Tax Candi

Ohio is home to a number of interesting things - the Rock and Roll Hall of Fame, a pennant-shaped state flag, and the first traffic signal system in America.   They also have a robust economic development program for investments, job retention and job creation; so, let's take a look at Ohio's...

Job Creation Tax Credit

The key things about Ohio's the Job Creation Tax Credit ("JCTC") is a refundable tax credit for new full-time jobs created pursuant to an application to and subsequent agreement with the Tax Credit Authority.  Yes - refundable (Excellent in this economy).  The credit is equal to an agreed-to percentage of the new employees' Ohio income tax withholding during the taxable year. 

To be eligible, a company must create at least 25 net new jobs and their salaries must be 150% of the federal minimum wage (so, $11.25).

The proposed municipality must provide an incentive as well.  As part of the required location portion, the municipality may also grant a nonrefundable tax credit against the municipal income tax (double bonus!).

Interested parties must contact and provide a rather lengthy application to Ohio's Department of Development.

Fall is definitely in the air (or is that winter)?  So, let's jaunt down the eastern coast to warmer climates...

Georgia Investment Credits (Standard, Port and Optional)

The standard Georgia Investment Tax Credit (ITC) ranges from 1% to 8% of qualified capital investments made by eligible companies.  The Percentage of ITC depends on the project county's tier level (of which there are three).  The ITC is available to:

• Existing manufacture or telecommunications business that
• Already operates a facility in Georgia
• And has done so for at least the 3 years prior to the investment, and
• Invests at least $50,000.

(Note: Higher level credits of 3% to 8% are given for investment in recycled equipment, pollution control equipment, and for certain plan conversions.) 

The ITC can be used against up to 50% of income tax liability in a given year and may be carried forward 10 years. AND companies pursuing the ITC are barred from also recieving the Jobs Tax Credit.

The Port Investment Bonus an alternative investment tax credit available to taxpayers with large shipments in or out of a Georgia port.  The port bonus increases the investment tax credit to 5% of qualified capital investment costs, regardless of project county tier level.  Since the 5% is in lieuof the investment tax credit, companies need to negotiate to see what the standard ITC would be higher first.  The port investment bonus is limited to 50% of income tax credit liability in a given year and may be carried forward 10 years. 

The Optional Investment Tax Credit can be taken in lieuof the Investment Tax Credit, as well.  The credits range from 6% to 10% of qualified capital investment cost depending on the project county's tier.    All requirements for this credit are the same as the ITC, except the minimum investment determined based on the tier of level of county, ranging from $5 to $20 million. The credit may be claimed up to 10 years.  The Optional Investment Tax Credit equals 90% of the difference between (1) the taxpayer’s Georgia income tax liability for the current year and (2) the taxpayer’s base tax liability. 

Companies interested in pursuing any of these credits should contact the Georgia Department of Economic Development.

I've always had issues with spelling. (Bad spellers of the world, untie!)  I think somewhere around 9th grade, people clued me into "Wed Nes Day" and "To Get Her" to remember how to spell these rather simple words.  "Connect I Cut" was one I figured out for myself, thankyouverymuch.  So, in continuing our tour of the east coast, let's take a look at this state's fine offerings...

New Job Creation Tax Credit

Businesses creating at least 10 new full time jobs in Connecticut are eligible for the New Job Creation Tax Credit. This credit is available for five (5) successive tax years and can equal up to 60% of the state personal income tax witholdings from the new employees wages.  (Connecticut requires employers to withhold 3% of wages up to $10,000 and 5% of wages above that amount.)

So, for an employee with a salary of $65,000, an employer would get a credit of up to $1,830 annually or $9,150 over five years.  Not bad.  

The tax credit has a few limitations: (1) the total amount of credits granted to all taxpayers may not exceed $10 million in any one fiscal year and (2) new jobs means "job which did not exist prior to the application and which is filled by a new employee hired by the taxpayer."  Also, no carryforwards. 

Interested enterprises should submit a formal application to Connecticut's Department of Economic and Community Development(DECD).

I live very close to a continental divide--half of the rainwater runs towards the Great Lakes, the other half drains into the Mississippi.  And as I re-read the posts I've collected for the past 3 months, I notice there isn't such even split between the geographic coverage of my states incentive summaries.  So, to remedy my focus on the western part of the country, this week we will be exploring the economic development offerings of the Eastern Seaboard.

First up, the One Maryland Tax Credit.

Eligible businesses may receive up to $5,500,000 in tax credits for expanding in Maryland.  This tax credit comes in two parts: 

The Project Tax Credit -- Companies may receive tax credits totaling $5,000,000, equal to the costs and expenses of eligible expansion projects.  These costs include, among others, land acquisition, bonding costs, insurance, architectural and engineering services and utility installation.  Of course, you're more than welcome to spend more than $5 million, but your potential credits max out at that amount.

The Start-Up Tax Credit -- Companies relocating from outside Maryland can receive up to an additional $500,000 for office start-up costs, such as furnishing and equipping the new location.

To be eligible, businesses must locate or expand in a "Priority Funding Area" and create at least 25 new jobs within 2 years. 

Companies interested in pursuing the credit must submit a Declaration of Intent to Maryland's Department of Business and Economic Development and be certified as a qualifying company.

Now, the actual application of the credit is a bit complicated.  Maryland has specific rules for what income the tax credits may offset in what year.  In a nutshell, the tax credits may be taken for up to 14 years and are initially limited to project income tax liability. Interestingly, companies paying 250% of the national minimum wage may use excess credit against non-project tax liabilities, so it might pay to give your employees a higher salary.  (And that's the definition of a win-win situation.)

I feel like I'm growing up as this blog progresses.  Time to move past some of the marshmallow-y posts and get to the chewy, rich and oh-so-satisfying statutory analysis!  So, first one up is an interesting development for California Enterprise Zone tax credits.

Last September, California enacted Assembly Bill 1452, which limited the amount of tax credits that may be used to offset state franchise tax liability while, at the same time, enabling corporate taxpayers to assign whole or partial credits to unitary affiliates.  (It's a nice little give a take on California's part.)  These assigned credits can be used beginning in the tax years following January 1, 2010, which is right around the corner. 

Now, eligible credits may only be assigned to eligible assignees.  An “eligible credit” includes any credit earned  in a taxable year on or after July 1, 2008 and any credit earned prior to July 1, 2008 that may be carried forward to the taxpayer’s first taxable year after July 1, 2008. An “eligible assignee” is any affiliated corporation that is a member of the same combined reporting group as the assigning taxpayer.

The assignment is irrevocable and must be made on the assigning taxpayer’s original return for that year, and the benefit of this assignment is limited—the assigned credit remains subject to any carryover limitations and may not reduce the franchise tax liability by more than 50%.  Additionally, Enterprise Zone credit may only offset taxes attributable to the particular Enterprise Zone and therefore the assignee may only use an assigned tax credit to reduce its tax liability based on its own income attributable to the same Enterprise Zone. (So really, it's not as good of a bargain as it first sounds.)

The trick to utilizing this credit-assignment scheme is to be a parent corporation with a few unique subsidiaries, doing business in about the same location.  If this description fits your company, check out some of the EZ tax benefits you may qualify for.

See, that wasn't so bad, was it?