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INCENTIVES & TAXES
 
EXCISE TAX
FRANCHISE TAX
PERSONAL INCOME TAX
EMPLOYEE TRAINING GRANTS
TN JOB SKILLS
INDUSTRIAL INFRASTRUCTURE
LOCAL INCENTIVES
TVA SPONSORED INCENTIVES
TVA VPI
TVA ECONOMIC DEVELOPMENT LOAN FUND
STATE TAX INCENTIVES
EXCISE TAX
  Tax credit of $2,000 (or $4,500 in special enhancement counties) per new full-time employee:
• in businesses that meet requirements of a minimum 25 new full-time jobs and additional capital investment of $500,000 and offer a minimal health care plan.
• for new jobs in the future resulting in a net increase in jobs.

No franchise tax on:

• finished goods inventory in excess of $30 million for fiscal year beginning on July 15, 1998.
• property under construction, not being utilized by the business.
• pollution control equipment.



FRANCHISE TAX
  Tax credit of $2,000 (or $4,500 in special enhancement counties) per new full-time employee:
• in businesses that meet requirements of a minimum 25 new full-time jobs and additional capital investment of $500,000 and offer a minimal health care plan.
•for new jobs in the future resulting in a net increase in jobs.

No franchise tax on:

•finished goods inventory in excess of $30 million for fiscal year beginning on July 15, 1998.
•property under construction, not being utilized by the business.
•pollution control equipment.
Property rented from an industrial development board may be capitalized on the business books.

For companies that increase Tennessee investment while also doing business in other states, Tennessee offers double, weighted sales apportionment formula for franchise and excise taxes. (This means that property, payroll and sales are all taxed, but they are taxed in fourths, not thirds. Property and payroll have one fourth each and sales has two fourths.)


The jobs tax credit can be applied to both the franchise and excise tax. The percentage of franchise and excise tax liability offset allowed ranges from 33 1/3 percent to 100 percent for total employment in Tennessee, ranging from less than 1,000 to 5,000 or more.



PERSONAL INCOME TAX
  Consistently one of the lowest per capita taxed states in the nation.

Property Tax


No property tax on:

• goods-in-process.
• finished goods inventories in hands of manufacturers.
• inventories of merchandise for sale.
• goods-in-transit (free port).
• pollution control equipment required for compliance with federal, state or local environmental protection laws.
Attractive depreciation schedules.

Sales and Use Tax


No sales tax on:
purchases, installation and repairs of qualified industrial machinery.
• purchases of material handling and racking equipment associated with the required capital investment of $10 million by a distribution or warehouse facility.
• raw materials for processing.
• pollution control equipment of manufacturers.

Reduced sales tax for:

• manufacturers' use of energy fuel and water. Tax-exempt if used directly in the manufacturing process and separately metered.
• any materials that become a component part of the finished product.
• containers, labels and packaging materials if they are sold with or accompany the product at no additional charge.

Reduced sales tax rates for manufacturer's use of energy fuel and water.


Credit of 5.5% for sales and use taxes paid on building materials, machinery and equipment used in new or expanded regional, national or international headquarters. Requires capital investment of $50 million.


Refund taxes paid on goods and services by motion picture production companies filming or producing in Tennessee. Requires expenditures of $500,000.



INDUSTRIAL INFRASTRUCTURE PROGRAM
  Funds are allocated by the Legislature to be used by local governments for infrastructure improvements where there is a commitment by certain private sector businesses to locate/expand in the state and to create or retain jobs. Communities can use these funds to help a new Tennessee company offset some of its startup costs
.
The seller is responsible for this tax.

Activities funded under the program will be limited to:

• Water Systems
• Wastewater Systems
• Transportation Systems
• Site Improvements


Eligible businesses that may be assisted with the funds are limited to:

• Manufacturing and other types of economic activities that export more than half of their product or services outside of Tennessee.
• Businesses where more than half of their product or services enters into the production of exported products.
• Uses that primarily result in import substitution or the replacement of imported products or services with those produced in Tennessee.
• Other types of economic activities may be supported by these funds if it is determined by the Commissioner of ECD to have a beneficial impact on the economy of Tennessee.
The maximum total TIIP/ITS grant for any project in any community is $750,000. This means that the combination of training, site preparation, and all infrastructures together cannot exceed this amount.

Other Tax Credits


The Day Care Incentive

Credit against franchise and excise taxes for businesses that establish a day care center for employee's children.



LOCAL INCENTIVES PROGRAM
  PILOT (Payment In Lieu of Taxes)
The local Industrial Development Boards have the authority to waive property taxes for up to 20 years for qualified job creation projects. As a result of waiving the property taxes, the company receiving the tax incentive must make a payment in lieu of taxes to the Industrial Development Board (typically a nominal payment). Projects are reviewed on a case by case basis.

Infrastructure Assistance

Local assistance extending roadways, water, and/or sewer lines, or other utilities can be provided for job creation projects. The requests are reviewed on a case by case basis.

Industrial Revenue Bonds

Tax-exempt industrial development bonds are available for qualified manufacturing operations. The financial strength of the company at the time the bonds are taken to market will determine the rate of the bonds. There is a $10 million cap on small issue bonds; however, there are a number of categories of projects that may be exempted from this limitation. Under the IRB board's jurisdiction, taxable bonds can be issued and loaned to eligible companies to acquire land, buildings, or equipment.

Tax Increment Financing (TIF)

Tax Increment Financing (TIF) allows the cost of infrastructure and the costs of assembly, relocation, demolition and development of a site within a designated redevelopment district to be financed through future increases in property taxes generated by the development itself. As private investments add to the tax base, the increased revenues are placed in a special fund with the revenues then funneled back into the project. TIF funds can amount to a substantial reduction in overall project development costs and can make available for reinvestment approximately 10 percent of an eligible project's total development costs
.



EMPLOYEE TRAINING GRANTS
    The Tennessee Department of Economic and Community Development will provide training assistance through its Fast Track Jobs Training program. The program compliments a company’s approach to training by reimbursing the cost of qualified expenses. The State will work with a company to tailor-make a training assistance program to fit the company’s needs. The support can include travel related training, pre-employment training, formal classroom instruction, on-the-job training, and vendor-delivered instruction. State training funds must go toward the training of new full-time employees (30+ hours with benefits) that are hired by the company.


TENNESSEE JOB SKILLS PROGRAM
  Tennessee Job Skills (TJS) program is a workforce incentive grant program through the Tennessee Department of Economic and Community Development focused on enhancing employment opportunities and meeting the needs of new and existing industry. Through training, the program shall give priority to the creation and retention of high-wage jobs. Focus is on employers and industries that promote high-skill, high-wage jobs for emerging, in-demand, and high-technology manufacturing occupations.

Training is a parallel component to technological advancement. TJS is a work force incentive grant program designed to assist existing employers in elevating the skills of their employees.


TJS staff helps a company plan, develop, and implement a customized training program that meets the company's initial training needs and follow-up to ensure each phase of the training program is effective and flexible.



TVA SPONSORED INCENTIVES
 

TVA Enhanced Growth Credit Program
The Enhanced Growth Credit Program can play a vital role in the planning of new and expanding businesses, particularly for those operations in which electrical power is a major component in the cost of the final product.
A business qualifies if it belongs to one of the following SIC codes or meets the All Electric criteria and meets minimum kilowatt demand requirements.

SIC Codes

• Mining: 10-14
• Manufacturing: 20-39
• Bulk transportation: 40, 42, 44 and 45

All Electric

• All Electric HVAC system, and
• At least 50% of the interior floor space heated or cooled by the HVAC, and
• At least 50% of the electric load is for the interior lighting, cooking and the HVAC system

Minimum added load requirements

• SIC qualifies 100 kW
• All electric qualifiers 50 kW

Customers may choose one of the following options for receiving credits:

• Eight-year declining option
• The monthly credit for the first 12-consecutive-month period will be $6 per kW. The credit is applied in any month in which power usage reaches the minimum added kW requirements.
• To the monthly credit for a four-year period, beginning with the date the first credit is received, is equal to $6 kW. The credit is applied in any month in which power usage reaches the minimum added kW requirements.
Distributors may choose to offer only one or both of the above credit options.

 

TVA VPI

VPI offers several competitively priced options to SIC-qualified customers with loads of at least 5 megawatts. VPI prices are generally low because they follow TVA's hourly power supply cost of producing electricity and because VPI has an interruptible feature. If TVA does not have enough power available or cannot purchase enough power to meet the region's expected needs, VPI sales are interrupted.

VPI offers two separate programs for customers: Zero Market Days VPI is a program for customers who cannot easily reduce load during peak periods when prices are high. Market DAYSVPI is a program in which market prices for electricity replace cost-based pricing during 12 days of the year.


Customers that can dramatically reduce load during market pricing periods have an opportunity for significant overall cost savings. VPI is priced at TVA's hourly power supply cost of serving the top 1,000 MW plus a markup, except during market pricing periods under Market Days VPI. The ammount of markup varies with the type of VPI the customer selects. TVA costs can change each hour of the day, and industrial customers can make hourly decisions about how much VPI they want to buy at the available price.


The options differ by price and the way that power interruptions are handled:

VPI A may be interrupted upon five minutes' notice. A customer can contract for no more than 50 percent of total power requirements under VPI A.

VPI B may be interrupted on five minutes' notice. A customer can contract for 100 percent of their power requirements as VPI B.


VPI C is also available for up to 100 percent of a customer's power requirements but is interrupted on 60 minutes' notice.


In addition to the markups for each VPI option, there is a 5.3 percent charge for payments in lieu of taxes.


*In addition to the markups, all options include the following: additional 5.3 percent charge for payment in lieu of taxes, a $1.21 kW charge, and a $1,075 per month communication access/administration charge.

       
VPI CLASS VPI A VPI B VPI C
Amount of Notice
Amount of total power
Amount of markup*
Summer months
Winter months
Shoulder months
Market Days VPI
Amount of notice
Amount of total power
Amount of markup*
5 minutes
50%
30%+4 mills/kWh
20%+4 mills.kWh
20%+4 mills.kWh
5 minutes
50%
10%+3 mills/kWh
5%+2 mills/kWh
5%+1.5 mills/kWh
5 minutes
100%
40%+4 mills/kWh
31%+4 mills.kWh
31%+4 mills.kWh
5 minutes
100%
20%+3 mills/kWh
15%+2 mills/kWh
15%+1.5 mills/kWh
60 minutes
100%
50%+4 mills/kWh
42%+4 mills.kWh
42%+4 mills.kWh
60 minutes
100%
30%+3 mills/kWh
25%+2 mills/kWh 25%+1.5mills/kWh


TVA ECONOMIC DEVELOPMENT LOAN FUND
  Administered by the Tennessee Valley Authority (TVA)
Revolving loan program designed to stimulate investment and job creation in the TVA region
Loudon County Economic Development Agency, through a cooperative agreement with TVA, serves as the co-sponsor on loan applications
• Loans are available to new or expanding industrial companies for fixed assets such as buildings, machinery, and equipment
• Loan applications are evaluated based on project's financial viability, its local economic impact, the amount of funds leveraged, and the expected increase in power sales
• Maximum loan amount varies according to type of project, but no project can exceed $2 million
• A minimum of one job should be created or retained for every $5,000 invested by TVA
• Interest rates are below prime and are considered on a case-by-case basis
• Loan terms vary depending on project
• 10 year term for new plant, plant expansions, and plant retention loans
• 7 year term for loans secured by machinery and equipment
• 5 year term for infrastructure loans