Is Your Company Eligible for the Hoosier Business Investment Tax Credit?

by Melissa Merrick and Marie Jett, CPA | Team Members of the Tax Services Group and the Manufacturing & Distribution Services Group

The Indiana Department of Revenue offers numerous tax deductions and credits. One such tax credit is the Hoosier Business Investment Tax Credit. Taxpayers are eligible for this credit when making qualified investments to directly expand Indiana’s workforce.[1]

What Types of Investments are Considered “Qualified”?
In order to be “qualified”, the investment must first pass the test that it directly relates to expanding the workforce in Indiana. The types of investments that have been approved for the credit include the purchase, cost of modernization, or construction of facilities and equipment used for:

• Telecommunications
• Production
• Manufacturing
• Fabrication
• Assembly
• Extraction
• Mining
• Processing
• Refining
• Finishing
• Distribution
• Transportation
• Logistical distribution

Qualified investments do include expenditures for onsite infrastructure improvements, retooling costs on existing machinery/equipment, and construction of special-purpose buildings/foundations in the computer, software, biological sciences, or telecommunications industries.

Investments must be expenditures in Indiana. Property that could be readily moved to another state would be ineligible for the credit.[2]

What is the Maximum Value of the Credit?
The credit may be for up to 10% of the qualified investment and can be carried forward for up to nine years. However, the amount of the credit and carry-forward period is determined on a case-by-case basis by the Indiana Economic Development Corporation (IEDC). This means that based on the IEDC’s assessment, your credit can be determined at a percent and/or carry-forward period of less than the maximum rates listed above. The credit expires December 31, 2013. [3]

As well, only one credit is allowed per project. This means, if you have already claimed a capital investment credit, community revitalization credit, or other types of credits regarding the project on your Indiana state tax return, you cannot claim the Hoosier business investment credit on that same project.[4]

How Can You Apply for this Tax Credit?
To obtain the credit, the taxpayer (business or individual) would need to apply with the IEDC before making the qualified investment. [5] The IEDC would make sure that the investment was a “qualified” investment. Per the IEDC, other factors they consider in order to enter into agreement with the taxpayer are: [6]

• “The applicant’s project will raise the total earnings of employees of the applicant in Indiana.
• The applicant’s project is economically sound and will benefit the people of Indiana by increasing opportunities for employment and strengthening the economy of Indiana.
• Receiving the tax credit is a major factor in the applicant’s decision to go forward with the project, and not receiving the tax credit will result in the applicant not raising the total earnings of employees in Indiana.
• Awarding the tax credit will result in an overall positive fiscal impact to the state, as certified by the budget agency using the best available data.
• The average wage that will be paid by the taxpayer to its employees (excluding highly-compensated employees) at the location after the credit is given will be at least equal to 150 percent of the hourly minimum wage or its equivalent.
• A taxpayer receiving the tax credit shall maintain operations at the project location for at least 10 years during the term that the tax credit is available.”

If you have any questions regarding whether you would be eligible for this tax credit, please contact us.