Amazon HQ2 Tax Package From Michigan Would Have Set Records

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Alex Ebert

Michigan was set to pay Amazon.com Inc. $4 billion in tax incentives to bring the retail giant’s projected $5 billion second headquarters and 50,000 employees to Detroit.

Though it’s out of the running, the state released its incentives package May 25, led by a pledge to create couture “Renaissance Zone” legislation that would have provided a 30-year real and personal property tax rebate. Also included in the legislation would have been a promise of zero city income tax liability, zero utility tax, and effective property taxes “lower than the established rate in any major U.S. city” for 30 years.

The state had previously refused to provide the incentive agreement, pointing to a confidentiality agreement, but released the details without announcement on May 25. The incentives are believed to be the largest ever offered by the state, including its unsuccessful 2017 bid for a Foxconn Technology Group factory.

Also included were the following incentives:

  •  $364.7 million in “Transformational Brownfield Program” funding, which includes tax increment financing agreements through which redevelopment of old property can capture up to 50 percent of the state personal income tax generated by new jobs within the development site for 20 years, and 100 percent of the income tax generated from the construction phase of a project.
  •  Up to $200 million in “Good Jobs for Michigan” credits, which allow employers to capture up to 50 percent of withholding tax generated by new jobs. Combined with the Transformational Brownfield Program, Amazon would have captured 100 percent of its employee’s withholdings.
  •  $40 million in state cash support for creating jobs.
  •  $99 million in automatic personal property tax abatement, provided to commercial personal property in the state.

How the ‘Breaks’ Break Down

Property assessments typically make up the greatest share of state and local taxes a company pays. But tax breaks can change that.

For example, abatements take a variety of forms, permanent and temporary, and they can be affected by not reassessing for new improvements or by discounting or suspending payments. Such incentives are a key component of bids from the 19 cities in the U.S. and one in Canada still in the running to become another headquarters for the Seattle-based company.

In the first round of bids in which Amazon pared suitors from more than 200 down to 20, Michigan’s incentive package is far from the largest offered. New Jersey, a finalist, has put at least $7 billion on the table. However, Columbus, another finalist, offered $2.6 billion in the first round.

To contact the reporter on this story: Alex Ebert in Columbus, Ohio at aebert@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

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