5 Benefits of Frederick's New Manufacturing Tax Credit

A Program Overview

The Mayor and Board of Aldermen established a new tax credit program targeted at Frederick manufacturers looking to make a substantial investment in their facility and workforce.  The ordinance was approved on August 20, 2015 and created a 10-year tax credit against the increased assessed taxable value of a manufacturing facility.  Frederick County approved a similar program on September 1, 2015.

"The tax credit will increase Frederick's competitiveness and is intended to attract new capital investment and job creation," said Richard Griffin, The City of Frederick's Director of Economic Development. Specifically, the credit assists the City in its ability to attract and retain advanced technology and manufacturing businesses, a targeted industry for the City of Frederick.

Manufacturing is especially important to Frederick's economic vitality.  Unlike many professional services businesses where workers can be located almost anywhere, manufacturers make significant capital investments in their site and rely on the local workforce to operate the facility. In addition to hiring from the community, manufacturers often create indirect jobs through related supply chain opportunities and partnerships.

In order to qualify for the credit, a manufacturer must 
  1. Increase the value of their facility by at least $100,000 (as a result of the expansion project), and 
  2. Add at least 3 net new jobs at the facility.  
Depending on the value of the new investment and the number of new jobs created with the project, the 10-year tax credit increases on a sliding scale from 20% to 100% (outlined below).  

While businesses will receive tax relief on the portion of their tax bill related to the expansion project, businesses will continue to pay property taxes on the the portion of the site not related to the expansion.

How it Works
  • A manufacturer plans to either acquire a new site or expand its current site with a new building or an addition to a current building.
  • The business constructs the updated facility and hires new employees.
  • Following completion of the project, the State Tax Assessor reassess the property and determines the dollar figure of the new assessment that can be attributed directly to the expansion project.
  • The business will now apply for the tax credit and will receive the credit on the number that was determined by the State. The business continues to pay its normal property taxes on the value of the property not related to the expansion.

5 Benefits of the Manufacturing Tax Credit
  1. It increases jobs. The tax credit encourages job creation as the program requires a business to not only make a capital investment in their facility, but to add net new jobs at a minimum of 150% of the federal minimum wage.  Manufacturing jobs provide family supporting wages and are vital to Frederick's economy.
  2. It encourages investment and reinvestment. Businesses will not be penalized with a higher property tax bill for investing in their facility and hiring new workers.  The tax credit gradually phases the increased taxable value of the building over a 10-year period.
  3. It gives Frederick a regional competitive advantage. In conjunction with a 100% tax credit for manufacturers acquiring new personal property, the tax credit program is another tool the City can utilize to market its business cost advantage to manufacturers considering a location in the region.
  4. It attracts new business. When a businesses is looking to open or relocate a business, every expense matters. This can tilt the scale between Frederick and another jurisdiction. 
  5. It helps small businesses. 95% of all businesses in Frederick are small businesses. The tax credit program doesn't just assist large corporations. It also assists small and locally owned manufacturers looking to expand or locate within the City of Frederick.
To find out more about the Manufacturing Tax Credit, contact The City of Frederick's Department of Economic Development