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What happens to incentives when a company cuts jobs?

VF Corporation was given tax credits in exchange for creating jobs. Now, they're cutting down on them.

DENVER — Four years ago, the deal VF Corporation got from the state of Colorado to move to Denver made headlines.

The company was approved for $27 million in tax credits over eight years in return for creating 800 jobs in the city of Denver.

“It was at the time, the second largest incentive the state has ever given a company to move here and yes, this means they will be getting a little bit less than that,” said Ed Sealover, a reporter for the Denver Business Journal who covered the incentive package.

Sealover broke a story last week that VF Corporation planned to cut 600 jobs worldwide, including 300 positions that are currently filled. 

A spokesman for the company confirmed the cuts to 9NEWS on Tuesday. That spokesman didn’t say how many jobs would be cut from the company’s world headquarters in Denver.

“They say that this won’t disproportionately impact any area,” Sealover said. “So if you’re doing the back-of-the-envelope math they’re probably letting 15-20 jobs go from their Denver headquarters… could be more, could be less.”

So what would that mean for the Job Growth Incentive Tax Credits approved for VF? Colorado’s incentives for incoming companies are performance-based, meaning jobs must be created and filled in order for a company to receive the tax credit.

“It’s not like a company comes in and the state gives them a big pile of money and says…thanks for coming,” Sealover said. “What it is, it is a 50% break on the annual FICA tax an employer pays per employee…that’s about 7.8% that they pay to the federal government.”

“They only get the money for each year that a job is filled so… they don’t get anything until they start creating jobs, and even then it has to be filled for that portion of the year and the taxes based on the salary they’re paying the person as well,” he said.

According to the most recent annual report from the Colorado Office of Economic Development and International Trade, VF Corporation has received more than $2 million in tax credits for already creating 800 jobs. 

A spokeswoman for OEDIT told 9NEWS that data on the impact of any job cuts for VF in Denver won’t be available until the company files its annual report with the state in March.

Colorado is known as a lower incentive state, according to Sealover. Most companies that move here are attracted to the talent pool in the state. The economic incentives help solidify the deal.

“What most executives will say is you’ve got to have [incentives] on your table,” Sealover said. “If you go to your board, especially as a publicly traded company, and say we’re looking at this state and this state and this state, the board is going to ask what kind of incentives can we get.”

According to a spokeswoman for OEDIT, of companies that have completed their incentive terms with the state, the economic development office has issued $44 million of $98 million approved in tax credits.

“Even though OEDIT has issued these credits, companies may not have the tax liability to use the credits, particularly if their profits were reduced during a recession or they are growing companies which have not yet turned profitable,” OEDIT spokeswoman Alissa Johnson said.

“Furthermore, companies may carry forward these credits for up to 10 years after issuance before they expire. OEDIT does not have taxpayer-specific data from the Department of Revenue to know if specific credits were used by the taxpayer or not, as this is confidential taxpayer data," she said.

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