• January 19, 2023

Understanding State Tax Incentive Programs

The Importance of Corporate Incentive Programs

It is common for local, state and federal government entities to offer tax incentive programs to recruit businesses to designated enterprise zones (also called empowerment zones) to stimulate growth. Additionally, in many states, employers are provided opportunities to participate in programs that support the economic development within their community in exchange for specific tax credits.

Qualifying activities such as job creation, research development, manufacturing, and other growth endeavors are included in these tax incentive programs to help support the state’s economic objectives. Each state has unique strategies in place to stimulate and diversify their economies.

Businesses can benefit from their state’s tax programs by promoting new capital investments and other desirable economic activities within a company. There are a wide range of employer tax incentive programs available for businesses in 2023. Here are a few specific objectives that states consider when offering their corporate tax incentive programs.

Job Creation

Hiring is something that most companies do often. Job creation and hiring tax credits are widely available. As far as employer tax credits are concerned, the job creation silo is certainly one of the most favorable, as it provides the push needed to grow and diversify a company and strive for revenue building growth.

Enterprise Zoning

Enterprise zone credit programs are incentives designed to help stimulate growth in depressed areas of a state. Areas of underemployment are targeted to help revive these somewhat struggling areas so they can attract more development and opportunity. Many qualifying locations benefit from the added jobs, market growth, and community awareness.

Manufacturing

The opportunity for manufacturing credit is often offered with the intention of bringing manufacturing activity to the state. This can significantly increase the number of available jobs and an promotes an atmosphere that inspires other manufacturing opportunities. Bringing in new businesses and increasing operating margins translates to new products, jobs, and industry advancements.

Research & Development

Research and development credit is used to motivate companies to engage in activities related to developing knowledge. This credit provides additional funds to stimulate innovation and development and is typically available to businesses of all sizes.

Work with a Tax Credit Consultant

Companies that analyze credits that exist in their state will benefit by taking steps to qualify for these programs proactively. Here at Tax Credit Group, we help your business by screening your company for employer tax incentives to ensure you get the credits that are owed to you. Call us today at (563)583-2115 to learn which benefits could be available to your company.

• January 19, 2023
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• Employment taxes

• July 16, 2019

The Best and Worst States when it Comes to Taxes

There are a lot of factors to consider when you begin to establish your business and one factor that is often overlooked is the effect state taxes will have on your business’s bottom line. Sometimes businesses forget that in addition to those federal taxes, they also have to pay state taxes and often local city business taxes as well. All of that can make a big dent on a business’s bottom line.

The Tax Foundation, a non-profit that specializes in tax policy took a look at all 50 states and ranked them in five different categories: corporate tax, individual income tax, sales tax, property tax, and unemployment insurance tax. Based on those rankings, it came up for an overall ranking for each state. You can see the full list here, but to make it a little easier, take a look at the top and bottom three on the list.

The Top 3

Wyoming

The state of Wyoming has the lowest corporate and individual income taxes in the United States. Its sales tax (just 4% in 2019) is also in the top 10, which makes it a very agreeable place for businesses to set up shop.

Alaska

Alaska is top in America when it comes to individual income tax and 25th for corporate tax. The state has no sales tax, but it allows cities to tax purchases up to 7%, which dropped the state down a few pegs in the rankings.

There are downsides to opening a business in Alaska. The cost of living in Alaska is high and the quality of life can be poor considering for part of the year it’s pretty dark outside.

South Dakota

South Dakota has the best corporate tax rate in the country and is tied with Wyoming for the best individual tax rate. But the state’s sales tax rate is 4.5% which is what knocked South Dakota down to third on the list.

Bottom 3

New York

New York’s low ranking has a lot to do with property taxes and the individual state income tax, which are 47th and 48th respectively. The one place the state does excel is how it treats its corporations. According to Nolo, the default corporate tax rate is 6.5%, but emerging technology companies get a 1% break and qualified manufacturers pay no corporate tax at all.

New York includes New York City and that’s another roadblock for businesses. Companies that want to open up in The Big Apple will have to contend with another set of taxes as well. According to Smart Asset, New York City also collects its own individual income tax on top of what the state and federal government collect.

California

Second to last on the list is California, in large part because of how much it charges in corporate and individual taxes. California is 49th on the list in individual tax, behind only New Jersey, which just so happens to be the lowest ranking state on the Tax Foundation’s list.

There is an upside to California, U.S. News ranks the Golden State as the top spot to start a business because “The state boasts the most venture capital investment and the highest patent creation rate of any state.”

New Jersey

The Garden State falls to the bottom of the list because it has high taxes in almost every category. The state has the highest individual tax in the United States and ranks 47th in corporate tax. There’s also a state sales tax that ranks 45th on the list at 6.625%.

• July 16, 2019
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• Employment taxes

• October 30, 2017

President Signs Disaster Tax Relief Bill

In the last three months, US residents were devastated and are now faced with recovering from the impact of Hurricanes Harvey, Irma, and Maria, with Harvey being one of the most powerful in recent history.

As we all know after such devastation, it is vital to a community to get back to operational as soon as possible and this includes helping businesses get their employees back to work and providing much needed services.  Disaster relief in the aftermath of crippling weather events is as important to businesses as it is to the residents of affected communities.

On September 29, 2017, President Trump signed HR 3823, the Disaster Tax Relief and Airport and Airways Funding Act of 2017, and that bill became law on that same date.  Section 503 of the bill, entitled “Disaster-Related Employment Relief,” addresses the retention tax credit, which applies to wages paid by an eligible employer to an eligible employee during the time when the employee’s workplace was inoperable as a result of a declared disaster.  The retention credit applies to impacted disaster zones resulting from Hurricanes Harvey, Irma, and Maria and also has specific requirements to meet eligibility.

Now to the good stuff!  How does a business qualify? Which employees are eligible? Etc, etc…the fun facts are below…

To paraphrase the cryptic language of the Internal Revenue Code, the employee retention credit for any taxable year is an amount equal to 40 % of the qualified wages for each eligible employee, of the affected employer, for that taxable year, not to exceed $6000 in qualified wages for each eligible employee.

To clarify…an “eligible employer” means any employer,

1) which conducted an active trade or business on August 23, 2017, in the Hurricane Harvey disaster zone, on September 4, 2017, in the Hurricane Irma disaster zone, and on September 16, 2017, in the Hurricane Maria disaster zone and

2) if the business was inoperable on any date between August 23, 2017, and before January 1, 2018, as a result of damage sustained by Hurricane Harvey; dates between September 4, 2017, and before January 1, 2018, as a result of damage sustained by Hurricane Irma; and dates between September 16, 2017, and January 1, 2018, as a result of damage sustained by Hurricane Maria.

The retention credit also requires that the employee is deemed an “eligible employee”…which is defined as an employee whose principal place of employment on August 23, 2017, September 4, 2017, and September 16, 2017, coincides with the designated hurricane disaster zones for Hurricanes Harvey, Irma, and Maria.

In addition, the term “qualified wages” means wages paid or incurred by an eligible employer, with respect to any eligible employee, on any of the specified dates for each of the hurricane disaster zones beginning on the date the business first became inoperable immediately before the hurricane and ending the date that the business was able to resume operations at the designated workplace.  The qualified wages include wages paid whether the employee performs no services, performs services at a different location, or performs services at the principal workplace before operations have resumed.

Here’s the caveat, and there is always a caveat with new legislation.  To be considered for the credit, the employee cannot be treated as an “eligible employee” if the employer is allowed the credit under the Internal Revenue Code of 1986 for the same time period.

If you would like more information and you just LOVE reading new tax legislation you can read the bill in it’s entirety here.

We know know tax credit changes can be difficult to understand. If you would like to know more about how to claim this credit, or whether or not you qualify, feel free to give us a call at 866-844-9529, or reach out to us here.

• October 30, 2017
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• Employment taxes