West Region Update. Greg Nunn Tax Manager Koch Business Solutions Wichita, KS

Transcription

1 West Region Update Greg Nunn Tax Manager Koch Business Solutions Wichita, KS Tam Vo Director Grant Thornton LLP Houston, TX 1

2 Learning Objectives Recall recently implemented and proposed credits and incentives changes. Identify potential opportunities and issues that may arise as a result of the changes with respect to eligibility, financial benefit, etc. Determine new or changes to existing compliance requirements 2

3 Western Region Road Trip

4 Texas

5 Texas HB26 Effective 9/1/2015. Abolished the Emerging Technology Fund. Replaced by the Governor s University Research Initiative Fund, providing matching grants to assist eligible institutions in recruiting distinguished researchers. $85 million of unexpended funds to be split: $40 million to the Governor s University Research Initiative, and $45 million to the Texas Enterprise Fund. 5

6 Texas HB26, con'd Established the Economic Incentive Oversight Board. Evaluate tax incentives, cash grants, and loans. Develop a performance matrix with economic performance indicators, measures, and metrics. Texas Enterprise Fund (TEF). Decisions must now be made within 30 days, previously 90 days. Budget cut from $120 million in FY2015 to $90 million in FY

7 Texas HB2712 Sales tax exemption for property used in large data centers. First created in 2013 but for state tax only. Now exempts both state and local sales and use taxes. The owner or operator must apply and be approved by the Texas Comptroller. Guidance: Letter Ruling, STAR Accession L (July 7, 2015). Effective June 10,

8 Texas HB2712, con'd Qualifying large data center project must meet the following basic requirements: Have at least 250,000 square feet in area; Create at least 40 permanent jobs, paying at least 120% of the county average weekly wage; Invest at least $500 million in the data center over a fiveyear period; and Agree to at least 20 megawatts of electricity transmission capacity for the data center s operations. 8

9 Texas SB100 Texas Enterprise Zone (EZ) program Rebate of state sales and use taxes based on certified employment. Benefits: $2,500 per employee paid over five years. Projects with over $5 million or more of investment may qualify for benefits up to 500 employees, i.e., potentially up to $1.25 million of tax rebates. Payments capped at $250,000 per year. Benefits double or triple for large investments. 9

10 Texas SB100, con'd Eligibility changes: Added veterans as qualifying employees to meet the hiring requirements. Benefit changes: Double and triple designations available only for projects with 500 new permanent employees. Removed concurrent designations. Created half designations for half the benefit. Removed option for a franchise tax credit. Effective September 1,

11 Texas HB2826 Chapter 313 limitation of appraised value. Would have allowed single projects spanning two or three different school districts to apply for benefit Value limitation would be based on the school district with the highest taxable value of property. Ultimately vetoed by governor as too costly: According to a 2013 report by the Comptroller's Office, Chapter 313 cost the taxpayers $341,363 for every new job created. 11

12 Oklahoma

13 Oklahoma SB387 Ad valorem tax exemptions for manufacturing and R&D. Five-year exemption from ad valorem taxes for acquisitions or expansions. Program was a constitutional amendment approved by the people in 1985 allowing. Annual application to the county assessor by March 15th is required. Amends eligibility effective January 1, 2016.

14 Oklahoma SB387, con'd Initial applications on or after 1/1/2016 subject to new payroll definitions. "base payroll": total payroll adjusted for any nonrecurring bonuses, exercise of stock option or stock rights and other nonrecurring, extraordinary items included in total payroll, and "initial payroll": base payroll for the year immediately preceding the initial construction, acquisition or expansion.

15 Oklahoma SB387, con'd Petroleum refineries, NAICS , previously denied between 2012 and 2016 due to the inclusion of nonrecurring extraordinary items (e.g., bonuses, exercise of stock option or stock rights), shall be allowed an exemption starting with 2016 through the remainder of the 5-year period.

16 Ad Valorem Exemption Policy Change All real and personal property that is necessary for the manufacturing of a product and facilities engaged in R&D, which meets certain requirements, receive a fiveyear exemption from ad valorem (property) taxes Sourced from 1% of the state personal income tax revenue though this is usually short and leads to a supplemental appropriation to schools for the lost property tax revenue. 5-year statewide property tax exemption allowed for certain new, newly acquired, or expanded manufacturing facility including a facility engaged in R&D 16

17 Ad Valorem Exemption Policy Change (cont.) Taxpayers complete an annual application to the County Assessor by March 15 th of the year in which the exemption is requested Effective Jan. 1, 2016 the exemption will be granted if there is a net increase in annualized base payroll over the initial payroll of at least $250k if the facility is located in a county with a population of fewer than 75k people, while maintaining or increasing base payroll in subsequent years, or at least $1M if the facility is located in a county with a population of 75k people or more. 17

18 Oklahoma SB498 Effective January 1, Further modifies the ad-valorem tax exemption to disallow eligibility for manufacturing by wind companies. Previously, wind companies were eligible if: net increase in annualized payroll at the facility of at least $250,000, OR a net increase of $2 million or more in capital improvements while maintaining or increasing payroll 18

19 Oklahoma SB502 New Jobs/Investment Tax Credit. Significant tax credits for growing manufacturers based on either investment OR on the addition of full-time-equivalent employees engaged in qualified activities. Qualified manufacturers entitled to: 1% of the qualifying investment; or $500 per new employee. Investments over $40 million eligible to "double dip" in Quality Jobs as well.

20 Oklahoma SB502, con'd Effective January 1, Legislation enacted that clarifies eligible manufacturing, processing or aircraft maintenance facilities. Manufacturing operations must have manufacturer exemption permit. Aircraft maintenance or manufacturing facility defined. Web search portals added. Wind electricity generation prohibited.

21 Oklahoma SB1582 Would be effective November 1, Proposes to amend the Investment/New Jobs Tax Credit to limit the amount of credit claim statewide in a fiscal year. As currently drafted, will cap at an annual $25 million beginning January 1, 2016 and ending on or before December 31, Expected to generate $14 million in tax revenue

22 Oklahoma SB1581 Would be effective November 1, Proposes to limit the amount of credit claimed statewide for investments in clean-burning motor vehicle fuel property in a fiscal year. As currently drafted, capped at an annual $6 million beginning January 1, 2016 and ending on or before December 31, Expected to generate $5.7 million in tax revenue. Credits reduced to 75% after November 1, 2017.

23 Oklahoma SB806 New law effective January 1, All incentive provisions enacted after effective date must include a measurable goal or goals. Incentives defined to include any of the following if offered by the state: any credits, exemptions, deductions or rebates of state tax liability of any kind; any grant, loan or financing program; or any program for incentive payments.

24 Oklahoma HB2182 Referred to as Incentive Evaluation Act. Effective November 1, New law establishing an independent review board to review and approve state incentives. Incentive Evaluation Commission to evaluate each incentive at least once every 4 years unless the Commission determines minimal fiscal impact and is exempt from evaluation.

25 Oklahoma HB2182, con'd Inaugural meeting of the IEC on February 25, 2016 marks the continuation of efforts to evaluate the tax policy as the state looks for ways to improve its finances. Tasked with reviewing over 70 incentive programs over the next 4 years. List of chosen programs for review this year expected in May and completed evaluations expected in December along with list of programs for next year.

26 Oklahoma HB2690 If approved, will be effective November 1, 2016 to create the Tax Credit Reauthorization Act. For tax credits enacted after January 1, 2017, there is a 3-year limit on claims. Afterwards, the credit must show an economic benefit of at least three times the amount of direct state revenue foregone in order for the credit to be extended.

27 Oklahoma SB977 Senate Finance Committee approved a bill establishing a two-year moratorium on nearly two dozen tax credits. This measure is believed to increase state tax revenues by $150 million over the next two years. Several amendments proposed to strike certain credits from the moratorium. If passed, would be effective July 1, 2016 though June 30, 2018.

28 Oklahoma SB977, con'd As it currently stands, the following will be suspended: Sec. 2: Credit for child care expenses Sec. 3: Investment Tax/New Jobs Credit Sec. 6: Credit for child care service providers Sec. 7: 2012 and 2013 Presidential disasters Sec. 8: Electricity generated by zero-emission facilities Sec. 10: Earned income credit Sec. 11: Credit for donation to biomedical or cancer research Sec. 12: Energy efficient home construction Sec. 13: Wages paid to injured employees Sec. 19: Wire Transfer fee credit Sec. 20: Affordable housing state tax credit Sec. 21: Volunteer firefighter tax credit Sec. 22: Rural economic development Loan credit Sec. 23: Property tax credit/refund for Elderly/Disabled Sec. 24: Sales tax relief credit for those earning under $12,000

29 New Mexico

30 New Mexico High Wage Jobs Credit Refundable credit for creating high-wage jobs. Credit is equal to 10% of the salary and benefits up to $12,000 per employee. Credit may be taken against gross receipts tax, compensating tax, or withholding tax for the year the job was created and the following three years. Increased minimum wage requirement: Jobs created prior to 7/1/ $40k/$28k urban/rural Jobs created after 7/1/ $60k/$40k urban/rural More than 50% of sales of good and services must be delivered outside of New Mexico during the applicable qualified period.

31 New Mexico New Sustainable Building Credit Passed to encourage investment in constructing or renovating sustainable residential or commercial "green" buildings. Applied to income tax liability for that tax year. 7-year carryforward. If amount is greater than $100k, the credit is split four ways and taken in equal parts that year and for the following 3 years. Must obtain certificate of eligibility for credit from EMNRD (New Mexico Energy, Minerals, & Natural Resources Dept.) and complete Form RPD and submit it along with a copy of the certificate.

32 Colorado

33 Colorado SB Enacted May 13, 2015, qualifying highly distressed Colorado counties (Jump Start Zones) that can offer enterprise zone-like tax benefits to any business that brings at least 5 new jobs to the county. Income tax credit equal to 100% of income taxes imposed on income from the new business in the zone New businesses will submit an application to IHE which includes a request for employee allocations; annually the business must request a tax credit certificate from OEDIT for itself and its employees.

34 Colorado SB Effective January 1, Provides an income tax credit for donations of land to a governmental body or qualifying charitable organization for conservation easements. Credit is equal to 75% of the first $100,000 of fair market value at the time of donation plus 50% of fair market value in excess of $100,000. The credit is capped at $1.5 million per donation.

35 Colorado HB Effective January 1, 2015 Renewable energy projects that receive ITC certification may now elect an 80% refund in lieu of the credit. Payments capped at $750,000 per tax year, regardless of number of qualifying projects a taxpayer had, until paid. Definition of renewable energy investment amended to mean a qualified investment for projects that generate electricity from eligible energy resources.

36 Colorado HB Job growth incentive tax credit amended for taxpayers who enter into a partnership with state institution of higher education. Must create at least 5 jobs with wages of at least 100% of the average wage within the county in which the new jobs are located & retain the jobs for 1 year. Now refundable for any qualifying taxpayers that has been in business in CO for 5 years or less, and did not relocate from another state.

37 Colorado Regulations Amended Colo. Code Regs amended to be titled The new Colorado investment tax credit. Now references the IRC as existed immediately prior to the enactment of the federal Revenue Reconciliation Act of 1990 Removed non-corporate lessors and S corporations as eligible entities for the credit. The amendment is effective April 30, 2015.

38 Colorado Regulations Repealed Code Regs , Postconsumer Waste Equipment Credit Colo. Code Regs , Credit allowed for purchase of vehicles using alternative fuel. Colo. Code Regs , High Technology Scholarship Contribution Credit; Colo. Code Regs , Individual Development Account Contribution Credit. All repeals are effective March 17, 2015.

39 Colorado TIF for Tourism In 2009, Regional Tourism Act enacted to provide a up to two local governments per year with tax increment financing for the development of large-scale regional tourism projects. Aurora applied for a $824 million Gaylord resort with 1,500 rooms and 400,000 sf. of meeting space and received $81 million. 11 Denver-area hotels sued but lost in district court and the Colorado Court of Appeals Hotel v. Colo. Econ. Dev. Comm'n, Colo., No. 15SC907, cert. denied 4/18/16

40 Montana 40

41 Montana Repeal Tax Incentive Effective October 19, Movie and TV Media Tax Incentive has been repealed 'Big Sky on the Big Screen Act' was terminated

42 Montana Coal Washing Effective April, 29, Extends the coal washing credit by 8years. Defined as any treatment to remove impurities from underground mined coal. Coal washing may include operations such as flotation, air, water, or heavy media separation, drying, and related handling. Extended from July 1, 2017 to July 1, 2025.

43 Arizona

44 Arizona Quality Jobs Tax Credit Potential Benefit $3,000/year for up to 3 years /job created Nonrefundable AZ income/premium tax credit

45 Arizona Quality Jobs Tax Credit Important Requirements Statewide growth each year Add 25/5 (metro/rural) full-time jobs Median pay floor by county (e.g., $35k salary) Hiring and $5M/$1M (metro/rural) expenditure must occur at same site within 12-month period 65% employer-paid health insurance File pre-approval and 490 fee/job created Final application provides support Significant Change 2014 Turnover can be filled by new hires

46 Utah

47 Utah Enterprise Zone Credits 79 Enterprise Zones phase out by zones expired between EZ Job Tax Credit / Health Insurance Credit $750 - $1450 (Max 30 jobs) Work at least 6 months 30 hours per week EZ Investment Tax Credit $75,000 max credit Exclude retail and utility At least 51% residency requirement

48 Utah Enterprise Zone Credit Amended Cash credits for a contribution to a nonprofit corporation have been eliminated. Population requirements for a county an municipality to qualify for designated enterprise zones have changed. Requirements to receive an enterprise zone tax credit have been modified, including the requirements related to obtaining a tax credit certificate.

49 Utah SB216 Effective for taxable years beginning on or after 01/01/2016. Nonrefundable credit for "high cost infrastructure projects, which are projects that expand or create new industrial, mining, manufacturing, or agriculture activity, or new investment of at least $50 million in an existing industrial, mining, manufacturing or agriculture entity. Equal to 30% of the infrastructure construction. 7-year carryforward.

50 Nevada

51 Effective January 1, Nevada SB170 Qualifying construction or expansion a data center in Nevada may qualify for a partial abatement of certain property taxes and local sales and use taxes. Employment and capital commitments vary depending on length of abatement. Abatement may not exceed 75% of the amount of personal property taxes payable. Does not include local sales/use tax for schools.

52 Effective July 1, Nevada SB94 Revises transferable credits for film and other productions; Narrows qualifying persons eligible for tax credits; Revises the application process; Revises the calculation of the tax credits; Revises the limitation on the total amount of tax credits that may be issued; and Repeals the prospective expiration of the provisions governing the tax credits.

53 California

54 California Competes Tax Credit Process & Funding Public Disclosure Requirements Contract Obligations Promotion and marketing Public disclosure Milestone objectives Investment, Employment, Wage CA Fiscal Year 2015/2016 7/20/2015-8/17/20 - $75M 1/4/2016-1/25/ $75M 3/7/2016 3/28/ $50.9M

55 California Competes Tax Credit (con'd)

56 California Competes Tax Credit (con'd) State trial court ruled that California governor's office cannot limit contingency fees paid to consultants who help their clients win a tax credit intended to boost manufacturing and investment in the state. The cost of a consultant's services is a matter between the taxpayer and the consultant. Ryan U.S. Tax Servs. LLC v. California, Cal. Super. Ct., No , ruling on submitted matter, 1/7/16. 56

57 California New Employment Credit From January 1, 2014 through January 1, 2021 For qualifying full-time employees performing work in a Designated Geographic Area (DGA). Annual certification required. Credit is five years of: 35% of qualified wages or between 150% (or $10 for a Pilot Area) and 350% of minimum wage Must have net increase total California headcount. 5-subsequent-year carryforward.

58 California New Employment Credit, con'd Statute requires the Franchise Tax Board (FTB) to provide the employer names, the amounts of tax credit claimed, and the number of new jobs created as a searchable database on its website for each taxable year. The FTB plans to post this information on its website in the coming weeks. Interested persons can access the database when it is available. California FTB Tax News No. 03/01/2016.

59 California Tax Incentive Reaches Cap California's Alternative Energy Tax Incentive reached its $100M cap. Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) disclosed on November 17 th that it has suspended new applications under its sales and use tax exclusion program, which provides an incentive for businesses working on alternative energy sources and advanced transportation projects, due to an "unprecedented program oversubscription." 59

60 Oregon

61 Oregon SB611 Tax years beginning on or after July 1, Data center operators are provided an exemption from the state's central assessment based on the company's brand and other intangibles. Clarifies that data center property of a company subject to central assessment must be locally assessed if the total historical or original cost of the real and tangible personal property of all data centers owned, leased or used by the company in Oregon is equal to or greater than $200 million. 61

62 Questions?