PRIORITY: State Tax Credit Portability and Refundability

Tax credits are one of the primary tools in Wisconsin’s economic development toolbox, and are frequently the primary state incentive offered to relocating and expanding businesses.

Often, these tax credits are offered to (1) start-up companies that have yet to generate a profit, or (2) projects similar to the Lowe’s distribution facility (which ended up outside Rockford, IL) that do not actually sell anything. Operations of this nature do not generate taxable income and, as such, do not have any state income tax liability, making the granting of tax credits largely ineffectual.

So what do these companies need? Often, the answer is cash to support investment in working capital, facilities and equipment. To remain competitive with other states, Wisconsin should enact a program to make its tax credits both portable and refundable. Tax credit portability will allow companies to sell their tax credits on the open market, while refundability will allow them to receive a refund from the state. This would provide these companies with the cash they need, and would position them for sustainability and future growth. Offering tax credits to companies who (1) do not currently need them, or (2) can’t utilize them over either the short- or long-term does not provide the economic incentive desired.

The federal government allows the sale of historic tax credits, which has sent historic redevelopment to new heights. 33 states already offer some form of tax credit portability, placing them at a distinct competitive advantage. In this time of economic uncertainty, Forward Janesville asks state leaders to enhance Wisconsin’s overall economic development competitiveness by enacting tax credit portability and refundability.