| Manufacturing Facility Relocation/Expansion Project Qualifies for State Tax Incentives and Sales & Use Tax Exemption
Scenario
The CB&H State and Local Tax (SALT) client is a privately held middle-market manufacturing company that produces metal products for heat and air systems. The company had outgrown their manufacturing facility and made the decision to relocate and build a new facility in an adjoining county. The owners of the company were well established in the local political scene, and reluctant to accept any assistance from a service provider when negotiating economic incentives for their project. After the facility was completed, they allowed our SALT professionals the opportunity to review their incentives package.
CB&H Action Steps
After learning more about our client’s business and the details of their expansion project, CB&H SALT professionals took a tour of their new facility and met with key personnel to review the financial details of the expansion project. CB&H had already performed a cost segregation study of the new facility. The SALT group uncovered two key cost savings opportunities for the company – an income tax credit generated by new jobs created at the facility, and a sales and use tax exemption for repair and replacement parts. The CB&H partner and SALT professionals secured an engagement to perform a tax credit review and sales and use tax refund analysis for a fee that represented a significant value to the company.
Results
The client has realized approximately $240,000 in state income tax credits. If the jobs are maintained in the future, then the client will realize approximately $450,000 in credits to use in subsequent tax years. The client immediately implemented accounting procedures to take advantage of the sales and use tax exemption. A refund claim of approximately $10,000 has been filed for the 2005 overpayment of sales tax. CB&H SALT professionals continue to work on the sales and use tax refund analysis for the 2006 and 2007 years. Through the team effort of the SALT group, CB&H was able to solve an issue for the client and assist them with realizing permanent tax savings.
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