Incentives Watch: Amazon HQ2 Is a Major Prize—What Tax Incentives Are States Willing to Offer?


Amazon Inc.

Amazon.com Inc. announced it will be creating its second North America headquarters, known as “Amazon HQ2,” that will be a “full equal” to its current Seattle campus. Amazon said it intends to invest over $5 billion in the project and anticipates its new campus will bring up to 50,000 high-paying jobs. Amazon has also released a list of factors that will influence their decision. Not surprisingly, state and local incentives, including tax credits and exemptions, made the list. With such a large investment on the line, many states will surely line up to give Amazon large tax breaks in an attempt to land HQ2 within their borders. Let’s take a look at what some states may be willing to offer.

New Jersey

New Jersey, led by Gov. Chris Christie (R), has proposed changes that could ultimately result in a $5 billion tax break for Amazon. Under Christie’s proposal, the Garden State would eliminate the project cap and lift the geographic restrictions placed on the state’s GROW NJ tax incentive, allowing any city in the state to offer Amazon benefits under the program. Additionally, Christie’s plan would increase the tax credit from a base of $5,000 per job to $10,000, and would increase the carry forward period of the credit from 20 years to 50 years. The plan would also allow Amazon to sell up to $25 million a year in tax credits to third parties for up to 20 years, if the proceeds are used to support infrastructure.

California

In California, Los Angeles is also vying to land Amazon’s HQ2. “I welcome the opportunity to compete for this remarkable investment, and the tens of thousands of good-paying jobs it is sure to bring with it,” said Los Angeles Mayor Eric Garcetti (D) in a statement to the Los Angeles Times. However, if Amazon decides to move its headquarters to Los Angeles it does not look like it will be due to large tax incentives, given the state’s recent history.

In 2014, California lost out on its attempt to house Tesla’s massive new battery factory after Nevada offered the company an incentive package valued at nearly $1.3 billion. California Gov. Jerry Brown (D) stated that California “fought hard for Tesla,” but “Tesla wanted a massive cash upfront payment that I don't think would be fair to the taxpayers,” according to the Los Angeles Times.

Illinois

Chicago is also looking to become the new home for Amazon’s HQ2. On Sept. 27, 2017 Illinois Gov. Bruce Rauner (R) and Chicago Mayor Rahm Emanuel (D) announced their formation of a special committee that will attempt to woo Amazon to the Windy City. Senior leadership in the Illinois General Assembly have indicated that a tax incentive package may be a necessary part of their proposal. A spokesperson for House Speaker Michael Madigan (D) said “[t]he Speaker supports the effort to offer the best possible package for Amazon to consider,” as reported by Bloomberg BNA’s Michael Bologna. The spokesperson, however, declined to speculate on the specifics of the tax incentive package the state would offer.

With an Oct. 19, 2017, deadline for proposals, it is not yet clear what many states may offer Amazon in terms of tax incentives, but given the amount of investment at stake, they will likely be substantial.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: What kinds of tax incentive do you think states will offer Amazon to land HQ2?

Get a free trial to Bloomberg BNA Tax & Accounting's State Tax solution, a comprehensive research service that provides deep analysis and time-saving practice tools to help practitioners make well-informed decisions.