State of Nevada Approves $1.25 Billion in Tax Breaks, Perks for Tesla Gigafactory

After two full days, a specially-convened legislative session in Nevada has passed both a series of tax breaks and incentives designed to move construction of Tesla’s massive lithium-ion manufacturing and reprocessing Gigafactory in Reno, NV to the next level.

Tesla CEO Elon Musk must be pretty happy with the incentives approved yesterday by the NV legislature

Tesla CEO Elon Musk must be pretty happy with the incentives approved yesterday by the NV legislature

As we reported on Tuesday, legislators were ordered back to Carson City to take part in the special session, less than a week after Reno, NV was officially named as the chosen location of Tesla’s first Gigafactory.

In total, $1.25 billion in tax breaks and abatements were unanimously approved by both the state Senate and Assembly, with Senate Bill 1 — along with Assembly Bill 1, 2 and 3 — receiving their official passage into law late last night.

Under the auspicious bills, Tesla will gain about $1.25 billion in tax abatements over the coming years, in exchange for investing an estimated $3.5 billion in the state of Nevada within ten years of the signing of the agreement.

Given Tesla’s plans to invest $5 billion of its own funds into the Gigafactory site, we don’t think that will be much of a problem, but the specifics of the deal are some you may find interesting.

Under Assembly Bill 1, Tesla will be guaranteed eight years of discounted electricity from NV Energy, expanding the existing discount period from the current four years to twice that amount. Estimated to be worth around $8 million over the course of the next eight years in saved electricity costs, Tesla will be required to sign a ten-year contract to purchase grid power from NV Energy in order to benefit from the discounted electricity.

To pay for the discount however, those who live in Northern Nevada will find their own electricity bills will get a $1.52 rise every year to make up for Tesla’s discounted rates.

Assembly Bill 2 secures Tesla’s right to sell direct to customers in the state, something which has obviously upset auto dealer unions in the area. While this won’t mean that Tesla will start building Tesla Stores all across the state, it does represent how hard the state of Nevada was willing to work to bring Tesla’s Gigafactory to the state.

The incentives and abatements include discounted electricity and tax breaks worth more than $1.25 billion

The incentives and abatements include discounted electricity and tax breaks worth more than $1.25 billion

But as any economist will tell you, when tax incentives are handed out to one group or company, they have to be taken away from another. In the case of the Tesla tax incentives, money was taken from other state incentives, meaning some industries will lose out as a consequence of Tesla’s deal.

Most noticeable among them is the Insurance Industry, which Nevada had previous offered generous tax breaks worth $25 million every year to insurance firms willing to base their head offices in Nevada. Of the original $25 million yearly rebate fund, $20 million has now been shifted to pay for part of Tesla’s incentive package, with insurance companies finding their tax breaks will start to disappear in January 2016.

By 2021 — long after the Gigafactory is in full swing —  Nevada’s Insurance Industry tax break will be completely eradicated.

Elsewhere, a movie-production tax credit program intended to entice studios to produce films in the state has also been cut to aid Tesla’s Gigafactory construction. In total, $70 million originally earmarked for movie-production tax credits will be sent to the Tesla Gigafactory tax credit, cutting the original fund to just $10 million.

Given the huge social and economic benefits of the Tesla Gigafactory however, legislators are hopeful that Tesla’s obligatory investment in the region — which will include funding roads, schools and infrastructure — will be far more beneficial to Northern Nevada than either of the industries who have had their tax incentives curtailed to fund Tesla’s mammoth construction project.

The icing on the electrified cake? That would be Tesla’s brand new address — which has been approved as “Electric Avenue, McCarran, Nevada.”

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  • D. Harrower

    I can totally see some special interest group attacking Tesla for increasing local power bills and “taking money out of the pockets of the hard-working citizens of Nevada”, even if it is only a couple bucks.

    • leptoquark

      per year

  • Kenneth_Brown

    Tesla has been quoted as saying the factory will employ 6,500 people which is what got the politicos drooling and tripping over themselves to offer such sweetheart incentives. nnnKnowing that much of the production of Li chemistry batteries must be done in vacuum or inert atmospheric conditions, I wonder if the figure was a little exaggerated. In addition, automation is the key to getting the prices down on any production. I’d really love to see a layout of the workings of the plant and where all of these people will be working. Is it all minimum wage warehouse and clerical jobs or positions that will pay a living wage?