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Tax Incentives

Affordable Apartment Rental Additional Unit Allowance

Apply an additional 50% revenue allowance over MLGW’s standard policy

The developer must submit documentation proving that the particular apartment development is recognized as a low income development by the appropriate nonprofit or government agency. The builder must also enroll the apartment development in MLGW’s EcoBuild program.

Promote development of apartments for affordable rental housing.


Affordable Homes Waiver of Connect Fees Incentive

Connect fees may be waived or refunded to the home builder

The Builder must submit proof of the home’s certification from a non-profit or government agency that the home is eligible for “affordable” incentives at the time the service request is made; The builder must enroll the home in MLGW’s EcoBuild program; The home must be an individual single-family home or duplex; The maximum sale price shall be $140,000.

Promote non-profit and governmental agency efforts to produce affordable dwelling units.


Affordable Housing Additional Lot Allowance Incentive

Apply an additional 50% lot allowance over MLGW’s standard policy

The developer must submit documentation proving that the particular development is recognized as a low income development by the appropriate nonprofit or government agency; At least fifty percent (50%) of the homes in the development must meet affordable housing criteria; The homes must meet EcoBuild criteria; The homes shall not exceed $140,000 in price.

Promote development of lots for affordable housing.


Community Investment Tax Credit

Provides a tax credit to financial institutions when loans, qualified investments, grants or contributions are made to organizations involved in developing low income housing

Eligible Activities are as follows: 1) Activities that create or preserve affordable housing for low income Tennesseans, 2) Activities that assist low income Tennesseans in obtaining safe and affordable housing, 3) Activities that build the capacity of an eligible non-profit organization to provide housing opportunities for low-income Tennesseans, and 4) Any other low-income housing related activity approved by the THDA Executive Director and the Commissioner of Revenue. Eligible Housing Entities are as follows: 1) Tennessee based non-profit organizations with an Internal Revenue Code 501 (C)(3) status, 2) Public Housing Authorities, 3) Development Districts, and 4) Tennessee Housing Development Agency.

Developed to increase low income housing development.


Data Center Tax Credit

Tax credit for the purchase of materials related to the construction of a data center

Applies to buildings housing high technology computer systems and related equipment in which the taxpayers had made a minimum capital investment of $250 million and has created 25 new jobs paying at least 150% of the state's average occupational wage. Investments must be made during a 3 year period, but can be extended to 7 years at the discretion of the Commissioner of Economic and Community Development; The purchase of computers, computer systems, computer software and repair parts for a qualified data center are considered purchases of industrial machinery and qualify for a minimum 5% Industrial Machinery Tax Credit against F&E liability. Computers, computer systems, computer software and repair parts used in qualified data centers are classified as industrial machinery and exempt from sales and use taxes. Qualified data centers also pay reduced sales taxes on the purchase of electricity (1.5% vs. the previous rate of 7%).

Created to assist expanding and emerging tech companies with expansion.


Diversity Plan

Extends the term of the PILOT program for those who hire minority employees or contractors

All PILOT companies must file a Diversity Plan with the industrial development board, but those which meet or exceed all of the goals of the Diversity Plan may extend the PILOT by one or two years at the discretion of the Industrial Development Board.

Created to encourage the support and inclusion of minority, women, and locally owned small businesses in the economic development of the local community.


Green Energy Tax Credit

Tax credit against franchise and excise taxes for companies involved in producing green technology

Must be a certified green energy supply chain manufacturer or affiliated company. "Certified green energy supply chain manufacturer? means any manufacturer that has made during the investment period a required capital investment in excess of $250 million in constructing, expanding, or remodeling a facility that is certified to be a facility engaged in manufacturing a product that is necessary for the production of green energy.

Green Energy Tax Credit was developed as a part of a comprehensive strategy to encourage green energy projects to locate in Tennessee.


Green Power Providers Program

Green Power Providers participants are eligible for a federal tax credit that can mean substantial savings on their tax bills

Tennessee Valley Authority (TVA) and participating power distributors of TVA power offer a performance-based incentive program to homeowners and businesses for the installation of renewable generation systems from the following qualifying resources: PV, wind, hydropower, and biomass; Eligible Systems must not have previously generated renewable energy for sale to TVA prior to October 1, 2012, unless the system was part of the Generation Partners pilot; Qualifying systems will have a minimum total nameplate generation capacity (DC) of 500 watts (W) and a maximum of 50 kilowatts (kW). Systems over 50kW may qualify to participate in TVA’s Mid-Sized Renewable Standard Offer program (link to DSIRE summary). Systems greater than 10 kilowatts in size will be subject to a load requirement.

The purpose of the Green Power Providers program is to continue to increase the renewable energy supply in the Tennessee Valley region.


Health, Education and Housing Facility Board PILOT

Property tax freeze for new or rehabilitated affordable housing units

To be eligible for a PILOT, the value of the building renovations, site improvements or new construction must be equal to or greater than 50% of the property acquisition cost. 20% of the Applicant?s units must be occupied by individuals whose income is 50% or less of the median gross income or 40% or more of the units must be occupied by individuals whose income is 60% or less of the median gross income. The project's primary use must be affordable multi-family residential within the limits of the City of Memphis containing a minimum of 24 units. The total project cost for new construction must be at least $1,000,000; and for acquisition/ rehabilitation projects must be at least $750,000. Priority is given to development projects located in Target Areas, as defined by the City, at the time of the application.

Created to encourage new construction and substantial rehabilitation of affordable multi-family housing.


Industrial Machinery Tax Credit

Tax credit of up to 50% of franchise and excise tax liability for purchasing, installing, or repairing industrial machinery

The credit applies to the purchase, installation and repair of industrial machinery as defined in T.C.A. 67-6-102. The credit also applies to the purchase and installation of computer, computer software and certain peripheral devices purchased in order to meet the capital investment thresholds of the Job Tax Credit. Any unused Industrial Machinery Tax Credit may be carried forward for up to 15 years. The percentage of Industrial Machinery Credit allowed is dependent upon the investment made during the investment period, from 1% to 10%.

Created to encourage capital investments in industrial machinery.


Industrial Revenue Bonds

Bonds issued by public entities to fund the construction or renovation of manufacturing facilities

The bonds are issued by public entities on behalf of private, for-profit companies. The bond buyers provide the funds needed by the company. Interest earned by the bond buyers is exempt from federal (and some state) income tax. As a result, the bond buyers are willing to accept a lower interest rate. Funds must be used to acquire land/buildings, construct facilities, renovate facilities, or acquire new or used equipment. Minimum of 70% must go to core manufacturing.

Developed to allow public entities to leverage capital to fund targeted development in the manufacturing sector.


Integrated Supplier and Integrated Customer Tax Credit

Extends certain tax credits to businesses qualified as an "integrated supplier" or "integrated customer"

Must be located within the footprint of a project meeting the $1 billion investment threshold and creating 500 or more occupational wage jobs. An integrated supplier or integrated customer locating within the footprint of such a project will qualify for a Job Tax Super Credit equal to $5,000 per qualified job with a 15 year carry-forward, plus an additional $5,000 per job each year for 6 years. The Integrated Supplier Tax Credit applies regardless of capital investment or number of jobs created.

The purpose of the Integrated Supplier and Integrated Customer Tax Credit is to expand the impact of large "anchor" projects by encouraging co-location of suppliers and customers.


Investment Tax Credit

Provides a tax credit for the rehabilitation of historic buildings

There are two types of ITCs available: 20% for a certified historic structure or 10% for a non-historic structure. The historic property must be income producing. To qualify for the 20% credit, the building must be listed on the National Register of Historic Places, or listed as a contributing structure within a National Register Historic District. The rehabilitation project must meet the "substantial rehabilitation test," which means the owner must spend the adjusted value of the building or $5000, whichever is greater.To qualify for the 10% credit, the structure must have been built before 1936 and must not be listed or eligible for listing on the National Register of Historic Places, the structure must retain 50-70% of external walls and 75% of internal walls, the rehabilitation must meet the "substantial rehabilitation test" as in the 20% credit, and the structure must be used for five years as an income producing property but not as housing.

Created to encourage the rehabilitation of historic buildings.


Low-Income Housing Tax Credit

Offers a credit against federal income tax liability each year for 10 years for owners of and investors in affordable rental housing

An indirect Federal subsidy used to finance the development of affordable rental housing for low-income households. To be eligible for consideration under the LIHTC Program, a proposed project must: 1) Be a residential rental property, 2) Commit to one of two possible low-income occupancy threshold requirements, 3) Restrict rents, including utility charges, in low-income units, 4) Operate under the rent and income restrictions for 30 years or longer, pursuant to written agreements with the agency issuing the tax credits.

Created by Congress to generate equity capital for the construction and rehabilitation of affordable rental housing.


Multifamily Tax-Exempt Bond Authority Program

THDA is making Multifamily Tax-Exempt Bond Authority available to local issuers for financing for multifamily housing units in Tennessee

The Multifamily Tax-Exempt Bond Authority can be used only to provide financing for new construction of affordable rental housing units, for conversion of existing properties through adaptive reuse, or for acquisition and rehabilitation of rental units. The development must be: 1) New construction, 2) A conversion of an existing property not being used for housing, or 3) Acquisition and rehabilitation.

Created to ensure the development of low-income housing.


Net Operating Loss Credit for Qualified Headquarters

Allows headquarters to convert unused net operating losses (NOL) to a credit against franchise and excise tax liability

Companies with a regional, national or international qualified headquarters facility in Tennessee may, with approval from the Commissioner of Revenue and the Commissioner of Economic and Community Development, convert unused net operating losses (NOL) to a credit against franchise and excise tax liability. The NOL credit is available only if the company is unable to use the NOL to offset net income during the current tax year.

Created to encourage companies to locate and expand their regional, national or international corporate headquarters in Tennessee.


New Markets Tax Credit Program

Allows individual and corporate investors to receive a tax credit for making equity investments in Community Development Financial Insitutions

The credit totals 39 percent of the original investment amount and is claimed over a period of seven years. Equity investment must be made in Community Development Entity certified by the US Treasury. CDIs provide investment capital for low-income communities or low-income persons.

Established by Congress in 2000 to spur new or increased investments into operating businesses and real estate projects located in low-income communities.


Payment in Lieu of Tax (PILOT)

Tax abatement of up to 90% of city personal and property taxes and 75% of county personal and property taxes for a maximum of 15 years

Amount of abatement is determined by capital investment, number of new jobs, average wage of new jobs, location of project, diversity plan, environmental plan, and industry. To be considered, companies must have a minimum capital investment of $1 million and hire add at least 15 new jobs at an average salary of $10 or more per hour. Retention PILOTs require a minimum capital investment of $10 million and the creation of at least 100 new jobs.

Created to alleviate the burden of start-up and relocation expenditures.


PILOT (Payment-In-Lieu-of Tax) or Tax-Freeze Program

Financial incentive that freezes property taxes at the predevelopment level for a predetermined period of time

The PILOT Program is offered for redevelopment projects within the Memphis Central Business Improvement District (CBID) which is bounded by Crump Boulevard on the south, Danny Thomas Boulevard on the east, the Wolf River on the north and the Mississippi River on the west. The CBID extends through the Medical Center, which is bounded by Linden Avenue on the south, Watkins Street on the east, Poplar Avenue on the north and Danny Thomas Boulevard on the west. To be eligible for a PILOT, the value of the proposed building renovations, site improvements or new construction must be equal to or greater than at least sixty percent (60%) of the total project cost (property & building acquisitions costs or value, soft costs, proposed building renovations, site improvements and/or new construction). See application here:

http://www.downtownmemphiscommission.com/documents/PILOT_Application.pdf)

The PILOT program is a financial incentive that is designed to encourage commercial real estate development in and around the Central Business Improvement District.


Pollution Control Equipment Tax Credit

Tax credit for the purchase of government-mandated pollution control equipment

Purchases of pollution control equipment that is mandated by state, federal or local law and that results in the reduction of water and/or air pollution or the elimination of hazardous waste qualify for tax credits such as exemption from franchise and sales and use taxes among other incentives. Tax credit applies to purchases of pollution control equipment for manufacturers.

Created to alleviate the burden of pollution regulations on industry.


Rural Opportunity Initiative Enhanced Job Tax Credit

Allows a qualified business locating or expanding in a Tier 2 county may take 3 years to create 25 jobs, and business locating or expanding in a Tier 3 county may take 5 years to create 25 jobs

The Enhanced Job Tax Credit for Tier 2 and Tier 3 Enhancement Counties is in addition to the regular Job Tax Credit and cannot be carried forward. If a qualified business enterprise locates or expands in a Tier 2 or Tier 3 Enhancement County, the company will be eligible for an annual Enhanced Job Tax Credit of $4,500 for each qualified job, provided that the job remains filled during the year in which the credit is being taken. The annual credit may be used to offset up to 100% of the company's total franchise and excise (F&E) tax liability each year for a three-year period in Tier 2 counties and a five-year period in Tier 3 counties.

The Enhanced Job Tax Credit was created to promote new industry locations and expansions in more rural areas of the state.


Sales and Use Tax Credit for Qualified Headquarters

Credit of 6.5% of the 7% state sales and use tax for qualified headquarters

Credit for sales and use tax paid on qualified tangible personal property purchased for the headquarters during the investment period. The investment period for the sales and use tax credit begins one year prior to construction or expansion and ends one year after construction or expansion is substantially complete and cannot exceed 6 years. Note: The taxpayer must file and receive approval of the Qualified Headquarter Business Plan with the Department of Revenue before taking the sales and use tax credits.

Created to encourage companies to locate and expand their regional, national or international corporate headquarters in Tennessee.


Super Jobs Tax Credit

Credit of $5,000 per new job to offset up to 100% of franchise and excise taxes for a period of 3 to 20 years; Note: The investment period for the Super Credit is 3 years, but can be expanded to 5 years for investments of $100 million or more and to 7 years for investments of $1 billion or more with the approval of the Commissioner of Economic and Community Development.

Company must invest capital of $100 million or more and create a minimum of 100 jobs paying at least 100% of Tennessee's average occupational wage or invest $10 million in a qualified headquarters facility and create at least 100 new headquarters jobs paying 150% of the average occupational wage. These credits can be used to offset up to 100% of the company's F&E tax liability each year for 3 to 20 years starting the first tax year after the job creation and capital investment thresholds have been met. In addition to the jobs portion of the Super Credit, a company that qualifies for the Super Credit may exempt two-thirds (2/3) of the required capital investment made during the investment period from the property measure of its franchise tax base on Schedule G of the company's F&E tax return during the tax years in which the annual credit is actually taken.

Created to incentivize larger, more capital-intensive investments.


Super Jobs Tax Credit for Qualified Headquarters

Tax credit of $5,000 for each new high-wage job created, offsetting up to 100% of franchise and excise taxes; Note: The investment period for the Super Credit is 3 years, but can be expanded to 5 years for investments of $100 million or more and to 7 years for investments of $1 billion or more with the approval of the Commissioner of Economic and Community Development.

Must commit to $10 million capital investment and create at least 100 headquarters jobs paying 150% of the average occupational wage in establishing or expanding a qualified headquarters facility. Credit good for three years with no carry forward. The Commissioner of Revenue may lower the wage requirement and investment criteria for a qualified headquarters facility if the headquarters locates in a Central Business District or Economic Recovery Zone. The investment period for the Super Job Tax Credit is 3 years, but may be expanded to 5 years with approval from the Commissioner of Economic and Community Development.

Developed to encourage companies to locate and expand their regional, national or international corporate headquarters in Tennessee.


Worker's Opportunity Tax Credit

Provides tax credit to employers who hire employees from identified target groups which traditionally face high rates of unemployment

Available to employers who hire and retain veterans and individuals from other target groups with significant barriers to employment. Employers generally can earn a tax credit equal to 25% or 40% of a new employee's first-year wages, up to the maximum for the target group to which the employee belongs. Employers will earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours.

Developed to address high unemployment rates among certain groups.