Finding ways to increase cash flow can be challenging for some business owners. State credit and incentive programs may help improve your business balance sheet. You may qualify if you are planning any of the following initiatives:
- Relocating business operations to a distressed or revitalization area
- Investing in research and development
- Making “green” or environmentally friendly upgrades or changes to infrastructure
- Creating jobs
In addition to credits and incentives, your business may be eligible for grants, low-interest financing or reduced utility costs.
The opportunities available vary, but even during this tough economy, your state may have programs that will benefit your business such as the Manufacturer’s Purchase Credit in Illinois. Federal opportunities, such as the Small Business Job Creation Tax Credits, are available as well.
How Credits Work
Credits are designed to encourage specific activities within your state. They are typically claimed on a taxpayer’s state or local income, franchise, or net worth tax return and may be carried forward if unused in the current year. Some are even refundable. It’s important to note that some credits require pre-approval from the government agency awarding the credit.
How Incentives Work
Incentives are benefits that are negotiated with state or local economic development, taxation, or other government officials as an inducement to locate or expand operations in a specific jurisdiction. Incentives must be negotiated well in advance with the government agency awarding the incentive. We have significant experience negotiating these incentives for our clients.
Historic Tax Credits
Redevelopment provides cultural and aesthetic benefits to communities. The redevelopers, however, may be unaware of the financial incentives that support these efforts.
The most significant tax incentives in this area are the 20% tax credit provided by the US federal government and the 25% tax credit provided by the Missouri Department of Revenue for qualified rehabilitation expenditures (QREs) used to rehabilitate certified historic buildings. Other states, in addition to Missouri, have historic or rehabilitation tax credits available. These qualifications apply:
- The building must be a certified historic structure or located in a certified historic district
- The project meets a ‘substantial rehabilitation’ test
- To qualify for federal tax credits, the building must be used for income-producing purposes such as for a trade or business after rehabilitation (the state of Missouri does allow tax credits on the rehabilitation of personal residences)
- The rehabilitation adheres to the Secretary of the Interior’s Standards for Rehabilitation
Brown Smith Wallace has an experienced team versed in how to identify and leverage tax credits and incentives for business owners.