Considering locating a new business in Minnesota or making a significant investment in expanding your infrastructure or equipment? If you’re going to be adding to a local area’s tax rolls through investment in real or personal property or you’re offering jobs to the local workforce, then the government is often willing to negotiate tax and other incentives to ensure you bring your business to Minnesota or stay in the area.
Large investments (generally over several million dollars) can discuss tax abatement offerings and tax increment financing. These agreements are negotiated between the business and the local government, which has some flexibility in negotiating these agreements. Investments that are larger or are actively considering locating in another areas are more likely to get the best arrangements. Tax abatement agreements, in particular, can be valuable to a business as they reallocate taxes owed to the county or municipality to finance property improvements. An area can also elect to abate taxes over a period of time to allow the project to get up to speed and begin having a positive cash flow. These types of abatements often occur in two phases, a significant abatement during the construction period and a second abatement over several years as the business begins operations.
Businesses considering locating in Minnesota generally start by contacting the Minnesota Department of Employment and Economic Development. This department has staff and data to help businesses review available sites, contact local governments and utilities, and provide information, data, and support to help move businesses to Minnesota. These staffers are also versed in available incentives and, at your request, will generally make an initial incentive offer. The size of this offer depends on both the size of investment and the number of potential jobs. Savvy businesses that are considering expansion or location can negotiate these incentives to customize the package.
In addition to property tax abatements, states also have the ability to offer a variety of other incentives. In Minnesota, these commonly include workforce training, expansion tax credits, and credits to locate in specific areas. These later are generally targeted at areas that are economically depressed and to attempt to remedy this, the government has decided to offer special incentives to attract businesses.
Research and development facilities that locate in Minnesota, for example, are granted tax credits that can count against general corporate tax liability (or personal tax liability depending on how the entity is set up). Combining this tax credit with others available can result in corporations paying little to no state income tax for several years after beginning operations.
These economic incentives are studied by academics and local government to ensure that, while the business is certainly getting a great deal, the economic impact that the business brings to the economy is significantly greater than the cost of the abatement or credits. Economists can model the impact a business has on the economy considering tax revenue, license fees, and employment taxes as well as the impact direct and indirect spending will have on the economy.
Business interested in growing in Minnesota or relocating to our fine state can reach out to Virtus Law Firm at 612.888.1000 or email us at firstname.lastname@example.org. Our team is made up of experienced business and real estate attorneys who can turn your incentive agreements into memorandums of understanding and then help you with the paperwork to finalize your agreement.