Location:
CORPORATIONS; ECONOMIC DEVELOPMENT; TAX EXEMPTIONS;
Scope:
Connecticut laws/regulations; Other States laws/regulations;

OLR Research Report


October 13, 2011

 

2011-R-0351

STATE INCENTIVES FOR ATTRACTING COMPANY HEADQUARTERS

 

By: Rute Pinho, Associate Analyst

John Rappa, Chief Analyst

James Orlando, Associate Analyst

Judith Lohman, Assistant Director

You asked (1) whether any states offer sales tax exemptions for purchases of taxable goods or services by company headquarters located in the state, (2) how many company headquarters are located in Connecticut, and (3) whether Connecticut has any economic development programs or tools specifically tailored to attract or retain company headquarters to or in Connecticut.

SUMMARY

We were unable to locate any states that offer a sales tax exemption for goods and services purchased by companies headquartered in the state. However, we found seven states that offer tax incentive programs specifically targeted to companies relocating their corporate headquarters to the state. Two of these states, Florida and Tennessee, offer a credit or refund that relocating companies can use to reduce their sales tax liability. Six of the states (Indiana, Mississippi, South Carolina, Tennessee, West Virginia, and Wisconsin) offer tax credits (1) to offset relocation costs or (2) based on the number of jobs the company creates or capital investment it makes in the state.

Many businesses, including large multistate and multinational corporations, are headquartered in Connecticut. Of the 54,595 companies listed in Bloomberg L.P.'s October 2011 company index, 570 have their headquarters here. In addition, 11 companies listed on the 2011 Fortune 500, and 23 listed on the Fortune 1000, are headquartered in Connecticut.

Although Connecticut offers business tax credits and property tax exemptions to local and out-of-state businesses developing new facilities here, including headquarters, it does not specifically target company headquarters. But between October 2009 and September 2011, the state gave assistance to eight economic development projects for multi-state companies that either relocated their company headquarters to the state or maintained them here.

OTHER STATES' TAX INCENTIVES FOR COMPANIES RELOCATING THEIR CORPORATE HEADQUARTERS

A computer search found seven states with tax incentive programs that are specifically targeted to companies relocating their corporate headquarters to the state. Table 1 lists the states and briefly describes the type and amount of the incentive, its eligibility requirements, and the taxes or fees to which it applies.

While none of the states offers a sales tax exemption for the goods and services relocating companies purchase, two offer other types of incentives that these companies can use to reduce their sales tax liability. Tennessee awards qualifying companies a sales tax credit on qualified goods they purchase for new headquarters facilities. Florida issues a tax refund to qualifying companies that may be used against the sales tax or a number of other state taxes.

All of the programs we examined either require the companies to create a certain number of jobs to qualify for the tax incentive or base the tax credit amount on the number of jobs created. Florida, Mississippi, Tennessee, and Wisconsin also consider whether the jobs meet specific salary thresholds when determining a company's qualifications for the credit or the credit amount.

The taxes to which the credits and refunds apply vary by state. The incentives may be used primarily against business and income taxes, such as corporation, personal income, insurance premium, and telecommunications taxes. South Carolina also allows companies to apply the corporate headquarters credit against their corporation license fees.

TABLE 1: STATE TAX INCENTIVES FOR COMPANIES RELOCATING THEIR CORPORATE HEADQUARTERS

State

Type and Amount of Incentive

Eligibility

Applicable Taxes

FloridaQualified Target Industry Tax Refund

(Fla. Stat. § 288.106)

Tax refund of $3,000 for each new full-time job created in the state ($6,000 if located in a targeted zone)

Additional tax refund of $1,000 to $2,500 per job awarded if the:

jobs meet specific salary thresholds,

business falls within a designated high impact sector or increases exports, and

projects are located in designated brownfield areas

(Local community in which the company locates contributes 20% of the total refund amount)

Business must

be in a targeted industry or relocate its international, national, or regional headquarters to the state,

create at least 10 new jobs, and

pay at least 115% of the annual average private sector wage in the area

Corporate income

Sales and use

Ad valorem

Excise

Intangible personal property

Insurance premium

Communications service

IndianaHeadquarters Relocation Tax Credit

(Ind. Code § 6-3.1-30)

Tax credit of 50% of eligible relocation costs

Business must:

relocate its corporate headquarters to the state,

have annual worldwide revenue of at least $100 million

employ at least 75 people in the state after relocating

Personal income

Corporation

Financial institutions

MississippiNational or Regional Headquarters Tax Credit

(Miss. Code Ann. § 57-73-21)

Five-year tax credit of up to $2,000 for each new full-time employee

Business must create a minimum of 35 jobs within one year of relocating its headquarters

Credit amount is greater if the salaries are higher than the average annual state wage

Personal income

Corporation

Table 1: -Continued-

State

Type and Amount of Incentive

Eligibility

Applicable Taxes

South CarolinaCorporate Headquarters Credit

(S.C. Code Ann. § 12-6-3410)

10-year credit of 20% of the value of the headquarters facility or its direct lease costs during the first five years of operation

Business must:

relocate its corporate headquarters to the state,

create at least 40 new full-time jobs (including at least 20 employees classified as “headquarters staff employees”) engaged in corporate headquarters or R&D activities, and

spend over $50,000 to establish or expand the headquarters facility

Corporation income

Corporation license fees

TennesseeHeadquarters Tax Credit

(Tenn. Code Ann. § 67-6-224)

Sales tax credit on qualified goods purchased for the headquarters (credit of 6.5% out of the 7% state sales tax)

Companies that meet certain job creation and relocation expense criteria may also qualify for a:

refundable relocation expense credit ranging from $10,000 to $100,000 per position relocated to the state and

“super jobs tax credit” of $5,000 per job created

Business must:

locate its headquarters in a specified zone,

spend $50 million to construct or remodel its headquarters facility, or

spend $10 million on a facility and create at least 100 new full-time jobs that pay at least 150% of the state's average wage.

Sales

Franchise and excise (for relocation and job creation credits)

West VirginiaCorporate Headquarters Relocation Credit

(W. Va. Code § 11-13Q-5.)

Tax credit amount based on the business' qualified relocation and investment costs and full-time jobs created

Out-of-state business must relocate to the state and employ at least 15 West Virginia residents on a full-time basis

Business and occupation

Severance

Telecommunications

Business franchise

Corporation net income

Personal income

WisconsinEconomic Development Tax Credit

(Wis. Stat. § 560.70 et seq.)

Credit of up to $10,000 per full-time job created, depending on salary levels

Business must locate its global, national, divisional, or regional headquarters in Wisconsin (also open to businesses whose existing headquarters are at risk of leaving the state)

Corporation income

Personal income

COMPANY HEADQUARTERS LOCATED IN CONNECTICUT

Of the 54,595 companies and organizations included in Bloomberg L.P.'s October 2011 company index, 570 are headquartered in Connecticut. The Bloomberg index lists companies by industry, number of employees, headquarters location, and revenue for the last 12 months. Table 2 shows the 35 companies in the Bloomberg index that have at least $1 billion in revenue for the last 12 months and are headquartered in Connecticut. (We can send you a complete list of all the Connecticut-headquartered companies at your request.)

TABLE 2: COMPANIES WITH $1 BILLION OR MORE IN ANNUAL REVENUE AND HEADQUARTERED IN CONNECTICUT

Company

Industry

Number of Employees

Headquarters

Revenue In Billions

General Electric Co.

Diversified Industrials

287,000

Fairfield

$146.8

United Technologies Corp.

Aerospace

208,000

Hartford

56.8

Aetna, Inc.

Heath Care Providers

34,000

Hartford

33.8

Hartford Financial Services Group, Inc.

Full Line Insurance

26,800

Hartford

24.4

Xerox Corp.

Electronic Office Equipment

136,500

Norwalk

22.5

Praxair

Commodity Chemicals

25,262

Danbury

10.7

Stanley Black & Decker, Inc.

Durable Household Products

36,700

New Britain

9.8

General RE Corp.

Full Line Insurance

3,869

Stamford

8.3

Frontier Communications Corp.

Fixed Line Telecommunications

14,800

Stamford

5.4

Pitney Bowes, Inc.

Electronic Office Equipment

30,700

Stamford

5.4

EMCOR Group, Inc.

Heavy Construction

24,000

Norwalk

5.3

Terex Corp.

Commercial Vehicles & Trucks

16,300

Westport

5.1

W.R. Berkley Corp.

Property & Casualty Insurance

6,253

Greenwich

4.9

Amphenol Corp.

Electrical Components & Equipment

39,100

Wallingford

3.9

Harman International Industries, Inc.

Consumer Electronics

10,103

Stamford

3.8

Priceline.com

Travel & Tourism

3,400

Norwalk

3.6

Silgan Holdings, Inc.

Containers & Packaging

7,400

Stamford

3.2

Magellan Health Services, Inc.

Health Care Providers

4,900

Avon

2.9

Hubbell, Inc.

Electrical Components & Equipment

13,000

Shelton

2.7

Odyssey Re Holdings Corp.

Reinsurance

721

Stamford

2.4

Crane Co.

Industrial Machinery

10,500

Stamford

2.4

United Rentals, Inc.

Business Support Services

7,300

Greenwich

2.4

The Phoenix Companies, Inc.

Life Insurance

625

Hartford

2.0

Cenveo, Inc.

Business Support Services

8,700

Stamford

1.9

Kaman Corp.

Industrial Suppliers

4,269

Bloomfield

1.5

UIL Holdings Corp.

Conventional Electricity

1,824

New Haven

1.4

Table 2: -Continued-

Company

Industry

Number of Employees

Headquarters

Revenue In Billions

Mohegan Tribal Gaming Authority

Gambling

7,150

Uncasville

1.4

Arch Chemicals, Inc.

Specialty Chemicals

2,504

Norwalk

1.4

Gartner, Inc.

Computer Services

4,461

Stamford

1.4

Hexcel Corp.

Aerospace

4,043

Stamford

1.3

People's United Financial, Inc.

Banks

4,528

Bridgeport

1.2

Barnes Group, Inc.

Industrial Suppliers

4,900

Bristol

1.2

United States Surgical Corp.

Medical Equipment

1,419

Norwalk

1.2

Intelsat Corp.

Telecommunications Equipment

1,111

Washington

1.1

Source: Bloomburg L.P., October 2011 company index

CONNECTICUT TAX INCENTIVES FOR BUSINESS HEADQUARTERS PROJECTS

Policy

The state offers business tax credits and property tax exemptions to Connecticut and out-of-state businesses developing new facilities here. The range of eligible projects includes corporate headquarters, but the determining criteria for many incentives include the type of business (e.g., manufacturing, banking) and the project's location (e.g., state designated enterprise zones, targeted investment communities).

The Department of Economic and Community Development (DECD) administers many tax incentive programs. In doing so, it seeks out businesses planning to build new headquarters, including businesses in other states and those based here. But DECD neither prefers headquarter projects over other types of projects nor tries to induce companies that only want to build or expand a facility in Connecticut to relocate their headquarters here unless a company is also contemplating building a new headquarters as well, DECD's legislative liaison, James Watson, explained.

Business Tax Credits

The emphasis on business type and location is seen in Table 3, which summarizes the business tax credits for developing new facilities. Most of the credits are limited to manufacturers or specific types of service businesses. The exceptions are the Urban and Industrial Sites Reinvestment (UISR) credits, which are available to any type of business developing a facility that will generate enough sales, personal income, and other tax revenue to recoup the foregone business tax revenue.

The credits for developing manufacturing and service facilities are limited to the 17 enterprise zones and the municipalities that host them (i.e., targeted investment communities (TIC)). A separate credit for banks developing facilities anywhere in the state expires December 31, 2013. UISR credits are available anywhere in the state for businesses cleaning up and redeveloping contaminated property or relocating a new facility here. Other projects qualify if they are located in a TIC, a state-designated distressed municipality, or a municipality with over 100,000 people.

TABLE 3: BUSINESS TAX CREDITS FOR REAL ESTATE DEVELOPMENT PROJECTS

Tax Credit Program

Eligibility Criteria

Applicable Business Taxes

Credit Limits

Facility

Business

Location

Urban and Industrial Sites Reinvestment (CGS § 32-9t, as amended by PA 11-78 and PA 11-86)

Any facility that generates enough income, sales, and other taxes to recoup foregone business tax revenue

Any type of business investing in projects developing or redeveloping property, including brownfields

(Business may invest directly in the project or through a fund manager)

Brownfield clean-up projects and business relocation projects with minimum $50 million investment

Other projects qualify if located in state-designated targeted investment communities, distressed municipalities, or municipality with over 100,000 people

Insurance Premium

Corporation

Air Carrier

Railroad Company

Community Antenna

Utility Companies

Other specified business taxes

100% credit up to $100 million, spread out over 10 years: 0% in first three years after investment was made, 10% per year in the next four years, and 20% in the remaining three years

Unused credits may be carried forward up to five years or assigned to other taxpayers

Total credits available for all projects capped at $750 million

Manufacturing and Specified Service Facilities (CGS § 12-217e(a))

Manufacturing facilities and other types of facilities housing specific types of businesses

Manufacturers

Specified types of service businesses, including insurance carriers, health care providers, and motor freight transportation and warehousing

Enterprise Zone

Enterprise Corridor Zones

Targeted Investment Communities

Bradley International Airport Development Zone

Bioscience Zone

Corporation

10-year credit against tax allocable to facility:

25% credit or

50% if at least 150 of the new jobs or at least 30% of them go to zone or municipal residents who qualify for federal job training assistance

Service Facilities in Targeted Investment Communities

(CGS § 12-217e (b))

Any type of facility housing specific types of service businesses

Specified types of service businesses, including insurance carriers, health care providers, and motor freight transportation and warehousing

Facility must be located in a targeted investment community (TIC) but outside of the TIC's enterprise zone

Corporation

10-year credit based on the number of jobs created:

15%, 300-599 jobs

20%, 600-899 jobs

25%, 900-1,189 jobs

30%, 1,200-1,499 jobs

40%, 1,500-1,999 jobs

50%, 2,000 or more jobs

Table 3: -Continued-

Tax Credit Program

Eligibility Criteria

Applicable Business Taxes

Credit Limits

Facility

Business

Location

Financial Institutions (CGS § 12-217u)

Minimum 900,000 square foot-facilities

Banks and other types of financial institutions

No criteria

Corporation

Two-stage credits;

Maximum $120 million over 1st 10 years:

30% for each year business maintains at least 1,200 new jobs or

40% for each year business maintains at least 1,600 new jobs

Maximum $145 million over next five years: 25% for each year business maintains at least 3,000 new jobs

Credit expires on December 31, 2013 (PA 10-75)

Property Tax Exemptions

Table 4 summarizes the property tax exemptions for businesses developing new facilities. These include the mandatory five year, 80% exemption for manufacturers and specified service businesses in enterprise zones and TICs as well as two exemptions municipalities may offer at their discretion. The property tax exemptions for large-scale development projects target specific business uses, including headquarters offices. The exemptions authorized under the Connecticut City and Town Development Act are for businesses that occupy property a municipality acquired and developed under a development plan.

TABLE 4: PROPERTY TAX EXEMPTIONS FOR LARGE-SCALE DEVELOPMENT PROJECTS

Property Tax Exemption

Type

Eligibility

Exemption Amount

Facility

Business

Location

Enterprise Zone Property Tax Exemption (CGS § 12-81 (59 (a))

Mandatory, with state reimbursement

Manufacturing facilities and other types of facilities housing specific types of service businesses

Manufacturers

Specified types of service businesses, including insurance carriers, health care providers, and motor freight transportation and warehousing

Enterprise Zones

Facilities outside of the zones in the towns with zone qualify at DECD's commissioner's discretion

Five-year, 80% exemption

Table 4: -Continued-

Property Tax Exemption

Type

Eligibility

Exemption Amount

Facility

Business

Location

Targeted Investment Community Property Tax Exemption (CGS § 12-81 (59) (b))

Same as above

Same as above

Specific types of service businesses, including insurance carriers, health care providers, and motor freight transportation and warehousing

Facility must be located in a TIC but outside of the TIC's enterprise zone

Five-year exemption

Exemption amount depends on investment; exemption range from 40% for investments between $20 million and $39 million and 80% for investments over $90 million

Property Tax Exemption for Large-Scale Real Estate Projects (CGS § 12-65b)

Local Option

Office

Retail

Permanent Residential

Transient Residential

Manufacturing

Warehouse, Storage, or Distribution

Multi-Level Parking Supporting Transit System

Information Technology

Recreation Facilities

Transportation Facilities

No explicit criteria; presumably, a business must be compatible with the facility's use

No criteria

Exemption amount and term depends on amount invested:

100% for to seven years for minimum $3 million investment

100% for up to two years for minimum $500,000 investment

50% for up to three years for minimum $25,000 investment

Connecticut City and Town Development Act (CGS § 7-498)

Local Option

Wide range of development projects

No criteria (Municipalities may acquire, develop, and dispose of property for many different purposes

All municipalities

Up to 100%, 20-year exemption for property developed under act

RECENT ECONOMIC DEVELOPMENT ASSISTANCE FOR COMPANY HEADQUARTERS

Between October 2009 and September 2011, the state concluded eight economic development deals involving multi-state companies either already headquartered in Connecticut or moving their headquarters to the state. Table 5 summarizes the state benefits provided in each case. Deals involving companies that only have in-state facilities are not included.

TABLE 5: STATE ASSISTANCE FOR COMPANY HEADQUARTERS IN CONNECTICUT, OCTOBER 2009 THROUGH SEPTEMBER 2011

Company

Summary of Benefits (Date Project Announced)

Headquarters Location

Starwood Hotels & Resorts, Inc.

$9.5 million loan from DECD, $75 million in Urban and Industrial Site Reinvestment Tax Credits, and up to $5 million in sales tax exemptions through the Connecticut Development Authority (CDA) (November 18, 2009)

Relocation from White Plains, NY to Stamford

Nestlé Waters North America Inc.

$4 million, low-interest loan, up to $5 million in Urban and Industrial Site Reinvestment Tax Credits, and up to $1 million in sales tax exemptions from CDA (January 25, 2010)

Greenwich

EpiEP Inc.

$1 million investment through Connecticut Innovation's Eli Whitey Fund (June 16, 2010)

Relocation from Charlottesville, VA to New Haven

Electric Boat

$15 million grant ($5 million per year for three years), in addition to possible other benefits due to New London facility being located in enterprise zone (June 21, 2010)

Groton

Inline Plastics Corp.

$800,000 in loans ($500,000 from DECD and $300,000 from CDA) (January 20, 2011)

Shelton

Schultz Electric Co.

$400,000 loan from CDA (January 21, 2011)

New Haven

CIGNA

$47 million or more in benefits, depending on number of jobs created; combination of Urban and Industrial Site Reinvestment Tax Credits, Manufacturing Assistance Act loan, loan forgiveness, and job training grant (July 12, 2011)

Relocation from Philadelphia, PA to Bloomfield

ESPN

$17.5 million loan from DECD, up to $1.2 million for a job training grant program, and up to $6 million in sales and use tax exemptions from CDA (August 2, 2011)

Bristol, CT

Sources: Press Releases by (1) Governor Malloy's office, (2) Governor Rell's office, and (3) the Department of Economic and Community Development.

RP/JR/JO/JL:ts