The Grocer’s Guide to Tax Credits and Incentives

While tax credits and incentives (C&I) are a prioritized component of financial strategy for industries like manufacturing, automobiles, film and energy, grocery often fails to capitalize on this significant asset. C&I has plenty to offer businesses that are looking to create opportunities for job creation and so much more.

Even though this article will mainly discuss the causes and subsequent redresses to this problem, the single most important takeaway from this article is this: C&I must be considered a central part of the financial plan for any grocery store, chain or distribution center.

If you are unfamiliar with C&I, essentially, government agencies issue various offsets, abatements and cash payments for businesses that meet certain achievements. In one example, Baltimore is offering a 10-year 80% personal property tax credit to grocers that are either planning to locate their stores or making significant renovations within targeted areas in the city. Some examples to qualify for this tax credit include the following: The business must be located in the grocery store incentive area, and have 500 square feet dedicated to fruit and vegetable sales and 500 square feet dedicated to the sale of other perishable goods, including meat, seafood and dairy products. 

While the value of C&I is regularly into the six- and seven-figure ranges for single stores, much less chains and distribution centers, significant contingents of grocers fail to monetize any C&I at all. Not only is this problematic for the grocer in question, it can also have real impacts on the communities served by the grocer, in the form of reduced square footage and corresponding increase of food scarcity. This is an extraordinarily suboptimal outcome for all sectors of the economy and society at large. Grocery matters; likewise, optimizing the grocery capital stack is not only in the best interest of the business, but also of the local community and associated governments.

Primarily, there are three reasons that grocery stores and chains fail to realize impact through C&I:

Failure to Discover

Finding all of the C&I available to any organization is difficult, much less one with the reach of grocery. Grocery not only has access to all of the standard hiring and cap ex credits, but a whole host of others, ranging from food deserts and specific locations to electric vehicle-charging stations and fleet conversion.

Grocers fail to find all applicable C&I generally for two reasons. The first is a simple failure to prioritize C&I, which we will get to in a moment; the second is a failure to know where and when to look. Calling a local economic development group can be extremely valuable in finding C&I; likewise, consulting a third party like an advisor or technology provider can be a huge step in the right direction. It’s also important to note here that C&I shouldn’t be an afterthought. Prospective C&I should be factored into budget decisions as soon as expansion is under discussion.

Failure to Comply

This is a sneaky one, but extremely important to organizations with multiple credits. Many credits have complex and significant ongoing compliance requirements. The best advice here is to be proactive on a regular basis — don’t put yourself in a position where you are scrambling two days before a deadline to gather all of the information needed for a final report. Stay ahead of schedule.

Failure to Prioritize

This is the biggest one, because once you decide as an organization to prioritize something, it will get done. C&I should be a part of your grocery plans and your entire business. Manufacturing is a massive area for C&I, distribution and warehousing — these are the things that society needs, so these are the things that C&I targets.

The purpose of C&I is for governments to align public interests with business interests within the bounds of capitalism. What C&I looks like to your organization will be larger stores with more sales, more employees and a reduced tax burden. What it looks like to governments is a larger tax base, lower unemployment and greater public health. What it looks like to a private citizen could be a job, a new store in their neighborhood, or even something as simple yet profound as a well-stocked produce section and the corresponding inclination to make a slightly healthier dinner that night. 

Key Takeaways

1. Don’t be afraid to call your local economic development office and see whether it have any programs that might affect your organization. It takes all of 15 minutes, and the answer may surprise you.
2. Encourage cross-departmental collaboration. C&I isn’t a tax issue any more than revenue is a cashier issue — tax plays a role but so does human resources, real estate, finance and virtually every other department.
3. Most of all, be proactive about finding C&I. If you are unfamiliar with the space or strapped for time, partner with a third party that can help you find all applicable C&I. It will be worth it in the long run.