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Small business owner seeks changes in tax credit requirement

The Tax Reimbursement Incentive, or TRI, program is still drawing ire from some small business owners a year and a half after passage.

Idaho Department of Commerce Business Attraction Specialist Kallen Hayes spoke in front of local business owners at the Southwest Idaho Manufacturers Alliance, or SWI-MA, meeting Dec. 4 to discuss how the TRI program could potentially help expanding operations.

A TRI is a tax credit available to moving or expanding businesses that can be worth up to 30 percent of a company’s income, payroll and sales taxes for as long as 15 years. So far, 24 projects have been approved for the credit.

“Most of us didn’t know about TRIs until the SWI-MA meeting,” Rekluse Motor Sports’ President Dwayne Dayley said of himself and four other businessmen who contacted him after the meeting to express concerns over the program. “Small business guys don’t have time because we are so buried. I have researched it since that meeting though. That’s why I attend SWI-MA.”

To qualify for the tax credit, a business has to bring 20 new jobs to a rural area or 50 to an urban area. The average salary of the new positions has to be above the county average.

Because of the size requirement, some small business owners worry they won’t qualify for the credit, but would have to compete with businesses it attracts.

“The state is doing a great job bringing companies in, but what is keeping me in Idaho?” Dayley said. “I have a project in the works that I have been putting off because I can’t quite swing it yet. This would have been perfect for it, but my project will only bring on 10 employees.”

The 24 projects approved for the TRI have created about 4,000 jobs with an average salary of $44,000, Hayes said. Half of the TRI credits were given to expanding Idaho companies.

“Some people are saying they have to compete against the companies that are coming in,” Department of Commerce spokeswoman Megan Hill said. “But we are definitely making sure the TRI program is available to existing companies.”

Small businesses that don’t apply for the credit still have to compete with the wages the new jobs are paying without the benefit of a tax break, Dayley said. He suggested a new measurement for approving TRIs.

“Why does it have to be a hard number?” Dayley said. “What if it was a percentage of the size of your company, like a 10 percent increase in your employee base?”

But Hill said the hard number was chosen to ensure the state gets a large enough payout on income taxes it collects.

“The goal is to attract businesses who would not otherwise consider Idaho for the project, not incentivize organic growth,” Hayes said.

Another requirement for a company to be awarded the credit is proof it will benefit the target community.  Project proposals are vetted to ensure they will not hurt the business already in the community, she said.

Dwayne Dayley

Dwayne Dayley

For example, the Athlos Academies project was recently approved because of the impact it will have on downtown Boise hotels and restaurants by flying teachers to Boise for training.

“If it is not going to benefit the community the state isn’t going to incentivize it,” Hayes said.

Hill said only two companies have complained to the Idaho Department of Commerce about the TRI program since it was

approved in 2014. One has since applied for a TRI.

“I have been thinking of what I need to tell my legislator,” Dayley said. “It’s a good idea to make it 10 percent.”

About Benton Alexander Smith

Benton Alexander Smith is a reporter for the Idaho Business Review, covering the Idaho Legislature, new business, technology and financial services.