Retail Companies Increase Use Of Economic Incentives And Tax Credits, But Still Leave Money On The Table, Kpmg Survey Reveals

Furniture World Magazine

A majority of U.S. retail companies report that they have been increasing their use of economic incentives and tax credits from state and local governments for expansion, consolidation and relocation activities, according to a survey by KPMG LLP, the accounting, tax, and advisory firm. But most said they still struggle with the administrative burden of securing the benefits and many indicated they are not realizing the full dollar value of benefits they are receiving. “Clearly, over the past few years, the retail industry has been taking greater advantage of tax credits and incentives, especially in connection with the growth of retail call-center facilities,” said Michael Camp, partner in charge of retail tax services for KPMG’s State and Local Tax practice, which conducted the survey. “In doing so, retail companies have made tax credits and incentives a more important part of their corporate culture, utilizing them mostly for capital expenditures, job creation and training activities. “But it’s also clear that despite the excellent strides retail firms have made, there’s still more they can be doing to capture their fair share of benefits,” Camp added. “The companies we asked complain about the administrative burden of securing these benefits--particularly those they need to negotiate for. In fact, many indicate they are receiving less than 75 percent of the actual dollar value of the benefits available.” KPMG’s survey polled 205 senior corporate-tax and real estate professionals from the automotive, retail, consumer products, and banking industries on tax credits and incentives usage and their effects on real estate business decisions. At present, all 50 states offer some type of incentives or tax credits to companies that choose to expand or relocate within the state, providing a boost to employment and eventually corporate tax rolls. Jim Gibbons, a KPMG tax partner and Tax industry leader in the retail, food and distribution industries, said he believes retail companies aren’t realizing the full benefits available to them because responsibility for tax credits and incentives is often “fragmented,” or spread among a number of departments within a company. In fact, the survey revealed only 16 percent of retail companies have responsibility for credits and incentives assigned to one person. According to the survey, a majority (58 percent) of retail firms polled (45 respondents) have increased their use of incentives and credits over the last five years, with most making use of benefits available at the state and local level. This increased use of tax credits and incentives by the retail industry mirrors a trend among all industries surveyed. Across the board, 63 percent of respondents said their companies increased the use of incentives and tax credits over the last five years, utilizing state and local benefits significantly more than federal benefits. And, while most retail firms (82 percent) indicated they believe they are taking advantage of most negotiated and statutory benefits available to them, 62 percent said they had realized less than 75 percent of the dollar value, citing “no resources,” “lack of knowledge,” and “not acting to qualify” as major reasons. Other industries surveyed reported they have not taken advantage of all available benefits, either, with 65 percent indicating they have realized only three-quarters or less of the dollar value. Camp said that one place, in particular, where retail companies are falling short is in securing benefits they’re entitled to in territories they are unfamiliar with. “We’re finding many companies are unaware of available benefits in these locations,” he added. “They need to be doing more homework here.” Retail Companies Increase Use Of Economic Incentives And Tax Credits-- Gibbons added: “The tax benefit and incentive landscape can be complicated and difficult to maneuver. Companies that are most successful in fully utilizing available benefits have made incentives and credits a priority in their corporate culture, have responsibility for them centralized under one person, and use outside resources, when necessary, to insure they capture all credits and incentives they’re entitled to.” Other key retail results included the following: Job creation tax credits (49 percent) and sales tax exemptions (47 percent) were the most used state and local incentives and tax credits in the last two years, followed by investment tax credits (38 percent). Federal credits used most in that same period were worker/welfare credits (22 percent), research credits (18 percent) and low income housing credits (18 percent). Incentives and credits were particularly important in decisions on real estate (40 percent), capital expenditures (36 percent) and business expansion (33 percent). Some 83 percent of retail firms have either expanded or consolidated, or both, in the last two years, with a majority (38 percent) involved in both activities. A majority (62 percent) of retail firms surveyed have been involved in a capital expenditure greater than $10 million at a single location in the last two years, but less than half (44 percent) plan to make a similar capital expenditure at another location in the next 12 months. n A majority of retail firms also believe the U.S. economy will grow over the next 12 months (71 percent) and that their industry in the U.S. will expand over the same period (67 percent). KPMG LLP is the accounting, tax and advisory firm that has maintained a continuous commitment throughout its history to providing leadership, integrity and quality in the capital markets. The Big Four firm with the strongest growth record over the past decade, KPMG offers clients the scale, global reach, industry insights, and multidisciplinary range of services they demand. KPMG LLP (www.us.kpmg.com) is the U.S. member firm of KPMG International. KPMG International’s member firms have nearly 100,000 professionals including 6,600 partners, in 150 countries.