Incentives in General
Every incentive will be different and will be weighed on its own merits. A company building a $10 million facility and hiring 20 people compared to a company building a $200 million facility and hiring 300 people will get different incentive packages. Not everyone who asks for an incentive will receive it. What distinguishes one Davis County community from the next is their willingness to extend the incentive and by how much. Some cities have banked their TIF financing and have a very large incentive to put on the table. Everyone has the same tools, it is just how they implement them. This is broken down by State, County and City. Other information with regards to financing and resources is listed at the end.
Utah has favorable demographics, national recognition, educated and qualified workforce, a low cost of doing business due to favorable utility and tax rates, and Utah is a right to work state. These all play favorably in Utah, however this information only deals with financial incentives.
Financial incentives are provided by the Utah Governor's Office of Economic Development for business relocation and expansion. These incentives are used to select companies that create new, high-paying jobs that help improve the standard of living, diversify the state economy, increase the tax base, attract and retain top-level management, and encourage graduates of in-state universities to remain in Utah.
Incentives may be offered as either grants or tax credits. The incentive amount and duration is decided by the Governor's Office of Economic Development Board and Executive Director based on statutory guidelines and evaluation criteria including the financial strength and historical stability of the company, the number and salary of jobs created, amount of new state tax revenue, long-term capital investment, competition with other locations, and whether the company is in a targeted industry.
All state incentives are awarded on a post-performance basis so that companies must meet specific milestones, including generation of new state tax revenue, before incentives are disbursed. This assures a positive “return on investment” to the State of Utah and its citizens.
Companies expanding or relocating in Utah may apply for incentive grants from the IAF. The IAF is a discretionary fund allocated by the state legislature to help encourage job growth in Utah. Incentives are paid on a post performance basis after jobs are created in yearly increments. Jobs must be retained over the life of the project. The length of the grant is typically five years with an incentive range of $1,000 to $3,000 per new job. Three categories or classifications:
- Urban – Creating at least 50 jobs paying 125% of the county average wage
- Corporate Headquarters – Relocating to Utah where we are competing against other states for the business
- Economic Opportunities – Relocating or expanding in Utah, ability to expend funds on employees, contractors, vendors and others proportionate to funding received. The IAF Funding ratio is 2:1 for 5 years and displays the ability to repay loan through new business growth.
A post-performance grant for the creation of high-paying jobs in the state.
It is a post performance refundable tax credit based on a percentage of “new state revenue” generated by a new project, including the payroll tax of the new employees, corporate income tax and sales tax. Incentive is based on number of new employees, wage level of new jobs (125% of county average wage), capital investment in the project, purchases from local suppliers, location of the project and type of industry. Preference is given to the states cluster centers, Aviation and Aerospace, Defense and Homeland Security, Life Sciences, Outdoor Products and Recreation, Energy and Natural Resources, Financial Services , and Composite Materials. A local incentive and creation of an Economic Development Zone at the project site are requirements of this incentive.
Maximum incentive is 30% of new state revenues over 20 years. Typical incentives range from 10% - 20% over 5 – 10 years.
Utah's vast renewable energy resources, history of innovation, and pioneering spirit position the state as a leader in the clean energy economy. This leadership, combined with aggressive incentive programs, creates an environment where business leaders can grow the renewable energy and efficiency industries.
The incentive amount and duration is determined by the Governor's Office of Economic Development Board and Executive Director based on statutory guidelines and evaluation criteria, including the financial strength of the company, the number and salary of jobs created, amount of new state tax revenue, long-term capital investment, competition with other locations, and whether the company engages in renewable energy generation related to:
The Renewable Energy Development Incentive (REDI) is a post-performance refundable tax credit for up to 100% of new state tax revenues (including, state, corporate, sales and withholding taxes) over the life of the project (typically 5-10 years).
Custom fit training provides specialized training for companies to train their employees. Funding can be used for in-house instruction or class room setting. The funding is run through the applied technology colleges and averages $250.00 per employee.
Companies doing qualified research in Utah are eligible for income tax credits of up to 6% of qualified research expenses. Qualified research expenses include: Purchase price of equipment and machinery used for conducting qualified research in Utah.
Manufacturers (SIC 2000 – 3999) are exempt from sales tax on the purchase of new equipment for Utah plant start-up. Replacement manufacturing equipment purchases are also exempt from sales tax.
Effective July 25, 2007, an approved production may receive a rebate up to 15% on Utah expenditures, with a cap of $500,000 per project and a minimum spend amount of $1 million in the state.
Industrial revenue bonds are available and issued through local government entities. Davis County has issued IRB’s before and is set up to do them. There is a $20 million cap per issue and $150 million total annual state allocation cap. Funds have to be used for construction and/or equipment, capital expenditures. They can not be used for overhead costs.
Business that collect, process, distribute, or use recycled materials in their manufacturing process can earn economic incentives by locating in these zones or by applying for a new zone. Incentives include the following:
- 5% state tax credit on machinery and equipment
- 20% state tax credit of up to $2,000 on eligible operating expenses
- Technical assistance from state recycling economic development professionals
BDF is a loan program run through the Council of Governments Inc. Ability to loan is based on the funding available at the time. Minimum amount is $50,000, highest amounts loaned was $1.2 million. This loan fund works closely with the banking and financial markets to assist in partnership loans. Quick turn around times, low origination fees and flexible terms make these loans attractive. They are full recourse loans requiring personal guarantees, collateral, and are generally used for gap financing. Funds are available for companies that are having a hard time getting traditional financing yet have first dollar revenues, are profitable and presents growth potential.
Economic Development Area (EDA) or Community Development Area (CDA) is designated areas over a geographical location that allows incentives through new tax dollar generation. EDA’s are created for development of land to generate job creation. They can not be used for residential or retail development. CDA’s undertake economic or community purposes of the city including job growth or retail sales. They can be used for residential, retail and industrial development. Each taxing entity agrees to give up a portion or all of the future taxes for a set time frame to create the incentive. Tax Increment Financing is taking new “property tax increment” over the base or current value and uses these funds as the incentive tool. Funding can go towards public infrastructure, land buy down, or to clear an area.
City council has the ability on a case by case basis to waive any or all fees associated with locating in a community. Waiving of fees is also viewed as a gesture that the city wants this business in their community. Waiving of fees needs to weigh against future taxes the business will generate back to the city.
Removing as many or all road blocks to getting a building permit. Reviewing ordinances pertaining to land use and building codes to make sure they are timely and meet the cities needs. Cities will need to have a willing staff to help developers and builders navigate the process.
Small manufacturers looking to grow and expand their businesses are prime candidates for private activity bonds. Issued through cities and counties, these tax-free bonds provide an ideal, cost effective means for acquiring manufacturing-related real estate and equipment. The federal government allocates $28 billion per year to states on a per capita basis, with Utah receiving $273,270,000 in 2009. For additional information please visit the following link: http://housing.utah.gov/pab/index.html
For companies who lack the resources to purchase equipment, or would like to improve their balance sheets and ability to borrow, equipment leasing may be an attractive option. Working through companies like CIT, GE Capital and most traditional commercial banks, equipment leasing can be done for equipment ranging in price from tens of thousands of dollars to tens of millions of dollars.
SBA loans are the most common and most successful means for which a small business can acquire capital. Working through banks that participate in the SBA loan program, companies can acquire funding for real estate, equipment and operating capital under terms that make the loans extremely attractive. For additional information please visit the following link: http://www.sba.gov/localresources/district/ut/
The Opportunity Finance industry provides capital and financial services to bridge market gaps and help mainstream financial institutions and the public sector connect to low- and moderate-income communities and customers. The Opportunity Finance industry includes more than 1,200 mission-driven Community Development Financial Institutions (CDFI’s). This industry enables lending to small- and medium-sized business in unconventional markets often overlooked by many financial institutions. Loans typically range from $50,000 to $5 million. For additional information please visit the following link: http://www.opportunityfinance.net/default.aspx
The UMLF offers a wide array of lending options to individuals looking for small amounts of capital to open their own business. The traditional micro-loan, ranging from $1,000 to $25,000, is repaid over five years at an interest rate of prime plus five percent. Over the past 15 years, the UMLF has helped secure funding for more than 570 small businesses in Utah. For additional information please visit the following link: http://www.umlf.com/
This program encourages rural lenders to finance good, quality business opportunities that support diversified economies in rural Utah areas. Working with commercial banks, the USDA provides a default guarantee of up to 80% of the loan value to help remove some of the risk undertaken by a lender. For additional information please visit the following link: http://www.rurdev.usda.gov/ut/
UTFC, a licensed Small Business Investment Company in Salt Lake City, invests in small companies throughout the region by providing subordinated debt to start-up and growing businesses. The UTFC assists a wide range of companies from manufacturing to services, but focuses primarily on information technology and provides up to $750,000 to entrepreneurial companies. For additional information please visit the following link: http://www.utfc.biz/
SSAP is the small business source for information and assistance for Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) program grants. SSAP can assist with the preparation of grant proposals. Grants are funded through the federal government and recipients may be awarded $100,000 to $1 million in funds. For additional information please visit the following link: http://www.innovationutah.com/sbir.html
The Utah Angel Investors are common angel, VC, and other investment groups in Utah. The groups stretch across Utah from Logan to St. George. Each group is comprised of accredited investors and most have been entrepreneurs themselves. If you know of other groups not listed on the growutahventures.com/utah-investors website link, please let them know at: email@example.com.
Grow Utah Ventures is directly involved in assisting a number of early stage Utah businesses in obtaining financial resources and achieving their revenue goals. Through partners and private members, Grow Utah Ventures helps a wide range of businesses transition from start-up to the early stages of business growth. This company is an integral player in the Utah Angel Network. For additional information please visit the following link: http://www.growutahventures.com/index.asp
ITDO assists companies in developing markets for their products and services in other countries. For additional information please visit the following link: http://international.utah.gov/
The Northfront Business Resource Center is dedicated to contributing to economic growth by helping small and newly formed businesses achieve their goals of growth, expansion, innovation, increased productivity, management improvement and success. The Northfront Business Resource Center is home to its Business Innovation Center, a business incubator for small and start-up companies seeking growth in Davis County. The center offers 16,000-square-feet of space where entrepreneurs operate their business while receiving infrastructure and entrepreneurial resources to accelerate business growth and create long-term business success. For additional information please visit the following link: http://www.northfront.org/
The Utah Department of Commerce is the licensing and registration agency for Utah’s professional and business community. This organization provides oversight for business registration, trademarks, Uniform Commercial Code filings, licensing, consumer protection, public utilities, real estate and mortgage lending. For additional information please visit the following link: http://www.commerce.state.ut.us/
The Utah Department of Workforce Services (DWS) provides employment and support services to help improve the economic opportunities in the state. The DWS Electronic Job Board is a qualified worker’s database that allows employers to filter applicants for those that have specific abilities, trades, educational attainment and other such criteria. The Electronic Job Board is connected to the American Job Bank, which enables open positions to be posted and viewed nationwide. DWS will also set-up in-house recruitment efforts at the business location and provide office space at various locations for conducting interviews. For additional information please visit the following link: http://jobs.utah.gov/employer/dwsdefault.asp
With nine regional centers throughout the state, the SBDC is dedicated to helping small businesses achieve their goals of successful start-up, growth, innovation, increased productivity, management improvement and success. The SBDC offers services ranging from one-on-one consulting in management, financing and marketing to assistance with marketing research and access to capital. For additional information please visit the following link: http://www.utahsbdc.org/
The USDC assists and promotes small disadvantaged, Hub-Zone, Veteran and women-owned business enterprises to become suppliers to large businesses. USDC provides training opportunities and sponsors trade fairs. For additional information please visit the following link: http://www.usdcutah.com/
The USEAC assists Utah businesses with exporting, market research, trade events, counseling and advocacy services. For additional information please visit the following link: http://www.buyusa.gov/utah/
The Zions BRC offers a broad range of services from basic business planning assistance to human resources, marketing and financial assistance to international trade and government resource assistance. For additional information please visit the following link: https://www.zionsbank.com/biz/business_resource_center.jsp?cid=3556
For additional information on financing options in Utah please visit the following link for our Business Incentives: http://www.edcutah.org/incentivesAndFinancing.php
For additional information on business resources please visit the following link for our Business Resource List: http://www.edcutah.org/documents/UtahBusinessResourcesList_040410.pdf
The Economic Development Corporation of Utah (EDCUtah) can provide relocation assistance through its diverse investor base. Please contact EDCUtah for more information: http://www.edcutah.org/contactUs.php