2023 Marcum Year-End Tax Guide

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“Businesses involved in these activities or planning on them should carefully examine the potential incentives ahead of time.”

With the passage of the Inflation Reduction Act and CHIPS Act, there has been a big push recently by the federal government to drive manufacturing within the U.S., particularly in the high-tech and clean industry. Some states have tailored incentive programs that target larger business investments from these industries and have garnered significant commitments. States constantly create new incentives or modify and extend programs to obtain specific objectives. For example, post-COVID credits and grants incentivized companies to reopen, keep staff, and get reimbursed for COVID-related expenditures. These incentives tend to be more targeted and shorter-lived, but if successful in accomplishing the intended purpose, the incentives could be extended or made permanent. New Jersey recently rolled out a successful PILOT grant program in 2022 that incentivized businesses to invest in new manufacturing equipment. New Jersey expects the program to be a success in 2023 as well. Illinois revamped some existing incentives and the process by which a company would satisfy the “but for” argument. New York made the investment credit

for farmers more lucrative, including making it refundable for the next couple of years. These are just a few examples of states continually updating their incentives to attract investment and jobs. • Activities that indicate incentives may be available include: • Opening new facilities or expanding existing facilities. • Changing headquarters locations or establishing a new regional headquarters. • Significant capital expenditures or leasehold improvements. • Workforce expansion and development (training). • Investment in high tech/ innovation. • Greening initiatives (carbon reduction/recycling). Businesses involved in these activities or planning on them should carefully examine the potential incentives ahead of time. This will help them plan from more targeted discussions and negotiations with economic development agencies on what makes the most financial sense.

Marcum Observation Credits and incentives are powerful tools used by governments to trigger desired actions. These incentives could benefit companies that engage in or are looking to become involved in certain activities. Using these tools effectively increases overall cash flow. Companies should consider consulting tax credits and incentives professionals to assist with obtaining and negotiating these incentives. There are hundreds of incentives nationally that businesses and owners can consider. Some of these incentives are localized to specific counties or tracts. Therefore, careful planning and scoping should be done before any planned expansions, development, hiring, or capital investment to ensure proper realization.

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