Tax Credits

Energy independence is becoming more important as the current grid structure is overwhelmed. The Clean Energy credit allows taxpayers to take up to a 50% federal income tax credit for investment in energy projects, including solar energy, battery storage, and combined heat and power systems (I.e., co-gens).

• Clean Energy Investment Tax Credit
• Production Tax Credit
• Advanced Manufacturing Production Credit
• Personal Clean Vehicle Credit
• Commercial Clean Vehicle Credit
• Alternative Vehicle Refueling Property Credit
• New Energy Efficient Home Credit

The Employee Retention Credit (ERC) is a refundable tax credit available to businesses impacted by COVID-19. Eligible businesses can receive up to $5,000 per employee in 2020 and up to $7,000 for each of the first three quarters in 2021, totaling up to $26,000 per employee. Navigating the complex eligibility rules is difficult, and the complexity increases as businesses combine the ERC with other programs like FFCRA credits and PPP loans. In 2022, the IRS began to aggressively audit ERC claims. If your business is being audited on its ERC claim, it is crucial to seek representation by qualified professionals. Withum is a recognized leader in the ERC world and can guide you through the audit process to achieve the best possible outcome based on your unique circumstances.

The Research & Development (R&D) Tax Credit is one of the largest dollar-for-dollar federal and state corporate tax benefits in the Internal Revenue Code, allowing business to immediately reduce their tax liability in the current year. The credit can go even further for qualified small businesses who are able to elect to apply the R&D credit towards their payroll tax liability rather than their income tax. Over 30 states offer R&D credits, and businesses are eligible if they participate in activities involving the design, development, and improvement of products, software, or processes. Withum’s R&D Tax Specialists are here to assist in investigating your potential tax benefit and keep you updated on everything related to the Research and Development Tax Credit.

Employers with 50 or fewer employees are allowed to claim an income tax credit for retirement plan startup costs equal to 100% of the costs paid or incurred in the first credit year and each of the immediately following two taxable years. Eligible employer plans are qualified employer plans under section 4972(d), including a 401(k) plan, SIMPLE plan, or simplified employee pension (SEP). The credit is limited to the greater of $500 or $250 per eligible employee eligible to participate in the employer plan, not to exceed $5,000.

SECURE 2.0 also provided an additional credit for small employer contributions made to a qualified employer plan. Therefore, a small employer would not only receive a credit in relation to startup costs but could also receive a credit for any employer contributions not to exceed $1,000 per employee.

The Work Opportunity Tax Credit (“WOTC”) is a federal incentive for employers to hire individuals who often face barriers to employment.

The WOTC is available to both for-profit and not-for-profit entities. For-profit entities (or the owners of pass-through entities) claim the WOTC as a credit against their income tax liability. Not-for-profit entities may claim the WOTC against their federal payroll tax obligations. The amount of credit an employer may receive for hiring an eligible individual is dependent on how long the employee works for the employer, how much the employee is paid during their WOTC eligibility period, and the employee’s specific eligibility criteria. The potential credit ranges from $1200 to $9600 per eligible employee. While there are caps on the amount of WOTC an employer may claim per eligible employee, there is no CAP on the number of eligible employees an employer may hire. As such, certain industries such as manufacturing, retail, and hospitalities may generate a substantial amount of WOTC over the course of a year due to the constant turnover in their workforces. WOTC eligible employees include:

Various states across the country offer tax-based incentives to companies producing and creating qualified musical, theatrical productions, films, television shows and other digital media in their state. Each state offers different tax-based incentives with their own unique rules, requirements, and other nuances. Companies need to understand these differences when ultimately deciding where they will create their production in order to maximize their benefit.