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16 May 2015 • www.CPAPracticeAdvisor.com A YEAR IN THE LIFE: SALT ACCOUNTANT Negotiating SALT Credits and Incentives with Multiple States and Localities By Kevin Kennedy, CPA, JD Of the 43 largest urban areas, 15 involve overlapping state lines. Kansas City, for example, includes two states, 14 counties, and at least 24 cities with more than 10,0 0 0 residents each. Being in or near such an area provides both rewards and risks for growing companies looking for some help from economic development agencies. Based on my experience of dealing with multiple economic development authorities regarding a single project, I have developed 5 rules of the road; 1. Timing is everything 2. Maintain relationships 3. Integrity is key 4. Keep all parties informed 5. To best represent your client, you must leverage one against the other Timing is everything Rule #1 is actually critical in all credit and incentive projects – not just those involving multiple jurisdictions. But it is so important that it needs to be empha sized i n a l l d isc ussions of credits and incentives. Ma ny, i f not most, cred its a nd incentives are based on a "but for" test. Economic development agencies only want to provide a beneft if it is needed to get the deal done. Therefore you must get ahead of the game – if your client has already signed contracts related to an expansion, or started hiring people, or issued a press release a n no u nc i n g t he i r d e c i s i o n – i t becomes much more difcult (if not impossible) to get incentives to which the company might otherwise have been entitled. Maintain relationships To be successful, you have to maintain relationships. It's important to fgure out who the providers are and keep in t o u c h w i t h t h e m . M o s t e c o n o m i c d e v e l o p m e n t agencies put out n e w s l e t t e r s o r announcements – get added to their mailing lists. When it's time to negotiate, pro- vide as many details as you can – the proje c te d c apit a l s pend i n g a nd expected job growth over the next 3 – 5 years, the training and workforce needs of the company, the types of bene f it s t he c ompa ny of fer s it s employees, etc. Use the expertise of the economic de ve lopment a genc ie s – do not assume that the best k now n pro- grams are the only ones available. Many states have very targeted tax credits. Companies who make capital investments within these economi- c a l l y d i s t r e s s e d a r e a s r e c e i v e enhanced credits and incentives. A lways ask if something else is available. Te initial ofers will contain statutorily mandated incentives, dis- cretionary incentives may not have been included with the initial ofer. Integrity is key If you fnd out your client is consid- ering mak ing a signifcant capital investment but there is no way that t he c l ient wou ld e ver move t he b u s i n e s s , g o t o t h e e c o n o m i c development aut hor it ies for t he current location and see what they can ofer. W hile you won't be able to create a bidding war between two c it ies/cou nt ies/st ates w it hout a relocation in play, economic devel- opment agencies really are trying to help local businesses in any way they can and might be able to of fer an incentive. Furthermore, many credits and incentives are statutory in nature – if you meet the requirements (and ask for them ahead of time), you qualify. Additional discretionary benefts are less likely, but the statutory benefts can be quite substantial. Keep all parties informed W hen I am dealing w ith multiple jurisdictions, I try to schedule calls w it h t hem (i ndependent of each other) on a regular basis. Tat allows me to keep them informed of the status of the project, helps to avoid m i s s i n g a ny d e a d l i ne s (of f e r e d benefts sometimes have an expira- tion date), and allows them to pos- sibly sweeten the pot as time goes on, or let me k now of add it iona l benefts that might be available. In a situation where two or more economic development agencies have ofered proposals, once the choice has been made you need to inform all sides – bot h t he state/cou nt y/cit y t he project is moving forward with, and the "losing" jurisdiction. Te losing jurisdiction may want to know what the deciding factors were, so that they can adjust their approach in future competitons if needed. Use leverage Finally, when you are truly in a posi- tion to leverage one of fer against another, you must do so – just to zealously represent the interests of your client. Many states have lesser- known programs they can utilize in special situations (including cash grants) – and one of the key factors for using them is if the project has a legitimate opportunity to be lost to another state. W ith the economy fnally showing some signs of l i f e , b u s i n e s s e s a r e looking to invest and grow. When you talk to y o u r c l i e n t s , d o n ' t forget to ask them about their planned capital spending, hiring plans and training needs. Almost every state (and many counties and municipalities) has resources to help – with everything from tax credits based on a per- centage of capital spend, to retention of withholding taxes, to cash grants to offset training expenses, and everything in between. But each entity has diferent rules and stan- dards to qualify for incentives.