As the year end quickly approaches, many companies are reviewing their tax plan to assess whether they can qualify for additional tax savings. While the tax planning process mainly focuses on federal income tax it’s important not to overlook the company’s state tax obligations as well. Some companies are surprised to learn that Utah offers a number of tax incentive and business assistance programs designed to help qualifying companies by reducing taxes or providing reimbursement. They range from research tax credits to on the job training programs that enhance the skill sets of Utah works. To help companies learn about these programs and determine if they qualify, Larson & Company has provided a brief list of the most popular opportunities below.
Utah Business Incentives
- Research Tax Credit – Utah companies conducting qualifying research and development activities may be eligible to receive a non-refundable income tax credit. This means the credit may not exceed the taxes due for the year, but any excess credit can be carried forward for a period of 14 years. The incentive provides a credit of 5% of qualifying research activities and up to 6% of qualifying investments in research machinery and equipment.
- Utah Targeted Job Tax Credit – This credit is designed for companies who employ qualifying disabled individuals. The tax credit allows employers in the state to take a credit against the corporate franchise or income tax based on sales paid to disabled employees who work for the employer. The credit is based on a percentage of the employee’s wages but may not exceed $3,000 per employee per tax year. It’s important to note that employers may only claim the credit in the first two years of the employment. After that they are no longer eligible for the credit.
- On the Job Training Program – Utah companies can receive up to 50% reimbursement of employee wages while they are in job training. In order to qualify for the program employers must have a physical location in Utah, current in unemployment insurance payments and intend to provide permanent employment and maintain wages and hours beyond the On the Job training contract period. It’s important to note that an On the Job Training Contract must be established with the state prior to hiring new employees and the maximum length of the contract is 6 months.
- Renewable Energy Systems Tax Credit – Companies that install solar hot water heaters, solar thermal electric, passive solar heat, solar pool heater and other renewable energy systems are eligible for a state tax credit. The value of the credit is limited to $50,000 or 25% of the cost of installation and system components. It’s important to note that construction companies can take the credit for installing qualifying systems in both commercial and residential projects.
- Recycling Market Development Zones – These zones are designed to incentives Utah manufacturing companies to use recycled materials in their manufacturing processes and to create new products for sale. It also offers a benefit to companies that collect process or distribute recycled materials. In order to qualify you must be located in a recycling market zone (currently there are more than 20 Utah communities with the designation) and engaged in qualifying manufacturing or related activities. Program benefits include 5% credit on state income tax towards the cost of machinery and a 20% state income tax credit (up to $2,000) on eligible operating expenses.
- Sales Tax Exemption – Manufacturing Equipment – Qualifying manufacturing companies (SIC 2000-3999) may be eligible to receive an exemption from sales tax on the purchase of new manufacturing equipment for use in Utah based manufacturing startups. The exemption applies to a variety of equipment used in various industries including energy production, medical device and aviation industries. It’s important to note the replacement manufacturing equipment may also be eligible for the exemption.
Interested in learning if your company qualifies for one of the Utah income tax incentive programs? It’s worth taking a look to see if you can save on your corporate state income tax return. However, some qualification criteria for these programs are complex, so it’s best to consult with a professional to determine qualification. For additional information contact the nearest Larson & Company office.