Tennessee is one of the more business-friendly states related to taxation. They are also one of the handfuls of states with no personal income tax which, obviously, appeals to individuals (although they have a high sales tax which doesn’t!). The Volunteer State has a number of credits and exemptions that make it attractive to small, mid, and large-sized companies. Notable among these is the standard job tax credit.
Businesses that invest in creating jobs in Tennessee are entitled to a tax credit, possibly more than one tax credit. The standard job tax credit is available to taxpayers whose investments lead to jobs in the state. A qualified business has to make an investment of at least half a million dollars in three years and create a specific number of jobs.
For purposes of this credit, Tennessee is divided up into 1,2,3, and 4-tier enhancement counties. The investment amount can be five years in tier 3 or 4 counties. The credit available is $4500 for each qualified job created. This credit can be used to offset up to 50 percent of franchise and excise taxes and unused credit may be carried forward for 15 years. The savings for businesses employing even a few dozen people can be substantial.
There is a minimum number of jobs each business must provide. The number varies by where the business is located. If the company is in tier 1 or 2 they need to provide 25 jobs, in tier 3 they need to provide 20 jobs and in tier 4 they need to provide 10 jobs. You can see the tier map of the state here.
You do need approval before claiming the credit. Keeping clear comprehensive records should also be kept for verification your business has met all the requirements. The record keeping is a bit complicated. You can read more about what records you should be keeping here.
Tennessee has other job tax credits. One of these is a tax credit for businesses that employ people with disabilities and another is the “community resurgence job tax credit” for businesses that are in high-poverty areas. Find out more information about the various job tax credits here.
There seems to be a flood of legislation where states are competing with each other to lower taxes on business. Yet the new laws are not necessarily any simpler than previous laws. Getting help with potential state taxes from a professional may be in your best interest. Hito is ready to help. Feel free to contact us for more information.