To better inform the public regarding post-performance tax credits awarded, the Utah Governor’s Office of Economic Opportunity (Go Utah) has changed the format for future press releases regarding Economic Development Tax Increment Financing (EDTIF) and Rural Economic Development Tax Increment Finance (REDTIF) programs.
The Economic Opportunity office will focus future press releases on new state revenues, in conjunction with the timeframe and percentage of the respective award. Prior press releases have included a numerical estimate of the maximum tax credit amount a company could claim.
The inclusion of the maximum amount has caused confusion. Utah does not give a company a cash incentive to continue or expand operations in the state. That is not how the EDTIF/REDTIF program works.
“We hope these adjustments will help the public better understand how the state’s corporate incentive program functions,” said Dan Hemmert, the Office of Economic Opportunity’s executive director. “Here at Go Utah, we take the administration of the state’s incentive program very seriously, and we’re always striving for the best transparency, accuracy, and accountability possible.”
Go Utah is making a renewed effort to educate our stakeholders and the public regarding the post-performance requirements of the EDTIF and REDTIF programs. There is no cash given at the time of the award. A business must first create new jobs and then pay the associated taxes. Only after those taxes have been paid can a company apply for a limited percentage rebate of those state taxes.
At the time of this press release, of the 237 EDTIF awards that the Go Utah Board has granted since the program’s 2005 inception, only 53% (126) of these businesses have pursued an EDTIF post-performance tax credit by entering into a contract. In other words, only a little over half of the companies entered into an EDTIF agreement with the state and received a post-performance assessment. None of the companies received a cash advance to expand in or relocate to Utah.
Of the 126 businesses that have pursued a post-performance tax credit, only 12 have reached their maximum award. Over the program’s life, companies that have received at least one post-performance incentive have received on average 34% of the maximum tax credit amount.
“Utah is open for business and actively supporting homegrown companies while recruiting new businesses and jobs in specific targeted industries,” said Hemmert. “We’re not one of those states you hear about that gives away millions of dollars in advance for corporate recruitment. Our approach is fiscally conservative as we limit the state’s liability and ensure the company is doing its part by first investing in the state and its workers. Then, after they’ve paid state taxes, and our office compliance team has conducted an annual audit, companies can receive a tax rebate for a limited amount of time, as outlined in the EDTIF contract.”
Highlighting the maximum award in news releases has led many to mistakenly believe that this amount is an upfront cash payment or that every business that receives an EDTIF award gets the maximum amount. These perceptions are not accurate.
Please see more information about the state’s tax incentive programs here.
About Utah Corporate Incentives
The state’s incentive program is called Economic Development Tax Increment Finance (EDTIF). The Utah Legislature has authorized economic development incentives in the form of post-performance tax credits. Utah does not provide up-front EDTIF cash incentives for corporate retention and recruitment. It provides a limited post-performance tax credit after the company meets specific obligations, including capital investment and new high-paying jobs. Eligible companies operate in one of Go Utah’s five targeted industries and work with the Governor’s Office of Economic Opportunity to outline performance criteria. Once the office confirms those criteria have been met, according to statute (U.C.A. 63N-2-106(2)), companies can receive a refund of up to 30% of the new state taxes they paid for up to 20 years.
About Rural Utah Corporate Incentives
The Utah Legislature has authorized economic development incentives in the form of post-performance tax credits to promote rural businesses development. The rural incentive program is called Rural Economic Development Tax Increment Finance (REDTIF). Eligible companies work with the Utah Governor’s Office of Economic Opportunity to outline specific performance criteria, including capital investment and new high-paying jobs. Once the office confirms those criteria have been met, according to statute (U.C.A. 63N-2-104(c)(ii)), companies can receive a refund of up to 50% of the new state taxes they paid for up to 20 years. The contract with the state is post-performance. Utah does not provide up-front REDTIF cash incentives. The state offers a state tax credit only if the company meets its obligations.