Manufacturing and distribution companies are being challenged today, both domestically and globally, by growth in the industry and competition. Companies are scrambling to deliver quality products and service to meet customer needs and demands. Faced with rising operating costs and increasing minimum wage rates, it can be difficult for manufacturers to stay profitable without comprising the quality of their products or compromising employee retention and morale. Fortunately, there are tax incentives programs offered on the federal and state level that include targeted employment incentives (like the Federal Work Opportunity Tax Credit), state employment-based incentives and training-based incentives that can be advantageous to manufacturers.
There are both federal and state targeted employment incentives available to manufacturers that can help offset income tax liability. These are tax credits that are offered to employers for employing individuals from specific target groups. The most popular of these programs is the Federal Work Opportunity Tax Credit (WOTC). The WOTC is a federal tax credit program that incentivizes employers to hire individuals who typically face barriers to employment such as ex-felons or Veterans. The tax credit can range from a maximum of $1,200 to $9,600 for each qualified new hire depending upon the new hire’s target category and there are currently 14 different target categories under which an employee may qualify. There are also a few states that offer tax credits that “piggyback” off the WOTC, meaning they may use some of the same qualifying criteria as the WOTC, but the credit may be used to offset state income tax liability rather than federal. Some states also offer specific tax credits for hiring Veterans or disabled individuals.
Many states also offer employment-based incentives for job creation/growth or job retention. These are typically income tax-based credits, although a few states like Georgia may allow employers to elect to utilize their credits to offset payroll withholding tax. These tax credit programs often require employers to show a net increase in full-time jobs year over year or in the case of retention credits, the employers are required to maintain or retain a specific number of full-time jobs year over year. These types of tax credits are great for manufacturing companies that are expanding or experiencing headcount growth.
Training incentives are also available to manufacturing companies. Many states offer businesses incentives in the form of grants, refunds or credits for providing qualified training to their employees. Examples of these programs include the California Employment Training Panel (reimbursement program), the Georgia Retraining Tax Credit (tax credit program), and the Florida FLEX (training grant) program. Many of these incentives equate to around 50% of qualified training expenses.
As manufacturers struggle to deal with the challenges of increasing competition and operating costs, implementing tax saving programs like targeted employment incentives (e.g. WOTC), employment-based incentives and training incentives can help boost their bottom line without having to cut other costs that may jeopardize their customers’ expectations.
For more information on tax incentive programs available in your area, find your state below.