Construction Tax Breaks Helpful
But his Grand Rapids-based Pinnacle Construction Group Inc. recently began two simultaneous state and local programs that will save the company a projected $50,000 on a $500,000 venture.
“It’s what makes these projects valuable,” he said. “If these tax cuts weren’t available, the project wouldn’t be cost effective. The building would just stay there abandoned.”
The project will renovate an older building in downtown Grand Rapids.
Pinnacle is working with The Right Place Program, a nonprofit economic development organization in Grand Rapids, which helped package the application for a tax credit.
The credit encourages the rehabilitation of obsolete buildings.
Pinnacle also is working with the city on a single business tax credit — both credits will help finance the same operation.
According to the Michigan Economic Development Corp., there are 31 tax credits available, worth $262 million since 2000.
Paul Krepps, a spokesman for MEDC, said his agency typically works on large-scale projects to create and retain jobs. The MEDC’s biggest tax credits are single business tax credits, but local governments must approve the deals.
The single business tax is the only general tax for business in the state.
Krepps also said that although general contractors usually don’t directly receive tax breaks from MEDC, tax breaks received by other companies sometimes create indirect benefits.
“We aim to reach an entity with the largest gain,” he said. “But as a result of the tax breaks, there is a domino effect because companies hire contractors to build facilities and help keep them renovated.”
A.J. Veneklasen Inc. of Grand Rapids is benefiting from its partnership with another company that is receiving tax credits.
Through a land feasibility study, Veneklasen helped the other business locate a building site in a state-designated Renaissance Zone in Grand Rapids.
Chris Veneklasen, vice president of the company, said that because of the Renaissance Zone, the $9 million project could save the client company up to $1 million in taxes over a 12-year period.
Michigan has 23 Renaissance Zones. The zones are virtually tax-free for businesses, ranging in size from five to 3,000 acres.
The state and local tax benefits continue for 10 to 15 years. In all cases, tax relief is phased out in 25 percent increments over the last three years of the program.
Ken Rizzio, of the Ottawa County Economic Development Office in Holland, a public nonprofit entity that helps companies apply for tax breaks, said even in poor economic times, tax breaks help rejuvenate the economy.
“These programs are getting more and more usage,” Rizzio said. “Companies want to save as much as they can.”
With the economy remaining stagnant, Veneklasen said, more contractors should take advantage of available tax cuts.
“It’s hard to find fault with them,” he said. “A lot of the times through tax breaks, tentative deals become guarantees.”