing reforms. Tax executives too are increasing their concentration on national expansion, with just under a third (32 percent) stating they will likely enter new geographic areas in the United States in 2017, up from 24 percent of respondents last year. For those planning domestic expansions, 48 percent cite income or franchise tax credits and exemptions as having the greatest impact on their decision to enter new markets. Over a quarter (28 percent) look to available property tax programs, and just eight percent prioritize financing programs, sales tax refunds and exemptions, and training grants. 

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“State governments are constantly working to balance the need to grow revenue while inspiring economic growth within their borders. Companies looking to expand within the U.S. should not undervalue the impact of state and local tax regulations and incentives when developing their tax strategies. – Rocky Cummings, tax partner and head of National Multistate Tax Services at BDO