In return for bringing in Big Business, Amazon is aiming to receive billions of dollars worth of tax credits from some lucky North American city. Is this a race to the bottom for prominent cities, future incentive for IRS audits, or a good deal?
The State of Illinois and Chicago entered the competition for a future second headquarters, “HQ2,” planned by Amazon, an enterprise with commercial boundaries that seem to expand daily. Between 2010 and 2016, Amazon reports it has added $38 billion to the economy of Seattle and Washington State. The eventual winner of the HQ2 sweepstakes is expected to see an influx of 50,000 good paying jobs along with associated revenue and development.
Chicago and Illinois have entered the bidding war. While the bid announcement did not reveal a lot of detail, sites involved in the bid likely include Lincoln Yards, Bucktown, and the former A. Finkl & Sons steel plant, among other sites. In a press release, officials expect HQ2 to generate $341 billion over a 17-year period, if Chicago is awarded the project.
Although the tax incentives and abatements offered by Chicago and the State of Illinois were not disclosed, the public bid process initiated by Amazon is intended to generate high stakes offers from cities and regions looking for big revenue growth—including Canada.
A mixed outcome
The winning city will see population, business, and residential growth, but the tax breaks required will almost certainly dim some of the achievement. Accelerated growth for the city that hosts HQ2 could easily mean loss of affordable housing and infrastructure stress at the same time it boosts service and business sectors.
The vast tax incentives needed to cultivate a serious look from Amazon may be large enough to eliminate, or deeply dampen, future revenues received by local government, with ensuing impacts on education, social services, and taxpayers.
The agglomeration of high-tech and other business in Seattle was originally spurred by Microsoft, and then Amazon. The HQ2 winner can also anticipate quickly-acquired and accumulating wealth, boosting the overall financial picture in its region.
With greater revenue comes the need for sophistication on the individual and corporate level when the IRS turns more attention to civil tax audits, tax fraud, and related crime. When Chicago attracts the long-term attention of Amazon—or other large corporate entities—be sure to speak with a Chicago tax attorney if challenged by the IRS, or a criminal tax investigation.
Experienced help with criminal tax matters
With offices in Chicago, the skilled legal team at Robert J. Fedor Esq., LLC represents individuals and entities within the U.S. and abroad on tax matters and strategic solutions to challenges with the IRS. Contact us today.
