United States

State tax credits bring opportunity to growing businesses

INSIGHT ARTICLE  | 

State tax credits and incentives are big business, often creating a mutually beneficial relationship between the providers and recipients of the incentives. These incentives can spur growth in traditionally underrepresented industries, such as enticing technology companies to relocate high-paying jobs and highly-educated personnel, or establish data centers to increase a state’s presence in the cloud computing era. Other incentives may be focused on manufacturing, providing incentives to build new or expanded facilities resulting in more active assembly lines. Some states have created incentive “zones” that provide benefits to businesses that locate to a designated area. Moreover, tax credits and incentives are not just statutory in nature – many can be uniquely negotiated for a particular business to encourage retention and investment.

Businesses looking to expand operations within their current state, whether through hiring or capital investment, or increase activity in others states should carefully consider how the benefits and advantages of state tax credits and incentives may impact their bottom-line. Businesses must realize that the availability of incentives exist around every corner – sometimes all you have to do is ask.

The following 10 state tax credits have favorable attributes for growing businesses such as low barriers to entry, high return or easy implementation; and depending on the credit and location, may provide large refunds.  Many of these credits are statutory and can be simply claimed on a tax return. Others are discretionary or discretionary in nature and require an application and potential negotiation prior to making the investment or adding jobs. 

  1. Georgia Jobs Tax Credit—A potential tax credit of up to $20,000 per job is available for companies engaging in manufacturing, telecommunications, broadcasting, warehousing, R&D, processing or tourism, that creates jobs within Georgia. The minimum number of jobs and the amount of credit available per job varies by location, but can be as low as two new jobs.  
  2. Tennessee Jobs Tax Credit—Companies may claim a tax credit of $4,500 per newly created job within the state of Tennessee. Depending on the location, as few as 10 new jobs are required for the tax credit. Qualifying companies must also increase the value of real and personal property or computer software owned or leased in Tennessee by $500,000. Eligible businesses must be engaged in manufacturing, warehousing, distribution, processing, R&D, computer services, call centers, headquarters facilities, back office and convention or trade shows.
  3. Georgia Retraining Tax Credit—For companies who are working to improve their workforce through training, a tax credit equal to 50 percent of the training costs up to $500 per employee may be available for each approved training program. Eligible activities include training for new equipment, new technology, software platforms, total quality management, ISO 9000, and self-directed work teams. Eligible costs include instructor fees, employee wages, materials, supplies and equipment.
  4. Indiana Jobs Tax Credit (EDGE)—Focusing on improving the standard of living for Indiana residents, the Economic Development for a Growing Economy (EDGE) Tax Credit provides an incentive to businesses that support jobs creation and capital investment in the state. The refundable corporate income tax credit is calculated as a percentage of the expected increased tax withholdings generated from new jobs creation. The credit certification is phased in annually for up to 10 years based upon the employment ramp-up outlined by the business.
  5. Wisconsin Business Development Tax Credit (BTC)—Wisconsin encourages business retention through a tax credit program that supports job creation, capital investment, and training for companies located in or seeking to relocate to the state. Those businesses may be eligible for the credit if the business’s net employment in the state increases each year (subject to retention requirements) for which the business claims tax credits.
  6. Louisiana Inventory Credit—The inventory tax credit reimburses taxpayers for the annual local property taxes paid on the value of inventories. Effective July 1, 2015, the refund of inventory taxes for eligible taxpayers whose ad valorem taxes paid is $10,000 or more will be limited to 75 percent of any excess credit. The remaining 25 percent of the excess credit is carried forward against income and corporation franchise tax for up to 5 years. Smaller taxpayers will continue to receive full refunds of inventory tax paid.
  7. Illinois Replacement Tax Credit—This credit is available for businesses in manufacturing, retail/wholesale and coal or fluorite mining. It is equal to 0.5 percent of the qualified property’s basis.  An additional credit equal to 0.5 percent of the qualified property’s basis is granted if the business’s base employment in Illinois increased by one percent or more over the past year.
  8. New York Excelsior Jobs Credit—Companies creating new jobs in New York state can claim a tax credit of up to 6.85 percent of the wages of newly created jobs. For software development, R&D, agriculture and music production companies, only 5 new jobs are required. Manufacturing companies are required to create 10 new jobs. The credit is refundable as cash if the company does not have a tax liability.
  9. Connecticut Fixed Capital Investment Credit—Taxpayers can claim a state tax credit equal to five percent of the costs of most fixed assets that are placed in service within Connecticut. Eligibility for the credit is open to any industry.
  10. Idaho Investment Tax Credit—Businesses can claim a tax credit of three percent of the costs of most capital investments that are placed in service. The credit is not limited to specific industries.

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