Credits and incentives, timing is everything
Credits & Incentives talk with Deloitte
“Credits & Incentives talk with Deloitte,” is a monthly column by Kevin Potter of Deloitte Tax LLP, featured in the Journal of Multistate Taxation and Incentives, a Thomson Reuters publication. The November/December edition of "Credits and Incentives talk with Deloitte," co-authored with Nancy Foster of Deloitte Tax LLP, discusses timing throughout the entire process of obtaining, securing, and monetizing credits and incentives benefits.
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Improving credits and incentives potential
In many cases it's all or nothing. There's no in-between when it comes to obtaining or enhancing the benefits to be derived from credits and incentives (C&I) because timing is everything and if it's not on your side, the results could be costly. Although good timing may involve a little luck, there are many ways to improve C&I potential, such as:
- Utilizing C&I in the investment decision-making process with negotiated/discretionary incentives
- Completing employee screening and documentation requirements prior to the hire date
- Identifying and timely completing credit prerequisites and requirements
- Filing applications early, before allocated funds are depleted for first-come, first-serve C&I programs; and
- Meeting compliance due dates and other requirements to avoid "clawback" provisions.1
Often, available C&I may involve a limited window of opportunity. If the sequence of events needed to secure or enhance a particular credit or incentive does not happen at the right time, the benefit can be substantially diminished or, worse yet, completely eliminated.
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Excerpts from this month's issue
What does timing have to due with it anyway?
After an incentive has been awarded, maintenance and other compliance requirements must be satisfied in order to monetize, utilize, and realize the benefit. These requirements may entail:
- Submitting forms, reports, or returns
- Responding to and participating in audits performed by the agency that granted the incentives; and
- Performing various administrative tasks in order to track and substantiate fulfillment of requirements that are stipulated in the executed incentive agreement or under the program generally
All of these tasks will have deadlines that are crucial in order to monetize benefits and avoid potential clawback provisions associated with different incentive packages. To satisfy the applicable compliance responsibilities within the specified deadlines, it is important that a company understand the reporting requirements, maintain a system that tracks the timing of all deadlines, and plan ahead, with an eye toward fulfilling the obligations in an orderly and timely manner.