[IMGCAP(1)]Now that 2016 is well underway, organizations across the country are looking for opportunities to boost their business and consolidate their spending through annual budgeting processes.
For many businesses, this also means parsing through new or updated tax credits and incentives related to hiring, training, investing in the economy and more. However, many businesses frequently overlook the 2015 tax credits for which they may still be eligible, such as the Federal Empowerment Zone Tax Credit or the Federal Indian Employment Credit, due to a lack of the right technology or not having the proper processes in place.
There are processes and analytical tools designed to help businesses monitor and track the tax credit landscape—to capture both 2016 credits as well as retroactive 2015 credits for which they are eligible. By using these tools, organizations can gain insights into their eligibility for possible tax credits.
Five of the common types of tax credits that pertain to businesses nationwide include negotiated, hiring, investment, training, and transferable tax credits. These credits are designed to encourage various types of corporate activity by incentivizing businesses to hire certain groups of workers, expand operations or invest in certain areas of the country, among other things. Additionally, many states are creating pre-certification tax credits that target similar business activities as many of the other statutory tax credit types but also have an application process or pre-approval process similar to negotiated incentives.
Navigating the array of available tax credits and incentives starts with understanding a company’s strategic objectives and identifying which credits can help achieve those goals. Then with the right technology in place, the process can be much simpler and smoother.
When considering 2015 tax credit opportunities, businesses based in some states may be eligible to retroactively claim certain tax credits. For example, in states like Alaska, Colorado, Connecticut, Georgia, Hawaii, Idaho, Illinois, Louisiana, Mississippi, New Jersey, New York, Oklahoma, South Carolina and Tennessee, there are still some 2015 tax credits available that primarily focus on job creation and property investment.
The Georgia Jobs Tax Credit of 2015, for instance, provides $750 to $4,000 per year for each new job that is created, with the ability to seek credits retroactively for one year. On the other hand, the South Carolina New Jobs Credit gives employers the ability to look at credits for the previous three years, and the program offers $1,500 to $8,000 per year for each newly created job. Both credits can be claimed over a five-year period, but the requirements and limitations vary, so it is important for businesses that operate in multiple states to understand the variations between credits. Tax credits and incentives are in no way “one size fits all.”
In addition to the state-specific 2015 tax credits, there are also retroactive options available at the federal level such as the Federal Empowerment Zone Employment Credit, which rewards up to $3,000 per eligible employee, and the Federal Indian Employment Credit, which rewards as much as $4,000 per eligible employee.
The tax credits landscape is complex. Because it’s so easy for companies to overlook credits for which they may be eligible, it’s important to implement and continue to evolve using the latest technology to help streamline the process. By capturing eligible tax credits from 2015 and the upcoming year, companies can help reduce their tax liability, lower their effective tax rate and improve their overall bottom line.
For more information, a list of available 2015 tax credits is available here.
Paul VanHuysen is the director of tax at ADP Tax Credit Services and has more than 13 years of experience in the tax credits and incentives industry.