Local Incentives Program Overview

Local Tax Incentives

Knoxville and Knox County each provide two primary types of tax incentives: Tax Increment Financing (TIF) and Payment-In-Lieu-Of-Taxes (PILOT). Tax incentives are designed to support both existing business growth and newly recruited businesses and are necessary to compete with other communities.

These programs, which are administered by the City of Knoxville’s and Knox County’s respective Industrial Development Boards (IDB) are performance-based and have time limits, depending on location and type of project. A third program, called a Redevelopment TIF, is available for community redevelopment projects within Redevelopment Areas prescribed by the City of Knoxville.

Under the PILOT program, a property’s current property taxes are frozen for a number of years. In some cases, certain items of personal property are included as well.

However, the owner and project still pay all other taxes. Including the mainstay of the Tennessee economy, sales taxes.

In Knoxville and Knox County, the Payment-In-Lieu-Of-Taxes (PILOT) program is targeted at development of property for either jobs creating economic development projects or economic-catalyst projects. In both cases, the goal is to appropriately incentivize business owners and developers to create economic activity where there was none before.

How do PILOTS work?

PILOTs are administered through the County and City IDBs. The IDB owns the property and leases it back to the owner/developer through a leasehold agreement during the term of the PILOT. If the leaseholder defaults on any of the terms of the lease, then the project is returned to the tax roles at its improved, fully appraised value.

Under a County IDB PILOT, a potential project must provide particular economic development information, including number of jobs created, average wages, amount of investment and air quality information, in order for the County IDB to determine the term length of the PILOT (up to a maximum of 15 years). Typically, the amount of taxes paid in the current year becomes the future amount to be paid as the PILOT payment. A City IDB PILOT is more commonly oriented towards catalyst-type developments, aimed at redevelopment districts and significantly underutilized properties. The City IDB works with the City staff to determine the amount and length of the PILOT (up to a maximum of 20 years).

Tax Increment Financing (TIF) is an economic development tool used by local governments to allocate all or a portion of the new, additional taxes generated by a project over a limited period of time to pay for public infrastructure and other improvements related to that project.

Tax increment is the difference in tax revenues generated by the project in the plan area after the project has been completed, compared with the tax revenues generated in the plan area before the development plan was adopted. The difference in these tax revenues pays the costs of improvements to the public infrastructure serving the plan area.

Qualifying Projects

In Knox County (typically for those areas outside qualified redevelopment and urban renewal project areas), the County IDB has established policies and procedures for the facilitation of Tax Increment Financing. The program is primarily for economic development projects that provide improvement to public infrastructure in blighted and under-utilized areas of Knox County and in other properties designated by Knox County Commission and Knoxville City Council.

The County IDB has always viewed its core mission as the promotion of economic development and growth, and in particular, commercial and industrial projects that involve a significant capital investment and the generation of new jobs with wages in excess of the annual average wage. Therefore, a project seeking TIF assistance that fits within the County IDB’s core mission will encounter greater flexibility and receptivity by both the County IDB and governmental authorities.

Application and Approval Process

Approval of Economic Impact Plan by County Commission, County IDB and City Council (when within corporate limits of City of Knoxville and when city taxes are utilized) are required when TIF application is considered.

Application

The process for requesting tax increment financing commences with an applicant filing a completed Application together with all exhibits, supplements, schedules, and financial information required in the Application.

Submission to Governmental Authorities

Once the County IDB determines that it has received a properly completed application and any other information that it considers relevant or necessary for County Commission to determine the qualifications of the applicant and the project, the IDB will submit the application and the information with a proposed Resolution of Intent to the County Mayor, Knox County Commission (or a designated Committee of the Commission), Knox County Department of Engineering and Public Works and other governmental departments specified by either the Mayor or the Commission. If the TIF request will affect City property taxes, the County IDB will take comparable actions and in a timely manner provide the same information to the City Mayor, City Council and other governmental departments specified by either the Mayor or City Council.

After a full review by these governmental authorities, the Commission may take one of three actions: (i) reject the application and return it to the County IDB, (ii) return it to the County IDB for more information, or (iii) approve a Resolution of Intent described below. To authorize further action and direct the County IDB to prepare and submit an economic impact plan, the Commission will adopt a Resolution of Intent stating that (i) the proposed project will provide necessary improvements to public infrastructure that the County wants to occur within the proposed time for the project, but does not currently plan to effect in the short term under its existing capital improvement plans, and (ii) the Commission will consider an economic impact plan prepared and submitted by the County IDB with respect to the project in accordance with the Policies and Procedures. If the TIF request will affect City property taxes, City Council may engage in the same deliberations and may take similar action with respect to the application.

Economic Impact Plan

If the County IDB receives a Resolution of Intent from the Commission or City Council that makes the above findings and directs the County IDB to proceed with the preparation and submission of an economic impact plan, the applicant will submit a proposed economic impact plan.

The applicant shall submit the proposed economic impact plan to the County IDB no later than 60 days after approval of the Resolution of Intent by County Commission.

Application Review Committee

The County IDB’s Application Review Committee (Committee) will review the economic impact plan, the application process to date, and the Resolution of Intent. The Committee will also review a proposed Development and Financing Agreement and will evaluate the terms in light of the County IDB’s policies and determine whether to recommend the agreement and any variations from such policies to the County IDB. The Committee will advise the County IDB whether the economic impact plan complies with the Act and this Program, and is, therefore, qualified to be considered for submission to County Commission and/or City Council for approval. The Committee will also determine whether to recommend the Development and Financing Agreement to the County IDB for its approval.

Notice and Hearing of IDB

After the Application Review Committee and the County IDB’s staff and counsel determine the economic impact plan to be complete, the County IDB will hold a public hearing related to the proposed plan at a regular or special meeting. If the County IDB determines that the economic impact plan substantially complies with the Act, and the IDB’s policies and core mission, it will submit the economic impact plan to Knox County Commission and/or Knoxville City Council for consideration and approval.

Approval of Municipality/Transaction Documents

If Knox County Commission approves the economic impact plan, the applicant and the County IDB will enter into a Development and Financing Agreement with the project developer, which will incorporate the specific terms of the tax increment financing approved by the municipality.

The applicant will close the TIF transaction within 30 days after the County IDB sends the Development and Financing Agreement and the related closing documents to the applicant.

**Applicants shall refer to the TIF Policies and Procedures for complete details on the application, review and approval process.**

Learn More

The County IDB is empowered to issue tax-exempt bonds for public development projects or taxable bonds for the construction of private development projects that may serve a public purpose.

Bond issues have been utilized for the construction of educational facilities, public parking garages and housing projects that include an affordable income component, and publicly-owned sports or entertainment complexes.

Business Parks

For more information about Knox County business parks, please contact Director of Site Operations Mac McWhorter.