R&D Tax Credit News

Indiana’s Economic Development Corporation has a mission to help companies invest and grow within the state. There is a long list of valuable incentives offered by the IEDC. Among the most powerful and broadly beneficial of these incentives is the Economic Development for a Growing Economy (EDGE) – Payroll Tax Credit.

The idea of Indiana offering a payroll tax credit is sort of a misnomer, because companies do not pay payroll tax to the state of Indiana – it’s a federal tax. However, getting back the equivalent of your federal payroll tax as a state tax credit should more than make up for the name confusion. Since the credit is refundable (as discussed in this previous blog), any growing company should feel a positive financial impact from the EDGE credit. Companies won’t just see their state tax burden reduced or eliminated, they can receive more money back than they paid in. A roughly 6% return on all new payroll created after an EDGE award should be enough to get any company excited!

EDGE Credit Building Blocks

There are many technical requirements the IEDC will consider when evaluating a company’s incentive application, but the basic conditions are simple:

1. Have a realistic plan to grow – The EDGE credit is a purely prospective incentive. A company estimates for the IEDC how many people they plan to hire over a five-year period and is issued an award based on that growth (and a handful of other key factors). The company earns the award amount in yearly increments based on the actual progress toward the employee hiring goals that were laid out during the award issuing phase. There is no minimum amount of growth required to apply for an EDGE credit. However, given the annual reporting requirements and reporting timeframe, typically a company needs to be adding ten full-time employees before this program is worthwhile.
2. Focus on corporate employees – Generally, employees in a direct retail customer service role are not eligible for inclusion in the incentive calculation. For example, food service workers working directly in retail locations are not includable, however, back-office personnel at a restaurant chain headquarters would be. Other examples that fall outside the bounds of the EDGE credit include patient-facing healthcare professionals, temporary employees, and seasonal workers.
3. Be willing to commit to the award period – Companies that receive an EDGE credit are allowed up to ten years to earn the entire award (by meeting the total hiring projection in the initial application). Additionally, there is a requirement to report company statistics to the IEDC for two additional years beyond the award period. All-in-all, an EDGE credit is the beginning of a 12-year relationship with the IEDC (as well as any consultant who may be helping you secure the award). Offsetting the equivalent of payroll tax for new employees is a powerful incentive, but entering a 12-year contract with anyone deserves serious consideration.

Making the investment worth it

An ever-present concern of most companies is the time investment a potential opportunity will require. While the IEDC is company-friendly, when a company is going it alone to secure an award, the time investment required can escalate dramatically. Hiring an expert with the experience to quickly and efficiently asses your opportunity, request the necessary information, and secure an incentive package can ensure you get your piece of the incentive pie.

The programs offered by the IEDC are not just for mega-corps with endless time and resources. Companies of all sizes should be rewarded for growing locally and boosting the Indiana economy. The right expert can be your guide to maximizing this opportunity to boost your bottom line.

Getting expert help is easy. You can contact us to chat about the state and local tax incentives that your company may qualify for. The conversation and the advice are free.