SALT Credits & Incentives: The Playbook

Let's demystify the credits businesses keep hearing about—but rarely use.

State and local tax credits and incentives (C&I) can play a significant role in helping businesses reduce costs, boost cash flow, and make smarter expansion decisions. Unfortunately, they’re also some of the most misunderstood—and overlooked—opportunities out there.

So, this March, we’re changing that!

Throughout the month, we’ll be rolling out a four‑part blog series that breaks down state and local credits and incentives and help businesses better understand what’s available—and how to take advantage of these opportunities. Each post will focus on one of the following key areas:

Background – What state and local credits and incentives actually are (and why states care so much about them)
Industries – Who tends to benefit the most—and why
Process – How incentives work from “we’re thinking about expanding” to “we received the benefit”
Case Study – A real‑world look at how incentives come together in practice

Along the way, we’ll also introduce Matt Carlson, our State and Local Tax Credits & Incentives leader, who spends his days helping businesses uncover opportunities they didn’t know existed—and avoid timing missteps that can cost them real dollars.

If you’ve ever wondered “Are there incentives out there for a project like ours?”—this series is for you.

Background: What Are State and Local Tax Credits and Incentives?

State and local tax credits and incentives are essentially a way for governments to say, “We’d really like your business here.” These programs are offered by states, cities, counties, and local economic development agencies to encourage businesses to locate, expand, hire, or invest in their jurisdictions. At a high level, incentives are designed to maximize the economic return on public dollars. When they work the way they’re intended, they benefit both sides of the table: businesses reduce costs and improve project economics, while states and communities see job creation, investment, and long‑term economic growth. From a business perspective, state and local incentives can help:

Reduce overall tax burden
Improve return on investment (ROI)
Offset hiring and expansion costs
Improve project cash flow, especially in early years

From the state or local government’s point of view, incentives are a strategic tool to:

Influence where a business chooses to locate and when it invests
Promote economic growth and job creation
Stay competitive with neighboring states and cities pursuing the same projects

As you see in the article below, Oregon is trying to become more attractive to new, locally chartered banks. The proposed credit aims to encourage long-term economic growth rather than short-term market participation.

Ore. Bill Would Give New Banks $1M Tax Credit - Sanjay Talwani, Law360 ($):

New banks in Oregon would be eligible for a $1 million tax credit over their first four years under legislation before the House Revenue Committee.

Under H.B. 4052, heard Wednesday by the committee, banks that commence business in Oregon in a tax year or the two preceding years would be allowed a $1 million credit against its corporate excise tax liability. The credit would give incentive for new banks to start business in Oregon, where no new banks have been established since 2008, bill sponsor E. Werner Reschke, R-Crater Lake, told the panel.

Not all incentives work the same way. Some programs are statutory, meaning they’re written directly into state law and available to any taxpayer who meets the eligibility requirements. Others are discretionary, which means they’re negotiated on a project‑by‑project basis with state or local governments. Discretionary incentives are often tied to larger or more competitive projects and typically require early conversations, careful planning, and a bit of negotiation.

Performance-Based Incentive: What Businesses Must Do

Here’s where many businesses are surprised: most state and local incentives are performance‑based. That means benefits aren’t guaranteed upfront. Instead, businesses must follow through on specific commitments, such as:

Making the promised capital investment
Creating or retaining a defined number of jobs
Meeting wage, benefit, or training requirements
Remaining compliant over a defined period

In many cases, incentives are realized after these benchmarks are met—not before. Ongoing compliance and reporting are typically required for the life of the incentive. We’ll dig deeper into what that looks like in Part III of this SALT C&I series, where we walk through the full process step by step.

Fanatics Inc. Scores Tax Incentives for New York City Expansion - Emily Hollingsworth, Tax Notes ($):

Athletics memorabilia and sports betting giant Fanatics Inc. is slated to receive up to $5 million in New York state tax incentives for a $50 million operations expansion in New York City.

[...]

The Excelsior Jobs Program offers five fully refundable tax credits that awarded companies may be eligible to claim. The tax credits are performance based, meaning that they are contingent upon the company meeting employment and investment requirements.

Common Types of State and Local Tax Credits and Incentives

While incentive programs vary widely by state and city, most fall into a few familiar buckets.

1. Investment (Capital Expenditure) Credits

These credits reward businesses for spending on buildings, equipment, machinery, and infrastructure improvements. They may be applied against state income tax, franchise tax, or sales and use tax, and the benefit can range from modest to significant depending on the state and size of the investment.

Illinois Over the Moon About Expanded STAR Tax Bonds - Emily Hollingsworth, Tax Notes ($):

Illinois has made it easier for localities to use tax bonds to fund economic development projects.

S.B. 1911, signed into law late last year, expands the state's sales tax and revenue bonds (STAR) program to allow all municipalities and counties to issue bonds. Under prior law, the program was limited to specific areas.

[...]

The STAR bonds program allows local governments to dedicate local sales tax revenues to funding large-scale economic development projects. The bill specifically prohibits the revenues from being used for professional sports stadiums.

2. Employment Credits and Withholding Retention

These incentives focus on job creation or retention and may include credits earned per new job, retention of employee payroll withholding for a set number of years, or refundable or non‑refundable income tax credits. Many programs include requirements around wages, full‑time status, or employee benefits.

Nebraska Bill Would Bolster Incentives for Businesses - Emily Hollingsworth, Tax Notes ($):

A Nebraska lawmaker has filed a bill to increase the state's tax credits for new employee wages and new investments.

[...]

L.B. 1165 would increase qualifying employers' tax credits for new employee wages and new investment under the ImagiNE Nebraska Act. The act, which was enacted in 2020 under L.B. 1107 and intended as a successor to the Nebraska Advantage Act, provides incentives for businesses, including wage and investment credits, sales and use tax refunds, and personal property tax exemptions.

3. Sales and Use Tax Refunds or Exemptions

Some states offer refunds or exemptions on sales tax paid on equipment, construction materials, or even utilities for qualifying industries. These incentives can significantly reduce upfront project costs, especially for manufacturing and other capital‑intensive businesses.

4. Property Tax Abatements

These incentives are especially common at the local level and may reduce or eliminate property tax on new construction for a fixed period—often five to twenty years—and are frequently negotiated with cities, counties, or school districts. In many cases, the abatement applies only to new improvements, not existing property.

In a recent case in Massachusetts, the Appellate Tax Board held that a district energy provider qualified for the manufacturing corporation property tax exemption, rejecting a challenge from the City of Cambridge. The Board concluded that the taxpayer’s operations involved an industrial process that met the state’s definition of manufacturing, making the company eligible for exemption from local property taxes. The decision highlights the significant property tax savings that can result from manufacturing classification under Massachusetts law.

5. Forgivable or Low‑Interest Loans

Not all incentives come in the form of tax credits. Some jurisdictions support low-interest loans for expansion or relocation projects. If job creation or investment benchmarks are met, repayment may be partially or fully forgiven.

6. Job Training Grants and Reimbursements

These programs support workforce development by funding employee training, partnerships with community colleges or technical schools, or other workforce initiatives. Typically, a portion of training costs is reimbursed after employees are hired and trained.

Timing Is Everything (Literally)

If there’s one rule that applies across almost every incentive program, it’s this: timing matters.

Most incentives must be applied for—and approved—before a project begins. Starting construction too early or making public announcements before approvals are in place can disqualify a project entirely. On top of that, negotiation and approval processes can take weeks, and sometimes months. Early planning and coordination with economic development agencies is often the key to maximizing available benefits.

How Incentives Differ from "Normal" Tax Work

State and local incentives don’t fit neatly into the traditional tax compliance box. They are:

Forward‑looking, not retroactive (in most cases)
Operationally driven, not just compliance‑driven
Contractual, not just statutory
Multi‑year, not one‑and‑done

Because of this, incentives work is often best viewed as a blend of tax, strategy, and economic development—not just another line on a tax return.

Coming Up Next: Who Benefits the Most?

Now that we’ve covered what state and local tax credits and incentives are—and how they work at a high level—the next logical question is: who actually benefits the most from them?

In Part II of our SALT C&I series, we’ll take a closer look at the industries that tend to see the biggest wins from state and local incentives. From manufacturing and distribution to technology, life sciences, and energy, we’ll break down why certain industries rise to the top—and why incentives are often driven more by what a business does than the label attached to it.

Meet Our State & Local Credits and Incentives Leader

Matt Carlson leads our State and Local Tax Credits & Incentives practice, helping businesses find opportunities they didn’t know existed. He works with businesses across industries that are considering new locations, expansions, hiring initiatives, or capital investments. Matt helps clients identify available incentive programs, navigate negotiations with state and local economic development agencies, and remain compliant throughout the life of an incentive.

If your business is considering building, expanding, relocating, or hiring, understanding available state and local incentives early can make a meaningful financial difference.

To get started, complete our State Credits & Incentives Request for Assessment. The form takes approximately five minutes, and Matt Carlson will reach out to discuss potential opportunities tailored to your project.

SALT Credits & Incentives: The Playbook - Part I