2023 Marcum Year-End Tax Guide

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Credits and incentives remain an excellent tool for governments to spark economic growth and attract and retain businesses. Incentives can target specific industry sectors or less developed locations (enterprise zones, for example) to spur economic growth and jobs. OVERLOOK MILLIONS IN STATE INCENTIVES BY BARRY HALPERN UNTAPPED POTENTIAL: WHY COMPANIES

Yet, credits and incentives continue to go unclaimed each year. In fact, in the recent Marcum manufacturing survey, over 60% of companies surveyed were not taking advantage of state and local tax credits. Even more surprising is that nearly 80% were not taking advantage of certain federal or state credits. While it is possible that incentives were not available to many of the companies surveyed, I would be hard-pressed to believe that 80% of companies surveyed could not avail themselves of any incentives. While certain incentives require rigorous compliance or an approval and negotiation process on the front end, numerous incentives have no such requirement. Some incentives are available to companies just running business as usual and can be claimed on an original or amended return. Therefore, it appears that at least a handful of these businesses were either not aware of or did not have the ability to pursue valuable incentives. Companies can significantly increase their bottom line by properly taking advantage of incentives.

Credits and incentives are generally either statutory or discretionary, negotiated incentives. Statutory incentives reward companies for activities that governments are trying to attract (e.g., investment, jobs, training, etc.). The requirements are generally contained in legislation, and the incentives are claimed on a filing such as a tax return. Statutory incentives can include: • Investment tax credits • Jobs tax credits/Withholding credits. • Research and development incentives • Training credits • Sales tax exemptions • Port credits • Foreign Trade Zones (“FTZs”) • Location-based credits Investment tax credits incentivize capital investment for targeted purposes. These credits are generally computed as a percentage of capital investment (including buildings and structural upgrades in some states).

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