Is your company missing out on Tennessee tax credits? Many companies overlook (or are simply unaware of) these significant tax-saving credits.
One of the most common tax credits in Tennessee is the Jobs Tax Credit (JTC), which is a credit of $4,500 per new job made available for “qualified business enterprises” that add a certain amount of net new full-time employees.
The credit is limited to 50% of the company’s current franchise and excise (F&E) tax liability. Any credit amount not utilized in the current year can be carried forward for 15 years.
Qualified Business Enterprise: A “qualified business enterprise” is a business that is engaged in manufacturing, warehousing, distribution, processing, research and development, computer services, call centers, data centers, headquarters facilities, convention/trade show facilities, or aircraft repair service facilities in Tennessee. Businesses that promote high-skill, high-wage jobs in high-technology areas can also qualify for this credit.
Capital Investment: To qualify for the JTC, the company must make a capital investment of $500,000 in real or tangible property in Tennessee.
Business Plan: Companies must submit a business plan to the Department of Revenue before claiming the credit.
Full-Time Jobs: Each of the company’s new positions must be a “full-time job,” which is defined as a permanent position providing at least 37 1/2 hours of work per week, for at least 12 consecutive months. And the employee must receive the minimum healthcare benefits.
The counties in Tennessee are divided into one of four incentive tiers based on the economic conditions of the area. Tiers are updated annually effective July 1. The number of jobs and the time frame in which they must be created are determined by each county’s tier classification.
Tier 1 & 2: 25 net new full-time positions within a 36-month period
Tier 3: 20 net new full-time positions within a 60-month period
Tier 4: 10 net new full-time positions within a 60-month period
An expanded credit is available for qualifying businesses located in “economically distressed” counties categorized as Tier 2, Tier 3, or Tier 4.
Based on the assigned tier of the county, the additional credit is allowed on an annual basis for the following time frames:
Tier 2: Additional three years at $4,500 per year with no carry forward
Tier 3 & 4: Additional five years at $4,500 per year with no carry forward
The expanded credit can be used to offset 100% of the taxpayer’s F&E tax liability for that year. This portion of the credit does not carry forward beyond the year in which the credit originated.
If you’d like to discuss your company’s potential to take advantage of the JTC or other tax credits, please contact us.