What Are Incentives
An “incentive” is not necessarily a formal legal or legislative program or benefit. Federal and state legislators establish tax credits and other benefits to provide incentives for business activities like providing health insurance to employees or using energy-efficient technologies. They typically do not, however, intend for these programs to benefit specific businesses.
How to Take Advantage of Incentives
The IRS enforces federal tax law nationwide. It has little interest in promoting business activities in specific areas unless directed to do so by Congress, such as in designated Opportunity Zones. State and local officials often have more flexibility to provide credits or exemptions to businesses in order to encourage them to do business in their jurisdictions by hiring local workers, investing in existing facilities or developing new operations in the area. Incentives offered at the state or local level might involve:
• Tax credits, exemptions or abatements;
• Fee waivers;
• Regulatory exemptions; and
• Grants.
Incentives Under Federal law
While federal incentives are not as flexible as state and local incentives, it is worth reviewing what kinds of incentives are available. State and local incentives often mirror programs established by Congress. Federal incentives most often take the form of tax credits, including the following:
• General Business Credit
• Investment Credit
• Work Opportunity Credit
• Credit for Increasing Research Activities
• Disabled Access Credit
• Qualified Electric Vehicle Credit
• Carbon Oxide Sequestration Credit
• Credit for Small Employer Health Insurance Premiums
• Employer Credit for Paid Family and Medical Leave
Incentives Under State and Local Laws
Examples of incentives through a state or local government agency or official might include the following:
• Income tax breaks: A state or local government might agree to reduce or waive business income tax for a period of time to encourage investment and development.
• Sales tax breaks: Local officials can provide sales tax exemptions to incentivize certain business activities.
• Payroll tax breaks: State and local governments can provide credits or exemptions for state payroll taxes, often to promote workforce development.
• Property tax abatements: Officials may provide exemptions on property tax to encourage development.
• Grants: Governments can provide grants to businesses to cover a wide range of expenses, including training and research.
• Fee or permit waivers: Officials may waive certain requirements to make their area more appealing to businesses.
Learn More About Business Incentives
Local and state governments want to encourage businesses to operate and prosper in their jurisdictions. Successful businesses tend to promote successful communities and satisfied voters, after all. Identifying available incentives can be challenging, though, so business owners should consult with experts who can help them understand their options.
Contact Frankel to learn more about how we can support your business at www.frankel.cpa or call us at (402) 469-9100.
