For businesses relocating or expanding into new markets, taxation is now one of the top 10 site selection factors that determine where companies decide to set up shop, especially in high-cost states like California, Massachusetts, New York and Illinois.

With great disparity among corporate tax rates and more states and cities turning to the business sector to raise revenue, it’s not surprising that long-term tax savings are becoming the final deciding factor between competing sites.

Historically, companies have favored lower property and sales and use taxes, but businesses today are finding tax abatements and credits more attractive because they offer flexibility in offsetting costs and bargaining power.

There are nearly 3,000 government-sponsored tax credits and incentives programs in the U.S. In the past, many corporate executives and business owners chose not to take advantage of the programs because they perceived them to be “too complex” or not worth the effort. But times are changing and more companies are looking to take advantage of those programs—and so can you.

Exploring the different tax incentives, understanding the eligibility criteria, analyzing their true net value and knowing the restrictions of these programs are still frustrating for companies—but a great business opportunity for accounting firms of all sizes.

Larger firms have typically dominated relocation services, but today small and midsize firms have the opportunity to offer similar consulting services by specializing in the incentive programs available in their service area.

Emerging from the recession, small and large businesses are trying to reduce operating costs across the board without cutting key resources. Helping businesses research and exhaust every possible tax credit, tax deduction or tax incentive they may be eligible for at a particular site is a now a highly valued service among CFOs and high-level financial advisors who don’t have the specialization or time to do it themselves. And those firms that can advise companies on how to lower their tax obligations, while helping them maximize their benefits, will gain long-term clients.

Building New Partnerships
One of the best ways to establish your firm in the relocation arena is to build strong partnerships with local commercial brokerage companies.

Brokers often need assistance understanding and breaking down various property and corporate tax incentives, workforce training programs, and research and development credits for their clients. In this world, the best way to communicate the value of an incentive program is to take the potential monetary benefit and equate it to annual cost savings per square foot. These types of conversions easily factor into an overall location analysis and may be exactly what the broker needs to sway the client.

Another opportunity is to build relationships with local economic development agencies. Being their go-to source for assistance in applying incentive programs to prospective businesses is worth its weight in gold. These agencies can also keep you updated on new programs as they are rolled out, as well as changes to existing programs.

Through these partnerships, referrals are bound to flow, and with established trust and an understanding of the client’s needs, you have a leg up on the competition.

Tax Incentive Programs to Watch
Enterprise zones are one of the few tax incentive programs that offer a range of credits and incentives to businesses. They represent a golden opportunity to find the lowest-cost location in California—a state that has an abysmal reputation to do business. The California Enterprise Zone program offers businesses located in one of the 40 designated zones annual tax credits for hiring workers in communities characterized by high unemployment and low income and for making capital improvements and equipment purchases. In Southern California, businesses that relocate to the San Bernardino Valley Enterprise Zone in San Bernardino County save an average of two to three cents per square foot per month, which goes a long way toward offsetting operating costs long term.

Workforce credits and assistance are another area where businesses can reduce their tax and labor costs. In addition to the federal Work Opportunity Tax Credit, which allows businesses to claim first-year wages for individuals from groups with special employment needs, there are state and local workforce programs that also help offset startup and ongoing employment costs. The programs they offer vary from state to state and county to county, but many of them provide recruitment assistance, on-the-job training, skills upgrading and other HR assistance. Companies with a large labor force will find these offerings very attractive.

Businesses that are trying to scale back their operating costs are also competing against companies overseas that are in the foreign trade zones. These zones are designated locations near U.S. ports of entry that are considered to be legally situated outside the U.S. customs territory. Companies located in these zones can defer, reduce or eliminate customs duties on foreign merchandise such as raw materials imported for storage, manipulation, manufacturing, exhibition or destruction. A business may defer the duty fee or pay lower duty fees if the final product is transferred to the U.S. as a final destination. The program helps businesses remain competitive in the global marketplace and also provides them tax relief on labor, overhead and profit attributed to production in the zone.

Armando Jamjian is managing director at Encore Tax Credit Consulting Group Inc. in Los Angles. He can be reached at ajamjian@etaxgroup.com or www.etaxgroup.com.