State tax incentives remain a critical component of economic development strategies across the United States. Various states have introduced modifications to existing tax programs and unveiled new incentives to attract businesses, encourage investments, and promote job creation. The following is a comprehensive review of the most notable state tax incentive updates for February 2025.

Colorado Advances Legislation to Attract the Sundance Film Festival

The Colorado House Business Affairs & Labor Committee has moved forward with House Bill 25-1005, a significant legislative initiative designed to attract a well-established and internationally recognized film festival, such as the Sundance Film Festival, to relocate to Colorado. This bill would establish a refundable income tax credit of up to $34 million per year, providing substantial financial incentives to support the relocation of a major film festival with a multi-decade operating history and a proven record of drawing at least 100,000 in-person ticket sales, including at least 10,000 out-of-state and international attendees. If enacted, the tax credit would become available in 2027 and remain in effect until 2036.

Colorado’s film industry could experience significant economic growth from such a relocation, as Boulder was one of the three finalist locations considered for hosting the festival last fall. In addition to this major incentive, the bill also allocates an extra $5 million in tax credits for small or existing film festivals within the state, with an individual project cap of $500,000, further reinforcing Colorado’s commitment to fostering a thriving film industry.

California Competes Income Tax Credit Adjustments and Recaptures

The California Competes Tax Credit Committee, which oversees the allocation of tax incentives to businesses investing in the state, recently approved a total of $10.5 million in tax credits. Notably, $10 million was granted to a data infrastructure company that has pledged to create 254 new jobs while making a capital investment of $11.7 million over the next four years.

However, in a separate development, 29 companies either voluntarily forfeited or had their previously awarded credits reduced due to failure to meet their prescribed hiring and investment milestones. Among them, notable cases include Luminous Computing ($13 million) and Burlington Distribution Corp. ($12 million), both of which opted to cancel their projects, leading to the recapture of their credits. The total $69 million in recaptured or reduced tax credits will now be reallocated to new applicants during the January 2025 application cycle, ensuring that funds remain available to businesses committed to meeting their economic development goals.

New York City Mayor Eric Adams Proposes Relocation Assistance Tax Incentive

In a bid to revitalize commercial real estate in Midtown and Lower Manhattan, New York City Mayor Eric Adams has proposed a Relocation Assistance Credit for Employees. Under this initiative, businesses that sign a lease for at least 20,000 square feet of office space in eligible areas would qualify for tax incentives. The city estimates that this program would have a total fiscal impact of $150 million over a ten-year period, although the exact credit amount per business and the application details have yet to be finalized.

Mayor Adams has also encouraged the New York State Legislature to extend the Relocation and Employment Assistance Program (REAP) for another five years beyond its current expiration date of June 30, 2025. This program provides business income tax credits of $3,000 per eligible employee relocated to New York City, serving as an additional mechanism to stimulate job growth in the city’s business districts.

Alabama Clarifies Overtime Tax Exclusion from Gross Income

In 2023, Alabama became the first state in the nation to exclude overtime pay earned by full-time hourly wage employees from Alabama gross income, aiming to provide relief for hardworking individuals and boost workforce productivity. However, uncertainty over what specifically qualified as overtime compensation created compliance challenges for employers, payroll providers, and the Alabama Department of Revenue.

To address these issues, Act 2024-437 (H.B. 407) took effect on October 1, 2024, redefining the exemption’s criteria to align with overtime compensation as defined by the U.S. Fair Labor Standards Act (FLSA). Additionally, the Alabama Department of Revenue has proposed amendments to Ala. Admin. Code r. 810-3-72-.02 and 810-3-75-.04, along with introducing a new rule (810-3-72-.03) to better implement the law’s provisions. Further legislative discussions are expected this session to extend the program beyond its current sunset date of June 30, 2025.

Expanding Data Center Tax Incentives: Louisiana, Michigan, and Massachusetts

• Michigan: The passage of Act No. 181 on December 30, 2024, extends sales and use tax exemptions for data center equipment purchases through December 31, 2050, provided that at least 1,000 new jobs have been created between January 1, 2016, and January 1, 2026. The legislation also introduces a new exemption for “enterprise data centers” that create at least 30 new jobs and require a minimum capital investment of $25 million.

• Massachusetts: Sections 47 and 214 of Chapter 238 (Laws 2024) create a sales and use tax exemption for qualified data centers that meet minimum thresholds of 100,000 square feet and $50 million in capital investment over ten years. The Executive Office of Economic Development (EOED) is finalizing regulations and will not accept applications until a standardized process is in place.

• Louisiana: Meta will benefit from newly established sales and use tax rebates for its $10 billion artificial intelligence data center in northeast Louisiana, following the enactment of H.B. 827 (June 2024). Eligible projects receive a 20-year rebate term, with a 10-year renewal option, provided they meet the required investment and employment thresholds.

Mississippi Proposes Tax Credit Program Extensions and New Housing Incentives

• Mississippi Workforce Housing Tax Credit (Senate Bill 2253): A new state-level tax credit for workforce housing modeled after the federal Low-Income Housing Tax Credit (LIHTC). The program would allocate $4 million annually in nonrefundable income, franchise, or insurance premium tax credits.

• New Markets Tax Credit Extension (House Bill 1243): Extends Mississippi’s New Markets Tax Credit (NMTC) program from July 1, 2024, to July 1, 2029. The NMTC provides a 24% credit on qualified equity investments, with a $15 million annual cap and a $10 million per project limit.

Ohio Approves a $452 Million Incentive Package for Anduril Industries Megaproject

Ohio has granted a $452 million, 30-year job creation tax credit to Anduril Industries for its Arsenal-1 autonomous weapons plant in central Ohio. The facility represents a $900 million capital investment, with expectations of creating 4,000 direct jobs and 4,500 indirect jobs. The company may also receive $70 million from the All Ohio Future Fund.

Conclusion

The tax incentive landscape continues to evolve as states implement measures to attract businesses, encourage economic growth, and support key industries. Companies should remain vigilant in tracking these opportunities and ensuring they meet the qualifications necessary to benefit from the available programs.