By Alan Olsen
One of the world’s most popular new car companies continues to make waves as it works to not only redefine how cars are made and run, but also change the way cars are sold. The latest move by Tesla Motors is not only a huge move for the car company but also a financial boon for the state of Nevada.
Battery Factory = Tax Break
That’s because Nevada recently won the rights to Tesla’s future gigafactory. The car company plans to build the world’s largest lithium-ion battery factory in Reno, NV. The Silver State won Tesla over thanks in large part due to a $1.3 billion tax break over 20 years. It also means that Tesla will essentially operate tax-free for the first 10 years of the deal. In exchange, Tesla has to invest a minimum of $3.5 billion in real property and manufacturing equipment in Nevada.
Better than Expected Deal
The deal seems like a bargain for Tesla, as CEO Elon Musk had said it would take $500 million for a state to attract the company. However, although Nevada won the rights to the factory some wonder whether it gave up too much. According to reports, some state officials had expected the Tesla Motors to invest as much as $10 billion into the state in exchange for the tax break.
However, with several other states apparently in the running for the factory, Nevada pulled the trigger on the deal. Plus, those who created the tax package argue that the benefits outweigh the negatives. Those officials argue that the size and scope of the factory should justify the tax break package. For starters, economic development officials believe that the factory, which is expected to have more than five million square feet of working space, will create a $100 billion economic impact for Nevada over the first 20 years.
The positives don’t stop there for Nevada, as the factory is also expected to create 6,500 jobs with an average pay of about $25 an hour. Plus, some economic officials believe that as many as 22,000 more indirect jobs could be created thanks to the new factory. That is equal to 2 percent of the state’s entire workforce. It appears that even though the state may be giving Tesla a huge tax break, it will make up for it in revenue the factory will create for the state.
Bountiful Tax Breaks
Speaking of those tax breaks, here is a closer look at the benefits Tesla Motors will receive.
$725 million in sales tax abatements over a 20-year time period.
$332 million in personal and real property abatements for 10 years.
$195 million in transferable tax credits. Plus, other companies will be able to buy these credits from Tesla and thus reduce their own state tax liabilities.
$27 million tax abatements for payroll for 10 years.
$8 million for eight years for electricity discounts.
Easier to Sell Cars
There is one other incentive for Tesla, as Nevada is expected to make it legal for the company to sell cars directly to consumers from a manufacturer’s store instead of through a franchise agreement. If you add it all up it appears that the deal could definitely be a win-win for both the car company and the state of Nevada. It was all made possible because Nevada was willing to ease up on corporate taxes.