This is the third article in our series on the details of the Amazon incentive agreements with Virginia, New York and Tennessee. The state of Tennessee has offered a package of grants and tax incentives with a projected value of $102 million for an Operations Center of Excellence in Nashville that will manage customer fulfillment, transportation and supply chain functions.
What is incentivized
A $65 million cash grant incentivizes capital investment of $600 million and 5,000 net new full-time employees earning an average of $76.32 per hour. Investment and hiring should occur within 7 years. The grant may be used for land acquisition, site preparation, building construction and infrastructure improvements.
A $21.72 million job tax credit incentivizes a capital investment of $623 million and the 5,000 employees . The estimated tax credit value is based on $4,500 per job over 7 years for 4,828 net new full-time positions created and filled. The company must make the capital investment and create the jobs over a 7 year period.
The projected summary and estimate of the cash grant is not yet a commitment. According to the released agreement, Amazon must submit an application for the incentives. The Department of Economic and Community Development will conduct its due diligence, as is typical for the state’s grant process, and the Grant Committee will make a final award determination.
If an award is made, the grant funds will be paid on a reimbursement basis. If Amazon does not meet its job commitment, it may be required to repay all or a portion of the funds.
By accepting the cash grant, Amazon would waive its access to credits under the Super Jobs Tax Credit and Industrial Machinery Credit for which it would otherwise be eligible.
Similarly, the job tax credit offer is a projection not a commitment.
The statutory job tax credit is designed to offset 50% of the state’s franchise and excise taxes. To receive the maximum credit amount, Amazon will need to submit an organizational chart, legal entity structure, timeline of capital investment and job creation, and a breakdown of capital investment, job positions, and wages per position. The agreement also states that the incentives “will require the filing of multiple business plans based on phases.”
Reporting and Transparency
The agreement does not address reporting or transparency. However, the Tennessee Department of Economic and Community Development provides a well-regarded Performance Metrics platform that includes an overview of grant and business activity. The FastTrack Project Database provides company-specific information for projects receiving grants. Baseline and ongoing performance reports by company are also available online.
Tax credit information from the Department of Revenue is governed by the state’s confidentiality laws and is generally not available to the public.
It is our expectation that these same terms will apply to the ultimate Amazon agreement.