What should be the rate of impact fees assessed on new developments?

24-27 CHAPTER 24 Multistate Corporate Taxation ETHICS & EQUITY Encouraging Economic Development through Tax Concessions The tax professional occasionally is in a position to negotiate with a state or city taxing jurisdiction to garner tax relief for a client as an incentive to locate a plant or distribution center in that geographic area. In times when construction budgets are high and interstate competition is fierce to attract or retain businesses that are making location decisions, such tax con- cessions can be significant For instance, to encourage a business to build a large distribution center in the area, community leaders might be agreeable to (1) paying for roads, sewer, water, and other improvements through taxpayer bonds, or (2) reduc- ing property taxes by 50 percent for the first 10 years of the center's operations. In most cases, the value of these incentives constitutes gross income to the business under $ 118(b)(2). An incentive-granting community provides the conces- sions even though the influx of new workers may place a strain on public school facilities and likely necessitate improvements in traffic patterns and other infrastructure, Consider the position of a large employer that has been located in the area for more than 50 years. By how much should it be willing to absorb the tax increases that result when economic development concessions are used to attract new, perhaps temporary, businesses to the area? Should the employer chal- lenge the constitutionality of the grant of such sizable tax breaks to some, but not all, business taxpayers in the jurisdiction? What should be the rate of "impact fees" assessed on new developments? Does your analysis change if the new business competes with the longtime resident for sales? For employ- ees? For political power? 24-7 TAX PLANNING L0.9 Recognize tax planning opportunities available to minimize a corporation's state and local tax liability. The inconsistencies in the tax laws and rates among the states not only complicate state tax planning but also provide the nucleus of pertinent planning opportunities. Although several income tax planning devices are available to a corporation that does business in only one state, most planning techniques are directed toward corporations that do business or maintain property in more than one state. All suggested tax planning strate- gies should be reviewed in light of practical business considerations and the additional administrative and other costs that may be incurred, because simply minimizing state taxes may not be prudent from a business perspective. the Antimal State in which to Operate 24 7