In a Mean Economy, Even Tax Incentives Bite Back

Compiled By Deborah Austin State and local governments, battling financial shortfalls, are becoming more hard-nosed about tax incentive programs' clawback provisions -- money or benefits to be rescinded if certain business/community goals are not met -- suggests tax-issues briefing Tax Incentives Alert in its August issue. Recent examples cited include Fort Worth, Texas' 2002 property-tax abatement reductions for Motorola and Nokia Mobile Phones. Tammy Propst, national partner-in-charge of the business incentives group at professional services provider KPMG's Charlotte, N.C., says top executives should stay fully briefed on:

  • What could trigger clawbacks on every incentive program nationwide in which the company participates -- gauging company exposure before jobs are eliminated.
  • Incentive-refund provisions beyond jobs/capital-investment issues; clawbacks often are triggered by loan defaults -- or simply failing to file required reports, not uncommon in today's short-staffed companies.
Such reviews should precede talks about downsizing, so deadline extensions can be sought, says Propst. And don't assume clawbacks are solely a big-corporation concern; recently, even smaller companies have been targeted, she says.
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