ECONOMIC DEVELOPMENT INCENTIVES OF THE FIFTY STATES. State Tax, Workforce Development and Financial Incentives. New England Region:

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1 ECONOMIC DEVELOPMENT INCENTIVES OF THE FIFTY STATES State Tax, Workforce Development and Financial Incentives New England Region: NEW HAMPSHIRE... 2 VERMONT... 4 MAINE... 6 MASSACHUSETTS... 9 RHODE ISLAND CONNECTICUT Compiled by the New Mexico Economic Development Department New Mexico State Data Center: June 2014

2 Tax Incentives NEW HAMPSHIRE Coos County Job Creation Tax Credit This is a tax credit to businesses hiring new employees in Coos County and paying wages equal to or above 200 percent the calendar year minimum wage. The credit is $1,000 for any new, full-time, year-round jobs applied to the Business Enterprise Tax. Any unused portion of the credit can be applied to the Business Profits Tax. Research and Development Credit New Hampshire allows cities and towns to offer an exemption from residential property taxes in the amount of the assessed value of a solar energy system, wind energy system, or woodfired central heating system used on the property. A solar energy system is defined as a photovoltaic (PV) system or a system that "utilizes solar energy to heat or cool the interior of a building or to heat water for use in a building" and that includes one or more collectors and a storage container. Stoves and fireplaces do not qualify. Cities and towns may adopt an exemption provision separately for each energy source. Commercial & Industrial Solar Rebate Program This rebate is offered to technologies including solar heat. Commercial Industrial, nonprofit, schools, local and state government, multi-family residential, and agriculture institutional are all sectors that can apply for it. The credit is equal to the lesser of 25% of the total cost or $50,000. Renewable Energy Incentives Renewable Energy Property Tax Exemption permits cities and towns to offer exemptions from local property taxes for certain renewable energy installations. These include solar systems (thermal and photovoltaic), wind turbines, and central wood-fired heating systems. Woodstoves and fireplaces are not included. The goal of the exemption is to create a tax neutral policy within a municipality that neither increases an individual's property tax, nor decreases the municipality's property tax revenues. By implementing it as a tax neutral policy, homeowners do not have a disincentive of higher property taxes for installing a renewable energy system, and since there is no net reduction in municipal tax revenues, other taxpayers in a municipality are not affected. CDFA Tax Credit Program Under the tax credit program, tax credits are awarded annually to nonprofit community, housing, and economic development projects based on a competititve application process. New

3 Hampshire businesses can then receive a tax credit for donations made to these organization of cash, securities or property. The credit is equal to 75% of the contribution amount, and may be taken against the Business Profits Tax, Business enterprise Tax, and Insurance Premiums Tax. The maximum credit that can be taken by a single taxpayer in one year is $1 million, and any unused credit can be carried forward for up to five years. Economic Revitalization Zone Tax Credit (ERZ) The ERZ tax credit program was established to encourage businesses to add to the infrastructure and create new jobs in certain areas of the state. To qualify as an ERZ, the location must meet certain demographic criteria and the municipality must apply for the designation. Calculation of the ERZ credit is somewhat complex, and is based on the capital investment made by the business, the number of new jobs created, and the salary level of the jobs created. The credit must not exceed $200,000 in total for a project and the maximum credit that may be used by a taxpayer in a single year is $40,000. Any unused credit may be carried forward for up to five years. Research & Development Tax Credit New Hampshire s R&D Tax Credit is available to businesses that have qualified manufactuing research and development expenditures. This consists of wages paid for services rendered in New Hampshire which qualify and are reported by the business on its federal tax return as a component of the federal R&D credit calculation. The credit cannot exceed $50,000 per taxpayer, per year. Any remaining credit can be carried forward to the succeeding five years. Source:

4 Tax Incentives VERMONT Research and Development Tax Credit Vermont companies that make eligible research and development expenditures in Vermont can claim a tax credit equal to 30% of the federal tax credit allowed in the taxable year. Eligible research and development investments are the same as those defined by the federal R&D tax credit. If the tax credit cannot be applied in the year earned, the taxpayer can carry forward the credit for up to 10 years. Work Opportunity Tax Credit (WOTC) The WOTC program offers federal tax credits to employers as an incentive to hire people in several specific target groups. WOTC helps both employers and targeted job seekers. Employers save as tax credits help defray payroll expenses. Job seekers qualifying as a member of one of the targeted groups gain an advantage in the job market. Percentage of Federal Investment Tax Credit Vermont provides tax credits for energy, qualifying advanced coal, gasification, and advanced energy projects. Cred is equal to 24% of the investment tax credit attributable to the Vermontproperty portion of the investment. Financial Assistance Incentives Economic Development Incentive Program (EDIP) This program offers incentive electrical rates for new or expanding industries that meet the eligibility criteria as outlined in the program. Economic Development Incentive Program (EDIP) credits will be available to customers who make complete application to the company for acceptance in the program and who meet all of the availability, applicability and eligibility criteria, as determined by the company. Credits are applicable to load determined to be eligible by the company. Vermont Seed Capital Fund This fund s purpose is to increase the amount of investment capital available to new Vermont firms or to existing Vermont firms for the purpose of expansion. The first $5 million of capitalization must have been contributed by taxpayers on or before January 1, Credits can be carried forward for up to four years and is nontransferable. Workforce Development Incentives Vermont Employment Growth Incentive (VEGI) VEGI's purpose is to encourage job creation in Vermont by a Vermont company, a Vermont

5 division of a company that plans to grow and expand in Vermont, a company considering locating a new business or division in state, or Vermont start-up business activity. Vermont also offers an enhancement to the VEGI program, called Green VEGI for projects that will create jobs in certain environmental technology sectors. One of the eligible sectors is clean" energy, including solar, wind, wave, hydro, geothermal, hydrogen, fuel cells etc. If the project in Vermont for which incentives are sought is primarily in the research, design, engineering, development, or manufacturing of fuel cells for energy efficient applications, the project could be eligible for this enhancement, which can increase the level of incentives by 20-25%. Vermont Training Program The Vermont Training Program promotes industrial expansion and encourages the creation and retention of jobs by providing training for new and existing businesses. Individually designed programs may include on-the-job; classroom; skill upgrade; or other specialized training which are mutually agreed upon between the State and employer. The program enables the Vermont workforce to develop the skills needed by Vermont s many diversified employers. The Workforce Employment Training Fund (WETF) A state funded program that can offset the cost of workforce training for Vermont employers'. This program also helps the Vermont workforce develop the skills needed to meet employers needs in different sectors. Source:

6 MAINE Tax Incentives Business Equipment Tax Exemption (BETE) This program eliminates the personal property tax on eligible business equipment that is first subject to assessment on or after April 1, BETE helps businesses avoid paying assessed taxes up front, rather than waiting and filing for a reimbursement, with no time limit to the exemption. The Business Equipment Tax Reimbursement (BETR) This program is for equipment and property acquired between April 1, 1995 and March 31, The reimbursement rate is 100% for the first twelve years and falls incrementally to 50% at year 18 and all subsequent years. This program is no longer in effect for new property and equipment acquired. Research Expense Tax Credit The credit is based on a percentage of the federal Credit for Increasing Research Activities. Limitations: the credit is limited to 5% of the excess qualified research expenses over the previous three-year average plus 7.5% of the basic research payments. The credit is further limited to 100% of the first $25,000 in tax liability plus 75% of the tax liability in excess of $25,000. The credit cannot be carried back, but can be carried forward for up to 15 years. Super Research and Development Credit The credit is based on qualified research payments exceeding 150% of the average for the three-year period prior to the effective date of the credit. Limitations: the credit is limited to 50% of the tax otherwise due after all other credits. Further, the credit cannot reduce tax liability below the amount due the previous year after credits. The credit cannot be carried back, but can be carried forward for up to five years. High-Technology Investment Tax Credit The credit is based on the adjusted basis of eligible equipment. Limitations: the credit is based on the adjusted basis of eligible equipment and is limited to high-tech equipment purchased (or leased) by businesses engaged primarily in high-tech activities. The credit cannot reduce tax to an amount below the previous year s tax after credits. The credit cannot be carried back, but can be carried forward for up to five years. Sales Tax Exemptions Maine state sales tax exemptions are available for manufacturing, R&D, custom computer programming, fuel & electricity, and biotechnology.

7 Financial Assistance Incentives Maine Community Development Block Grant (CDBG) All units of general local government in Maine are eligible to apply for and receive State CDBG program funds. County governments may apply on behalf of the Unorganized Territory. Groups of local governments may apply for multi-jurisdictional or joint projects. Multi-jurisdictional applications require designation of one local government as the lead applicant and consent for that designation by each participating local government. All CDBG funded activities must meet one of three National Objectives of the program. These objectives are: Benefit to low and moderate income persons; Prevention and elimination of slum and blight conditions; and Meeting community development needs having a particular urgency. Municipal Tax Increment Financing (TIF) Tax Increment Financing is a flexible finance tool used by municipalities, towns, plantations, and the Unorganized Territory to leverage new property taxes generated by a specific project or projects within a defined geographic district. Any portion of the new taxes may be used to finance public or private projects for a defined period of time up to 30 years. The Program is locally-driven: the municipality, town, or city defines the district and chooses how much of the new taxes will go to what public and private projects over what period of time, with the whole package requiring local political approval. Employment Tax Increment Financing Employment Tax Increment Financing (ETIF) is a state program that helps new and established Maine businesses to hire new employees by refunding from 30-80% of the state withholding taxes paid by the business for up to 10 years. The reimbursement rate rises with the level of local unemployment, with those in Pine Tree Development Zones receiving the highest rate. Businesses must plan on hiring five or more new employees over the next two years. The wages for these jobs must be higher than the average for the county. Manufacturing Sales of machinery and equipment used by the purchaser directly and primarily in the production of tangible personal property for later sale or use is eligible for a sales tax exemption. In addition, items consumed or destroyed directly or primarily in production, and repair and replacement parts for qualified production equipment are exempt from sales tax. Also, any manufacturer is exempt from paying 95% of the sales tax on fuel and/or electricity used in the manufacturing facility.

8 Research and Development Sales of machinery and equipment used by the purchaser directly and exclusively in research and development is eligible for a sales tax exemption. Custom Computer Programming Any custom computer programming purchased by a business is exempt from sales tax. If a standard program is purchased, then customized, the cost of the standard program would be taxable and the customizing, if separately stated, would be nontaxable. Fuel & Electricity for Use in Manufacturing Manufacturers are exempt from paying 95% of the sales tax on fuel and/or electricity used in the manufacturing operation. Biotechnology Sales of machinery, equipment, instruments and supplies used by the purchaser directly and primarily in a biotechnology application are eligible for a sales tax exemption. Pine Tree Development Zones The Pine Tree Development Zone (PTDZ) program offers eligible businesses the chance to greatly reduce or virtually eliminate state taxes for up to 10 years when they create new, quality jobs in certain business sectors or move existing jobs in those sectors to Maine. Eligible sectors are: Biotechnology Aquaculture and Marine Technology Composite Materials Technology Environmental Technology Advanced Technologies for Forestry and Agriculture Manufacturing and Precision Manufacturing Information Technology Financial Services A new, quality job is defined as one that: Meets the income requirements for the current year, which must exceed the per capita personal income for that Access to group health insurance with an employer contribution encouraged but not required Includes access to group retirement benefits with an employer contribution encouraged but not required Source:

9 Tax Incentives MASSACHUSETTS The Economic Development Incentive Program (EDIP) The Economic Development Incentive Program (EDIP) is a tax incentive program designed to foster full-time job creation and stimulate business growth throughout the Commonwealth. Participating companies may receive state and local tax incentives in exchange for full-time job creation, manufacturing job retention, and private investment commitments. There are three categories of projects that can qualify for companies that generate substantial sales outside of the Commonwealth and are seeking the EDIP Investment Tax Credit (ITC): fulltime job creation and investment projects within Economic Target Areas, projects with exceptional employment growth across the Commonwealth and finally, projects within gateway communities that sustain and grow manufacturing jobs. Manufacturing Retention Project (MRP): The EACC may certify Manufacturing Retention Projects (MRP) that will retain at least 50 and / or create at least 25 full-time, permanent manufacturing jobs in a gateway community. The project must receive municipal approval of the MRP prior to being considered by the EACC and may also seek local tax incentives from the city or town. The Job Creation Incentive Program Qualifying biotechnology and medical device manufacturing companies are eligible to receive incentive payments for new job creation. Massachusetts already has a leading concentration of biotechnology and medical device manufacturers located within its boundaries. Eligibility: The jobs incentive payment for newly created manufacturing jobs is available to corporations engaged primarily in the research, development, production or provision of biotechnology, or manufacturers engaged in the production of products for a medical device manufacturing business primarily engaged in manufacturing medical or surgical instruments, surgical appliances or supplies, or electromedical devices. A qualifying biotechnology or medical device manufacturing company that creates 10 or more eligible jobs in the Commonwealth during a single calendar year shall be entitled to an incentive payment equal to 50% of the eligible jobs salary multiplied by the applicable Massachusetts income tax rate of the newly hired persons. The Research & Development Tax Credit Massachusetts offers a tax credit for research and development investment for both

10 manufacturers and R&D companies. This tax credit was designed to reduce obstacles to R&D investment and spur growth and innovation. The Massachusetts R&D Tax Credit is divided into two categories: The first credit category is designed for Qualified Expenses which are defined as any research expense incurred which would qualify for the Federal R&D tax credit. This credit is computed at 10%. The second credit is available to Basic Research Payments and is computed at 15%. This credit is available for any costs related to donations and contributions made to research organizations such as hospitals and universities. Benefits: Massachusetts credit is permanent, while other states have temporary credits The R&D tax credit can be taken in conjunction with the state s Investment Tax Credit of 3% (or 5% as part of the Economic Development Incentive Program). Unlike some of the other credits, the R&D tax credit may reduce the corporation s tax to the minimum tax of $456. The Investment Tax Credit The Massachusetts Investment Tax Credit (ITC) offers a 3% credit for qualifying businesses against their Massachusetts corporate excise tax. The credit is to be used for the purchase and lease of qualified tangible property used in the course of business operations. This credit is available to manufacturers, certain research and development corporations and corporations engaged primarily in agriculture or commercial fishing. Single Sales Factor Massachusetts offers an attractive tax environment for businesses. In particular, the Single Sales Factor reduces the tax burden for manufacturers and other qualifying companies. Manufacturing companies, qualifying defense contractors, and qualifying financial services providers, who have multi-state tax filings, are eligible for single sales factor Massachusetts income tax apportionment. Sales & Use Tax Exemption Massachusetts exempts manufacturing equipment and R&D equipment from sales and use tax.

11 The companies that are eligible will receive a 5% sales tax exemption if their purchase of equipment is primarily for use in R&D and/or manufacturing in Massachusetts, regardless of where the equipment was purchased. 100% Personal Property Tax Exemption Companies that are classified as manufacturing corporations are exempt from paying local personal property tax on tangible, depreciable assets. Company must provide documentation to the local municipality establishing that it is a manufacturing corporation to avoid assessment of personal property tax liability. Financial Assistance Incentives MassDevelopment (MDFA) MassDevelopment provides real estate and equipment financing at low interest rates through direct loans or through its Emerging Technology Fund. Direct loan caps are $3 million for real estate and $500,000 for equipment. ETF cap for real estate or equipment is $2.5 million or 25% of total project cost. MDFA also provides tax exempt bond financing to manufacturers to be used for the purchase, construction, or renovation of facilities to be used for the purchase, construction, or renovation of facilities. The tax exempt bond financing means lower interest rate and longer term while the ETF provides capital access to emerging technology companies at below market interest rates through a simple and fast application and approval process. Eligibility: Be ready to grow in Massachusetts. Be engaged primarily in the biotechnology, medical devices, telecommunications, advanced materials, electronics, environmental or other emerging technology based industry. Have at least two at-risk parties, in addition to MassDevelopment. Have a strong management team. Be able to demonstrate technical feasibility, market demand for your end products and a feasible loan repayment plan. You must be a manufacturer that is making an investment in a capital project in Massachusetts that is in the public interest. Workforce Development Incentives Safety Training Grants In an effort to prevent worker injuries and help employers lower worker s compensation costs, the Commonwealth administers a safety training grant program. $800,000 in grant funding is

12 awarded each fiscal year to various organizations throughout the state. Grants help fund a wide array of safety training programs selected by the company that improve workplace safety, including ergonomics, hazardous material handling and proper heavy lifting techniques to name a few. Any company, regardless of size, may receive one grant per fiscal year. Applicant companies, consulting staff and those receiving training must be covered by Massachusetts Worker s Compensation. One-Stop Career Centers For employers seeking a skilled, motivated and adaptable workforce to meet current or emerging labor needs. All employers in the Commonwealth can access services through One- Stop Career Centers. There are a number of services for employers, including the ability to list job openings, help in planning a job fair, prescreen and refer potential job applicants, resources to help train, maintain and grow workforces, and provide research on the Commonwealth s labor market. Infrastructure Financing Soultions Community Development Action Grant (CDAG) The Community Development Action Grant (CDAG) Program is authorized to fund community development projects to revitalize and redevelop decadent, substandard and blighted open areas for public benefit, in the public interest, and for a public purpose consistent with the sound needs of communities. Any Massachusetts city or town, or under special circumstances two or more communities working together to address regional economic development needs, may submit an application. Public Works Economic Development Grant (PWED) The PWED program was created by the legislature to assist municipalities in funding transportation infrastructure that will stimulate economic development. Any Massachusetts city or town, or under special circumstances two or more communities working together to address regional economic development needs, may submit an application. Grants can be up to a maximum of $2 million per municipality per project. The District Improvement Financing Program (DIF) The District Improvement Financing Program (DIF) is a public financing alternative available to all cities and towns in the Commonwealth. The DIF enables municipalities to fund public works,

13 infrastructure, and development projects by allocating future, incremental tax revenues collected from a predefined district to pay project costs. DIF is locally driven and must be approved by the municipality and the state s Economic Assistance Coordinating Council (EACC). The municipality must define the district and document a development program describing, among other things, how the DIF will encourage increased residential, commercial and industrial activity within the district. It must also detail the project improvements, financing plans, and community benefits. After the local public hearings and approvals, the municipality must submit an application to the EACC for final approval prior to implementing the program. Source:

14 Tax Incentives RHODE ISLAND Motion Picture Production Tax Credit The State of Rhode Island provides a transferable 25% tax credit against the corporate or personal income tax for all certified costs (including salaries) associated with Rhode Island primary locations of feature-length film, video, video games, television series, or commercial. There are no caps on the amount of certified costs that are eligible for the credit. A primary location means the locations within which at least 51% of the motion picture principal photography days are filmed. Unused credits can be carried forward for up to three years. The film/tv commercial/video game production must be filmed primarily in the state of Rhode Island and have a minimum budget of $300,000. International Investment Management Fee Income Tax Exemption Companies with at least 500 employees in Rhode Island will not be taxed on fee income derived from international investment management services rendered to investors not domiciled in the United States. These services include investment advice, investment research, investment consulting, portfolio management, administration or distribution services rendered to or on behalf of non-u.s. persons and non-u.s. investment funds. Job Training Tax Credit Rhode Island grants a credit against the corporate income tax (or the insurance premium tax) equal to 50% of eligible training expenditures for new or existing employees, in accordance with an approved training plan. Employees must be full-time, and after training, the employee must earn at least 150% of the Rhode Island minimum wage. Training plans must be filed with the Governor s Workforce Board Rhode Island for prior written approval. The credit is capped at $5,000 per employee over a three-year period. Adult Education Tax Credit The Rhode Island Adult Education Tax Credit allows for a tax credit of 50% of the direct costs for worksite and non-worksite-based vocational training or basic education, up to a maximum of $300 per employee. The maximum overall credit is $5,000 per employer per calendar year. The employee must remain employed by the business for 13 consecutive weeks and a minimum of 455 hours of paid employment before the credit can be claimed. Excess credits cannot be carried forward. Employer's Apprenticeship Tax Credit Employers of registered full-time apprentices in the metal and plastic industries are eligible for an annual corporate tax credit of 50% of the actual wages paid to the qualifying apprentice, or

15 $4,800, whichever is less. The number of apprenticeships for which tax credit is allowed must exceed the average number of apprenticeships begun during the five preceding income years. The following trades are eligible: machinist, toolmaker, model-maker, gage maker, patternmaker, plastic process technician, tool & machine setter, diesinker, mold-maker, tool & die maker, machine tool repair. Educational Assistance and Development Credit Rhode Island is allowed a tax credit of 8% for the amount above $10,000. The contribution, which can include qualified tangible personal property, must be for the establishment or maintenance of a faculty chair, department, work fellowship, or program of scientific research or education. The 8% tax credit is applied against the Corporate Income tax, the Bank Excise tax, or the Insurance Companies tax. Unused credits may be carried forward up to five years. Manufacturing Investment Tax Credit A manufacturer is allowed a 4% tax credit against the Rhode Island corporate income tax on buildings and structural components, as well as machinery and equipment, which are owned or leased and are principally used in the production process (including storage). Property principally used for administration and distribution purposes is not eligible. The investment tax credit may not reduce the taxpayer is liability below the minimum business tax. Unused credits may be carried forward for up to seven years. High Performance Manufacturing Investment Tax Credit High-performance manufacturers are allowed a 10% investment tax credit against their corporate tax on the cost or qualified lease amounts for tangible personal property or other tangible property, as well as buildings and structural components owned, leased to own, or leased for at least 20 years. Under current law, credits are transferable between related entities. Unused credits may be carried forward up to 15 years for biotechnology firms and up to seven years for other types of manufacturers. Innovation Tax Credit Rhode Island offers a tax credit to encourage investment in high-growth, high-wage innovation industries. The Rhode Island Innovation Tax Credit offers investors up to a 50% credit on eligible investments, with a maximum tax credit of $100,000. This tax credit cannot be taken against a taxpayer s personal income tax. Eligibility: Company must produce traded goods or services Annual gross revenues of less than $1 million in the prior two calendar years Business categorized as one of the following innovation industries: o Biotechnology and Life Sciences

16 o Communication and Information Technology o Financial Services o Marine and Defense Manufacturing o Professional, Technical and Educational Services o Industrial and Consumer Product Manufacturing and Design The credit may be carried forward for up to three years. Income Tax Reduction on Performance-Based Income The Jobs Growth Act allows eligible businesses in any industry to offer their employees an exclusion of 50% of performance-based compensation from their Rhode Island gross income. In return, the company pays a 5% tax each year on the performance-based income paid that year. An application for certification would be filed with the Rhode Island Economic Development Corporation. In order to qualify, a company must hire 100 new employees in the state and add at least $10 million to its state payroll. Those new workers must earn at least 125% of the state is average annual compensation. Employees must be hired or relocated after June 1, 2005 and cannot have been previously employed by the company. The tax cut applies only to bonus or incentive income, not base salary. Research & Development Property Credit A corporation is allowed a 10% tax credit for expenditures paid or incurred for the construction, reconstruction or acquisition of any property which is principally used or to be used for research and development in the experimental or laboratory sense. Leased property is not eligible. The property must be depreciable and have a useful life of 3 years or more. Unused credit may be carried forward for up to seven years. Jobs Development Act: Corporate Income Tax Reduction for Job Creation The Jobs Development Act (RIGL ) provides an incremental reduction in the corporate income tax rate (currently 9%) to companies that create new employment in Rhode Island over a three-year period. The reduction equals: A quarter percentage point (0.25%) for every 10 new jobs created, for those companies having a baseline employment below 100; or A quarter percentage point (0.25%) for every 50 new jobs created, for those companies having a baseline employment above 100.

17 The corporate income tax may be reduced to as low as 3%. The rate reduction is permanent as long as the company maintains the same level of employment that it had at the end of the third year following the company is self-selected base period. New employees must be paid at least 250% of the state minimum wage. Financial Assistance Incentives Protected Cell Companies The protected cell act facilitates insurance securitization transactions and rent-a-captive formation through its protected cell structure. These features are available to domestic insurance companies, domestic reinsurance companies, and domestic captive insurance companies. Foreign Trade Zone 105 The following is a partial list of benefits when using Foreign-Trade Zones or Foreign-Trade Subzone: Duty Exemption on Re-Exports: If merchandise is re-exported after being placed in a FTZ or shipped to another FTZ and then re-exported, no customs duty is ever paid. If the merchandise is sold domestically, no duty is paid until it leaves the zone or zones. Duty Elimination on Manufacture, Re-Packaging, Waste and Scrap: Merchandise in a foreign trade zone may be stored, repackaged, manipulated, manufactured, destroyed or otherwise altered or changed. No duty is charged on most waste and scrap from production in Foreign- Trade Zones. Relief from Inverted Tariffs: Generally, if foreign merchandise is brought into a Foreign-Trade Zone or Subzone and manufactured into a product that carries a lower duty rate, then the lower rate applies. Elective Deduction for Research & Development Facilities In lieu of depreciation or the investment tax credit, a corporation is allowed a one year writeoff for expenditures paid or incurred during the taxable year for the construction, reconstruction or acquisition of all qualifying depreciable tangible property, including buildings, which is used or to be used for the purpose of research and development in the experimental or laboratory sense. The deduction is allowed under the corporate income tax. Manufacturing Fuels & Raw Materials Sales of tangible personal property, computer software, and public utility services are exempt from sales tax when the property or service becomes a component part of a manufactured

18 product for resale, or when the property or service is used in the process of manufacturing or processing products for resale. Manufacturing Machinery & Equipment Sales, storage, use, or other consumption of tools, dies, and molds, and machinery and equipment (including replacement parts), and related items to the extent used in an industrial plant in connection with the actual manufacture, conversion, or processing of tangible personal property are exempt from sales tax. Business Income Apportionment for Manufacturers Affiliated multi-state corporations may file single, separate Rhode Island corporate tax returns or file a consolidated return. In either case, the corporate net income/net worth is subject to Rhode Island apportionment using the average of a three-factor formula (property, receipts, and payroll). For tax years beginning on or after January 1, 2005, the alternate apportionment formula allows for a 25% property factor, a 25% payroll factor and a 50% receipts factor. Small Business Credit Incentives Small Business Capital Investment Tax Incentives Small business entities or venture capital partnerships that are certified by the Rhode Island Economic Development Corporation may be eligible for two types of special incentives: Deductions or Modifications: The deduction or modification is equal to the taxpayer's qualifying investment in a certified venture capital partnership or equal to the entrepreneur's investment in a qualifying business entity. Restrictions prohibit the deduction of modification from reducing the business corporation tax, public service corporation tax or bank excise tax to less than the minimum tax. Gross premiums tax may not be reduced to less than $0. The amount of unused deductions or modifications may not be carried over to following years. Capital Gains Exclusion: The calculation of the business corporation tax, public service corporation tax or bank excise tax may exclude long term capital gains from sale or exchange of an interest in a qualifying business entity or certified venture capital partnership if it is: recognized by a partner in a certified venture capital partnership from the sale or exchange of an interest in the partnership a partner's distributive share (from a certified venture capital partnership) of a long term capital gain recognized by the partnership from the sale or exchange of an interest in a qualifying business entity

19 recognized by an entrepreneur from the sale or exchange of an interest in a qualifying business entity. Taxpayers must provide proof of the date and amount of the investment in the qualifying business entity or certified venture capital partnership. Disabled Access Credit for Small Business A tax credit of up to $1,000 is available to small businesses that incur expenses in complying with federal or state laws protecting the rights of persons with disabilities. The credit is equal to 10% of the total amount expended up for removing architectural, communication, physical, or transportation barriers; providing qualified interpreters or other effective methods of delivering aurally delivered materials to persons with hearing impairments; providing readers, tapes, or other effective means of making visually delivered materials available to persons with visual impairments; providing job coaches or other effective means of supporting workers with sever impairments in competitive employment; providing specialized transportation services to employees or customers with mobility impairments; buying or modifying equipment for persons with disabilities; and providing similar services, modifications, material or equipment for persons with disabilities. A "small business" is one that, for the preceding year, had 30 or fewer full-time employees, or had $1 million or less in gross receipts. Enterprise Zone Business Tax Credit Firms that locate in a state-designed enterprise zone and increase employment at registered enterprise zone locations by at least 5% annually may be eligible for a state business tax credit equal to 75% of the total wages paid to employees living in an enterprise zone or 50% of wages paid to workers not living in an enterprise zone. The maximum credit is $5,000 per enterprise zone resident employees and $2,500 for other enterprise zone employees. All new hires must be Rhode Island residents and the jobs must be classified as full-time. Earned but unused enterprise zone credits may be carried forward for up to three years. Workforce Development Incentives Hiring of Unemployed or Low-Income Residents A tax credit of 40% of a newly-hired employee's first year wages (up to a maximum of $2,400) is allowed for businesses that employ and retain Rhode Island residents who were previously unemployed or receiving public assistance. The business must seek certification of the employee's unemployment status from the Department of Labor and Training within 30 days of hire. Employee Eligibility:

20 Have been a Rhode Island resident for at least one year prior to the date of hire Previously unemployed for a period of at least 26 calendar weeks immediately prior to the date of hire Received public assistance during the prior year Source:

21 Tax Incentives CONNECTICUT Urban and Industrial Sites Reinvestment Tax Credit Program This program was designed to drive investment to the state s urban centers and other economically distressed communities. The state may provide up to $100 million in tax credits over a ten-year period to support projects that create significant jobs and capital investment in these underserved areas. Total expenditures for the program are capped at $500 million. The amount of credits offered is based on the department s extensive due diligence process, which includes a comprehensive financial review and an impact analysis using the REMI econometric model. The commissioner must submit any requests for credits over $20 million to the legislature for their review. If approved for credits, a company cannot begin to take advantage of them until the fourth year of the project. Any project using these credits must be, at a minimum, revenue neutral to the state and that the law provides strict audit, compliance and penalty provisions that are strictly adhered to throughout the life of the project. Direct investments must be made in a minimum amount of $5 million or, in the case of an investment in an eligible project for the preservation of an historic facility and redevelopment of the facility for mixed uses that includes at least four housing units, a total asset value of not less than $2 million dollars. Investments can be made either directly by the taxpayer or indirectly through an investment fund. The investment fund must have a minimum asset value of $60 million. The fund must have been established for the specific purpose of making investments under this program and must be managed by a certified Program Fund Manager. Insurance Reinvestment Tax Credit Program This program provides a 100% insurance premiums tax credit to insurance companies that invest with approved fund managers who will provide financing to eligible Connecticut businesses, including 25% committed to green technology. Real & Personal Property Tax Exemption Tax exemptions are available businesses with newly acquired and installed machinery and equipment, real property improvements, unbundled software, and commercial motor vehicles.

22 Digital Media & Motion Picture Tax Credit This program awards tax credits for the production of digital media and motion pictures in Connecticut. The minimum expenditure is $100,000 and makes the credit amount dependent on the production's total expenses or costs. Production companies incurring production expenses or costs between $100,000 and $500,000 are eligible for a 10% credit, between $500,000 and $1 million are eligible for a 15% credit, and over $1 million continue to be eligible for a 30% credit. A qualified production means the process of producing any type of entertainment content. Entertainment content is defined to include motion pictures, documentaries, television series, music videos, commercials, mini-series, video games and other productions listed in the statute, which are created primarily for distribution or exhibition to the general public. Eligible costs include the preproduction, production or postproduction costs of a qualified production, including expenditures in the form of either compensation or purchases including production work, production equipment, production software, postproduction work, postproduction equipment, set design, set construction, props, lighting, wardrobe and other costs or services directly incurred in the state in connection with a qualified production. A production company is required to conduct at least 50% of its principal photography days in the state to be eligible and no out-of-state expenses will be eligible. Any tax credit not used in the income year in which final certification is made may be carried forward for, or in, the three immediately succeeding income years. The tax credits are nonrefundable. Corporate Business Tax Exemptions The following qualify for corporate business tax exemptions: All insurance companies, Connecticut incorporated and non-connecticut incorporated Corporate income, insurance premium and sales and use taxes for certain banks, insurers and investment companies locating in the Hartford Financial Service Export Zone that conduct all business with non-u.s. persons Capital gains from the sale of protected open space or Class I or II water company land to the state or certain entities Non-U.S. corporations of which their sole activities in Connecticut are trading stocks, securities or commodities of their own account. Real & Personal Property Tax Exemptions Tax exemptions of up to 100% for 5 years can be awarded based on on newly acquired and

23 installed manufacturing machinery and equipment eligible for 5-7 year depreciation % for eligible real property improvements can be offered by towns for 2-7 years, depending on the investment amount; 100% for 5 years on new commercial motor vehicles weighing over 26,000 jobs. Sales and Use Tax Exemption Sales and use tax relief exists on the purchase of tangible personal property for qualifying retention and expansion projects or projects that significantly contribute to a targeted industry cluster. The minimum investment in eligible property must equal $5 million and a total award must not exceed $10,000 per new job created and $2,000 for each retained position. Renewable Energy Sales and Use Tax Exemption A sales and use tax exemption on machinery, equipment, tools, materials, supplies and fuel used directly in the renewable energy and clean energy technology industries. Renewable energy and clean energy technology industries mean industries that apply technologies to produce, improve or develop solar energy electricity generating systems, passive or active solar water or space heating systems, geothermal resource systems and wind power electric generation systems, including equipment related to such systems. Small Business Credit Incentives Urban and Industrial Site Reinvestment Tax Credit Corporate tax credits of up to 100% for an investment up to a maximum of $100 million in an urban area or an industrial project are available. The minimum investment is $5 million in distressed communities and $50 million in all other communities. Film Production & Digital Media Tax Credit A tax credit equal to 30% of qualified digital media and motion picture production can be awarded with this program. Pre-production and post-production expenses in the state that exceed $50,000 can qualify. Job Expansion Tax Credit (JET) Connecticut businesses can be eligible for tax credits of $500 per month for each new full-time job created. If the new employee is receiving vocational rehabilitative services from the Bureau of Rehabilitative Services, receiving unemployment benefits, or is a veteran employee who, at the time of hiring by the taxpayer, is a member of, was honorably discharged from or released under honorable conditions from active service in the armed forces, then the tax credit is increased to $900 per month. Research and Development Tax Credits A tax credit equal to 20% of the R&D expenditures in Connecticut in the current income year

24 exceeding R&D expenditures of the prior taxable year can be awarded. Unused R&D credits can be carried forward and, for companies with gross income of $70 million or less, can be sold to the state for 65% of their value. Fixed Capital Tax Credit A 5% tax credit for fixed capital investment in tangible personal property or a 5% tax credit for investments in human capital (employee training, childcare, facilities and subsidies and donation to higher education for advancement of technology) is available for small businesses to apply for. Machinery and Equipment Tax Credit A 10% tax credit exists for increased investment in machinery and equipment for companies with 250 or fewer full-time permanent employees in Connecticut. Financial Services Tax Credit Financial institutions constructing new facilities and adding new employees can receive a credit of as much as 50% of the tax for up to 10 years and may be extended for an additional 5 years based on size of the facility and level of employment. Angel Investor Tax Credit This is a tax credit for angel investors with a cash investment of $25,000 or more in a qualified Connecticut business. The credit shall be equal to 25% of the investor s cash investment. Total tax credits allowed shall not exceed $250,000 for any angel investor. Manufacturing Reinvestment Account (MRA) Program The MRA Program is helping Connecticut-based manufacturers invest in their companies. Manufacturers with 50 or fewer employees are allowed to deposit up to $100,000 annually, or 100% of their domestic gross receipts, whichever is less, on a corporation tax-deferred basis for up to five years. Funds in the account are to be used for worker training or the purchase of machinery, equipment, or manufacturing facilities. Upon withdrawal, a 3.5% tax rate is assessed, regardless of a company's corporate or business structure. Any balance remaining after five years is taxed at the full rate. Economic Development Zone Programs Enterprise Zone Qualifying corporations established within an enterprise zone can receive a 5-year, 80% real

25 and personal property tax abatement and a 10-year, 25% up to 50% corporate business tax credit. There are a total of 17 municipalities with a designated enterprise zone. Bradley Development Zone Enterprise Zone level benefits in designated areas in the towns of Windsor, Windsor Locks, East Granby and Suffield. Source: