An Overlooked Opportunity for Impressive Tax Breaks

Location-based incentive credits often trigger six-figure savings

By Blake Christian, CPA, MBT, Partner, Holthouse Carlin & Van Trigt LLP

There are currently more than 8,500 distinct Location-Based Incentive Credit (LBIC) regions throughout the United States that offer important tax credits and other incentives for businesses that locate in economically challenged zones and hire workers who live nearby or meet other statutory criteria.
It’s estimated that 20 percent of businesses, or more, have locations that are eligible for LBICs, but very few take advantage of the tax breaks available. The tax savings can be significant — at our firm the average client savings is more than $250,000 per taxpayer, with some savings reaching into the millions.

In addition to current-year tax savings, most federal LBIC programs let you claim credits for up to three prior years, via amended returns. State rules vary, and may require applying to participate before claiming tax credits.

The amount of annual tax credits available range from $500 to $15,000 per qualified employee, depending on the program. You might be surprised to learn that even at so-called “white collar” businesses, we’ve found 15 to 20 percent of workers qualify, while at manufacturers, the number of qualified employees can reach 35 to 40 percent or more.

Generally, employee eligibility hinges on factors like income at or near the poverty level, or eligibility for entitlement programs. However, employers can also get tax breaks for hiring veterans or for retraining workers laid off at another industry.

In addition to location-specific credits, businesses located anywhere can take advantage of the federal Work Opportunity Tax Credit and generate from $2,400 to $9,000 in tax credits for workers on public assistance or residents of 408 Rural Renewal Counties.

Because LBICs can be a big “win” for the tax department, it makes a lot of sense to invest the time necessary to see if your business qualifies. Years ago, that would take literally hundreds of hours of detective work, but now, database products like CCH’s Business Incentives products can tell you in a fraction of the time, and give you the tools you need to get the credit you deserve.

This story is from the CCH e-newsletter Figures, written specifically for corporate tax professionals. Figures offers tips, tricks and ideas about how to increase your organization’s productivity and efficiency.  Every issue also features insights with a corporate tax professional

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AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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