Winning this Compliance Season: The 4 W's of Annual Reporting
“[Insert Name Manufacturing Company] received $4.5 million in tax benefits for new expansion.” Headlines like this flood business journals and media outlets every day. While these announcements are exciting, they do not necessarily guarantee that the awarded company will receive even a single dollar of benefit.
Companies must comply with their tax agreements by not only performing (usually by way of adding headcount or making capital investments) but also accurately documenting said performance. Failure to document the company’s growth and commitment to the community will result in lost credits for a job well done.
So, where does compliance fit into all this? To receive the benefit that was promised! Compliance reporting for incentive packages can be boiled down to four fundamental components: why, what, when, and who.
The Why: Money
Compliance reporting is the avenue to unlocking the awardee’s promised benefit. Granting entities, such as state or local governments, require this documentation to ensure companies hold up their end of the bargain on economic development projects. These communities are usually excited about the proposed development and simply need the appropriate documentation to grant the benefit associated with the investment(s). Other times, entities require compliance to ensure the company uses the awarded dollars appropriately, such as with up-front grant dollars.
The What: Compliance Documentation
Correct compliance documentation can include employee reports, fixed asset lists, training cost validation, detailed investment reports, and much more. It all depends on the program that is being utilized. No matter the state, local municipality, or program, attention to detail is paramount to compliance reporting.
Learning about the reporting requirements beforehand, especially before inking an incentive deal, makes the entire process more efficient. Having that information on hand aids in documenting purchases, new hires, wages, etc., and allows you to be more prepared when it’s time to submit compliance reports. However, there are important caveats to note. If multiple programs were granted, for example, you would need to check for mutual exclusivity. Qualifying the same purchase for two different programs is sometimes prohibited.
The When: Due Dates & Reporting Periods
Compliance reporting due dates and frequency vary depending on the community and program. Set calendar reminders for yourself well before any due dates to allow ample time to gather the necessary information. Late reports can come with late fees, loss of benefit for the year, or even loss of the entire incentive agreement. Consulting professionals can help keep track of these due dates and ensure that your company remains compliant.
The Who: Granting Entities
There are often many governing bodies involved in economic development projects. Cities, counties, states, regional groups, and non-government agencies all love to be in the know on new projects. It’s essential to understand which entities granted the incentives and who should receive the compliance reports via what avenue. McGuire Sponsel has several relationships with entities nationwide and can help facilitate connections down to the individual level to who will be analyzing the compliance report and granting the reward.
Win this compliance season by following these guidelines and contacting a consulting professional. McGuire Sponsel’s Location Advisory team is here to help and provide the direction and expertise necessary for continued compliance.