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State Credits and Incentives Overview
Each year, billions of dollars in federal, state, and local tax credits are available to qualifying companies. There are more than 7,000 different credits, incentives, and grants available nationwide. States typically offer incentives and grants to lure new businesses and keep existing jobs from moving out-of-state. New credits and incentives are being created every day, as communities fight to bring jobs back from overseas, re-educate their workforce for new-economy jobs, and survive without large manufacturing companies employing hundreds of residents. Renewable energy is a big issue, as well as pooling funds for local start-up companies to create new businesses and new jobs.
alliantgroup's tax professionals focused on state and local tax have more than 35 years collective experience in identifying, securing, and administering valuable state and local credits and incentives for companies ranging from small proprietors to Fortune 1000 companies. Our tax specialists have extensive experience serving in government as well as in the private sector.
alliantgroup's credits and incentives practice identifies opportunities including: WOTC and other Federal Hiring Credits, Federal Empowerment Zones/Renewal Communities, State Enterprise Zones, Sales and Use Tax Exemptions and Refunds, State Income/Franchise Tax Credits, State Hiring Credits, Jobs Tax Credits, Job Training Credits, Training Grants, and Site Location Services.
What Are Credits and Incentives?
Credits are available by statute and may be carried forward or claimed retroactively. Generally, credits offset state income or franchise tax liability. At the local level, real and personal property taxes can be reduced on incremental liability due to new investment. Sales and Use tax may be exempted or refunded on certain qualifying purchases. Also, eligible training expenses may be refunded via grants or loans at the state, regional, or local level.
Incentives are negotiated up front, prior to any qualifying activities taking place. The form and amount of incentives vary from state to state. The Midwest and Southeast tend to be much more competitive with one another for new businesses, and are aggressive in offering incentives. In the heavily populated Northeast, incentives are more difficult to obtain. In the sparsely populated western states, low tax rates are seen as their advantage in attracting new businesses, and incentive packages are minimal. In competitive situations, an incentive package must pass a “but for” test, meaning the project would not locate in a particular state but for the incentives the state is offering. If any public announcement is made, land contract signed, capital investment made, or new employees hired before the incentive offers are formally agreed to and signed, all incentives can be voided.
Examples of federal tax credits and incentives include:
- Work Opportunity Tax Credit (WOTC)
- Federal Indian Employment Credit
- Energy Policy Act of 2005
- Location-based incentives such as Empowerment Zones and Renewal Communities
Qualifying factors for receiving credits and incentives can be a combination of the following:
- Number of new jobs created or existing jobs retained
- Average wages paid and/or benefits offered
- Industry type
- Training programs
- Capital investment in new equipment, buildings, and technology
- Energy efficiency or “green” initiatives
- Location of facility
Who Are The Best Candidates for Credits and Incentives?
Companies located within designated economic development zones and/or companies that are manufacturing, distribution, processing, or biotechnology enterprises
What May Trigger Eligibility?
Whenever a company has made an acquisition, relocated, or is contemplating expansion
For more information, please click here to contact alliantgroup.
For immediate assistance, contact Daryl Jendras.
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