Timing is Everything: Prepare Your Credits and Incentives Plan Early

Economic credits and incentives deliver tremendous value to growing companies. When the Amazon HQ2 project made national headlines, everyone became aware of the breadth of credits and incentives. It seems that these valuable tax savings are reserved for only large-scale projects; however, that is not the case. Everyday businesses in manufacturing, technology, logistics and even commercial or multi-family developments can benefit from credits and incentives if they meet the necessary thresholds. The driving factor involves planning for economic credits and incentives in advance of a growth project.

The question business owners and their advisors must ask themselves is: How can we realize these valuable outcomes? More specifically, when should the process start, and what are the key steps?

Timing is the most crucial element for businesses seeking economic credits and incentives. Correct timing can deliver tens of thousands of dollars in savings. As business owners make plans for the new year and future years to come, economic credits and incentives should be a part of the strategic planning discussion.

The majority of incentives are discretionary and often require a “but-for” clause; in other words, were it not for the offered incentives, the company would not invest or would limit its investment in a new growth project. Therefore, businesses must apply for economic incentives before final growth decisions take place. By discussing growth options with your CPA early in the decision-making process, your trusted advisors will evaluate and determine the best programs or tax savings tools.

A few “key triggers” signify incentive opportunities for business owners. Key triggers include plans to:

• Add jobs
• Add investment (tangible property or real property)
• Make a business acquisition
• Change a company location

When a company states it is considering new growth in these areas, advisors should see potential incentive value.

Growth triggers often sound like:

• “I need to add another shift to keep up with demand!”
• “My equipment is running 24/7 – I need to add more capacity and am looking at capital options to purchase additional machinery and equipment.”
• “We are busting at the seams! We have been looking at the space next door, and I’ve started talking with a real estate broker about finding a bigger location.”
• “One of our competitors did not make it through the pandemic; I’m starting to talk with my attorney about acquiring their assets and book of business.”

Future growth and vision are essential starting points for economic credits and incentives discussions. CPAs and economic credits and incentives professionals can help vet these opportunities and determine which options are best for the business. By starting these conversations early in the decision-making process, the business owner can increase their opportunity to maximize their tax savings. 

Do you have a growth project planned soon? Will you add more jobs or increase investment into your business this year? If so, reach out to your CPA advisor, and let’s discuss credits and incentives that may be available to you!

Contributor: Ben Worrell, Economic Credits & Incentives Consultant at McGuire Sponsel