Multistate: State Legislatures Consider Compact to Limit Tax Incentive Bidding Wars

Listen to a brief overview of state tax developments this week, including a multistate update on state legislatures.

Detailed Multistate Development

Lawmakers in several states have proposed bills to establish an interstate compact aimed at limiting the use of tax and other incentives that encourage companies to relocate from one state to another. The proposed measure, termed variously a compact to phase-out “company giveaways” or “corporate welfare,” has been introduced in Maryland (HB 525), Illinois (SB 2502), Delaware (HB 288), Florida (HB 917), Hawaii (HB 1601 & SB 2003), Iowa (HF 2095), New Hampshire (HB 1132), New York (AB 8675), and West Virginia (SB 121). States entering into the compact would be prohibited from offering company-specific incentives or grants to entice a business with a facility in any other member state to relocate that facility to the offering member state. Member states would also commit to engaging in research to limit the future use of incentives. Enforcement in any member state would rest with the chief law enforcement officer of that state, but resident taxpayers in a member state would have standing in the court of any member state to require enforcement of the compact provisions.

In 2019, the Governors of Kansas and Missouri agreed to limit the use of tax incentives to entice businesses to relocate from one state to the other. The Kansas-Missouri border runs through substantial parts of the Kansas City metropolitan area. In recent years, governments in the two states reportedly had provided over $300 million in incentives to encourage companies to relocate across the border, sometimes called the Kansas-Missouri “border war.” Under the agreement, embodied in legislation in Missouri and an executive order in Kansas, certain incentive programs in each state will be based on only the net new jobs created as part of any relocations along the border; incentives will not be applied to existing jobs.  Please stay tuned to TWIST for additional updates on these compacts.

This Week's Developments

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Featured Speaker

Sarah McGahan

Sarah McGahan

Managing Director, State & Local Tax, KPMG US