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Q1 2013 State Tax Credits & Incentives Update

April 2, 2013

First quarter 2013 many states focused on publishing guidelines and posting informational memorandums.  No breakthrough legislation was at the forefront in the tax credits and incentives arena and mostly tweaking and clarification occurred this quarter.  Many state governors are asking their legislators to consider tax cuts and rate reductions and even elimination of personal income tax, corporate tax and in some instances property tax.  Solutions to this lost revenue are deep cost cutting and higher sales tax.

Following is a summary of Q1 legislative tax credits and incentives activity:

Alabama – approves designation of “Major 21st Century Manufacturing Zones” by municipalities.  Legislation provides for funding up to 100% of costs through tax increment financing by cities and counties.  The state also extends the sunset date of capital credit and recording of tax abatements to end of 2018.

Florida – DOR adopts emergency rule regarding R&D income tax credits.  The rule clarifies annual reporting, documentation, and tax credit limits in Advisement No. 13A-001.  Florida also reduces the increases in productive output requirement from 10% to 5% for sales and use tax exemption eligibility on industrial machinery and equipment.

Montana – new processes and timelines enacted for local government approval and denial of property tax abatements or exemptions in H.B. 152.  Legislators also amend and adopt new regulations for Alternative Energy Systems credit, Film Production credits, Energy-Conservation credit and credit for increasing R&D.

New Jersey – refundable New Jobs for NJ tax credit for employers of 100 or fewer FTEs hired after 4-1-13 equal to payroll taxes paid during tax year for each eligible employee.

Minnesota – expands R&D credit for qualified activities

Iowa – on the table is a proposal to raise state tax credits allowance from $120 million to $185 million to expanding companies in the state.  Also look for a streamlined HIRE One Act Credit and elimination of personal property tax.  The Department of Economic Development adopts amendment to Endow Iowa tax credits increasing the amount available against corporate and personal taxes for 2012.

New York – releases TSB-M-13(1) summarizing reduced tax rates for eligible manufacturers until 1-1-15.  Eligibility requirements are also explained.

Wisconsin – published updated fact sheets on income tax credits.  The governors proposed budget includes adding $175 million additional credits for economic development tax credit program.

Michigan – beginning 12-31-13 local property tax exemption is allowed for commercial and industrial personal property if combined taxable value of all property owned is less than $40,000.  Michigan personal property tax is being phased out through 2016.

California – on the horizon with public comment closed in February, various changes to the EZ legislation; updated fees, elimination of retroactive vouchering; streamlining processes, self-certification, data collection and audit procedures.

Colorado – provides guidance revisions for various tax credits including Aircraft Manufacturer New Employee Credit, Job Growth Incentive Credit, and Plastic Recycling Investment Credit.  DOR updated guidance for claiming EZ New Business Facility Employee Tax Credits and updates the list of counties designated as Enhanced Rural EZs for 2013 – 2014 in FYI Income 10 memorandum.

Pennsylvania – The city of Philadelphia extends the Special Tax Credit Opportunity for Job Creation indefinitely for each new job created for eligible employers.

Louisiana – DOR issues Informational Bulletin No. 13-010 summarizing changes to the R&D credit with and extension to 12-31-19.

New Mexico – modifies High-Wage Jobs credit to clarify eligibility, adjusts certification requirements and extends the credit to 2020.

Virginia – increases the amount of worker retraining to maximum of $200/year/employee tax credit for eligible worker training courses by qualified employers.  Retraining must be in science, technology, engineering, mathematics or applied mathematics.  Sunset date is extended to 2018 (H.B. 1923).

Illinois – DOR issues Bulletin FY 2013-12 summarizing reporting requirements for EZ tax payers receiving tax incentives and also deadlines for reporting.

Please contact Baetsen & Associates at (616) 301-5980 or dawn.baetsen@debaetsen.com for your business tax credits and incentives needs.

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