Let’s set the scene. A Central Massachusetts business has remained competitive during the COVID-19 pandemic and is looking to expand – growth driving real estate investment, creating new jobs and positively impacting local and surrounding communities. But between uncertainty about the state and nation’s fiscal future, rising inflation, and a myriad of other economic concerns, the company may be hesitant to move forward.
However, with government tax incentives for real estate expansion projects available through the Massachusetts Economic Development Incentive Program, growing businesses can save thousands, if not millions, of dollars. EDIP has become a leading economic development tool in the Commonwealth and can best be described as a partnership between state, municipality and business.
A variety of tax incentives are available to businesses with a proposed real estate expansion project, meaning the project is considered if it will result in job creation and renovation or new construction at a Massachusetts site.
Lynn Tokarczyk is president of Business Development Strategies, Inc. at Medway. Contact her at [email protected]
Municipal tax increment funding is the most well-known tax incentive available to qualifying businesses. In short, a TIF is a negotiated local property tax exemption of up to 20 years based on the increase in value of the project property as a result of new construction or other major improvements. In recent years, a number of central Massachusetts companies have applied for and received TIF approval, including WuXi Biologics in Worcester, SMC Ltd in Devens, and IPG Photonics in Oxford. The projects best suited for TIF incentives are those aimed at increasing property tax revenue.
While TIFs have received the lion’s share of media coverage, there are other options that can result in significant savings for a growing business. These include:
• EDIP status Credit based on job creation and other criteria
• 10% Tax Deduction for State Abandoned Buildings for costs associated with renovating an abandoned building that has been at least 75% vacant for two years
• Municipal Property Tax Exemptiona local property tax exemption negotiated for up to 20 years with all TIFs
• Municipal special contributiona negotiated local property tax exemption of up to 20 years on the total base value of the project property
Due to the complexity of the incentive process, it is essential that participating companies have strong communication and negotiation skills. The ability to present the project to government officials and resident voters at numerous town meetings and community sessions is key to achieving a successful outcome. Getting the green light is not a simple process. Once the available incentives have been identified, the business must seek approval from various city councils and committees, the city council or city assembly, and possibly the State Economic Aid Coordinating Council.
Another critical element is the project schedule. If a company has already committed to a property, tax incentives are unlikely to be available for the proposed project, with the unfortunate result of the company leaving money on the table.
Taking the time to learn about, apply for, and obtain government tax incentives for projects can not only pay off financially for businesses planning to expand, but also for communities and residents who now have a boosted local economy. with new tax revenues, jobs and other benefits.