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Alpha-Mail

A Tax Professional's Guide to Credits and Incentives, Courtesy of Alpharesults
Vol. VIII No. 9 September 2014
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In this issue

Single Factor Apportionment and Tax Credits

Spotlight on Colorado Credits and Incentives

Hello!

Welcome to Alpha-Mail, the monthly newsletter about tax credits and incentives for tax professionals.

This month, learn how single factor apportionment can impact tax credits for your clients. Also, some of you may have clients with operations in Colorado, so be sure to see our overview of Colorado credits and incentives. We hope you can use this information to strengthen your client relationships!

Thank you for reading Alpha-Mail -- please click reply to tell us what you think.

All the best,

Dale&JimSigsSM1

Dale Stapler Jim Tinsley
Alpharesults, LLC

Single Factor Apportionment and Tax Credits                 
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For companies that sell in multiple states, the amount of state income tax paid to each state is typically determined by applying an "apportionment factor" to its total net income, or some other measure depending on the state. Georgia has a Single Factor Gross Receipts Apportionment formula (click here) that is solely based on the sales factor (that is, sales within Georgia as a percentage of sales everywhere). In other words, a company's Georgia income tax liability decreases as its percent of sales outside of Georgia increases. As this happens, the company's ability to utilize Georgia income tax credits also decreases. A company may have a lot of tax credits due to its activities, but limited ability to utilize the tax credits. An exception may be when the company can utilizes the tax credits against Georgia payroll withholding taxes (click here for list).
 
Lately we are seeing manufacturers and distributors increasing their sales outside of Georgia. Initiatives such as e-commerce, Fulfillment By Amazon (click here) and other strategies are helping drive this. As you reach out to clients, make sure you discuss their sales plans outside of Georgia and the potential impact of Georgia tax credit utilization.

Colorado Credits and Incentives            
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      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 Colorado. I was able to speak with some Colorado economic development professionals and learned some of their details (Colorado Office of Economic Development and International Trade (OEDIT) click here).
 
Colorado is in the middle range for corporate tax burdens and incentives when compared with other states.  Colorado ranks 19th in the The Tax Foundation's 2014 Business Tax Climate Index (click here).

Colorado has a moderate selection of incentives, credits, loans, and programs to assist businesses for increasing and retaining jobs and increasing business investments.  Job Growth Incentive Tax Credits provide a 50% of FICA growth tax credit to create a minimum of 20 new jobs in the state, or a minimum of 5 jobs in certain zones (click here).  Other incentives include Advanced Industry investment credits and various sales tax and energy tax exemptions.  The Strategic Fund Incentive provides comprehensive discretionary assistance to new and expanding businesses (click here). Specific requirements depend on business type, size, wages, location, and other factors.

Another big consideration -- an application and approval process is required for all of Colorado's OEDIT incentives.

Compared to Georgia, Colorado has:              
Somewhat lower taxes:  Lower corporate income tax rate.  Lower personal income tax rate.  Similar sales taxes and higher property taxes.
A smaller range of industries eligible for incentives if adding jobs and capital investments, and a far narrower range for training incentives.     
NO opportunities for incentives unless pre-approved.
Location, location, location -- cool mountains and great climate, if that's what is important to the business 
To summarize, Colorado is not as competitive as leading states for new and expanding businesses, unless those businesses really need Colorado's Central Rockies location.

Do any of your clients have Colorado connections?  Make sure you review their potential qualifying activities early to maximize their $$ benefits!!

About Us-------------------------------------------------------------------------
Alpharesults has assembled a team with the specialized knowledge and approach required to obtain state tax credits and incentives.  We are not a public accounting firm.  Rather, our business services complement those of public accounting firms and do not create conflicted loyalties, because our professionals do not perform attestation work or other external audit functions.
   
We focus on small to medium-sized businesses and work with a wide variety of accounting firms.  For more information on our services, follow this link. 
 

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email:  alpha-mail@alpharesults.com                   phone: 770-667-1332 
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