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A Practical Guide to Tax Credits & Incentives

15 May 2013
There are thousands of tax credit and incentives programmes in the United States, sponsored by federal, state and local Governments. All 50 states offer a myriad of programmes, with credits driven by a company's investment levels, headcount and business activity at each location.

For companies operating in various locations in multiple states, the identification, application process and on-going management of these programmes is no simple task. Taxand USA provides 5 key steps which can serve to re-focus attention on identifying, capturing and managing the relevant incentive opportunities.

  • 1. Develop and maintain a trigger list
    The first step in identifying credits and incentives is the creation of a trigger list that will help the business know when the tax department should be contacted because incentives may be available.
  • 2. Know the types of credits and incentives that create the most value
    Not every incentive is created equal. Federal and state tax positions may be very different, so it is important to understand the company's tax profile in all major jurisdictions.
  • 3. Engage non-tax areas of the company to help drive credits and incentives
    Most tax incentives require interaction with non-tax areas of the organisation, therefore it is important to engage these areas early and often so they understand the benefits that are available and how they can assist with the process.
  • 4. Create a process to continually evaluate available incentive programmes
    It is important to diligently keep abreast of new opportunities on the federal, state and local levels by developing a formalised monitoring process.
  • 5. Understand and document ongoing administration
    Necessary documentation should be tracked on the front end, and a calendar should be developed for future tax reporting requirements.

Discover more: A practical guide to tax credits & incentives

Your Taxand contact for further queries is:
Kathleen King
T. +1 703 852 5013

Taxand's Take

When carefully managed, a company's tax incentives programme can be a profit centre that helps fund future growth. If management understands the value of an incentives programme, it will be easier to engage internal and external resources to assist with the process. At the end of the day, the business operations must be the driver, but tax credits and incentives should be a critical component in any investment decision-making process.

Taxand's Take Author