How to Reduce the Cost of Doing Business in Massachusetts
ByLynn Tokarczyk, President, Business Development Strategies, Inc.
Whether you are planning an on-site expansion or the purchase of new machinery and equipment, looking for a new facility to lease or purchase, hiring more employees, or searching for that ideal parcel of land, there are many state and local resources that can help reduce the company’s overall project costs. Knowing where and how to search is the key to unlocking a variety of state and local incentives that could ultimately save a company thousands, or even millions in tax dollars in the future.
For example, did you know that in 1993 the Massachusetts Economic Development Incentive Program was created to help new and existing businesses expand? In partnership with the Commonwealth, city and town officials work to develop economic growth plans for their future through a three-step process:
First, a community must be located within an Economic Target Area (ETA) in order to access business incentives. Currently, there are 197 communities that are designated ETA’s in Massachusetts.
Once an ETA is defined, community planners designate specific Economic Opportunity Areas (EOAs) for priority projects that meet established criteria.
Finally, expanding businesses or Certified Projects are eligible if they create new full-time jobs and invest in private real estate.
Benefits include:
A 5% state EOA investment tax credit for qualifying, depreciable, tangible assets. Department of Revenue rules exist which limit the credit; companies are not allowed to use the credit to reduce state tax liability by more than 50% for any one year.
A 10% state abandoned building tax deduction for costs associated with renovating an abandoned building (building must be at least 75% vacant for two or more years)
Tax Increment Financing (TIF) – a 5 to 20-year property tax exemption based on the increased value of the project property due to new construction or other significant improvements (TIF’s can be accessed in non ETA’s under the state’s "Exceptional Opportunity" program).
A 100% local personal property exemption with all TIF’s or
A Special Tax Assessment — a 5 to 20-year property tax exemption based on the total base value of the project property.
To find the programs that best fit your business, it’s important to first identify the available incentives. Navigating through the maze of bureaucracy in state and local governments is challenging, but help is available. A private government incentives consultant can help businesses identify appropriate resources, strategically map and manage the entire process, prepare the necessary paperwork, and secure local and state approvals. There are also annual compliance reports based on the business commitments of the real estate expansion that are required in order to maintain such incentives.
Accessing benefits requires solid and diplomatic negotiating skills. At the local level, moving your project forward requires that you interact with and receive approval from various town and city boards and eventually the state. Be prepared to participate in several community sessions. These sessions are designed to outreach to the residents of the municipality. The goal is to have the municipality embrace the project to obtain the required votes at Town Meetings or City Councils. The cities and towns benefit greatly from new jobs and new local taxes generated as a result of a business expansion. The intent of the program is to create a win-win-win situation for all parties involved in the transaction.
A real estate expansion is an exciting chapter in a company’s history. All too often we see companies leave significant dollars on the table because they are too busy running their businesses to investigate and apply for the many state and local government incentive programs. So, if you’re planning to expand your business make sure you have the right people on board and the proper programs identified to ensure long-term success and savings.
Lynn Tokarczyk is President of Business Development Strategies, Inc., a government incentives consulting firm. For more information, please contact Lynn at (508) 966-4300 or e-mail at [email protected] or visit www.businessdevelopment-strategies.com
