How States Are Competing for Business Investment: Top Tax Credits and Incentives in 2026

When companies decide where to locate a new facility, expand operations, or build a data center, tax credits and incentives are often a significant factor. For businesses unfamiliar with how these programs work, our previous post, SALT Credits & Incentives: The Playbook – Part I, provides an overview of the incentives landscape and why states offer these benefits. While certain factors remain in play such as location of the workforce and infrastructure, states are continuing to utilize incentive programs to attract investment within their borders. Several states stand out for their competitive tax policies, economic development incentives, favorable loan rates, and refund programs. Specifically, many southern states offer substantial incentive packages. States are often trying to not only offer generous incentive packages, but also to provide benefits that can be quickly realized such as cash grants, refundable credits, payroll tax incentives, workforce training reimbursements, and property tax reductions. As a result, businesses are not only considering the amount of a credits/incentives package, but also how quickly they can realize the benefits.

Southern States Continue to Lead

The states mentioned below are consistently recognized for their competitive incentive programs and business-friendly tax environments. This can mean anything from low or zero income tax, low personal income tax, single sales-factor apportionment coupled with limited throwback rules, and predictable and clear tax administration. Many of these states also have lower cost of living, lower real estate costs, and plenty of available power infrastructure.

Texas

Texas has always been popular with companies due to its pro-business environment, including no state corporate or personal income tax (other than franchise tax). Texas has a strong utility infrastructure and a reputation for supporting business investment. Texas also benefits from its central U.S. location and a growing, young, and talented workforce. Some notable incentives available in Texas include: 

1. Texas Enterprise Fund – performance-based grants related to significant job creation and capital investment
2. Texas Enterprise Zone Program – sales and use tax refunds for qualified investment in distressed areas
3. Texas Jobs, Energy, Technology, and Innovation Act – property tax reductions for manufacturing, energy, and tech projects
4. Skills Development Fund – reimbursement for customized job training

Georgia

Similar to Texas, Georgia has a pro-business environment. Examples include faster permitting timelines, fewer licensing requirements, and greater flexibility in workforce management. Georgia also maintains an excellent logistics network as well as a deep-water port in Savannah. Some beneficial incentive programs in Georgia include:

1. Quality Jobs Credit – 5-year income/payroll withholding tax credits
2. Investment tax credits – credit for manufacturers operating for at least 3 years in Georgia
3. Port Activity Bonus Tax Credit – credit to increase shipments through Georgia ports
4. Employee Retraining Credit – 50% credit on eligible training costs
5. Payment in lieu of tax – property tax abatement

Tennessee

Like Texas, Tennessee has no personal income tax, adding to its appeal for site selection. The state also has many industrial sites ready for development, which makes it particularly attractive to manufacturing companies. Credit and incentive programs in Tennessee include:

1. Job tax credits – credits against franchise/excise tax if creating new, full-time positions
2. Industrial machinery credit – credits for purchasing qualified machinery
3. Fast Track Grants – financial assistance for infrastructure development and training to support new job creation and investment
4. Tennessee Valley Authority Grants and Investment Credits – performance grants to support job growth, power bill reductions, direct cash incentives
5. Payment in lieu of tax – property tax abatement

North Carolina

North Carolina has one of the lowest corporate income tax rates in the country, and electricity costs that are 26% below national average. It also benefits from accessible industrial locations, a highly skilled workforce due to top universities, and strategic infrastructure in the state. Specific incentive packages in the state include:

1. Customized Training Program – training for new employees through certain community colleges
2. Building Reuse Program – grants for renovating vacant buildings
3. One North Carolina Fund – cash grants for capital costs based on investment, project location, and jobs created
4. Job Development Investment Grant – performance-based cash grants for job creation and capital investment for up to 12 years

South Carolina

South Carolina benefits from having no state property tax, inventory tax, or sales tax on manufacturing machinery or materials. It also has low industrial electricity rates. South Carolina boasts a low cost of living, a strong manufacturing sector, and the deepest port on the East Coast. Some top incentive programs in South Carolina are:

1. Job Development Credit – cash refund of employee withholding taxes
2. Jobs Tax Credit – five-year income tax credits for full and part-time jobs
3. Economic Development Grants – funds site prep and infrastructure
4. Investment Tax Credit – 2.5% credit for manufacturers
5. Port volume increase tax credit – income or withholding tax credit for increased port usage
6. Fee in lieu of property tax agreement – can reduce property tax for 20 years
7. ReadySC – credit against withholding tax for eligible training costs

Industry-Specific Incentives

Another trend worth mentioning is the increased use of targeted incentives towards certain industries that states view as strategic priorities. As discussed in our prior post on state competition for data center investments, many states are increasingly using industry-specific incentives to attract projects viewed as critical to long-term economic growth. For example, Arizona is targeting its incentives toward technology and data center projects while many midwestern states such as Ohio, Indiana, and Kentucky are gearing more towards manufacturing, logistics, and energy-related investments. Companies should evaluate the type of investment and jobs involved, then assess which states offer the most favorable incentives for that industry. Because each state has different economic development priorities, this analysis can materially affect the value of an incentives package.

Final Thoughts

State credits and incentives are a powerful tool for businesses evaluating investment opportunities, relocation, and expansion. However, many of these opportunities must be identified, applied for, and negotiated before a project can be announced or investment can begin. Engaging with qualified SALT professionals early gives businesses a chance to compare different programs, strengthen their negotiation position, ensure application requirements are met, and maximize all available benefits. Eide Bailly’s SALT team can help businesses evaluate potential locations for investment, estimate financial impacts of available incentives, and develop a strategy for the business and the investment. Learn more about Eide Bailly's State and Local Tax Credits & Incentives services and how our team helps businesses identify, negotiate, and realize available incentive benefits.