Lawsuit challenging Idaho tax incentive on competitive grounds dismissed

BOISE – A lawsuit filed by an Idaho company challenging the state’s tax-reimbursement incentive program has been dismissed.

A judge ruled this week that Employers Resource Management Corp.’s claim that tax incentives benefitting competitor Paylocity have forced it to pay higher wages to retain workers did not amount to evidence that the state incentive program injured it.

“In short, ERMC has no protectable, legal interest that has been directly damaged by the Act; the claim of injury is ill-defined, fuzzy, and speculative, essentially self-inflicted in mere anticipation and expectation of what may happen,” wrote 4th District Judge Samuel Hoagland.

ERMC didn’t apply for the state tax incentive; instead it sued because Paylocity got it.

The company, whose co-founder and CEO is George Gersema, has complained bitterly since Paylocity got the incentive last year. The Idaho Freedom Foundation has championed the suit.

The lawsuit charged that the tax incentive was “rewarding cannibalization of existing Idaho businesses by new entrants into the Idaho business market.”

The Legislature enacted the Tax Reimbursement Incentive program two years ago at the urging of then-state Commerce Director Jeff Sayer. It offers qualifying companies a tax credit of up to 30 percent of their income, payroll and sales taxes paid for up to 15 years, if they create specified numbers of new full-time jobs with salaries equal to or higher than the average in the county. In rural areas, companies must create 20 new jobs to qualify; in urban areas, it’s 50 new jobs.

The incentive is an after-the-fact reimbursement of the taxes paid, and companies must prove each year that they meet the requirements.

Both existing and new companies to Idaho are eligible. So far, the state has awarded the incentive to 30 projects.

Commerce Director Megan Ronk said the program has helped spur about $2 billion in new payroll to Idaho.

The award to Paylocity, estimated at $6.5 million, covers 28 percent of the company’s specified taxes paid for 15 years, in return for the company creating 551 jobs at an average salary of $46,200. Paylocity made capital investments of $5 million in the Boise area.