When Tesla inked a deal with the state of Nevada to build its giant battery factory near Reno, it was widely reported that Tesla received $1.3 billion in tax incentives. While the deal could be worth close to the amount over a 20-year period, it is not clear how much Tesla is currently getting from the state because it was awarded as sales and property tax abatements, transferable tax credits (TTC) and discounted electricity rates.
Through documents recently released by the Nevada Governor’s Office of Economic Development (GOED), we now learn that Tesla started profiting from transferable tax credits by selling around $20 million worth to MGM Grand Casino.
It’s not exactly clear how much money Tesla got from the deal since there’s generally a discount on the worth of the tax credits, but GOED’s Executive Director Steve Hill said that Tesla got “close” to the $20.4 million the company earned.
ThisisReno reports on the deal:
“More than $9 million in TTCs earned by Tesla in 2015 was reported by the Las Vegas Review-Journal in December, but only after months of attempts to get unredacted public records from GOED did the state agency disclose where the tax credits went.
Since that time, another $10.8 million in tax credits were transferred by Tesla to the MGM Grand, which used the credits for gaming license fees.
Internal emails retrieved through the public records request show that GOED quickly moved to get Tesla’s TTC documents signed in March so that MGM could use the credits to meet a gaming tax filing deadline.”
The deal closed on March 14 just in time for the end of the first quarter 2016. Hill talked of the benefits of the deal to the state:
“The benefit to the state comes from what Tesla is bringing, which is a lot of investment, a big boost in the economy and the jobs that they create. The ability for them to sell that tax credit to others is a neutral issue for the state. Most of the time, you don’t sell the (tax credits) for face value, but it’s close.”
In its Q1 2016 Quarterly Activity Report for the Tesla Gigafactory, the GEOD judged the company’s progress to be satisfactory.
Tesla sent us to following statement about the TTC sale to MGM:
The approximately $20 million tax credit that Tesla sold to MGM is the first money that Tesla has received under its incentive package from the state. Any fair description of this package demonstrates how small it is relative to the total cost of the Gigafactory and the economic development that Tesla is bringing to Nevada. First, the incentives largely consist of foregoing sales and use tax on factory equipment, which are taxes that Nevada wouldn’t have received if the Gigafactory weren’t there. Second, they are spread out over 20 years and result in a discount of about 1% of our total costs over that time. Relative to what the Gigafactory will contribute to Nevada for decades, this is tiny. Third, Tesla only receives these incentives if it performs. They are tied to Tesla generating an estimated $100 billion of positive economic impact for Nevada and spending a minimum of $3.5 billion. If Tesla executes, both Nevada and Tesla share the upside, and if it does not, only Tesla suffers the downside.Additionally, Tesla’s overwhelming use of Nevada residents for its Gigafactory workforce is clear from the numbers. Although the state only required that 50% of the Gigafactory workforce be Nevada residents, it was important to Tesla to do much more than that, and we have. At last count, more than 70% of the construction workers on site are Nevada residents and that number jumps to more than 90% for the Gigafactory’s production employees, bringing the total percentage of Nevada residents at the Gigafactory to about 80%. These numbers are not subject to dispute. They are regularly audited by the state.