Beginning next year, banks in Delaware will receive a $400 tax credit for every new employee hired above the minimum requirement of 50.
Thanks to a law enacted this summer, banks will get a break on the state franchise tax for beefing up their operations in the state. The program is slated to continue through 2001.
"The idea is to let a migrant industry like banking know there are benefits for being here," said James Burke, finance director in Delaware's economic development office. "The tax credits are not exactly a free giveaway. There are requirements the banks must meet. This is geared to add jobs over the next couple of years."
To qualify, banks must invest a minimum of $15,000 per new employee, which could be met through the purchase or improvement of land, buildings, or equipment. This provision is designed to commit the bank to expansion in the state.
The credit may not exceed half of the bank's total franchise tax. In Delaware, the more taxable income a bank has, the less it pays. The tax originally began at 8.7% and bottomed at a rate of 2.7%, but was lowered to 1.7% if a bank's taxable income exceeds $650 million. This so-called "challenge rate" is designed to lure large bank holding companies to Delaware.
Tax credits are neither new to Delaware, nor exclusive to banks. A similar plan was offered to banks in the early 1990s. This program is different from its predecessor because it requires an investment and carries a quota for new employees. Other industries, like manufacturing and communications, are offered incentive programs as well.
"There was a tax credit program before," said Tim McTaggart, Delaware's banking commissioner. "The program was reviewed and reinstituted for a number of industries, each with different requirements to meet and maintain in order to qualify for the credit."
Mr. Ketelaar is a student in the Washington Semester Program at American University.