Tax Pros Can Bridge Public-Private Path to Supporting Hybrid Work

Hybrid and remote work is now a persistent and perhaps permanent aspect of many sectors. In our post-pandemic world, state and local economic development agencies must reevaluate their incentives and support for on- and off-site work in communities.

Tax professionals have a vital role to play in this evolution by ensuring state and local incentives achieve the aim of expanding economic activity in business districts, while helping businesses identify and obtain the incentives that benefit them most.

New Jersey, as an example, proposes reducing its 60% pandemic-era on-site work requirement for workers’ eligibility to participate in certain state incentive programs. Before the pandemic, New Jersey’s incentives aimed to boost local economic growth by requiring employees report to specified locations at least 80% of the time.

But if lawmakers don’t loosen the requirements before breaking in July, New Jersey companies will have to bring their employees back to the office at least three days a week to continue receiving billions of dollars in tax relief.

New Jersey’s example shows it’s time to adapt policies to today’s environment through thoughtful discourse and innovation.

Government on-site work incentives exist across all 50 states, and most programs offer income, sales, and/or property tax benefits. As a result, tax professionals hold a unique position as intermediaries between state and local governments and businesses.

These professionals understand tax policy, practical implications, and corporate impacts. They can build and cultivate mutually beneficial outcomes by developing and fostering relationships with diverse stakeholders, understanding nuances of evolving tax programs and their implications, and comprehending company policies and activities.

They can share their expertise and shape tax policy that fosters resilience, innovation, and inclusivity in a rapidly changing economic landscape. This can be achieved through active participation in state accounting societies, business and industry groups, and community organizations.

Tangible Return

A common thread among all stakeholders is that government incentives shouldn’t be overly complex or burdensome for a state to administer, should serve the public good, and shouldn’t include unreasonable compliance requirements for businesses.

Traditionally, a key aspect of state economic development policy involved measuring economic impact by examining the number of employees at a given location and their contributions to the local economy, such as purchasing services, dining out, and buying coffee. It’s reasonable for local communities and their advocates to receive a tangible return on investment for the use of their tax dollars.

State and local agencies recognize the need to adapt their incentive programs to prioritize job creation and economic development without relying on traditional location requirements.

For example, Indiana and Virginia recently amended their programs to allow a company to receive an incentive without a physical location in the state. Illinois allows some flexibility for certain employees who actively work in a remote or hybrid capacity on a project located in the state to count toward employment requirements for purposes of determining EDGE credit eligibility.

Other states have explored alternatives that don’t require an in-office presence. In 2023, Texas amended its enterprise zone law to eliminate the strict in-office presence requirement, instead requiring eligible employees reside within 25 miles of the designated work site.

This approach provides greater flexibility for businesses and employees, making it easier for companies to attract and retain talent while still promoting local economic development.

Other outcomes may include enhancing employee satisfaction and productivity by reducing commute times and providing better work-life balance.

Such flexibility could benefit residents in communities that surround central business districts and stimulate residential development and economic activity around these hubs, ultimately creating a more resilient and dynamic local economy.

Other states and localities are evaluating a sliding scale approach that adjusts benefits based on the actual number of days employees work on-site.

This approach would allow businesses that maintain a higher percentage of on-site workers to receive greater incentives, rewarding companies that continue to contribute significantly to local economies through physical presence.

Offering partial benefits to businesses that adopt hybrid or remote work models acknowledges the evolving nature of work without fully penalizing them. This flexibility allows businesses to adapt their operations to changing employee preferences and market conditions, promoting a more dynamic and responsive business environment.

Such a concept may be more appealing across various industries. From the state’s perspective, implementing a sliding scale could simplify program administration by reducing rigid compliance checks and allowing a more nuanced assessment of business contributions to local economies.

It also would demonstrate a commitment to modernizing economic policies in line with contemporary work trends, potentially attracting more progressive and forward-thinking businesses.

Tax Pros’ Role

Given these considerations, tax professionals must possess the necessary knowledge to offer pragmatic guidance to their organization or businesses they represent, regardless of the state where the project is located. To serve as valued advisers, tax professionals must be able to:

• Understand rules, requirements, and compliance implications of incentive programs
• Ensure businesses have appropriate documentation to support compliance with program rules (such as key card entry-exit data, expense tracking, and other location-based evidence)
• Facilitate cross-functional conversations within an organization to align business and personnel policies with incentive program rules and day-to-day operations
• Address current and deferred tax implications when businesses are no longer eligible for credits
• Assist in prioritizing goals and determining the most beneficial types of credits and incentives, considering the reward amount compared with administrative burden and potential impact on attracting talent
• Stay informed about anticipated business changes to provide proper tax advice and assist in negotiations regarding such programs

As tax professionals consider their role, they can help businesses adeptly navigate the intricacies of incentive programs with expertise and foresight.

Going beyond mere compliance, tax professionals can serve as architects of opportunity, cultivating environments where organizations thrive amid challenges and promising prospects, while recognizing the needs of states in offering incentives to promote economic growth and development.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Jamie Yesnowitz is principal at Grant Thornton serving as state and local tax leader in its Washington National Tax Office.

Bridget McCann is state and local tax solutions managing director at Grant Thornton.

Paul J. Criscuolo is state and local tax solutions managing director at Grant Thornton.

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