Emilie Ritter Saunders was StateImpact Idaho's multimedia reporter until the project merged with the Boise State Public Radio site in July 2013. She previously worked as the Capitol Bureau Chief for Montana Public Radio and was a Senior Fellow with NPR's Economic Training Project from 2009 until 2010. She graduated from the University of Montana School of Journalism in 2007.
The Division of Financial Management reports Idaho’s general fund balance was $1.6 million less than predicted for the month of October.
“This month’s shortage was caused by the sales tax that came in $4.1 million below its
target. This shortfall was partially offset by the remaining revenue categories that all
came in above their predicted amounts.” – Division of Financial Management
Individual income tax collections exceeded expectations by $1 million. Corporate income tax collections, product taxes and miscellaneous revenue were also higher than predicted.
This week I’ve been looking at some of Idaho’s business tax credits. I spoke with a non-partisan expert, the state Department of Commerce, a state tax expert and a business owner. I wanted to better understand the kind of tradeoffs the state is willing to make in order to develop new industries and expand existing companies in Idaho. The one question I’ve found most difficult to answer is, do those tradeoff’s pay off? It will be an ongoing question here at StateImpact. For now, here is what we do know.
Idaho currently has nine different business tax credits on the books (not including tax exemptions). The most popular, by far, is a three percent investment tax credit. The Division of Financial Management estimates businesses will collect more than $33 million in investment tax credits this year. It’s popular because any company can receive a three percent credit on qualifying equipment purchases. Qualified purchases include machinery, elevators, greenhouses, milking barns, research facilities, and just about everything in between. What doesn’t qualify? Apartment buildings and horses. (You can see the full list here)Continue Reading →
These are the five stories that got the most clicks, comments and shares this week. In case you missed one, we put them together in this handy list. Just click the blue link to read more!
Chobani’s parent company, Agro Farma, has released some details of its plans to build a new yogurt manufacturing facility in Twin Falls. The company plans to break ground on the facility in December. It will be located on 200 acres south of U.S. Highway 30.
The city of Twin Falls has agreed to more than $25 million in infrastructure improvements using urban renewal dollars, tax increment financing and Idaho Community Development Block Grants, according to Agro Farma. The Times-News has this explanation of the funding sources:
“Urban renewal districts get their money primarily by tax-increment financing, which allows the agencies to collect any increase in assessed property tax value within their boundaries after their formation and use them as incentives for developers. In this case, the site is in the city’s urban renewal district, and is turned the site area into a revenue allocation area that will generate the urban renewal dollars. The city’s also putting $6.75 million of tax dollars into wastewater pretreatment and sewer line improvements that are needed for wet industry projects to come to Twin Falls. The deal with the company also puts fee waivers in place for construction and wastewater system capacity.”
Idaho offers nine different tax credit programs for businesses. We’re highlighting the five most popular. The investment tax credit is used far more than any other credit-type incentive. In 2009, businesses collected more than $26 millionunder that credit alone, according to the Division of Financial Management.
Here’s a look at the other most frequently used business tax credits:
Research Activity Credit: Enacted in 2001, it’s a five percent credit for expenses related to research completed by a small business, university or federal government entity. The research must be done in Idaho to qualify.
Broadband Investment Credit: This is a three percent credit for purchases of qualified broadband equipment in Idaho. The credit is limited to no more than $750,000 per tax year, and no more than the taxpayer’s liability after all other credits in a single tax year. It can be sold to other taxpayers. It was enacted in 2001. Continue Reading →
The Greek yogurt maker Chobani says it will hire at least 400 people and invest $100 million in its new manufacturing plant in Twin Falls, Idaho.
The Times-Newsreports city officials and local and state economic development leaders brokered a deal behind closed doors to lure the New York-based company to the region. The newspaper reports the efforts started in May when Chobani’s parent company, Agro Farma, contacted the Southern Idaho Economic Development Organization. Continue Reading →
Michael Mazerov is a Senior Fellow with the State Fiscal Project at The Center on Budget and Policy Priorities. I contacted the center to discuss the potential shortfalls of Idaho tax incentive programs after coming across this article.
The Center on Budget and Policy Priorities is a non-partisan research and policy institute which works at the federal and state levels on fiscal policy and public programs that affect low and moderate income families and individuals.
Q: How do state tax incentives work?
A: There’s a wide variety of incentives that state governments and local governments use to try and attract new businesses or encourage businesses that are already in the state to expand their investment or job creation. Basically, a tax that a state imposes on a business could theoretically have an incentive added to it. At the state level the most common kinds of incentives are reductions in the state corporate income tax based on increasing investment or increasing the number of employees a company has or increase the amount of R & D in the state. Some states have credits or reductions in the state corporate income tax if the company moves its headquarters to a state. But, they all basically involve cutting a tax in exchange for doing something the state thinks will benefit its economy.
Q: Does the state end up losing money?
A: Certainly, when the state first grants the credit, they’re definitely reducing the revenue from the tax that they’re allowing the break on. What they’re doing is hoping that in the long run what they’re doing will generate enough economic activity as a result of the credit that the economic activity will recoup some of the revenue lost that they initially lost by granting the credit. Continue Reading →
Idaho’s Division of Financial Management (DFM) released its latest economic forecast today and the news is gloomy. The probably of slipping back into a national recession is higher than it was just three months ago. “In the previous (July) forecast, the probability of the economy slipping into a recession was 25 percent,” says Derek Santos, chief economist. “The probability of a recession was raised to 40 percent in the current forecast.”
Santos writes the state’s economic recovery stalled more than expected this last spring and summer. Advancements in job creation are now predicted to be slower through 2014. For example, Idaho’s non-farm employment was forecast to grow two percent in the second quarter of this year, but it didn’t.
“The economic recovery had its second anniversary this summer”, says Santos. “Instead of being a milestone to celebrate what has been achieved, it served as a reminder of how much more is to be accomplished. The economy should be further along the road to recovery than it is.” Continue Reading →
Idaho’s most popular tax incentive is the three percent investment tax credit. Businesses that purchase qualifying new equipment can earn an income tax credit. The credit can offset up to half of a company’s state income tax liability and can be carried forward up to 14 years.
Dan John manages tax policy at the Idaho State Tax Commission. “So, if you have $100 of computed tax liability, even if you have $1,000 worth of credit, you could only claim $50 of the credit against that liability.”
Whatever is left over can be used for the next 14 years. Plus, this credit isn’t a one-time deal. John says companies that are ‘capital intensive’, like manufacturers, use this credit all the time on qualified purchases. Continue Reading →
The Commerce Department’s website lists 18 different business incentive programs. Many of them are broad and open to any industry. Some are very specific, like the Idaho Film Incentives, which offers discounted lodging and sales tax rebates for media production companies, among other things.
We’ll look at some of Idaho’s most popular tax incentive programs over the next few days and try to answer a few questions. How do they work? Who uses them? What’s the tradeoff that the state is choosing to make when it forgoes tax revenue to spur investment?
And, we want to hear from you. Does your business use tax credits to grow? Are you skeptical of the growth touted through incentives? Share your thoughts throughout the week in the comment thread.
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