STate Tax Credits & Incentives
Various kinds of state tax credits and incentives are available against different state's income taxes for businesses. Many require a strict set of qualifications and compliance. Listed below is a summary of what is available in the New England Area states (if any), New York and California. Find out how our expertise in tax credits and incentives can add value to your business. Email us or call us at 1 (888) 875-9770.
Massachusetts offers a "Full Employment Credit" for an employer who participates in the Full Employment Program and continues to employ a participant at least one full month after any full employment program subsidy for that participant has expired. The credit is $100 per month of eligible employment per participant, up to $1,200 per participant after the program expiration period. Unused portion of the credit may be carried up to five years. Participation in the program must first be approved by the Department of Transitional Assistance. More information can be found on: http://www.mass.gov/Eeohhs2/docs/dta/g_reg_208.pdf.
Employers must keep adequate records to substantiate the credit. The records must state the name and Social Security number for claimed participants and the number of months of eligible employment completed by the participant. For each year where there was an unused portion of the credit, employers must maintain a reconciliation of the unused credit with the amount of the credit that is to be applied to the current year's tax and any remaining amount that will be carried forward.
Massachusetts also offers Job Incentive Payments to qualifying biotechnology and medical device manufacturing companies. Qualifying companies must in one calendar year increase their level of Massachusetts employment by at least 10 full-time equivalent biotechnology jobs over the previous calendar year in order to qualify for a jobs incentive payment. The jobs incentive payment equals 50% of the salary attributable to the increase of biotechnology jobs multiplied by the Massachusetts personal income tax rate. The payment is made in equal installments to qualifying companies over a three year period. The company must submit its request in the calendar year immediately following the increase year but before 12/31/2009. A company must make the request for Jobs Incentive Payments at http://www.dor.state.ma.us/apps/JIP/JIP.asp. Further information can be found under Technical Information Release TIR 04-19 on the MA.gov.
The Hiring Incentive Tax Credit against Connecticut state taxes may be available to employers. Employers can get a credit of $125 a month for up to 12 months for each employee hired who has received more than nine months of Temporary Family Assistance and who has worked or received training for at least 30 hours per week for a calendar month. This credit can total as much as $1,500 for each eligible employee per year. The state has a limited amount of money set aside for this credit, so the number of available credits is limited. The tax credits must be reserved in advance of hiring. The Commissioner of the Connecticut Department of Labor must approve all credit applications in advance. Applications for the hiring incentive tax credit program must be submitted annually to the Connecticut Department of Labor, Program Support Tax Credit Unit, 200 Folly Brook Boulevard, Wethersfield, CT 06109, during the application period of July 1 through December 31. The Labor Commissioner must approve or disapprove each application within 60 days of receipt. Further information can be found on CT Guide to Tax Credits found on http://www.ct.gov/drs/lib/drs/Publications/pubsip/2007/ip07-31.pdf.
The New Employment Tax Credit is available to employers who hire someone who previously received aid to families' dependent children or temporary assistance for needy familiars. The employer is allowed a credit of 40% (up to $2,400) of an eligible new employee's wages. New employees must have been previously unemployed for at least 26 weeks, and must have been a resident of the state or a welfare recipient for at least one year prior to date of hire. Employers must file with the RI Department of Labor and Training (DLT) within 30 days of hiring qualified employees. The credit cannot reduce the tax beyond $500 or be carried over or applied until all other credits have been applied. A written certificate from the director of human services must be obtained to claim the credit. More information can be found on the RI Website at http://www.dlt.state.ri.us/esu/taxcredits.htm#LongTerm.
June 9, 2008, New Hampshire has enacted a Coos County Tax Credit to attract jobs to the North County. The tax credit provides that any business that creates a job paying at least 150% of minimum wage would be eligible for a $750 credit against its business taxes for each of the next five years, while a company that creates a job paying 200% of minimum wage would receive a $1,000 credit. Also, the cost of health benefits can be added to a wage to determine whether the newly created job qualifies for a tax credit and at what level. Businesses will be able to apply the tax credit to the Business Enterprise Tax, and any unused portion to the Business Profits Tax. The credit is structured to protect existing jobs so that, for example, a company in the southern tier cannot move jobs to Berlin and receive the credit. More information can be found at http://www.nh.gov/revenue/faq/dra_3000.htm.
Generally, a taxpayer qualifying for an investment tax credit (other than at the optional rate applying to research and development property) may be eligible for an employee incentive tax credit for each of the two next succeeding tax years for which the investment tax credit is allowed. This credit is allowed only if the average number of employees during the tax year is at least 101% of the average number of employees during the employment base year. The employment base year is defined as the year immediately preceding the year in which the investment tax credit is allowed. If the taxpayer was not subject to tax and did not have a tax year in that period, then the employee base year is the tax year in which the investment tax credit is allowed.
The following rates apply for purposes of computing the employee incentive credit:
(1) Where the investment tax credit is allowed in tax years beginning after 1990, the amount of the employee incentive credit is: (a) 1.5% of the investment credit base if the average number of employees during the tax year is at least 101% but less than 102% of the average number of employees in the employment base year; (b) 2% of the investment credit base if the average number of employees during the tax year is at least 102% but less than 103% of the average number of employees in the employment base year; and (c) 2.5% of the investment credit base if the average number of employees during the tax year is equal to or greater than 103% of the average number of employees in the employment base year.
(2) Where the investment tax credit is allowed in tax years beginning in 1990, the amount of the employee incentive credit is (a) 2% of the investment credit base if the average number of employees in the employment base year is at least 101% but less than 101.5%; or (b) 2.5% of the investment credit base if the average number of employees in the employment base year is equal to or greater than 101.5%.
(3) Where the investment tax credit is allowed in tax years beginning in 1987, 1988, and 1989, the amount of the employee incentive credit is equal to 2% of the first $500 million of the investment credit base, and 2.5% of the excess over $500 million.
More information can be found on http://www.tax.state.ny.us/pdf/2007/corp/ct46i_2007.pdf or by calling the NY State Department at 1 (800) 782-8369.
Brawley (10/01/1998) and Calexico (10/01/1998) California are the two designated manufacturing enhancement areas. The hiring credit for a Manufacturing Enhancement Area must be reduced by the credit for employment of disabled or disadvantaged persons and by the federal credit allowed under IRC § 51. In addition, any deduction otherwise allowed by the Corporation Tax Law for wages or salaries paid or incurred by the qualified taxpayer on which the credit is based must be reduced by the amount of the credit, prior to any reductions arising from the limitations on how much credit may be allowed. The hiring credit for a Manufacturing Enhancement Area, including any credit carryover from prior years, that may reduce the net tax for the taxable year cannot exceed the tax that would be imposed on the qualified taxpayer's business income attributed to a Manufacturing Enhancement Area, determined as if that attributable income represented all of the net income of the qualified taxpayer subject to tax. Attributable income is the taxpayer's California source business income as apportioned to the Manufacturing Enhancement Area. Further information can be found at http://www.hcd.ca.gov/fa/cdbg/ez/manufac_enhance/.
Similar credits in California are available for Local Agency Military Base Recovery Areas and designated Enterprise Zones. Enterprise zones (EZs) were established California to provide tax incentives to businesses and allow private sector market forces to revive the local economy. Furthermore, taxable years beginning after 1996, qualified enterprise zone employees are allowed a credit against the net tax for 5% of their qualified wages. More information can be found on the CA Department of Housing and Community Development Website at http://www.hcd.ca.gov/fa/cdbg/ez/.
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