Don’t miss out on tax credits and incentives
Coming out of the Great Recession, perhaps no industry faces a greater pressure than manufacturing. To be a player in the new landscape where advanced manufacturing rules, every penny of reinvestment in your business, your processes and yourself is important. So you strive to maximize your bottom line like never before.
It’s likely that you are so focused on production strength, process efficiency, cost containment, and supply logistics that you have no time to consider how to best position yourself in light of the current tax environment. It’s very difficult to stay on top of the availability of tax credits and incentive programs. But taking the time to explore these options could result in exactly what you need: dollars.
Avoid missed opportunities
It’s common for business owners to find incentive programs intimidating. Their number is overwhelming, and determining eligibility can be difficult. All too frequently, businesses underestimate applicability or fail to reap the full benefits of a given jurisdiction’s incentive program. Many businesses simply miss out on these opportunities all together.
It’s a shame, because today’s incentive programs go far beyond traditional, income-tax-only programs. Many allow refundable credits against tax liability or the ability to use credits against non-income taxes such as the Ohio Commercial Activity Tax.
Some programs actually issue a cash grant against training costs, independent of a business’s tax liability. When applicable, these serve as a significant opportunity for an expansion, since manufacturers generally face costs for training employees on new machinery and processes during updates.
Demystifying tax credits
Becoming knowledgeable about credits can go a long way in advancing a business’ application of them. As a start, know that incentive programs can generally be classified into two types: statutory incentives and discretionary or negotiated incentives.
Statutory incentives are created when the federal or state legislature passes laws to create them. Since the incentive programs are codified into law, such programs are available to businesses that meet the statutory requirements. When your business determines it has met the requirements for a statutory incentive program, you generally have the ability to go back and file amended tax returns for the allowable period in order to claim such credits. Failing to do so could result in money left on the table.
Negotiated incentives typically derive from planning to undertake a large-scale project within a given taxing jurisdiction. Frequently, to secure the incentive you must build a compelling case as to why the project will be good for the community and why receiving the incentive is vital. The art of the deal is critical here; businesses must persuade that receipt of incentives is essential to either move the project forward or keep the business from potentially expanding elsewhere. Timing is critical in these opportunities. You must generally approach the taxing jurisdiction and secure the incentives before the project commences.
5 incentives to know
- Ohio Jobs Creation Tax Credit – a refundable tax credit for the creation of full-time equivalent jobs
- Ohio R&D Credit – a nonrefundable credit based on a percentage of qualified research expenditures incurred in Ohio
- Ohio Enterprise Zone program – encourages investment in targeted areas in return for negotiated property tax abatements on assessed value increases
- Ohio Incumbent Workforce Training Grant – a cash grant reimbursement for certain training expenditures
- Indiana EDGE credit – a refundable tax credit computed as a percentage of new payroll created in Indiana
No need to go it alone
Tax opportunities are out there, but you have to know where to look. A State and Local Tax (SALT) advisor can help you obtain grants and incentives for new or expanded business and for training existing business employees. A SALT advisor can also help you unlock and maximize tax credits, exemptions, and abatements as well as negotiate certain economic benefits with state and local authorities.