Losing promised benefits as a result of subsequent statutory changes recently happened to a Missouri taxpayer in a situation involving Missouri s Enterprise Zone benefits. In the first year in which benefits were granted, the company used the tax credits to offset all of the company s Missouri income taxes. In the following year, the General Assembly limited the benefit to offset only the taxpayer s income tax liability resulting from the portion of the business located within the Enterprise Zone. The company lost millions in promised benefits, and sued for but did not obtain relief. Absent a binding agreement that is authorized by statute, estoppel will generally not lie against the state.
Some states do, however, offer other ways to legally bind the state.
For example, many states offer binding private letter ruling procedures and companies should take advantage of them to the extent they exist. Virtue is its Own Reward. Anything the company does prior to formal approval will probably not qualify for the benefits and such premature announcements could eliminate all of the benefits promised. If the incentives are dependent upon the fact that the company is relocating into an Enterprise Zone, distressed community or other location-based criteria, the company should ensure that the relevant government agencies have officially designated the relocation area as such before the company spends any money and that the relocation or expansion is actually within the designated area. After the state and city governments have agreed to award the company benefits for its intended acquisition or expansion, the company should not forget to give them lots of kudos.