Lesser Known State Tax Credits That You Could Be Using

We all know about the generous tax credits that many states offered to Amazon to entice it to locate to their state. Wouldn’t it be nice if there was a tax credit available to us average folks? You are in luck! Many states are offering tax credits that are available to the average person or small business owner. Read on for more information on some of the more beneficial – and lesser-known – tax credits that we have identified.

CALIFORNIA – Agriculture Product Donation Credit

Under California law, a qualified taxpayer who donates qualified donation items to a food bank located in California is allowed a credit against the “net tax” equal to 15% of the qualified value of those items. The tax credit is effective for tax years beginning on or after January 1, 2020, and before January 1, 2022. A qualified taxpayer is a person responsible for planting, managing and harvesting the crop. It also includes the person responsible for growing the qualified donation item or harvesting, packing, or processing the item as long as they are not a retailer.

Qualified donation items include the obvious fresh fruits and vegetables, but it also includes the following raw agricultural products and processed foods:

  • fruits, nuts and vegetables
  • meat food product
  • poultry
  • eggs
  • fish
  • rice
  • beans
  • fruits, nuts and vegetables in canned, frozen, dried, dehydrated and 100% juice forms
  • cheese, milk, yogurt, butter, and dehydrated milk
  • infant formula
  • vegetable oil and olive oil
  • soups, pasta sauce, and salsa
  • bread and pasta
  • canned meats and canned seafood

PENNSYLVANIA – Malt Beverage Tax Credit

In an effort to encourage the growth of small breweries, Pennsylvania offers a credit to offset the cost of investment for manufacturing expenditures in the malt or brewed beverage industry. The Commonwealth has $5,000,000 in credits available each year. The maximum credit available to the brewer is $200,000 based on the cost of Qualifying Capital Expenditures. Qualifying Capital Expenditures include plant, machinery, or equipment for use by the brewery in the Commonwealth in the manufacture and sale of malt or brewed beverages. Applications are due to the PA Department of Revenue by April 1st each year.

The credit is applied toward the taxpayer’s Pennsylvania Malt Beverage excise tax liability. The PA Malt Beverage excise tax is levied on malt or brewed beverages manufactured and sold for use in Pennsylvania or manufactured outside of Pennsylvania but sold for importation and use in Pennsylvania. The tax is borne by the consumer, but manufacturers, distributors, and importers remit the tax to the commonwealth.

NEW YORK – Credits available for veterans

New York offers three different property tax exemptions to veterans who have served in the U.S. Armed forces. Veterans are eligible to receive one of three exemptions.

  • Alternative Veterans' Exemption
    • Available only on residential property of a veteran who has served during a designated time of war, or who has received an expeditionary medal
    • Currently available in over 95 percent of the county, city, town, and village taxing jurisdictions across the state. School districts also have the option to offer this exemption
  • Cold War Veterans' Exemption
    • Available only on residential property of a veteran who served during the Cold War period
    • Counties, cities, towns, villages, and school districts have the option to offer this exemption to qualified veterans
  • Eligible Funds Exemption
    • Provides a partial exemption
    • Applies to property purchased by a veteran. Such owners must purchase the property with pension, bonus or insurance monies

On November 12, 2019, New York Governor, Andrew Cuomo, signed a law amending the tax law to include veterans who have certain qualifying conditions or who were discharged as an LGBTQ veteran in the definition of a qualifying veteran. This allows veterans who may have been dishonorably discharged due to PTSD or being LGBTQ to have access to veteran’s benefits.

Illinois – Minimum Wage Tax Credit

On January 1, 2020, Illinois raised the minimum wage to $9.25. The rate increased to $10 on July 1, 2020. As a result, a tax credit was offered to small businesses to help relieve the financial burden of the increase. Employers who have 50 or less full-time equivalent employees are allowed a credit of 25% on the difference paid by a business due to the minimum wage increase. The average wage paid per employee making less than $55,000 in 2020 must be greater than the average wage paid per employee making less than $55,000 in 2019.

A “Qualified Employee” is an employee who is earning the required minimum wage for the current reporting period and whose average wage paid during the previous four reporting periods was equal to or less than the required minimum wage. The employee must be a full-time employee who works at least 520 hours in a quarter. The maximum credit for the first and second quarters of 2020 is $6,500 and $11,375 for the third and fourth quarters.

Maryland – Apprenticeship Tax Credit

Maryland is just one of sixteen states who offer a tax credit related to the employment of an apprentice. The Maryland Apprenticeship Tax Credit is available to Registered Apprenticeship Sponsors and/or employers who employ an eligible Registered Apprentice(s). For each eligible Registered Apprentice, a credit up to $1,000 is available.

The credit may be taken against the state income tax for the first year of the Registered Apprentice’s employment. The Registered Apprentice must also have worked for the Employer for a minimum of seven full months. There is no limit on how many Registered Apprentices can be claimed for each taxable year provided they meet the eligibility criteria. The credit may be carried forward if the tax credit exceeds the amount of state income tax.

The Maryland Department of Labor, Licensing, and Regulation (DLLR) is limited to granting $500,000 for this credit per taxable year. The credits are provided on a first-come, first-serve basis.

There are state tax credits available for all types of taxpayers. You just need to look. If you have questions about state tax credits, please contact your HBK Advisor.

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About the Author(s)
Sue is a Senior Manager in the Pittsburgh, Pennsylvania office of HBK. She began her career in 1990 spending 14 years in public accounting followed by 14 years in government. Sue has extensive experience in state taxation and pass through entities. She is a member of the HBK’s Tax Advisory Group.
Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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