Want to boost cash flows? Here’s where tax teams can start has been saved
Want to boost cash flows? Here’s where tax teams can start
Find potential savings across your whole organization
Today’s turbulent economy has spared no one. The pressure to increase cash flows is nearly unprecedented. Tax leaders are facing mounting burdens to devise shrewd tactics and execute productive strategies. Looking across income tax, indirect tax, and credits and incentives, tax teams can ultimately help boost their organizations’ cash flows.
Cash flow concerns
Strong economic growth. A global pandemic. Inflation. Over the past two years, the business environment has been unpredictable. Now, your organization may need to address the rising costs of goods and talent that may be, in part, the result of these challenges.
Enhanced cash flow is the expectation. Planning for an efficient tax footprint can contribute to meeting that goal. Organizations should complete a broad-based assessment of their current and future tax situation in three key areas.
A first step in exploring potential opportunities to increase cash tax savings in the area of state income tax requires a landscape assessment of an organization’s income tax situation. This assessment should include an understanding of the impacts of ongoing federal and state tax reforms, completed and planned merger and acquisition (M&A) initiatives, changes to your business models, and risk mitigation strategies. Once the assessment is complete, it may be used to rank cash flow priorities, including those offering quick wins and those presenting long-term considerations for efficiencies.
Understanding an organization’s indirect tax life cycles—both for transaction and property taxes—and the risks and areas to generate value within them is vital when looking for enhanced cash flow. Evaluating all the aspects of these life cycles can help determine if there are options for correction or automation that could spur retroactive and/or prospective savings or mitigate existing risks.
Credits and incentives
Many tax credits and incentives may be available simply by engaging in regular, day-to-day business activities. This includes activities such as investments in certain business locations and facilities, capital equipment investment, personnel additions or retention, new products, research and development (R&D), M&A, technology investments, outsourcing, and energy efficiency programs.
To benefit from credits and incentives, both hindsight and foresight are crucial. An organization should answer questions about and provide metrics for the following items:
- Operational expenditures past and future plans
- Capital investments past and future plans
- Office locations, expansions, closures, and reductions
- Job creation and force reduction by location
- Tax incentive agreements of organizations that may have been acquired through a M&A event
- Environmental, sustainability, and governance (ESG) investments past and present
Once this information is gathered, then explore tax credits and incentives that may be available and determine which to pursue—and how.
Once activities that may apply to the organization have been assessed, then determine which may pair with existing credits and incentives programs. Most states and local governments offer tax incentives programs that can provide tax and financial benefits for qualifying investments and projects. In some instances, the overall cost of an investment and project can be offset by these benefits.
Examples of some federal and state credits and incentives programs:
- Federal Work Opportunity Tax Credit
- Federal Investment Tax Credit and Production Tax Credit
- Federal New Markets Tax Credit
- Georgia Investment Tax Credit—manufacturing and telecommunications
- Georgia Job Tax Credit and Quality Jobs Tax Credit
- New York State Excelsior Jobs Program incentive
- New York City Relocation and Employee Assistance Program (REAP)
- New York State Qualified Emerging Technology Company (QETC) tax benefits/credits
- New Jersey Emerge incentive and Angel Investor credits
- California Competes Tax Credit
- Texas Enterprise Zone Program
- Illinois Economic Development for a Growing Economy Tax Credit Program (EDGE)
- North Carolina Job Development Investment Grant (JDIG)
Ready to learn what’s possible?
Two years ago, few of us would have predicted that we would be living through a historic inflationary period featuring global supply chain disruption, rising wages, and labor shortages.
With this dramatic change in the business environment often comes the need for enhanced cash flows to ensure flexibility. Efforts to enhance an organization’s cash position may be effective if cash planning is developed in tandem with tax planning.