Category: Retraining Tax Credit

Tax Incentives “Below the Line”

Tax incentives that impact a company’s income taxes are considered “below the line.”  They are not part of the EBITDA calculation (Earnings Before Interest, Taxes, Depreciation, and Amortization) and only benefit income tax payers.  But tax payers may be the company itself (such as a C-Corp) or individual shareholders (pass-through entities).
Many tax incentives for companies are based on activities that the company has already done or plans to do.  Depending on the type of company and location, a company may be able to benefit from the following Federal and State tax incentives and related activities:


  • Research and Development Tax Credits — new products or new processes
  • Work Opportunity Tax Credits (WOTC) — hire new employees that have specific backgrounds
  • Section 179-D Deductions — energy incentives for buildings
  • Cost Segregation Studies — reclassify building costs of new construction

State (Georgia Example)

  • Research and Development Tax Credits — new products or new processes
  • Retraining Tax Credits — train existing employees
  • Job Tax Credits — new job additions
  • Investment Tax Credits — new land, buildings, and equipment

If your clients are paying income taxes, remember to review their current and planned activities to find their “below the line” tax incentives — they will thank you for helping them save money!


Pattern Recognition for Tax Credits

Your tax software may be able to help you find patterns in your client’s tax data that could uncover tax credits! During tax season, everyone is busy collecting and reviewing client tax data. After it has been reviewed, this data is entered into the tax software, and the software usually helps guide you through the steps required to file the tax returns.

But before the tax return is finalized, don’t forget to check for potential tax credits. Since tax credits are based on your client’s activities, it may not be immediately apparent, but their tax data could contain key indicators of tax credit qualifying activities.

Here are a few tax categories that could include indicators of potential tax credit activities:
  • Salaries and wages
  • Rents and operating leases
  • Depreciation, Section 179 deductions & bonus depreciation
  • Other deductions such as computer expenses, professional services, consulting, and outside services
  • “Other costs”

Your tax software’s reporting and business analytics capabilities may be able to assist with your analysis of current year and prior years.  For example, look at a 4-year trend of Section 179 items (such as equipment or software). Any slow steady growth, large blips or increases, or unusual trends?  A year-to-year increase of 20% or more may be worth drilling down into the details for further review. If you find something, talk with your client and ask a few questions! What about that employee training (Retraining Tax Credit or training grant program)? Was that large purchase used for manufacturing (Investment tax credits)?

Your client will thank you for recognizing their patterns — and for not being just another “tax return filer” outfit.


“Professional” Tax Credits!

Did you know that your professional service firm clients could get Georgia tax credits?  Here’s why — more than ever, professional service firms are continually updating and adding new technologies. Your clients that provide Advertising, Architectural, Consulting, Accounting (including yours!), Engineering, Insurance Agency, Law, Marketing, Public Relations, Software Development, Training, Wealth Management, and others, could be eligible:
  • Job Tax Credits – For firms adding employees and located in Opportunity Zones, Military Zones, or Tier 1/Lower 40 counties.
  • Retraining Tax Credits – For training existing employees on new technologies that include new software, upgrades, additional modules, customized systems and business process changes.
 The following areas offer great potential for Retraining Tax Credits:
  • Business management systems – main business systems for operating the firm, such as Deltek Vision, SAGE, Aderant, Epic, or other software, including annual updates
  • Customer relationship management systems (CRM) – for business development, lead generation, prospective client tracking, and new client intake such as
  • Document management systems – for paperless operations and workflow
  • Specialized systems – CAD, design, project management, engineering analysis, tax, audit, case management, time & material tracking, portfolio analysis and other software
  • Lean Office – similar to Lean Manufacturing initiatives for quality, cost and customer service improvements.
  • Marketing systems – website, social media, LinkedIn, Twitter and other e-commerce systems

Reach out to your professional service firm clients to let them know about the potential $$ waiting for them!


Year End Tax Planning and Obamacare

Now that the October 15 tax deadline has passed, I hope you are rested and back to work! The next big things on your plate are year-end tax planning with your existing clients and reaching out to prospective clients.

While you discuss upcoming tax liabilities with a client, you can also point out how much they can save with tax credits. What does that have to do with Obamacare?

The bad news:  the ACA (Affordable Care Act) requires additional reporting by every company with 50 or more full time employees (called “Applicable Large Employer,” or ALE). Click here for details.

The good news: based on our experience with thousands of retraining tax credit (RTC) projects over the past 13 years, companies with 50+ employees almost always have qualifying activities for Retraining Tax Credits!

The following may help with your client discussions:
  • Last year: Any changes to their business or related software? How about head count increases? Any expansions, new locations or large capital expenditures?
  • This year: Same as above and any plans for November or December
  • Next year: What are they planning to do?

So you see, the Obamacare reporting requirements are a great leading indicator for tax credit opportunities.  Bottom line: ALE = $RTC. Good luck as you reach out, find out, and help out with tax credits.


Hungry for Tax Credits?

Georgia offers several tax credits for poultry, pork, sausage, vegetable, pecan, peanuts, Ag business and other food processors. Their activities that may qualify for the following Georgia tax credits:
  • Job Tax Credits – For distribution, manufacturing, or wholesale operations, or if the company has locations in Opportunity Zones, Military Zones, or Tier 1/Lower 40 counties.
  • Investment Tax Credits – Qualified manufacturing operations may benefit from capital expenditure and operating lease investments for investment tax credits, which can include land, buildings, equipment and packing sheds.
  • Retraining Tax Credits – For training existing employees on new technologies that include new software, upgrades, additional modules, customized systems and business process changes.
Here are more details for those Retraining Tax Credits:
  • Enterprise Resource Planning systems (ERP) – order entry, billing, accounts receivable, and human resources such as Microsoft Dynamics, Just Food ERP, Sage software, Vicinity Manufacturing software and SAP
  • Customer Relationship Management systems (CRM) – sales management, lead tracking, customer service and marketing, such as and other systems
  • Warehouse management systems (WMS) – order picking, replenishment, inventory management, and shipping, such as JDA software, Foxfire, and Ramp Systems
  • Equipment – equipment for cleaning, cutting, cooking, packaging, bailing and other processes
  • Programs and initiatives – SQF 2000, ISO-9000, HAACP, HARPC, GMP and others
  • LEAN Manufacturing and workflow changes – business process and workflow changes for quality, costs, on-time delivery and other initiatives.

Help your food processor clients satisfy their hunger for tax credits. Reach out and let them know about the potential $$ waiting for them!


Healthy Tax Credits

Physician practices, auxiliary surgery centers and other healthcare providers are continually investing in their business and utilizing more technologies. Many of their activities may qualify for the following Georgia tax credits:
  • Job Tax Credits – If the practice has locations in Opportunity Zones, Military Zones, or Tier 1/Lower 40 counties.
  • Retraining Tax Credits – For training existing employees on new technologies that include new software, upgrades, additional modules, customized systems and business process changes.
Look for the following great opportunities for Retraining Tax Credits:
  • Practice Management System (PM) – main business system for patient billing, patient scheduling, ICD-10 initiatives and accounting. Software includes Athena Health, Allscripts, GE Centricity, Greenway, eClinical and other vendors.
  • Electronic Medical Records (EMR/EHR) – for digital/paperless patient records, Meaningful Use compliance and related activities.
  • Laboratory information system – Lab data collection, test, analysis and tracking.
  • Patient service systems – patient portal & kiosks, automated patient check-in, and intake form processing, such as Clearwave and Phreesia systems.
  • Clinical & diagnostic equipment – such as Sonia gram, MRI, PET, and Cardio stress testing.
  • Workflow and LEAN Healthcare – business process and workflow changes for quality, costs and other initiatives.

So reach out to your healthcare clients and prospects to let them know about the potential $$ waiting for them!


Driving to Tax Credits!

Automobile dealership are rebuilding their facilities, expanding their operations, utilizing more technologies, and adding employees. In Georgia, these activities could qualify for the following state tax credits:

  • Job Tax Credits – If the company has locations in Opportunity Zones, Military Zones, or Tier 1/Lower 40 counties.
  • Retraining Tax Credits – For training existing employees on new technologies that include new software, upgrades, additional modules, customized systems and business process changes.

The following areas offer great potential for Retraining Tax Credits:

  1. Dealer management systems (DMS) – main business system for operating dealerships, such as CDK Global (formerly ADP), Reynolds & Reynolds, DealerTrack or other software, including annual updates
  2. Customer relationship management systems (CRM) – for the sales team in the new car, used car and service areas such as eLead, Vin Solutions, Lead generation systems and Business development center systems
  3. Vehicle key security systems – for key control, management, security and tracking
  4. Technician training – on new technologies needed for maintenance, repair, refurbish and other vehicle services
  5. Document imaging – for paperless contracts and agreements
  6. E-Commerce – manage inquiries, inventories, and parts; schedule vehicle service and other customer needs

Any or all of these qualifying activities (for future and prior years) could provide hidden tax credits that drive your clients’ AND your business.


Logistics and Trucking Tax Credits

Georgia’s growing logistics, trucking and third party logistics (3PL) companies are making a big impact on the economy due to Georgia’s location, ports, highways and airports. Fortunately, the State of Georgia offers key tax credits to assist these companies with their growth and activities. These activities could qualify for the following Georgia tax credits:

  • Job Tax Credits – If the company has locations in Opportunity Zones, Military Zones, or Tier 1/Lower 40 counties. There may be additional job tax credits if the company is involved with distribution, wholesale or manufacturing.
  • Retraining Tax Credits – For training existing employees on new technologies that include new software, upgrades, additional modules, customized systems and business process changes.

The following areas offer great potential for Retraining Tax Credits:

  1. Enterprise management systems – order entry, billing, accounts receivable, and human resources such as Microsoft Dynamics, Sage software and SAP
  2. Warehouse management systems – order picking, replenishment, inventory management, and shipping, such as JDA software, Foxfire, and Ramp Systems
  3. Transportation management systems – booking, dispatch, and load management such as McCleod software, CarrierWeb, Profit Tools and Fleetmatics
  4. Hours of Service tracking and management systems such as Peoplenet
  5. On-board vehicle tracking, messaging, and log management systemssuch as Bigroad
  6. Fleet maintenance, tractor service systems and procedures such as Squarerigger

So find out what your logistics, trucking, and 3PL clients are planning next.  Now is a great time to reach out to your existing or prospective clients in these industries to discuss tax credits!


Contractors & Tax Credits

Weak recovery or not, seems like contracting and construction company activities have really picked up lately. And with increased business, these companies are now finally upgrading their software, training their employees, and adding more jobs. And guess what?  These activities may qualify for Georgia tax credits:

  • Job Tax Credits – Contractors and construction companies located in Opportunity Zones, Military Zones, or Tier 1/Lower 40 counties.
  • Retraining Tax Credits – For training existing employees on new technologies that include new software, upgrades, additional modules, customized systems and business process changes.

The following areas offer great potential for Retraining Tax Credits:

  1. Business management and project control – main business systems for operating the company, including accounting, estimating, costing, and project management. Examples include Viewpoint, Timberline/SAGE, Deltek or other software packages.
  2. Customer relationship management systems (CRM) – similar to for the business development team.
  3. Mobile technologies: for field superintendents, project managers, technicians and others that use mobile devices/tablets such as Apple’s iPad.
  4. Document imaging: for paperless contracts, agreements, invoices and document management.
  5. Computer assisted systems: CAD, building information modeling (BIM, virtual construction systems, and others.
  6. LEAN initiatives: Six Sigma, 5-S and other business process and work flow productivity changes.

If your existing or prospective client is a contractor or a construction company, tax credits can be a tremendous benefit for activities last year, this year and next year. Reach out to these companies to let them know about the potential $$ waiting for them!



Private Equity, Portfolio Companies, & Tax Credits

You may be working with a private equity group and their portfolio companies. In addition, your client may be looking at a transaction such as a buy-out or a recapitalization for their business. Tax credits can generate great leverage by reducing taxes and increasing cash in many cases. Here are some examples:

Pre-Transaction — Getting the company ready 2+ years in advance. Things need to be cleaned up, systems need to be upgraded, operations and processes improved. Many of changes may qualify for retraining tax creditsdue to the changes in workflow and business processes and software. Employment increases may qualify for job tax credits.

Portfolio Company — May be held for 5 to 7 years before it is sold. The private equity group’s operating partner may make changes to the company to prepare it for the exit. These changes may include acquiring, integrating or rolling-up with other portfolio companies. Related business activities could involve new systems and software (retraining tax credit), new equipment (investment tax credit) and new jobs (job tax credit). In certain situations tax credits can be applied against state payroll withholding taxes, which will increase cash flow.

Exit/Divestiture — After the company has been sold, it may benefit from tax credits due to changes the new owner will make. If the new owner is located out of state, you can help them greatly with your knowledge of state incentives.

Whether your client is a private equity group or a potential portfolio company, tax credits can be a tremendous benefit for them and providing a large value added service from you. Keep these credits and incentives in mind when you discuss their big deals!


Use Payroll Records to Find Tax Credits!

Believe it or not, your clients’ payroll systems contain key data to help you find them tax credits!  Whether they use an outside payroll provider or internal payroll software, it’s important to discuss this with them. For example, the Georgia Retraining Tax Credit and the Job Tax Credits in many states are dependent on details that can only be found in the payroll systems. Here are a few items to keep in mind regarding payroll systems and tax credits:

  • Employee Data – employee ID (not SSN), job title, pay rate, hire & termination date, state resident, location and Quarterly Georgia DOL-4 details.
  • Access to historical data – important for prior years and trend analysis.
  • Ability to download details to spreadsheets – Since each tax credit has its own unique requirements, it’s important to be able to analyze the data as needed.
  • Georgia payroll withholding taxes – Ask the outside payroll provider about their actual experience with utilizing tax credits against Georgia payroll withholding taxes (click here for the form and list of qualifying tax credits).

Many payroll companies offer sophisticated Human Resource Information Systems (HRIS) that provide additional features that may be beneficial. For example, monthly headcount by location and analysis of employee transfers versus new hires are critical when your client has multiple locations throughout Georgia. Some locations may be in special Opportunity Zone or Military Zone tax credit locations.

Helping your clients understand how payroll helps with tax credits strengthens your client relationships!



Get Two Years of Tax Credits Instead of One!

Your Georgia clients may be able to get two years of Retraining Tax Credits if they start now. Since this tax credit is capped at $1,250 per employee per tax year, they may start their software roll out now, begin the initial training in 2014 (first tax year), then complete the training in 2015 (second tax year).

Here are some ideas that may help:

  1. Potential training in 2014 (initial training):
    • Overview & introduction to all employees, with coffee & donuts
    • Major business processes affected by the new system(s) – customer records, project management, financial control
    • Departmental platforms/changes
  2. Potential training in 2015 (more specific to your client’s business processes):
    • For employee’s job or task areas, such as accounting, order entry, and customer service
    • Job-specific training; for example, accounts receivable, accounts payable, and journal entry.
    • Software add-ons and specialized modules affecting individual teams.

Your client and their software vendor may be planning the implementation right now, so your input sooner rather than later will go a long way towards helping them double their benefits from tax credits. Instead of getting $1,250 per employee, why not have better-trained employees and get $2,500 per employee in tax credits??



Kentucky Credits and Incentives

As we’ve mentioned before, our Georgia clients frequently ask us to investigate potential credits and incentives in other states where they have operations, potential acquisitions or strong relationships with customers or vendors. In addition, private equity groups ask us about potential $$ for their portfolio companies.

We were recently asked about credits and incentives in Kentucky. I was able to speak with some Kentucky economic development professionals and learned some details (Kentucky Cabinet for Economic Development’s Think Kentucky site click here).

Kentucky’s main tax credits and incentives are meant to encourage new jobs and investments within the state.  Incentives and credits are available to a decent range of targeted industries that include manufacturing, energy, technology, motion picture production, headquarters facilities, and others.

Kentucky’s credits and incentives range in complexity and are typically more generous than other states.

  • Kentucky Business Investment Program (KBI) – Up to 100% tax credit or wage assessment up to 5% of gross wages for projects creating 10 new jobs and $100,000 investment.
  • Kentucky Reinvestment Act (KRA) – Provides up to 50% of project costs and 100% of job skills upgrade costs for investments by manufacturers of $2.5 million (plus other qualifications) for up to 10 years.
  • Kentucky Enterprise Initiative Act (KEIA) – Sales and use tax refunds for minimum investments of $500,000 on materials, equipment, and IT.
  • Skills Training Investment Credit – Tax credit for existing companies, providing up to 50% of approved costs for occupational and skills upgrade training, limited to $500 per Kentucky resident not to exceed $100,000 per company per biennium.
  • Other incentives include tax credits, grants, loans, and reimbursements for “environmental stewardship,” industrial revitalization, research and development, alternative fuel development, and small business investments, among others.
  • Bluegrass State Skills Corporation (BSSC) – A leading workforce training program, BSSC provides grants for training and employment services for new, expanding, and existing companies (click here).

Compared to Georgia, Kentucky has:

  • Similar tax rates and structure
  • A similar range of incentives and credits.
  • A somewhat smaller range of companies eligible for most credits.
  • Similar qualifying activities and somewhat smaller incentive $$ amounts.
  • more hands-on approach to working with companies and projects.
  • BIG DIFFERENCE – most incentives must be pre-approved and carefully planned.

To summarize, Kentucky is very competitive with surrounding states. However, prospective and existing Kentucky businesses must get permission from the state to receive benefits from most of the credits and incentive programs.

Do any of your clients have Kentucky connections?  If so, check out the Blue Grass State’s opportunities.


Tax Credits for the Deal

Have you seen an increase lately in buyouts, mergers, and acquisitions in your market?  You may have been involved in deals with private equity groups buying local companies, hospitals buying physician practices, etc.

The buyout of a client can create uncertainty and turmoil in your business, as you well know.  But even in this environment, there are ways you can strengthen and build a client relationship, even if they will no longer be your client.

Often in the time leading up to a business sale, the buyer’s integration team works with the seller’s employees to install the buyer’s software, business processes and workflow.  Since the buyer doesn’t want to disrupt the seller’s business during transition, this installation may be done prior to the “official” sale date (when the seller’s employees are moved to the buyer’s payroll). During this time period, the seller’s employees are still employed by the seller. The seller is heavily involved with the training development and employee training. Luckily, these activities may qualify for a training tax credit or other incentive!  Depending on your client’s location, either the seller or the buyer could get a huge training or retraining state tax credit.

By letting your clients know about these tax credit opportunities, you will maintain your relationships with them and may be able to leverage new relationships with the buyer for additional business. Who knows, in three years, your main contact may leave the company and start another company (and engage you again).  Either way, that would be a good Deal!



Which Employees Count for Tax Credits?

As your clients’ business improves, they may start to hire additional employees or need to retrain their existing employees.  As with many states, there is a lot of confusion about the Georgia tax credits and employment levels. Here is a high level overview that may help in determining which employees count for the credits:

All tax credits:

  • Can NOT count 1099s, contractors, or employees of third party firms

Retraining Tax Credit:

  • Georgia resident (for example, CANNOT reside in South Carolina and commute to Augusta)
  • Existing employee (employed with the company a minimum of 16 weeks)
  • Full time (employed for a minimum of 25 hours per week)
  • Leased employees okay (for example, PEO)

Job Tax Credit (including Opportunity Zones, Military Zones and Less Developed Census Tracts):

  • Georgia withholding (for example, CAN reside in South Carolina and commute to Augusta)
  • All employees (new and existing)
  • Full time (regular work week of 35 hours or more) and not seasonal (no predetermined end date)
  • Leased employees okay (for example, PEO)

Check with your clients about their plans to add jobs and train employees. They may have potential $$ tax credits!



Catch Up Means Tax Credits

We are seeing many companies cautiously coming out of the recession. For example, architects, engineers and construction firms are finally getting new business. As things pick up, they are finding that their software (such as business-wide systems and project management, document management and CAD software) is out of date or no longer supported. In addition, their customers’ and suppliers’ requirements for electronic interfaces (for example, paperless contracts) and e-commerce are driving changes.Your customers are now having to play the “catch up” game to either get current on their installed versions or even buy new versions. These catch up activities may qualify for Retraining Tax Credits in Georgia since many of the company’s employees have to be retrained on the systems. Other states may offer incentives for these activities as well.

So get out there and identify those client activities that happened in 2013 or planned for 2014 that qualify for tax credits.  Your clients will appreciate your proactive followup!