Written by Gregg Gothreaux
Wednesday, April 28, 2010
More often than not, business owners don’t take advantage of the tools that are out there to lessen their tax burden.
What if businesses had an opportunity to save thousands of dollars on taxes? Sound too good to be true? It’s not. With the federal and state incentives currently in place, businesses have the potential to save thousands of dollars with forethought and planning, but most are letting the opportunity slip away.
Here at LEDA, we’re proud to play a role in Lafayette’s economic growth. One way we do this is by providing businesses with information on incentive and tax credit programs that have the potential to save your business tax dollars. LEDA staff meets with more than 500 unique businesses each year, part of those visits includes a discussion of available business incentives. We also provide the most up-to-date incentive information to businesses looking to open or relocate to the area. No one likes taxes, but more often than not business owners don’t take advantage of the tools that are out there to lessen the tax burden on their business. For that reason, we try to keep areas businesses informed about the incentives that are available.
Whether a business is starting up, expanding, or relocating operations to Lafayette Parish, there is a broad range of incentives including tax abatements, tax credits and financing assistance that can be accessed. These incentives and credits were put in place to help stimulate business investment in the state and to foster growth in legacy and emerging industries, such as energy and digital media respectively. These programs also help to strengthen the backbone of our economy — entrepreneurs and small business.
Along with your tax adviser, LEDA can help you determine which incentives might be appropriate for you. For example, new businesses or expansions are a natural fit for Enterprise Zone or Quality Jobs because of the programs’ job creation requirements. Currently, the rules for Enterprise Zone and Quality Jobs are undergoing review; however, the benefits will remain the same for qualifying projects. The state’s Advance Notification form is the first step when applying for either of those programs as well as the Industrial Property Tax Exemption and Restoration Tax Abatement Programs.
Enterprise Zone and Quality Jobs
If you’re making a considerable investment in a physical structure and you might increase your employee base, we encourage you to look at the Enterprise Zone or Quality Jobs programs, as they provide for tax credits for eligible new hires as well as a 4-percent state sales tax rebate on taxable expenditures such as building materials and fixtures. In the city of Lafayette, there were approximately 2,247 commercial construction projects (new and additions & alterations) between 2005 and 2010, but only 163 advance filings for these programs.
What does this mean? Simply put, too many businesses are leaving money on the table by not doing the research and making the initial application. This is one time when planning ahead can potentially save your business thousands of dollars because any work performed prior to filling out and submitting the form cannot be counted toward the project. You don’t even have to provide exact and final numbers on the form — just estimates of investment costs, employment and payroll. Your final incentive valuation will be calculated at the designated time based on the actual project outcome.
What kind of savings can these incentive programs actually produce? With the Enterprise Zone Program, if you own a business with 20 employees and hire just two new employees, one of whom meets the program requirements, you can receive a total, one-time tax credit of $5,000, or $2,500 per new job/hire. If you’re also building an expansion and the taxable cost of your construction project, including materials used and permanent machinery and fixtures, is $500,000, you could also receive a $20,000 rebate of the 4 percent state sales tax. That’s a total $25,000 tax burden lifted. What business couldn’t use that? The catch is that you must complete the advanced notification form before construction starts or you make the first new hire.
Entertainment Industry Incentives
With The Accelerator housed at LITE gearing up, our growing film industry and momentum from last week’s FiberFête, Lafayette is working to attract and grow new and existing digital media and film production companies to the region. The state has a slate of attractive incentives in place for the entertainment industry. The incentives encourage development of a strong capital and infrastructure base locally for film, sound and digital media productions in order to achieve an independent, self-supporting industry. These incentives were recently updated to be even more competitive with neighboring states.
Louisiana offers up to a 35 percent transferable tax credit for qualifying film projects. The credits are fully transferable, and there is no limit to the amount of incentives that can be earned by a production that has a minimum investment of $300,000. The Interactive Production Incentive offers up to a 35-percent tax credit on base investment and payroll expenditures. There’s no minimum spending to qualify, and credits may be applied to Louisiana tax liability or sold on the secondary market. Finally, Incentives for Music and Sound Recording include a 25 percent rebate related to the production of a sound recording with a $15,000 minimum investment.
Incentives have the power to help turn an idea into a reality for small business owners and entrepreneurs. No matter the size and scope of the project, incentive options should be considered. For a comprehensive list of incentives that may be available for your business, visit www.lafayette.org/incentives. LEDA wants to see businesses succeed across Acadiana. One way we can do that is by continuing to inform business owners about available incentives. But it’s up to you to take that money off the table and put it in your pocket.
Gregg Gothreaux is president and chief executive officer of the Lafayette Economic Development Authority.
To take advantage of federal tax credits and incentives for producing clean energy, LEDA, UL Lafayette and other community partners last year launched the Acadiana Alternative Energy Committee to help develop a viable alternative energy industry in our region.
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