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Trends in Tax Credits: Exchanging Tax Credits and Recovering Overpaid Taxes

Let’s take a look at some of the most common opportunities for companies to take advantage of tax credits and incentives—including many that support the kinds of efforts and initiatives that companies undertake as part of their plans for growth and competitive advantage. We’ll cover how to buy or sell unused credits, and how you can recover overpaid taxes for sales and use taxes.

Buy and Sell Unused Tax Credits

Companies can purchase state tax credits and incentives from companies willing to sell them at a discount. In ADP’s experience working with clients, buyers typically purchase these credits/incentives at 10% below the value of the credit/incentive.

Tax credit exchanges enable companies to buy and sell unused tax credits without having to engage with a broker. State tax credits and incentives available for purchase on the exchange include may of the types of credits and incentives described in this paper, such as film credits, low-income housing credits, and credits for building and construction, such as:

  • Georgia Film, Television & Digital Entertainment Tax Credit
  • Louisiana Motion Picture Investor Tax Credit
  • Grow New Jersey Assistance Tax Credit
  • Massachusetts Low-Income Housing Tax Credit
  • New Jersey Technology Business Tax Certificate Transfer Program (Net Operating Loss / Research & Development) Tax Credit
  • Massachusetts Brownfield Tax Credit
  • New Mexico Sustainable Building Tax Credit
  • Massachusetts Historic Rehabilitation Tax Credit

Recover Overpaid Sales and Use Taxes

Companies can recover overpaid sales and/or use taxes and reduce tax liabilities for a variety of investments, including:

  • Construction and capital improvements
  • Integrated plant theory (continuous manufacturing)
  • Equipment & consumables used in R&D or manufacturing
  • Equipment used in R&D or manufacturing
  • Temporary storage & equipment rentals
  • Common carrier and PUC
  • Industry-specific exemptions (i.e. data, rail, energy, retail, mining, etc.)
  • Software, licenses, SaaS, or IT spend
  • Opportunity zone “leakage”

To learn more about tax credits that can benefit your manufacturing business, check out our other blogs on Federal Employment Incentives and Investment and R&D Credits.

Dana Fox is the Vice President of Alliances with ADP. ADP has over 40 years of tax credit experience across national, state and local levels, ADP has helped its clients capture over $1 billion in tax credits in a single year. To learn more, visit  https://www.adpinfo.com/rd-tax-credit.

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