Tag Archives: tax credit

Maryland Offers Physician Tax Credit

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Maryland is launching a new program aimed at bringing physicians to underserved areas of the state. As of June 1, 2016, Maryland physicians can earn a credit reducing state income tax from $1,000 up to $10,000 by serving as a preceptor to medical students in areas with health care workforce shortages. According to the American Association of Family Practitioners, primary care physicians are one area where there are workforce shortages. See full article.

Physician preceptors must work with an approved preceptorship program in an area of the state with health care workforce shortages. Funding of the credit is limited – participation through the Maryland Department of Health and Mental Hygiene is on a first-come, first-served basis.

If you have questions regarding the Maryland tax credit or to discuss your particular situation, please call your Aronson Tax Advisor at 301-231-6200. Our medical practice specialists provide valuable guidance in all aspects of federal and state tax matters.

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Additional Extension: Work Opportunity Tax Credit

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On June 17, 2016, the IRS issued Notice 2016-40, which extends the transition relief period for employers claiming the Work Opportunity Tax Credit (WOTC) for new qualifying employees until September 28, 2016. Specifically, the notice grants an extension of time to submit Form 8850, Pre-Screening Notice and Certification Request to the Designated Local Agency to certify targeted group members hired.

The WOTC is a wage credit available to employers that hire individuals who are members of a “targeted group,” including, among others, qualified veterans, recipients of assistance from a state TANF plan, qualified summer youth employees, qualified food stamp recipients, and long-term unemployment recipients. Depending on the employee’s target group, the maximum credit amounts range from $2,400 to $9,600 for each certified new hire.

Normally, to be eligible for the tax credit, the pre-screening notice must be submitted by an employer no later than 28 days after an individual begins working for them. In March, the 28-day deadline for WOTC pre-screening notices was extended to June 29, 2016. However, the IRS has further extended the deadline through the issuance of this most recent notice to September 28, 2016. The extension applies to qualifying employees hired from January 1, 2015, to August 31, 2016. However, for qualified long-term unemployment recipients, which is a newly created target group within the WOTC program, the extension applied to qualifying employees hired from January 1, 2016, to August 31, 2016.

If you have questions about the WOTC or other tax credits, please contact your Aronson at 301.231.6200.

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Changes to the Healthcare Tax Credit for Small Business Employers

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As small businesses work to keep up with the evolving state of healthcare in the U.S., recent tax changes may be a double-edged sword for employers. The good news is that the available tax credit, for plan years beginning after December 31, 2013, has increased from 35 percent up to 50 percent of premiums paid by small business employers. The bad news is that, to be eligible, plans must be offered through a Small Business Health Options Program Marketplace (i.e., through healthcare.gov or a state-run marketplace). A second new limitation is that the credit may only be taken for two consecutive years.

Other eligibility requirements remain the same. To qualify:

  • A small employer must have fewer than 25 full-time equivalent employees (e.g., two half-time employees count as a full-time equivalent employee).
  • The average wages for employees (excluding owners) must be less than $50,000 per year (total wages divided by the number of full-time equivalent employees).
  • The employer must pay at least half of the cost of the employees’ individual (not family) health insurance premiums.

For small employers who qualify, the credit can be a significant tax savings. For “flow-through” businesses, like a small medical practice partnership, the credit would flow through to the individual owners’ tax returns.

If the credit exceeds the 2014 tax liability, it may be carried back to a prior year for a refund or carried forward to reduce next year’s taxes. For employers who missed the credit in 2012 or 2013, a quick calculation may help determine if amending a prior year return to claim the credit would be worthwhile.

For more information, please contact your Aronson tax advisor or Ellen Boulle-Lauria of Aronson’s Professional Services Industry Group at 301.231.6200.

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Virginia Research & Development Tax Credit Gets a Boost

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Virginia lawmakers have approved legislation that enhances the Commonwealth’s research and development income tax credit. The legislation, which makes a number of changes to the R&D credit, takes effect for tax years beginning on or after January 1, 2014. Virginia is among a number of states, including Alabama, Arizona, Illinois, and Pennsylvania, which have considered enacting or improving research and development tax incentives this year. Maryland’s R&D credit also was recently given a facelift.

The Virginia legislation, which was approved by the Governor Terry McAuliffe on March 7, 2014, increases the amount of the R&D credit from 15 percent on the first $167,000 of qualified expenses to 15 percent of the first $234,000 of qualified expenses. Thus, the credit has gone from approximately $25,000 to $35,000. For qualified expenses conducted in conjunction with a Virginia institution of higher education, the R&D credit will increase from 20 percent of the first $175,000 to 20 percent of the first $234,000. Further, the General Assembly increased the maximum amount of annual R&D credits that can be issued each fiscal year from $5,000,000 to $6,000,000.

Another significant change to the R&D credit pertains specifically to pass-through entities (i.e., partnerships, limited liability companies, and S Corporations). In lieu of having the credit being allocated to the pass-through entity’s owners, the new law allows the pass-through entity to elect to claim the credit at the entity level. The legislation instructs the Department of Taxation to development guidelines on how the entity level credit would be implemented, but presumably the pass-through entity would receive payment from the department for the amount of the credit.

This election makes it more likely that the benefit of the credit will be reinvested in Virginia’s economy. The General Assembly also showed its commitment to attracting research and development activities in Virginia by extending the expiration of the credit through 2018, rather than at the end of 2015 as originally specified.

If you have any question about state tax credits, please contact your Aronson tax advisor or Michael L. Colavito at 301.231.6200.

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Maryland Increases and Decreases Security Clearance & SCIF Credits

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The Maryland legislature has increased the income tax credit for employer costs related to obtaining federal security clearances and constructing or renovating sensitive compartmented information facilities (SCIF) within Maryland (L. 2013, c. 482, § 1). The legislation also enacted an additional credit for first year rental payments for spaces leased in Maryland by a small business performing security-based contracting. The modifications to the Maryland Employer Security Clearance Costs (ESCC) Tax Credit take effect on July 1, 2013.

ESCC-eligible costs include administrative expenses for processing in-state employee applications for federal security clearances; training in-state employees to administer such applications; the installation, maintenance, and upgrading of required computer systems; construction and equipment expenses incurred to build or renovate SCIFs; and rent payments incurred by a small business security contractor during the first year of a rental agreement for leased spaces in the state. The recently enacted legislation increased the credit amounts:

  • from $100,000 to $200,000 for security clearance administrative expenses;
  • from $100,000 to $200,000 for construction and equipment expenses related to a single SCIF;
  • from $250,000 to $500,000 for construction and equipment expenses related to multiple SCIFs;
  • and added a $200,000 credit for small business rental payments.

Despite increasing the ESCC credit amounts that a taxpayer may claim, the legislation decreased, from $4 million to $2 million, the total amount of credits that the Department of Business and Economic Development (DBED) may approve in a single calendar year. Each applicant’s credit will be limited ratably if the total credits applied for exceed $2 million in any calendar year, as opposed to the credit being awarded on a first-come, first-served basis. Thus, depending on the number of applicants and credits applied for, the increases discussed above could be nullified by the decrease in the total credit amounts that can be awarded. The credit is not refundable, but any excess may be carried forward to subsequent years until the entire amount is exhausted.

If you have any questions, please contact your Aronson tax advisor or Michael L. Colavito at 301.231.6200.

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