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Regionally Tailored Strategies

Tennessee’s General Assembly gathered in Nashvillethis March facing projections of up to $1 billion less inrevenue in state coffers. According to some estimates,when coupled with previous spending obligations andbudgets, the lower revenue level left state policymakers

unemployment levels in the state remain relativelyhigh, spring has brought some signs of recovery, withtax revenues beginning to recover, and jobless ratesbeginning to recede from recessionary highs. With thestate facing a challenging economic environment, newlyelected Governor Bill Haslam has made dealing with thepending budget shortfall his central policy focus. Haslamhas called for reductions in government employment,cutting administrative budgets, extending collection ofsome “temporary” fees, and making cuts to governmentdepartments averaging around 2.5 percent.

The governor has also laid out several agenda items relatedto the state’s economic development environment and jobcreation policies. Haslam has proposed expanding reviewsof the state’s economic development assets and programs,in an effort to identify successful programs, eliminatelagging ones, and create a more cohesive approach to jobcreation statewide. The governor has also argued in favorof investing in infrastructure that would support business

budget situation. This includes backing over $180 millionin economic development projects around the state, andsupporting construction of intermodal and port facilities toexpand transport and export capabilities. As in other states,rule and regulation review is also being discussed, with thegovernor calling for a review of the state’s 140 boards andcommissions to see which remain necessary, and whichmay be hindering future development.

job creation initiative. The administration’s Jobs4TNplan will make use of existing economic developmentassets to identify and prioritize growth-ready industryclusters, establish nine regional “jobs base camps” whichwill work to produce more regionally tailored economicdevelopment strategies throughout the state, coordinateinnovation activities, and reduce regulations that get in theway of business and job growth. The plan also includes theINCITE initiative, a planned $50 million project designedto increase the state’s investment in innovation activitiesby providing early-stage companies with access to capital

and increasing funding to support commercializationpartnerships between the public and private sectors.

FastTrack to Job Creation

A national leader in its overall business tax and regulatoryenvironment, Tennessee offers new and expandingbusinesses in multiple industries access to a wide arrayof tax incentives to help spur job creation. Boasting arelatively low state and local tax burden, the state touts thefact that it has no tax on personal income and no stateproperty tax in its business attraction efforts. While thestate does collect a franchise tax, excise taxes, and salesand use taxes, it offers businesses several exemptions andincentives related to each. Businesses are charged no sales

equipment, renewable energy production equipment,

supplies, among other exemptions largely tailored to

TENNESSEE

Tennessee’s Place in the Rankings

2nd Cost of Living

4th State and Local Tax Burden

10th Growth in Share of National Exports

10th Budget Gap

11th Export Intensity

11th Small Business Survival Index

14th Entrepreneurial Activity

18th Export Growth

19th Business Birth Rate

21st Export Intensity Growth

22nd College Affordability

24th Transportation InfrastructurePerformance

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support production and manufacturing. Manufacturersare also offered sales tax reductions on energy, fuel, andwater used in their production processes. The state also

the ability to carry forward net operating losses for 15years. Large industrial employers, investing in projects

code, and are able to carry forward losses beyond the 15-year threshold, giving them the ability to offset future tax

The state’s Job Tax Credit also offers job-creatingbusinesses in the state relief from franchise and excisetaxes. Companies in targeted industries creating at least25 jobs in a year and meeting minimum investment levelsare able to claim a tax credit of up to $4,500 per job. Thecredits can be used to offset up to 50 percent of their taxliability in a year. If unused immediately, the business isable to carry the credit forward up to 15 years, obtainingfuture tax relief. In order to give more support to jobcreation activity in areas of need, the state offers expandedtimeframes to meet job creation thresholds for the creditin certain counties. There are also lowered job creationstandards to gain access to the credit if a company is

Tennessee also offers a version of the program focused onlarger-scale industries called the Job Tax Super Credit.

to $5,000 per created job, which can be used to offset up to100 percent of the companies state tax liability and carriedforward under certain circumstances for up to 20 years.

To further support manufacturing development in the state,Tennessee maintains an industrial machinery tax credit

investment, varying from 1 to 10 percent. Tennessee hasalso made efforts to attract business headquarters facilitiesto the state, offering job creation tax credits and relocation

operations in the state. The state has also implementeda data center tax credit, supporting the construction andexpansion of such facilities.

Tennessee has also made increasing exports one of itsareas of emphasis in its job creation platform. The statehas sought to attract foreign direct investment, particularlythrough the use of aggressive manufacturing incentives.Areas such as automotive and clean tech manufacturinghave been areas of notable success. The state also

the globe, acting as ambassadors for the state’s businesscommunity.

Tennessee’s FastTrack program offers grants for usein conducting job training activities and infrastructureupgrades proposed by communities for use in businessattraction and expansion activities. The program’sInfrastructure Development Program allowsTennessee’s communities to apply for funding to buildand improve infrastructure needed to create new jobs.Applications for funding must be tied to a private sectorpartner’s commitment to locate in a community and createnew jobs.

Supporting small business establishment and growth isthe focus of Tennessee’s Business Resource Enterprise

with other state agencies and programs to offer smallentrepreneurs the information and resources they need to

to grant and loan opportunities, offering small businessesconnections to potential public and private sectorpartnerships, information and technical support services,aid in expansion and location efforts, and connection toeducational opportunities for entrepreneurs. The state hasalso made increasing opportunities for rural entrepreneursa focus, through its Creating a Rural EntrepreneurialSystem in Tennessee (CREST) program. Operated inpartnership with the University of Tennessee, CRESTtakes a community-centered approach to small businessdevelopment. The program offers rural communitiesthroughout the state aid in developing strategic plansto support small business creation, organizationaldevelopment support, and assistance in identifyingcommunity economic strengths and weaknesses with aneye towards small business job creation.

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Clusters in Tennessee

Largest Cluster: Business & Financial Services,333,477 jobs

Largest Growth Cluster: Business & FinancialServices, 70,107 new jobs since 2002

Most Competitive Cluster: Biomedical/Biotechnical (Life Sciences), 18,577 new or retainedjobs due to state competitive advantage

Most Concentrated Cluster: ElectricalEquipment, Appliance & Component Manufacturing,2.28 times the national concentration level