Monday, January 18, 2016

Utah Economic Incentives Explained

There are multiple parties involved in obtaining economic incentives from the State of Utah when a business is relocating or expanding, but the most important is the Governor's Office of Economic Development (GOED). As you would expect, economic incentives are usually only granted when there is a significant economic benefit to the state. The majority of the expected benefits fall into two categories:
  1. Job creation 
  2. Capital expenditure
The state typically grants incentives in the form of post-performance tax credits. In other words, the business has to perform by creating jobs and/or spending the money and then the state rebates back a portion of the taxes associated with those activities (e.g., payroll tax, sales tax).

Salt Lake City skyline
When it comes to jobs, the average salary needs to be in excess of the average for the county in which they are located, to the tune of 10-25%. Since this is an average across all industries, it is fairly easy for a high-tech "Silicon Slopes" company to meet this requirement. For perspective, the most densely populated and highest cost location in the state is Salt Lake County and in 2014, the average salary was $47,652.

The incentives are usually granted for a period of 5-10 years, sometimes even longer, and the typical values are 20-25% of the estimated taxes to be paid, with a "not to exceed" cap. See GOED's new video for additional details. Interestingly, the state usually requires the city which most directly benefits from the economic development to also offer some type of incentive.

Another important party for economic incentives in Utah is the Economic Development Corporation of Utah (EDCUtah). They are a private, non-profit organization which partners closely with the state.

There are many examples of successful incentive awards in Utah. Following are a few recent ones:

The other category of party important in obtaining economic incentives is often a site selector. It was convenient for us to use ADP since they also manage our payroll and can easily access the data required for reporting when we claim our payroll tax incentives each year.

In summary, Utah is a business friendly state and their economic incentives program is just one of the reasons why.

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