Taking Advantage of State Tax Credits

1. Taking Advantage of State Tax Credits Presented by John Corn Director of State & Local Taxes September 30, 2009 IRS CIRCULAR 230 DISCLOSURE: Unless explicitly stated to the contrary,  this communication (including any attachments) is not intended or written to  be used, and cannot be used, for the purpose of (i) avoiding penalties under  the Internal Revenue Code or (ii) promoting, marketing, or recommending to  another party any transaction or matter addressed herein.

2. Overview • Projects that offer tax credit opportunities • Credits vs. Incentives – What’s the difference? • Georgia’s “Big 3” Tax Credits • Job Tax Credit • Investment Tax Credit • Retraining Tax Credit • Resources needed to compute, secure, and comply with state tax credit policies

3. Projects that offer tax credit opportunities • New facilities • Expansions • Machinery and equipment purchases • Consolidations • Relocations • Modernization/multi-year investment • Mergers and acquisitions

4. Credits vs. Incentives – What’s the difference? Credits Statutory – Tax Policy Incentives Negotiated – Discretionary

5. Credits vs. Incentives – What’s the difference? Credits • Statutorily enacted to affect a certain behavior to stimulate economic development within a given region • Tax credits are usually based on • Certain industry sectors • Enterprise zone or targeted areas • Job growth • Capital expansion • Employer provided training • Research & development expenses • Employer provided childcare • Contributions to the local community • Hiring of disadvantaged individuals • Most tax credits are used to offset state income/franchise taxes • Some tax credit policies require pre-approval or pre-certification • Some states allow businesses to claim tax credits retroactively if overlooked on the original returns, and claimed within the statute of limitation

6. Credits vs. Incentives – What’s the difference? Incentives • Usually in the form of discretionary funds from the state or local government for infrastructure that supports the company’s expansion project as well as the public • Generally incentives are negotiated and agreed upon prior to a company’s proposed expansion • Incentives can be awarded in the form of • Grants • Low-interest financing • Property tax relief • Fee waivers • Free or discounted land • Utility rate reductions • Services for site preparation • Employee hiring and training support • Incentive agreements are usually conditional to capital spending and hiring commitments and have claw back provisions if commitments are breached

7. Georgia’s “Big 3” Tax Credits • Job Tax Credit • Investment Tax Credit • Retraining Tax Credit

8. Job Tax Credit • Most businesses are eligible - other than retail and certain service industries • Credit is based on the creation of new jobs – new jobs measured by average monthly headcount in prior to next year • Amount of credit ranges between $750 and $5,200 per job - credit is computed for multiple years if jobs are maintained • Factors that determine the credit value are the location where the jobs are created, capital expansion criteria, hiring thresholds, average wage requirements, and utilization of GA ports • Credit is claimed against GA income taxes, may be assigned to affiliated entities, and in some instances may be used to offset GA withholding tax

9. Investment Tax Credit • Credit is available to manufacturing and telecommunications businesses • Credit is based on capital expansion projects greater than $50,000 • Amount of credit is 1%, 3% or 5% of total project capitalized expenses (credit amount determined by location of expansion project) • Project plan must be approved by GA Dept. of Revenue prior to claiming credit • Credit is claimed against GA income taxes or may be assigned to affiliated entities

10. Retraining Tax Credit • Credit is available to any business providing certain technical training to experienced employees otherwise unable to function effectively • Credit is one-half of the direct costs for retraining – limited to $500 per participant, $1,250 per employee • Retraining courses must be approved by the Technical College System of Georgia prior to claiming credit • Credit is claimed against GA income taxes or may be assigned to affiliated entities

11. Resources needed to compute, secure, and comply with state tax credit policies • Project management • Multi-state tax policy research • Information gathering / data collection • Excel / Word • Advocacy / Lobbying • Compliance and monitoring

12. Questions

13. Contact Information John Corn Director of State and Local Taxes (770)353-3156 (office) john.corn@hawcpa.com IRS CIRCULAR 230 DISCLOSURE: Unless explicitly stated to the contrary,  this communication (including any attachments) is not intended or written to  be used, and cannot be used, for the purpose of (i) avoiding penalties under  the Internal Revenue Code or (ii) promoting, marketing, or recommending to  another party any transaction or matter addressed herein.