Lockheed Martin To Retain, Expand Presence in Connecticut

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

By Martha Kessler

Sept. 22 — Lockheed Martin Corp. will receive up to $220 million in financial incentives from Connecticut in exchange for retaining and increasing jobs at Sikorsky Aircraft.

Lockheed Martin said it reached a deal with the state, which will run until 2032, to grow the helicopter manufacturer's employment to 8,000.

Under the accord, which will require legislative and union approval, Lockheed Martin will keep the Sikorsky headquarters in Connecticut, nearly double its spending of $350 million per year with in-state suppliers and increase its capital spending for machinery and equipment by 22 percent, Gov. Dannel P. Malloy (D) said at a press conference Sept. 21.

In return, Malloy said the state will provide the company with grants of up to $8.57 million on an annual basis for meeting certain benchmarks, as well as sales and use tax exemptions of up to $5.7 million per year over the life of the agreement. In addition, if Lockheed Martin exceeds the target level employment by 100 to 550 jobs in any given year, it will be eligible for a performance incentive grant of up to $1.9 million, totaling no more than $20 million.

Saving Manufacturing Jobs

“This is a significant deal with wide-reaching ramifications,” Malloy said. “It ensures that great manufacturing jobs—thousands of them—will remain in Connecticut, and that Sikorsky’s extraordinary record will continue to flourish for years and years to come right here at home.

“If we don’t do this deal, we risk losing thousands of good-paying jobs,” he added.

Lockheed Martin purchased Sikorsky from United Technologies Corp. (UTC) in November 2015. Under the deal, Sikorsky will build nearly 200 CH-53K King Stallion Helicopters in Connecticut for the U.S. Navy until at least 2032.

Special Session Expected

The agreement will require state legislative approval via special session in the coming weeks. A tentative Sept. 28 date for that session is being discussed.

Republican leaders sent a letter to Malloy late Sept. 21, calling on him to expand the purview of the special session to consider additional economic issues - including ending participation in the mileage tax pilot program, assessing pension reform and requiring the Legislature to act when projected budget deficits occur in two consecutive months.

That call by Republicans was decried by Senate Majority Leader Martin M. Looney (D), who said in a statement, “Republicans should not jeopardize this time-sensitive initiative by injecting partisan politics and campaign rhetoric into the process.”

Union approval is also required. A Bloomberg BNA call seeking comment from United Brotherhood of Teamsters Local 1150, which represents workers at Sikorsky, wasn't returned.

Employment Growth For Pratt & Whitney

The Sikorsky announcement comes just one week after it was revealed that the Pratt & Whitney division of UTC is expected to hire approximately 8,000 employees in Connecticut over the next 10 years as part of the company’s plan to hire 25,000 employees worldwide. Those hiring figures are based on several factors, including workforce retirements, normal attrition and incremental growth.

Pratt & Whitney didn't make an announcement relating to tax benefits that would be attached to new jobs.

However, in 2014, UTC reached an agreement with the state under the terms of the Connecticut Aerospace Reinvestment Act to enable UTC to use stranded tax credits earned for past research and development activities in Connecticut to offset certain future sales and income tax obligations.

In order to fully achieve the benefits of that agreement, UTC must continue to invest in aerospace research and development in Connecticut. The hiring at Pratt & Whitney will help fulfill that commitment.

To contact the reporter on this story: Martha Kessler in Boston at mkessler@bna.com

To contact the editor responsible for this story: Cheryl Saenz at csaenz@bna.com

For More Information

The agreement is at http://src.bna.com/iNm.

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