As a business, do you hate meeting with your tax accountant? Remember – they aren’t always the bearer of bad news. Here’s something you should want to talk with your tax planner about.
The Business Development Credit (BTC) provides incentives for job creation, capital investment, training, and corporate headquarters location or retention, for new and current businesses located in Wisconsin.
The credit is available to businesses certified by the Wisconsin Economic Development Corporation (WEDC) for taxable years that begin on or after January 1, 2016. This is new. During year-end planning, this may have been overlooked or it wasn’t known you were planning an expansion, training, or creating new jobs.
The BTC is a refundable credit equal to all of the following, as determined by the WEDC:
- The amount of wages the business paid to an eligible employee in the taxable year, not to exceed 10-percent of such wages.
- In addition to any amount claimed for an eligible employee under #1, the amount of wages that the business paid to the eligible employee in the taxable year, not to exceed 5-percent of such wages, if the eligible employee is employed in an economically distressed area.
- An amount equal to up to 50-percent of the business’ training costs incurred to undertake activities to enhance an eligible employee’s general knowledge, employability, and flexibility in the workplace; to develop skills unique to the business’ workplace or equipment; or to develop skills that will increase the quality of the business’ product.
- The amount of the personal property investment, not to exceed 3-percent of such investment, and the amount of the real property investment, not to exceed 5-percent of such investment, in a capital investment project that involves a total capital investment of a least $1,000,000 or, if less than $1,000,000, involves a capital investment equal to at least $10,000 per eligible employee employed on the project.
- An amount equal to a percentage of the amount of wages that the business paid to an eligible employee in the taxable year if the position in which the eligible employee was employed was created or retained in connection with the business’ location or retention of the business’ corporate headquarters in Wisconsin and the job duties associated with the eligible employee’s position involve the performance of corporate headquarters functions.
A Wisconsin manufacturer who is currently taking the Wisconsin Manufacturing and Agriculture Tax Credit would be eligible to receive a refund for the above activities even if their current Wisconsin income tax liability is effectively zero. Yes, that refund could help fund an expansion!
Evaluation of all BTC applications will include, but is not limited to, the following factors:
- Whether the project might not occur without the allocation of tax credits.
- The extent to which the project will increase employment in this state.
- The extent to which the project will contribute to the economic growth of this state.
- The extent to which the project will increase geographic diversity of available tax credits throughout this state.
- The financial soundness of the business.
- Any previous financial assistance that the business received from the Department of Commerce or the WEDC.
Businesses that are not qualified, except in extraordinary circumstances, include but are not limited to, the following: payday loan and title loan companies; telemarketing, other than inbound call centers; pawn shops; media outlets; retail; farms; primary care medical facilities; financial institutions; and businesses in the hospitality industry.
It’s not all good news though
The BTC is intended to encourage Wisconsin expansion and growth since several tax credits have expired. The following credits have expired for taxable years beginning on or after January 1, 2015, and while no new credits may be computed, unused nonrefundable credits computed prior to the expiration date may be carried forward subject to the carry forward limitations of each credit:
- Woody biomass harvesting and processing credit (refundable)
- Relocated business credit (nonrefundable)
- Health insurance risk-sharing plan assessments credit (nonrefundable)
- Job creation deduction (deduction)
The following credits have expired for taxable years beginning on or after January 1, 2016. No new credits may be computed unless the claimant entered into an executed contract or was issued a letter of intent to enter into a contract with the WEDC prior to December 31, 2015:
- Economic development credit
- Jobs tax credit
If you’re expanding your business, don’t miss out on some opportunities that can help pay for the project. If you’re not sure if you can or how to take advantage of these credits, reach out to Cam Brawley, Director of State and Local Tax Services at Wegner CPAs.