BDS News

Government Incentives For Real Estate Expansions

Do You Know How Growing Businesses in Massachusetts Can Save Cash and Expand?

by Lynn Tokarczyk, Government Incentives Consultant,
Business Development Strategies, Inc.
Published in Coastlines; February 2012 Issue
Business News From The Falmouth Chamber of Commerce

In recent months, the country’s top economists have predicted that the recession is ending. While it may still take a while for many to feel the effect, there are already signs that the economy is improving.

Although some Massachusetts companies delayed their expansion plans due to the economic climate, many recession-proof companies continued to thrive and expanded their operations across the state in 2011 due to a growing demand for their products and services. In turn, these expansions sparked economic development during challenging times by creating new jobs, increasing tax revenue and infusing cash into the local economy.

While a soft market and a business-friendly location will generate some savings, in order to maximize a real estate investment in the long run, companies should investigate available local and state tax incentives. These valuable incentive packages are available to companies that have real estate expansion plans, such as: an on-site facility expansion; the purchase of new machinery and equipment; the lease or purchase of a new facility; the hiring of additional employees; or searching for that ideal land parcel. Knowing where, when and how to find and access these programs is the key to saving thousands—even millions—of tax dollars in the future.

To learn if your client or company is eligible for these incentives, here’s what you need to know:

First, find out whether your company is located in an Economic Target Area (ETA). In order to apply for and receive state and local incentives, your company must be located in one of the state’s approximate 210 ETAs. Eligibility is based on state statutory criteria. However, under legislative changes effective January 1, 2010, incentives are available in non-ETAs if the project meets specific criteria. Falmouth is in an ETA.

Planning a real estate investment? Tax incentives may be available if you plan to renovate a leased or purchased building or construct a new facility.

Does your company generate sales outside of Massachusetts? This is a must in order to be eligible for state and local incentives.

Are you planning to create new jobs with this expansion? If so, you could receive “Certifi ed Project” status. However, timing is essential and incentives need to be secured prior to site commitment. This designation allows your company to access a variety of incentives such as:

State EDIP investment tax credit (ITC) for qualifying depreciable assets. The new laws cap the ITC at $25 million annually.

  • State 10% abandoned building tax deduction for costs associated with renovating an abandoned building.
  • Local Tax Increment Financing provides a negotiated fi ve to 20 year real estate tax exemption based on the increased value of the project property due to new construction or other significant improvements.
  • Local Personal Property Exemption provides a negotiated personal property tax exemption from five to 20 years on new and existing personal property with Tax Increment Financing, or
  • Local Special Tax Assessment, a negotiated four to 20 year property tax exemption on the total base value of the project property

  • After you have identified the available incentives and determined that the program criteria meet your project requirements, you must receive approval from various town and city boards and eventually, the state. Having diplomatic negotiating skills are essential as you will need to present an informative and engaging project plan at several community sessions.

    The primary objective is to secure the required votes at Town Meeting or a city council session by illustrating how your business expansion will create economic success for all of the stakeholders involved. Explain how this expansion will create new jobs, generate new tax revenue and infuse cash back into the local economy.

    Keep in mind that even after incentives are secured, there is still work that needs to be done. Annual compliance reports based on the business commitments of the real estate expansion need to be filed in order to maintain such incentives.

    A real estate expansion is an exciting chapter in a company’s history. Taking the time to learn about, apply for, and secure government incentives for your company’s expansion and growth will keep your company on the fast track to success with the realization of long-term financial benefits.