When your organization is acquiring new employees, locations, and/or moving into new states, there are often opportunities to take advantage of these transactions and help offset costs through various tax credit and incentive programs offered by the federal government and individual state and local governments.

Unfortunately, tax credits and incentives are an often-overlooked opportunity during a period of merger and acquisition activity. Don’t let that be you!

Let Us Know!

A frequent theme of merger and acquisition activity is to keep your vendors updated! Without the appropriate information – provided in a timely manner – you may miss out on credit opportunities and/or run into compliance issues.

Thomas & Company, and our partners at Silverlode Consulting, are here to help.

Let us know about any merger/acquisition activity and we will ensure you have the right information to make informed decisions that enable your success.

Location Based Incentives

Statutory Incentives

Statutory incentives, also referred to as federal and state tax credits, are available to companies making capital investments, hiring employees, or participating in other qualifying activities in eligible zones or areas. These incentives typically take the form of single or multi-year tax credits, helping businesses reduce their tax liability over time.

Opportunities for Statutory Incentives

Acquiring a new company often results additional locations. If these locations are in states or localities where your organization did not previously have a presence, you may be eligible for new tax credits and incentives. Statutory incentive programs may include:

• Federal Empowerment Zone
• Colorado Enterprise Zone Credit
• Connecticut Fixed Asset Credit
• Georgia Job Tax Credit
• Idaho Investment Tax Credit
• Illinois Enterprise Zone Investment Tax Credit
• Mississippi Jobs Tax Credit
• South Carolina Job Tax Credit
• And More!

Discretionary Incentives

Alternatively, discretionary incentives, also known as negotiated incentives, are incentives that must be negotiated in order to be procured. Organizations expanding their existing facilities or work force or investing in new locations, facilities, projects, and/or jobs have an opportunity to negotiate unique incentive opportunities.

Opportunities to Negotiate Incentives

When participating in merger and acquisition activity, there are many different opportunities to engage in negotiations for incentives.

• If the FEIN changes, or the employment entity changes, there may be an opportunity to argue the employees are new.
• If any facilities are consolidated into existing facilities, there may be an opportunity to negotiate incentives.
• Many times, companies will need to invest in new systems/equipment to make sure that the company is operating on consistent platforms. These new equipment purchases or technology requirements often present an opportunity for incentives.

There are also often opportunities to extend or enhance existing incentives for surviving entities/locations. Existing incentive agreements should be reviewed to ensure the legal name and other important details are changed to reflect new ownership.  Legal agreements need to be reviewed to ensure they can be transferred.

Assessment Opportunities

With just a list of company locations, our experts can perform a high-level assessment of potentially available incentive programs. This can help determine if additional incentive opportunities are available based on the new locations – or if you aren’t already taking advantage of incentives available through your current locations!

Work Opportunity Tax Credits

The Work Opportunity Tax Credit (WOTC) program incentivizes the hiring of individuals that have faced barriers to employment as members of certain targeted groups, including veterans, SNAP recipients, long-term unemployment, and more. Credits range from $2,400 to $9,600 depending on the targeted group of the new employee and that employee’s hours worked.

Just like all other aspects of your organization, the WOTC program can be impacted by merger and acquisition activity.

Will the FEIN Change?

Yes

No

Previous Credits

If there is a change to the FEIN during merger and acquisition activity, the successor cannot take the previous credits that the predecessor applied for under the original FEIN.

Screening Employees

However, if the FEIN changes, the transferring employees may be classified as new hires, resetting potential WOTC eligibility. Therefore, you can screen each of these individuals for WOTC qualification.

When individuals are classified as new hires, it is important to screen before the acquisition date. As with all WOTC screening, in order to maintain compliance and be eligible for applicable credits, screening must be done on or before the job offer is made. In the case of mergers and acquisitions, this would mean the acquisition date. Failure to do so can result in losing access to any credits.

Employer Declaration Forms

Similarly to unemployment POA forms, WOTC Employer Declaration forms are impacted by any changes to FEIN. If a new FEIN is obtained or created, appropriate authorization will need to be filed with the State Workforce Agencies in order to ensure Thomas & Company can represent your organization.

If there is no change in the FEIN, the credits already applied for by the predecessor can continue to accumulate based on hours worked by the applicable employees. The successor company can claim these credits, assuming the employees were appropriately screened, and the Form 8850 was filed timely and approved.

It is important to communicate any merger/acquisition activity with Thomas & Company, as additional information and research is needed to ensure your organization can maximize your WOTC credits.

Thomas & Company in Partnership with Silverlode

Thomas & Company has supported clients since the WOTC program’s inception in 1996, bringing unparalleled expertise to the Work Opportunity Tax Credit (WOTC) space. Removing the administrative burden associated with complicated state filings and associated follow ups, Thomas & Company delivers bottom line profitability paired with an industry leading client experience.

In addition, we have partnered with Silverlode Consulting to bring decades of experience identifying, securing, and managing both statutory and negotiated incentives.

If your company is expanding, consolidating, relocating, hiring, or making capital investments, developing an effective tax incentive strategy and process is essential to maximizing cost saving opportunities and ensuring your organization captures all available benefits.

Check Out More on This Topic!

Don’t forget to check out our previous articles on all facets of M&A activity impact.