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Tax & Business

Tax Credits & Incentives - Tennessee

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2016 YEAR-END TAX GUIDE

The Marcum 2016 Year-End Tax Guide continues our tradition of providing timely tax guidance for the upcoming year.

 

Participating Investor's Investment Tax Credit

Investors can earn an investment tax credit against state premium tax liability equal to 100% of the invested tax credit upon vesting of qualified Tennessee investment. For tax years 2016 through 2019, 10% of the investment tax credit is allocated to the participating investor.

To qualify for this credit, the investor must apply and be accepted based on the following criteria:

  • Have at least two investment managers with five or more years of investing experience.
  • Have a principal office in the state for at least five years.
  • Have a proposed investment strategy for achieving transformational economic development.
  • Demonstrate the ability to lead investment rounds, advise and mentor entrepreneurs.

Participating investors that qualify can receive credits up to $120 million which can be awarded in $20 million allocations.

Credit Against Franchise and Excise Taxes

A credit of $4,500 per job can be used to offset a company's franchise and excise tax liability.

Credit Against Surcharge or Tax

A credit shall be allowed against the surcharge/tax collected for county wheel taxes, municipal fees/fees for registration, title, data processing and transaction fees. The credit is calculated annually and proper documentation for the vehicle is required.

Job Tax Credit for Hiring Persons with Disabilities

The following credits are available to NJ business hiring disabled individuals:

  • Part-time employees and full-time employees who do not receive health insurance ($2,000 credit per employee).
  • Full-time employees who receive health insurance ($5,000 credit per employee).

The credit shall apply against the franchise tax and excise tax. The credit shall not exceed 50% of the combined franchise and excise tax liability shown on the return. The credits may be carried forward no longer than 15 years.

Job Tax Credit Business Plan

Upon completion of the business plan, the investment period begins. Qualified investments include capital, real property, tangible personal property, or computer software in compliance with GAAP.

To receive the Tier 1 credit of $4,500 per job, there must be a minimum investment of $500,000 and a minimum of 25 qualified jobs created within 12 months of the effective date of the business plan.

Tier 2 and Tier 3 investments require the same minimum requirements as a Tier 1 investment. Tier 2 and Tier 3 investments have the same minimum requirements and per job credit amounts, but the duration of the annual credits are 3 years and 5 years, respectively.

Higher level investments range between $10 million and upwards of $1 billion.

Credits for Qualified Disaster Restoration Projects

A qualified disaster restoration project consists of a restoration of real or tangible property in a declared federal disaster area that suffered damages. A taxpayer who engages in this type of project will be eligible for a credit for all state or use taxes paid to the state of Tennessee, except for tax at the rate of 0.5% on the sale or use of tangible personal property.

The project requires a minimum investment of $50 million.

Tax Credits - Qualified Headquarters Facility

If a taxpayer constructs, expands, or remodels a headquarters facility in Tennessee, the taxpayer will be eligible for a credit for all state sales or use taxes paid to the state, except for tax at a rate of 0.5%on the sale or use of qualified tangible personal property.

A minimum $10 million investment must be made and a minimum of 100 new jobs must be created.

Further information on Tennessee credits can be found:
http://www.lexisnexis.com/hottopics/tncode/
https://www.tn.gov/revenue/article/tennessee-code-and-revenue-rules
https://www.tn.gov/transparenttn/topic/openecd-tax-incentives

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IT Risk and Assurance
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James Lundy

Partner
Tax & Business
Nashville, TN
 
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