Manufacturing plant

Reshoring? Don’t Miss Possible Tax Breaks.

February 16, 2022
By David Belpedio, Elaine Boch

The ongoing pandemic and the unpredictability of international trade has spurred a push to strengthen the US domestic supply chain, which is driving reshoring numbers higher. According to the Reshoring Initiative, reshoring and foreign direct investment (FDI) job announcements for 2021 were projected to be over 220,000 – 38% above 2020 and, by far, the highest yearly number recorded to date.

Moving operations back to the US may seem like the best option for many, but the move requires strategic planning. Possible incentives, moving costs, and the available labor pool must be considered before making final decisions on a location. 

Manufacturers can take advantage of existing federal and state tax credits and incentives. States and communities compete to lure new corporate and manufacturing facilities, creating favorable economic conditions. There is also the possibility of property tax abatements and economic development incentives which can help companies offset the costs of moving, real estate, and investments in equipment.

For example, Missouri offers many incentives programs that can make relocation attractive. A few examples are the Missouri Business Use Incentives for Large Scale Development (BUILD) program and the Missouri Works program. If a company is eligible and approved for the Missouri BUILD program, the Missouri Development Finance Board (MDFB) will issue bonds that can be used to finance public or private infrastructure to support the project or on capital improvements of the business at the project location. If a company is approved for the Missouri Works program, they will be able to retain the state withholding tax of the new jobs and/or receive state tax credits, which are refundable, transferable, and/or saleable. There is no annual limit on the retained withholding taxes, which makes overperforming an attractive option. There are many additional credits and incentives offered at the state, local, and even utility level.

A federal program that can greatly offset the cost of reshoring is the Foreign-Trade Zone (FTZ) program. An FTZ allows domestic activity involving imported items to take place prior to formal customs entry. Items that are re-exported can avoid paying duty entirely, and duty payment is deferred on items sold in the US market, thus offsetting customs advantages available to overseas producers who compete with producers located in the United States.

Kansas Governor Laura Kelly signed the Attracting Powerful Economic Expansion (APEX) bill into law on Thursday, February 10. The bill is aimed at businesses investing at least $1 billion over five years. The bill provides qualified companies with investment tax credits, reimbursement of a percentage of total payroll, reimbursement of a percentage of eligible employee training and education expenses, partial real property tax exemption, and sales tax exemption for construction costs of the qualified business facilities.

The costs of reshoring operations may seem high, but tax breaks and incentives can reduce overhead and ultimately generate savings. Incentives make a good location great, but they don’t make a bad location good, so it is vital for a company to work with location strategy and credit and incentive specialists to determine if a major relocation is the best option.

The MarksNelson team will dissect your business. We’ll run a cost analysis on aspects of the move. If your company wants to see a positive increase to its bottom line by moving operations to the US, MarksNelson can help you move forward.

David Belpedio leads the firm's Commercial Real Estate industry specialty group. He is responsible for positioning MarksNelson as the premier partner dedicated to maintaining and growing commercial property needs. David works directly with clients to identify new opportunities, negotiate incentive opportunities, and support ongoing property... >>> READ MORE

Elaine Boch Elaine Boch

Elaine Boch has been structuring Foreign-Trade Zones, ensuring they meet compliance requirements, for more than a decade. As a key member of our State and Local Tax group she also assists clients with negotiation, application, and compliance with credits and incentives.

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