Written by: Molly Giddens—Tax Manager, Credits & Incentives
Stranded incentives are one of the most overlooked and expensive risks in economic development. Every year, companies leave meaningful dollars on the table. Not because they were negotiated poorly or failed to qualify, but because many organizations treat incentives as a completed transaction once the award is secured rather than as an ongoing process requiring execution and compliance.
Incentives don’t fail loudly. They don’t send alerts when deadlines approach or escalate when project assumptions shift. They simply fade into the background as unused carryforwards, credits misaligned with tax liability, sunk costs, or benefits displaced by newer programs. Several programs also involve non-refundable application or compliance costs that become stranded when incentives are not fully realized. Organizational changes, growth, restructuring, and acquisitions only magnify the issue. The result is often six- or seven-figure value loss with no single moment where anyone realizes it happened.
The Breakdown Isn’t Eligibility—it’s Execution
One of the most persistent myths is that if a company can’t use a credit immediately, the value is gone. That assumption drives inaction. In reality, incentives sit at the intersection of statute and strategy, and realization depends on execution. Execution in practice means compliance.
In many organizations, the teams implementing projects are not the same teams responsible for understanding downstream tax, reporting, and compliance implications. That disconnect is where value is often lost.
Most incentive programs require ongoing obligations long after the initial award:
- Annual reporting and certification
- Job creation and wage thresholds
- Capital investment timelines
- Documentation to substantiate claims
- Coordination across tax, finance, legal, HR, operations, and real estate
When these requirements are not actively managed, incentives do not simply underperform—they can become partially unusable, trigger compliance exposure, or even result in costly clawbacks.
Many companies technically earn credits but fail to certify, document, or claim them correctly. Others experience misalignment across internal teams that creates gaps, preventing utilization. The issue isn’t qualification, it’s the ability to consistently execute program requirements over time.
From One-time Transaction to Ongoing Discipline
A clear divide is emerging in the market. Companies that treat incentives as a one-time transaction tend to lose value over time. Companies that treat incentives as a living strategy supported by ongoing compliance, monitoring, and cross-functional coordination capture significantly more of the economic benefit.
This requires reevaluating how and when credits are used, navigating transitions between programs, and aligning incentives with evolving operations and tax profiles. These are not one-time decisions; they require continuous oversight.
The challenge is that incentive compliance is rarely centralized. Tax manages filings, finance tracks forecasts, operations drives hiring and investment, and legal maintains agreements. Without a coordinated framework, critical requirements fall through the cracks.
Timing, Compliance, and the Shrinking Window to Act
Timing plays a larger role than many companies expect. Mid-year program changes, shifting project timelines, or evolving business conditions can create gaps in incentive utilization that often go unnoticed until it is too late.
Many of these risks are compliance-driven:
- Missed filing or certification deadlines
- Incomplete or inconsistent reporting
- Failure to validate eligibility metrics in real time
By the time expiring credits are identified or conflicts surface, options are limited. The strongest outcomes come from proactive alignment well before compliance deadlines, expiring program windows, or operational changes limit available options.
Understanding the Boundaries and the Opportunity
It’s important to be clear about the limits. States are not in the business of writing checks for unused credits, nor do they overlook statutory requirements. But there is often more flexibility than companies assume, particularly when they have delivered on commitments and continue to invest in a state.
In those situations, the conversation can shift from rigid interpretation to practical alignment. For states, unused incentives represent a missed opportunity to reinforce retention and continued investment. For companies, it represents a chance, if addressed early, to better align timing, structure, and utilization with their evolving business reality.
From Awarded Value to Realized Value
There is growing recognition that incentives should not simply be awarded—they should be realized. That shift requires more than strong negotiation. It requires structured execution, ongoing compliance, and cross-functional alignment long after the deal is signed.
For companies with expiring credits, unused carryforwards, overlapping programs, or changing project dynamics, the risk is not just losing value—it’s failing to meet the requirements needed to claim it in the first place.
At DMA, we focus on helping organizations bridge the gap between negotiated incentives and realized economic benefit by aligning strategy with execution and compliance at every stage.
Don’t Let Incentive Value Slip Away
Unused carryforwards, expiring credits, changing project timelines, and compliance gaps can quietly reduce value over time. DMA helps organizations align strategy, execution, and compliance so incentives deliver the economic impact they were intended to create.