Tax Credits and Incentives for Manufacturing and Distribution Companies

Manufacturing and distribution (M&D) organizations are vital in driving economic growth and are highly sought after by local governments. The M&D industry provides some of the most financially impactful jobs, offering competitive wages and requiring highly skilled workers. Beyond direct employment, these organizations generate a significant ripple effect throughout the economy as every dollar invested in manufacturing is estimated to contribute approximately $2.69 to the economy, according to the National Association of Manufacturers (NAM).

Across the United States, state and local governments actively compete to attract M&D companies, offering credits and incentives to encourage investment. Understanding these financial opportunities is crucial for an M&D company when deciding where to establish or expand operations. Evaluating available credits and incentives and assessing your capital expenditure plan can uncover value for your organization, and your investment contributes to a thriving community.

The Landscape of Tax Credits and Incentives

Tax credits and incentives support manufacturers by encouraging capital investment, job creation, and workforce training. These programs vary by jurisdiction and can offer manufacturing and distribution entities significant financial benefits.

The government offers incentives in multiple ways, including:

• Income tax credits – Reduce taxable income through credits tied to specific business activities
• Property tax exemptions – Lower tax burdens on eligible properties
• Payroll tax incentives – Offset employment taxes by rewarding job creation
• Sales and use benefits – Provide exemptions or reductions on purchases of equipment, materials, or utilities

Statutory Incentives

A statutory tax incentive is a tax benefit automatically available to eligible organizations or individuals under established laws and regulations without requiring discretionary approval or negotiation. The government designed these incentives to promote specific economic activities such as job creation, investment in research and development, or renewable energy adoption.

Discretionary Incentives

A discretionary incentive is a tax benefit, grant, or financial incentive awarded at a government agency’s discretion, typically requiring prior approval and a review process. Unlike statutory incentives, which are automatically available to qualifying entities, discretionary incentives are negotiated on a case-by-case basis and often depend on factors such as job creation, capital investment, industry sector, and overall economic impact. These incentives aim to attract or retain businesses within a particular jurisdiction. They can include cash grants, property tax abatements, infrastructure support, and customized training funds.

Getting Started

To effectively leverage tax credits and incentives, M&D companies should consider implementing internal processes to assess the potential for credits and incentives, such as:

• Develop a proactive tax strategy: Implement internal processes to regularly assess capital investments and hiring plans. By identifying applicable programs well before making decisions, M&D companies can align their strategies to maximize available benefits.​
• Engage in continuous education: Encourage your financial and operational teams to stay informed about evolving tax laws and incentive programs. Regular training and attendance at industry seminars can keep your organization aware of new opportunities.​
• Foster relationships with economic development agencies: Engage with local and state economic development organizations. These agencies often provide guidance on available incentives and can assist in the application process.​

Navigating the landscape of tax credits and incentives requires diligent research and strategic planning. By understanding available programs and aligning them with your organization’s activities, M&D organizations can significantly enhance their financial performance while contributing to economic growth and innovation.

Our trusted advisors identify potentially applicable credit and incentive programs and advise if they can be utilized and monetized based on your needs. Contact us today to find out how we can assist.