Sign Tennessee Electrical Services Contract Now

Document type sign electrical services contract tennessee now

good afternoon uh thank you again this is rhonda hampton with hhm uh we appreciate you joining uh our presentation on tennessee tax credits and incentives um if you have need or would like to you can look at my bio anytime on either linkedin or on the hhm web website by just clicking my picture and i am a long time state tax specialist so with that let's get started talking about uh the universe of credits and incentives first of all our agenda today we're just going to talk first of all about credits and incentives in general then we're going to talk about you know the difference between statutory and discretionary incentives then we'll start out with a discussion of statute statutory exemptions and tax credits including corporate income tax credits then we'll talk about discretionary incentives and of course most of this will be focused on the state of tennessee and what they offer then we'll go over some georgia highlights and then if time allows we'll have a q a if i'm unable to get to your questions today i promise you uh you are not being ignored someone is taking down all the questions that come in and i will get back with you whether it's today or early next week i will respond to those so with that let's get started let's get started with our credits and incentives overview um of course today we're focusing on incentives offered by the state of tennessee but whether it's the federal government the state government or local government credits and incentives are offered for a reason and these government agencies basically they want something in return for the gift they are giving you so to speak and uh the ultimate purpose behind it is to either grow the economy in a certain area or to uh create and sustain quality jobs and so what these incentives might entail they may want you to hire from specific targeted populations for example the federal watsi credit they want you to hire from long-term unemployed or persons who've been incarcerated or certain other groups state and local governments want you to locate or expand operations within a jurisdiction they want you to create new jobs or retain existing employee levels they want you to invest in new property plant or equipment sometimes upskilling of employees is the goal for example new technologies are created all the time and maybe you need to train employees on new technologies so that would be a goal of certain incentives in fact they want you to invest in r d activities sometimes there are incentives offered for investing in pollution control sustainability or renewable energy projects and then there are depending on the state other there's a myriad of different types of economic development incentives such as related to film production or port activity it just depends on the state that you're going into there are different types of incentives offered there are tax credits tax exemptions tax rebates ad valorem tax exemptions um there are tiff programs in pilot programs grants the offer of financing utility rate reductions public infrastructure assistance assistance training cost reimbursements potentially land donation there's quite a large myriad of how these incentives can take place let's talk a minute about statutory incentives versus discretionary incentives statutory means that you have a right to that incentive it's in the statute if you meet the qualifications for example as a manufacturer then you have a right to get your excuse me your manufacturing machinery free from a payment of sales tax so that is statutory discretionary incentives are different they're typically negotiated or bargained for the funds can come either from sometimes there are statutory allotments um we'll discuss that later on in this program an example of that some can come from first come first serve government funding for example a grant pool and they say you know you may apply for this grant but when the funding is gone it's gone it's first come first sir typically also discretionary incentives involve a contractor agreement and typically there are compliance and reporting requirements for example pilot programs in the state of tennessee there are reporting requirements we're going to go first into statutory exemptions and tax credits um obviously today we can't discuss everything that's out there on the books uh time would not allow for that we're gonna try to hit some highlights to help you make you aware of some of the basics and how you go about obtaining those so we'll do the best that we can to get school and some of the more common statutory exemptions and tax credits the first important note about statutory exemptions and credits and is that even if an exemption or credit is statutory there will still be administrative procedures with the tennessee department of revenue also known as some paperwork or paper shuffling uh the one that we're going to focus on uh mostly today here's three different examples of sales tax exemption we're going to talk about the manufacturing exemption for industrial machinery and also manufacturers are entitled to a reduced rate on energy fuel and water at a rate of zero to one and a half percent depending on how it's used and they are also eligible for a reduced rate on gas electricity and other energy sources again depending on use let's talk about the exemption for manufacturing machinery um first of all i put where the definition is located in the tennessee code this definition matters it matters because you have to understand it to understand whether or not you will qualify as a manufacturer and it matters so that you understand what part of your your business purchases will qualify for exemption um and i hate reading off slides but i do want to cover a lot of what this says right here because it's very important the exemption for manufacturing machinery covers machinery apparatus and equipment with associated parts of pertinences and accessories that includes hydraulic fluids lubricating oils and greases necessary for the operation and maintenance maintenance of the machinery it also includes repair parts repair labor and installation labor of the machinery the machinery must be necessarily necessary to and primarily for the fabrication or processing of tangible personal property for resale and consumption off the premises it also includes pollution control facilities and then we're going to talk about this last section here where the use of such machinery equipment or facilities is by one who engages in such fabrication or processing as one's principal business that may not sound like an important sentence but it's very important and here's why let's say for example you have a business where you manufacture a certain type of specialty brick and thirty percent of your business is meant of your revenue stream is comes from those specialty bricks that you sell but seventy percent of your revenue stream comes from just standard bricks that you buy from other manufacturers and resell those well in the eyes of the state because you only manufacture 30 percent of what's going out the door there you will not qualify as a manufacturer and they do not do piecemeal manufacturers it's the 51 rule and it's been that way for quite some time so in other words you have to make sure that more than 51 percent of what is going out the door at that location is in indeed being fabricated and processed there and is leaving the premises for resale industrial machinery also includes machines used for generating producing and distributing utility services electricity steam and treated or untreated water and then it also includes equipment used in transporting raw materials from storage to the manufacturing process and transporting finished goods from the end of the manufacturing process to storage now that sentence that i just read is also very important for manufacturers because that tells you the start and the end of the manufacturing process for example if you have a fork truck or a conveyor that is transporting raw materials from the storage from from a storage facility to the manufacturing line that will qualify or a conveyor or a fork truck for example transporting finished goods from the end of the process to storage would be exempt that's the last instance of manufacturing an important node is that not everything in a manufacturing plant is exempt in the state of tennessee taxable items that you really need to be on the lookout for would include things like company vehicles and corporate aircraft logistics equipment that's strictly used in the warehouse office equipment and supplies break room equipment and supplies hand tools and so forth all of those things would be subject to sales tax and the manufacturer would be expected to pay tax sales tax on those the next question is the exemption for manufacturing machinery is this automatic because it's written into the statute or do you have to apply uh you definitely do have to apply and you get in return what is called an industrial machinery permit first of all you have to register for sales tax purposes and then you apply for the industrial machinery exemption and i put the forum number um on there and these forms that i have on here today are readily available on the tennessee department of revenue website there are a few important notes here multiple manufacturing locations require separate registrations and separate industrial machinery exemptions for each location and one of the reasons for that is because manufacturers are entitled to a reduced rate on a utilities for such as electricity and water that can only be done on a location by location basis so for example if you have a manufacturing location in one place that would be eligible for an industrial machinery permit and then you have a retail store in another place obviously the retail store cannot get those reduced rates on any sort of equipment or utilities and so each location has to be separately registered another important thing is that if there are contractors involved in the purchase and or installation of manufacturing machinery they must apply for industrial machinery exemption on a per job basis and the manufacturer's exemption does not automatically flow through to a contractor multiple contracts with the same manufacturer will require a separate machinery application for each contracted job that can get a little bit onerous if you are a contractor and you do a lot of different jobs for the same manufacturer but that has been their position for a long time contractors use the same form as manufacturers and i believe there is a special check box on there for contractors let's also talk about um the sales tax exemption for our r d equipment um it's a very similar uh definition to what you find in the manufacturing machinery definition however it's important to know that you are not required to be a manufacturer in order to get r d equipment exempt from sales tax here is a rule that explains that the ultimate goal of qualifying research and development must be one of the following it must be a basic research in a scientific field of endeavor advancing knowledge or technology in a scientific or technic technical field the development of a new product uh the improvement of an existing product the development of new uses of an existing product and the design and development of prototypes here as fought is not research and development it does not include ordinary testing and inspection of materials or products used for quality control market research efficiency surveys consumer surveys advertising and promotion management studies or research in connection with literary historical social science psychology or other non-technical activities that type of if there is equipment used in those it does not qualify it has to be scientific or technical you do have to apply for this you must first apply for a sales and use tax number and then i have the form number that you have to use to get exemption for research and development equipment [Music] okay let's talk about uh corporate income tax credits in tennessee first of all there is industrial machinery credit uh industrial machinery has the same definition as it does in the sales tax code which i just read you a few minutes ago the credit is one percent of the purchase price of industrial machinery uh purchased during the tax period covered by the return it cannot exceed um 50 of your tennessee franchise and excise tax liability the credit has a 15-year carry forward leased machinery also qualifies for the credit but it must be new original use machinery to qualify and next we're going to get into jobs tax credits and let's just talk for a moment about just some general comments about jobs tax credits whether you're looking at georgia or tennessee or other states projects in more economically distressed counties these are the counties are rated by both tennessee and georgia each year result in higher levels of incentives both statutory and potentially discretionary if you go on the tennessee department of economic and community development website they actually have listings of distressed counties in the state and also at-risk counties in the state and also just a general comment the greater the level of hiring and investment of course the greater the potential incentives uh you know particularly when it comes to negotiated or discretionary incentives one of the most uh arguably the most important incentive in the tax code is tennessee's jobs tax credit i guess this and the manufacturing machinery exemption from sales tax are probably two of the most used and two of the most important um this jobs tax credit is for capital investing and hiring in tennessee it will apply to both the franchise and excise tax the amount of the per job credit depends on the county where the business is located jobs in certain counties may be eligible for an enhanced credit and it cannot exceed 50 percent of the franchise excise tax liability and it has a carry forward provision first of all a required capital and capital investment except for convention and trade show is 500 000 uh not a tremendously huge sum so that is the definition of required capital investment for the basic jobs tax credit is 500 000 in tennessee a qualified job means a job that meets all of the following criteria the job position is permanent rather than seasonal or part-time the position provides employment in a qualified business enterprise for at least 12 consecutive months the job must provide at least 37 and a half hours per week and yes they are sticklers on that number the job must provide minimum health care you have to offer it the person does not have to take it but it does have to be available to them and you do have to offer it well one thing just a side note here there are some additional rules in the code for adventure tourism i did not tackle those in this presentation and so a qualified business enterprise is an enterprise which has met the required capital investment necessary to permit the creation or expansion of manufacturing warehousing and distribution processing r d computer services call centers headquarters facilities as defined back office operations convention or trade show facilities again as defined or tourism-related businesses so um when you fill out a business plan and you submit it to the tennessee department of revenue for review you have to tell them what your investment period will be and that's the period of time that you think that you will be it will take you to get both the capital investment amount of 500 000 plus the minimum hiring level for the county and we're going to see a chart on that in a minute it cannot exceed three years from the effective date of the business plan so here is a chart outlining the hiring requirements in tier one and two tier two counties you can see it is a minimum of 25 hires during the three three year period uh a tier three county only has to get 20 hires during the three-year period and a tier four county only has to get a minimum of 10 hires just to give you a couple of examples of the current tier map in tennessee for example a tier one would be hamilton county or knox county an example of tier four locally ray county and meg's county are both tier four counties the important points to remember a e you have a three-year time frame to make the hiring and do the 500 000 dollar minimum capital investment you do not have to complete the jobs tax credit business plan in advance of the hiring or investment you may file a business plan for periods that are outside the statute of limitations um however how this works is if you do find out that you should have filed a business plan and the period is outside the statute you get the carry forward however if you want a refund if you want to amend returns due to the jobs tax credit and get refunds the period must be within the statute of limitations and i've got a little chart here this is an example for a tier one county and uh let's say that they wanted to do a business plan for a three a three year period 2018 19 and 20. their hiring would be based on a base year of 2017. you can see that this tier 1 county needs 25 hires in order to claim the credit in 2018 they only have five in 2019 they have 10 and in 2020 um they have 20. so in 2020 they finally get their they exceed their 25 higher minimum and actually they've got 35 but because their business plan covered the three years they can take credit in 2020 for all 35 hires also important here is that they didn't meet their capital investment in 2018. they did meet it in 2019 but they hadn't met their hiring yet and so in 2020 they had met both you do have to meet both um before you can take the credit but do remember that you do get a nice carry forward on this um another important thing is that it is net new hires so for example if you um hire uh 30 people in a year but you have you're in an industry with a lot of turnover and 25 people quit you only have five net new hires and so uh it's not based strictly on hiring it's based on net new hiring and here is an another example of a tier one county they actually met the hiring and the capital investment in all three years they have an option here you do not have to do a three-year business plan they can do a business plan for each year separately and get these um the jobs tax credit let's talk for a minute about discretionary incentives and as we all already said these are incentives that typically uh they're grant-based they're typically negotiated or bargained for um they're typically are very stringent hiring and capital investment requirements and generally these discretionary incentives have a clawback feature for failure to meet the requirements and discretionary incentives may and that means probably will involve multiple state and local agencies such as economic and community development the department of revenue and industrial development board it all just depends on the type of incentive that you're looking at the first thing we're going to talk about is tennessee's fast track job training assistance program this is through tennessee department of economic and community development and they give grants to assist new or expanding companies with funding to support the training of net new full-time employees funding for this is allocated in the state budget so it is a state budget item so hopefully if you went after this there would be some money there for it uh there this is a little bit different in that it is only for new jobs created it is only forward-looking it is not for already hired there is a formal application process for the fast-track job training assistance and retail and hospitality are excluded there are some other training grants that are available through the tennessee department of labor and workforce development that money is provided through federal funding those grant polls may or may not be there at any given time there's one called the incumbent worker training grant that particular grant is for upskilling of employees they're on the job training grants and also apprenticeship training grants so what i'm going to talk about just a little bit is the incumbent worker training grant and qualifying businesses have to be classified as a tennessee for profit it has to have been in operation for at least a year it has to have at least five full-time employees uh current on all tax obligations and the business must be a financially viable business and it cannot appear on any federal suspension or disfarmat list for the incumbent worker training grant costs that can qualify for reimbursement instructors and trainer salaries curriculum development textbooks and manuals materials and supplies and tuition expenses that have to meet a certain definition and non-reimbursable costs are the trainee's wages and purchases of capital equipment purchase of any item or service that can be used outside the training project travel expenses assessment and certification fees language training generally and or advertising or recruitment costs let's talk a little bit about the tennessee's fast track infrastructure program these are grants made to local government bodies for public infrastructure improvements but they must be for specific infrastructure projects benefiting one or more companies committed to creating new jobs and making new capital investment these type grants again they go to the local governments but they do cover infrastructure such as rail public roadways airports water sewer gas and that type of thing those grants do require local matching funds based on the community's ability to pay and they require a payment in lieu of tax for at least five years on real property there is also a thing called a fast track economic development fund this is to help companies offset costs when expanding or locating a business operation in tennessee with reimbursable grants made to local governing bodies um i think you have to go through an industrial development board to get this particular one it can offset the costs including retrofitting acquiring real property relocation and other expenditures that are another uh not otherwise eligible under a fast track infrastructure that we just talked about or the job training assistance program this particular one is used in exceptional cases where the impact of the company on a given community is significant um i have been told that significant means a 40 million dollar investment in 100 employees hired so it is pretty significant so if you're looking to expand or looking to go into a new area and you go on the tennessee websites and you want to look at you know what's available out there in specific areas or how the counties are rated the tennessee department of economic and community development that is an excellent website uh the state is divided into nine regions there is a regional director for each region and there are also directors for specific international geographies and i did put the web address on there for you that is a very good website tennessee department of revenue of course processes industrial machinery and r d exemption applications jobs tax credit business plans they review jobs tax credit hiring and capital investment documentation of course amended returns and so forth so those are the the different duties of each of those departments another starting place if you are interested in expanding or moving to a new area uh the local chamber of commerce may be helpful it depends on where you're going some of the smaller less populous counties in the state may not have a strong chamber and you can always start with the tennessee department of economic and community development but i do know the chambers are always happy and willing to help this next little section is just um a brief fyi on a couple of special grant programs uh of course this summer um governor lee announced the use of federal uh relief funds to it to assist tennessee small businesses uh that program went very well uh payment amounts were based on a business total gross sales and ranged between 2500 and 30 000 per business eligible businesses were limited to those with gross sales of 10 million or less this program did close september 30. 200 million dollars was distributed to 28 000 businesses in tennessee uh 70 of those recipients had gross sales less than half a million dollars and specific industries qualified with no application required and there was a new program called the surge program that was announced on september 7th it was open to all businesses with less than 10 million in sales it is an application based program 50 million was allocated to this grant program on a first-come first-served basis and it was for reimbursement for business interruption or direct expenses incurred through a certain period of time and it is my understanding that they have had a ton of applications for that okay additional points that we may want to talk about um do other states have similar credits and incentives uh yes they do however the type in the mechanics of how they work can vary very greatly for example what qualifies as manufacturing machinery even can vary somewhat from state to state state and so you can't just make assumptions there we're going to talk a little bit about georgia georgia does exempt from sales and use tax machinery and equipment for qualifying manufacturers of course repair and replacement parts molds dyes and waxes tooling raw materials of course and packaging distribution centers investing a minimum of five million in a new or expanded facility are eligible for sales and use tax exemptions on machinery and equipment used to handle move or store tangible personal property georgia also has a jobs tax credit um it ranges depending once again on the county uh from 1250 to 4 000 per year for five years for every new job created the jobs must be in specific industry sectors such as manufacturing warehousing distribution and logistics and you can see of course the others there or a headquarters of one of these industries you must create a minimum number of jobs within a year and the number depends on your company's tier or special zone um to keep earning the credit for all five years the jobs you create must be maintained for all of those years and once your project qualifies the clock starts ticking on a five-year window each new job may earn job tax credits each year for five years and the value depends on where the new jobs are created um counties with the highest level of economic distress are classified as tier one they do it exactly the opposite of tennessee a tier one in tennessee is the lowest level in georgia it's a tier one um those are eligible for four thousand dollars per job per year for five years new jobs in counties with less economic distress can earn lower credits such as 12.50 per job georgia also has special zones military zones less developed census tracts in georgia opportunity zones which is not the same thing as a federal opportunity zone they have their own in georgia jobs tax credits may be used to lower payroll withholding obligations if the job is created in a special zone or a tier one county and here is just a chart to overview the different tiers and of course as with tennessee you can go on their website and look at the counties and see what qualifies where and the credits and the carry forward for example a tier one county which is would be the more impoverished counties um you only have to have a minimum of two jobs or a tier two ten jobs so georgia has a really good and very popular jobs tax credit program there are some qualifications each job must have a minimum 35 hour work week they must offer health insurance benefits consistent with what is offered to existing employees and they must pay more than the average wage of the county with the lowest average wage in the state which as of june 2020 was 541 dollars a week if you want more information georgia has a really excellent brochure on all their various types of incentives um of course there is the address and phone number of the georgia department of economic development and then there is the website location before you begin a big credits and incentives project uh the thing you need to know is that and this is in no way meant to discourage anyone from claiming of what you are entitled to or what your business could get however many credits and incentives require heavy amounts of documentation and compliance you do need to estimate the cost benefit before you get into it if it's something which most of this does affect some type of tax return tax returns are always subject to audit incentives particularly discretionary incentives are subject to increased public scrutiny for example if you go into a county and you get a lot of big property tax abatements and so forth that is probably going to be on the news although people may be very very glad that you're there and that you're bringing jobs um also the thing that you need to know is that discretionary incentives will be subject to clawback if agreement terms are not met and um i do know they track this and and they i do know that they enforce it so um anyway i hope today's presentation has been helpful to you um there is my photo my email address in my direct line at work again you know just contact me with any questions that you have and i'll be happy to either answer it or find the answer for you thank you again for being present on today's program