cutri- competing for new investment

Competing for New Investment

Roundtable in the Desert October 8, 2014

Your Presenter

► Michael A. Cutri, ► Executive Director, Indirect Tax ► Ernst & Young LLP ► Los Angeles, CA

Agenda

► Where is investment happening globally?

► What types of investments are occurring in US?

► What states are receiving investment? ► How can EDAs compete for investment?

Where is investment happening globally?

Where is Global Investment Happening?

Source: 10th Capital Confidence Barometer, 2013 Ernst & Young, LLP

Which are the top five countries (outside of your local market) in which your company is most likely to invest?

Apr-2014

Top destinations

Top 5 destination countries

China US

UK

► China ► US ► India ► UK ► Germany

Germany

India

US still top destination for investment

► United States: $168 billion ► China: $121 billion ► Brazil: $65 billion ► British Virgin Islands: $65 billion ► United Kingdom: $63 billion ► Australia: $57 billion ► Singapore: $57 billion ► Russia: $51 billion ► Canada: $45 billion ► Chile: $30 billion

Source: United Nations Conference on Trade and Development, 2013

Why the US?

► Increasingly competitive workforce ► Decreased time to market ► Rising wages in developing countries

► Availability of real estate

► An increase in non-tax/discretionary incentives

Why not abroad?

► Difficult compliance standards ► Increased clawbacks ► Decreased land / building incentives ► Decreased labor pool / increased wages ► Increased taxation ► Political instability ► Increased port and transit fees

Where is investment coming from? Announced Foreign Investments and Jobs in US Facilities by Origin Country, 2013

What types of investments are occurring in US?

Top 20 projects ranked by capital investment, 2013

Top 20 Projects Ranked by New and Retained Jobs, 2013

Manufacturing companies account for significant portion of new investment and jobs

What states are receiving investment?

Announced Foreign Investment as a Share of Total Announced Investment

State rankings by capital investment and job creation and retention

State Investment (US$ millions)

1) Texas 29,493

2) Louisiana 22,914

3) Pennsylvania 8,723

4) Ohio 5,640

5) Georgia 5,473

6) Tennessee 5,416

7) Michigan 4,974

8) North Dakota 4,038

9) New York 3,907

10) North Carolina 3,827

TOTAL 94,405

Percent of US total 65%

State Jobs

1) Texas 34,315

2) Tennessee 27,318

3) Florida 26,195

4) Georgia 25,276

5) Ohio 23,320

6) North Carolina 21,393

7) Pennsylvania 20,496

8) Michigan 19,895

9) Wisconsin 16,924

10) Virginia 14,007

TOTAL 229,139

Percent of US total 53%

Texas

► Biggest investments were in chemical manufacturing ► Job creation was dominated by wholesale and retail trade ► Site Selection

► Dallas remains of interest as a regional hub with a large population but labor costs are at the higher end of the range

► Companies are attracted to the language capabilities and proximity to Mexico

► Incentives ► Texas Enterprise Fund ► Local incentives from cities, counties, and school districts

1st in Investment 1st in Job Creation

Ohio

► Job creation was not dominated by any one industry ► Over 75% of capital investment was in non-durable and

durable manufacturing ► Site Selection

► Significant interest in Columbus due to IBM investment

► Incentives ► Job Creation and Retention Tax Credits ► JobsOhio Discretionary Incentives ► Economic Development and Workforce Grants ► Growth Fund

4th in Investment 5th in Job Creation

Georgia

► Two-thirds of all capital investment was in manufacturing, with a majority in non-durable manufacturing

► Over half of new jobs were also in manufacturing, with over one-third in non-durable manufacturing

► Site Selection ► Atlanta is the largest labor force with strong availability of IT skills

► Incentives ► Jobs Tax Credit ► Regional Economic Business Assistance (“REBA”)

5th in Investment 4th in Job Creation

Tennessee

► Over 50% of capital investment was in non-durable manufacturing, with a majority in chemical manufacturing

► Over 40% of new jobs were in durable manufacturing, with most in motor vehicle and parts manufacturing

► Site Selection ► Non-manufacturing interest in Nashville

► Incentives ► Jobs Tax Credit ► Headquarters Tax Credit

6th in Investment 2nd in Job Creation

How Can EDAs Compete for Investment

What are companies looking for?

► Above the line savings ► Cash grants or cash equivalents ► Non-income tax benefits, including exemptions/rebates of

transaction taxes ► Unique/creative responses addressing specific business drivers

► Consider program features that are “refundable”, “transferable” or “offsetting”

► Culture of collaboration and acknowledgement of the benefits associated with a win-win result

► Anticipate performance requirements ► Streamline and simplify application, approval and compliance

requirements

Companies are increasingly aware of credits and incentives

► 27% of executives stated they are more aware of C&I opportunities

► 36% of companies say

they have become more active in pursuing business incentives

Source: EY’s 2013 Tax Credits and Incentives Survey

Questions/discussion

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cutri- competing for new investment

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