Legislature’s special session earlier this year offered a host of incentives to retain and recruit businesses to Wisconsin
Story by Lee Marie Reinsch
HAM POINTS. DOUBLE COUPONS. Buy one, get one deals. Buy five boxes of Krunchy Kritters cereal and receive a free gallon of milk. Five-dollar gas card after you rack up $3.2 bazillion in purchases. Grocery stores and other commercial outlets use all kinds of alluring gimmicks to lure customers through their doors. On a much larger scale, Wisconsin – like many other states around the country – offers a variety of incentives with the goal of attracting business and rewarding locally grown companies for continuing to add jobs here.
Passed into law earlier this year during a special session of the legislature, several bills set forth by the Gov. Scott Walker administration offer enticements for businesses that may be looking to expand or move to Wisconsin from out of state. For economic development officials in the region, it expands the toolbox available to them to help the New North compete with other vibrant markets across the country. “We have had tax credit programs for a long time, and this is expanding it,” said Rob Kleman, executive director of the Oshkosh Area Economic Development Corp., the economic development arm of the Oshkosh Chamber of Commerce. Here’s a sample of some of the state’s recent moves toward making Wisconsin more marketable to business.
Relocate, get two years of tax credits
Also known as Act 3 of Wisconsin Assembly Bill No. 7, out-of-state businesses that move at least half of their employees and operations into Wisconsin can get up to two years of income and franchise tax deductions and credits equal to their net income tax liability.
“Corporations that locate to the state from another state, moving at least 51 percent of their workforce payroll (or at least $200,000 in wages, as defined in Section 3121 of the U.S. Internal Revenue Service code) for at least two consecutive years” may qualify for the deal, according to Tony Hozeny, communications director for the Wisconsin Department of Commerce.
The measure took place in the wake of the tax increase in Illinois and Gov. Walker’s bumper sticker campaign to businesses from our neighbors to the south to “escape to Wisconsin.
” “For companies looking to relocate to our area from outside the state, this is another good tool we would have on hand to utilize in Wisconsin, and ultimately locally. It is a recruitment tool,” Kleman said. In early 2011, Illinois Gov. Pat Quinn raised the corporate income tax rate from 4.8 percent to 7 percent and the personal income tax rate from 3 to 5 percent. Gov. Quinn’s move apparently spurred the Crystal Lake, Ill. exhibit-supply company Catalyst Exhibits, Inc. move to Wisconsin. Act 3 took effect on Feb. 15, 2011.
Deal extended due to popular demand
Also known as Wisconsin Act 4, the legislature approved a measure in late January to inject an extra $25 million into state’s economic development tax credit program. The program started out the state’s two-year budget cycle back in July 2009 with $75 million available to help businesses expand their operations across the state, but that money ran low as more and more qualifying awards were presented last year. A variety of northeast Wisconsin companies received economic development tax credits during 2010 for capital improvement projects that enhanced facilities or acquired new equipment, ultimately allowing them to expand operations.
“We provide an income tax credit to companies that undertake and accomplish certain initiatives, such as job investment and training,” Hozeny said.
Hire 1, get $$ off
If you’re a business that grosses less than $5 million per year and you hire new employees, you can deduct up to $4,000 per new employee under Act 5 of AB 7 relating to job creation. For businesses over $5 million in annual receipts, the deduction is $2,000 per employee. Of course, the deal has fine print. Each employee has to earn at least $20,000 per year, and a certain dollar amount has to be spent on training and development of employees.
But Eric Hoopman, owner of DealerFire, a new media marketing tool for the automotive industry based in Oshkosh, said the hoops are worth hopping through.
“We have a couple hundred thousand dollars capital investment in the business that needs to happen, and there are some other terms – the jobs need to be of a certain duration and pay grade, but really our business is made up of 98 percent technical professionals,” Hoopman said. “We are a sweet spot for that.
” DealerFire employs 45 people full time and is applying for a tax credit for another 30. The company creates custom Web sites and marketing solutions for automotive dealers throughout the U.S. and Canada.
“I thought the state did a great job of communicating their need,” Hoopman said. “The process wasn’t that painful. It might be painful for an upstart business without a solid history, but for a growing small business, it’s worth going for. I would absolutely recommend going through it.” The tax deduction can’t be taken if a company is already taking advantage of the relocation tax deduction. Act 5 took effect Feb. 19, 2011.
Now under new management
Well, sort of. Known formally as Act 7, legislators stripped down the existing state Department of Commerce to create the Wisconsin Economic Development Corporation, a quasi-public agency that will focus its efforts more exclusively on business attraction, retention and job creation. The new WEDC takes effect as of July 1.
“Planning is going on to make the transition to a private corporation,” said Hozeny of the state Department of Commerce. The new Wisconsin Economic Development Corp. will be relieved of some of the responsibilities it currently is charged with, such as overseeing tax credit programs for film production and dairy facility investment. The state Department of Tourism will handle film production tax credits going forward, and the Department of Agriculture, Trade and Consumer Protection will handle the dairy credit. The reorganization also shifts certification and aid programs related to businesses owned by disabled veterans, women and minorities to the newly named Department of Safety and Professional Services, or DSPS for short, formerly referred to as the state Department of Regulation and Licensing.
DSPS will also take over grant programs for innovation and research assistance in business, as well as grants to the Women’s Business Initiative Corp.
“The funding we have to help companies will transfer over,” Hozeny said. “The idea is that we will be more nimble and able to help businesses.” Longtime critics of the standing Department of Commerce structure argued the agency was saddled with too many other responsibilities – such as building code enforcement oversight and the film production credit program – to allow it to effectively concentrate on competing nationally and globally to attract businesses into the state. A 13-person board of directors, with Gov. Walker as chair, will oversee WEDC. The board will consist of legislators and private-sector business people who are appointed.
According to Kleman, the new statewide economic development agency will be open and accountable. “By consolidating a lot of programs, it’s going to make the process easier to navigate through for businesses and entrepreneurs,” Kleman said. “It will help with response times … and help advance their projects faster.
“We are the economic development arm of the Oshkosh chamber, and our charge is to grow jobs, grow the city’s tax base, and connect our businesses with resources that are out there in the field,” Kleman said. “As we go out and market our area outside Wisconsin, we would certainly be talking about this as one of the incentives that the state has to offer to relocate here.”
On the sidelines
As with every deal, there’s fine print, and it’s not all good news. Gov. Walker’s 2011-2013 biennial budget proposal nixes many programs that could help small business. Out the window, according to Assembly Bill 40, are:
- All current economic development grant and loan programs administered by Commerce, including grants to Wisconsin Business Development Finance Corporation for a capital access program;
- Grants and loans to a business or researcher for projects generally related to renewable energy;
- Loans to manufacturing businesses for projects generally related to energy efficiency and renewable energy;
- Grants and loans to businesses for diversifying a local economy;
- Grants and loans for improving the profitability of businesses negatively impacted by a casino;
- Grants to the Center for Advanced Technology and Innovation;
- Grants to businesses for employee skills training or other education;
- Grants to businesses for expenses in hiring students as paid interns; and
- Grants and loans to businesses, municipalities, and other entities for encouraging minority businesses and businesses in economically distressed areas, and for strengthening urban and rural communities. Also, AB 40 would repeal the requirement that the Department of Commerce link investors of venture capital and entrepreneurs seeking to obtain venture capital. It also sets the annual grant issued to regional economic development organizations like The New North at $100,000, down from the $200,000 such organizations have received in recent years to help fund marketing activities.
An alumna of Ripon College, Lee Reinsch is a freelance writer based in Green Bay.