Free Agent Scores Spicy Signing Bonus
Ernie Neve, CPA
May 9, 2018
Baseball is back in swing, and several teams have already made it clear that they won't be contending for playoff berths. The Cincinnati Reds are leading that sorry pack, the first team to lose 20 games in the season. But the Orioles, White Sox, and Rangers are all nipping at their heels. If any of them are serious about winning this year, it might be time to take a look at signing some free agents. Find an unhappy veteran, steal him away with a big salary and signing bonus, and maybe you'll be at .500 by the All-Star break!
Big corporations with thousands of employees generally prefer playing "Hometown Hero," so long as it suits their business goals. But corporations can play "Free Agent" too. They can even pocket fat signing bonuses when they do it, in the form of rich tax breaks in their new hometowns.
AllianceBernstein is an investment manager supervising $550 billion in assets for institutions, individuals, and mutual fund shareholders. (We're not sure why they spell it as just one word; maybe they just couldn't afford the space.) You'd expect to find that kind of firm in Manhattan. And you'd be right — their current headquarters is a blandly intimidating black-glass slab in midtown. (Fun facts: it's the building Gwen Stacy falls from in the crane scene in Spider Man 3, and it's the office for the fictional law firm in Michael Clayton.)
But life in the big city, including taxes, is pricey. So AllianceBernstein declared free agency to find a new home. Last week, they announced they had picked their new team. They'll be moving 1,050 jobs, including the CEO, legal, marketing, and IT staff, to fast-growing Nashville. (Traders and portfolio managers stay on Wall Street.) Of course they cited lower taxes as a prime reason for their choice.
So how is Tennessee stepping up to the plate? They just passed a new law implementing a "single factor sales apportionment" formula (don't ask) for publicly-traded financial asset managers whose physical presence in the state is larger than their customer base. That new law could add as much as 2% to AllianceBernstein's gross margins. Tennessee also dangles a $5,000/employee "Super Jobs Tax Credit" to companies who create 100 or more new jobs in the state.
Staffers moving from the Big Apple to Music City can certainly expect some culture shock. They'll miss the bright lights, Broadway shows, and Michelin-starred restaurants of Manhattan. (They'll miss the Yankees and Mets, too.) But they'll get to sample Nashville's "Music Row" entertainment scene. And who knows, maybe they'll fall in love with Nashville-style hot fried chicken, a local specialty breaded with spicy cayenne pepper paste and served on slices of white bread with pickle chips. (Then again, maybe they won't.)
But we can be sure that Nashville's newest residents will love their tax savings, too. Tennessee has no state income tax and is phasing out its investment tax. Property taxes are lower than in New York. And housing dollars stretch a lot farther in Nashville, even for those who glam it up in nearby Franklin (the "Greenwich" of Nashville) with the country music superstars. No matter how good the corned beef is back at the Carnegie Deli, it can't hold a candle to the tax-savings "W" AllianceBernstein picks up by going free agent.
What about you? Have you tried Nashville-style hot chicken? Are you a fan or not? Either way, we're pretty sure you'd appreciate a recipe for tasty tax breaks. That's where we come in, of course. So call us if your mouth is watering for savings and we'll see what we can serve you!