Does Your Remote Workforce Qualify for Revised State Tax Incentives?
- In response to many organizations shifting to a remote workforce, certain states have revised their tax credit and incentives programs to accommodate these employees.
- Remote employees must still meet standard qualifying program requirements and often must be residents of the state incentivizing the organization.
- This change allows organizations to continue offering flexibility to their workforce while at the same time qualifying for new, or retaining their existing, tax credit and incentives.
Don’t get weighed down by the details of tax incentives
Organizations with a remote workforce may have reason to cheer. During the COVID-19 pandemic, numerous state governments placed restrictions on business activity and occupancy limitations. In response, many employers adopted telecommuting and remote work options.
Now some states are recognizing this workforce shift and changing their tax credit and incentives programs to accommodate employers. This means your telecommuting and remote workers may count as qualifying employees for these programs. Some states with recent changes to their workforce incentives to reflect the changing remote workforce includes Ohio, Kansas and Georgia.
Refundable tax credit changes in Ohio
The Job Creation Tax Credit (JCTC) is a refundable tax credit taken against an organization’s commercial activity tax liability. The amount of the tax credit is calculated as a percent of the newly created payroll. Beginning with reporting periods after calendar year 2020, Ohio taxpayers can now include the payroll of certain remote employees. The revision came with the passing of H.B. 110, which defines a qualifying work-from-home employee as an employee who is a resident of Ohio and whose services are supervised from the employer’s Ohio project location. The work must also be performed primarily from the employee’s Ohio residence.
Kansas incentive programs include remote workers
In 2021, the Kansas Department of Commerce revised its policies to include work-from-home employees in its incentive programs. That includes its two most utilized programs: Promoting Employment Across Kansas and the High-Performance Incentive Program.
Kansas outlines several qualifications remote workers must meet in order to be included. In addition to meeting the standard wage and health care requirements, a remote worker must also:
- Appear on Kansas Department of Labor reports
- Work a minimum of 20 hours per week
- Have at least 50% of income tied to work completed on behalf of a project facility located in Kansas
Telecommuting employees may qualify for Georgia tax credit
Georgia has enacted favorable changes to the Jobs Tax Credit by allowing certain telecommuting employees to qualify for the credit. The Jobs Tax Credit provides a statewide tax credit for any organization engaged in manufacturing, warehousing and distribution, processing, telecommunications, tourism, research and development industries, or services for the elderly and persons with disabilities.
As of the writing of this article, the Georgia changes are only allowed for organizations claiming the credit in 2020 and 2021 tax years. The remote or telecommuting employee must still meet the other program requirements for wages, hours worked, and health insurance.
Other state tax credit and incentive considerations
Some states already recognized remote workers in their credits and incentives programs prior to COVID-19, so work with your tax advisor to review potential opportunities in your state. For example, since the inception of the Missouri Works program in 2012, workers that spend less than 50% of their time at the project facility are deemed eligible. Those employees must still meet certain other requirements for residency and receiving direction and control from the facility.
Generally, incentive programs require the remote employee to be tied to a physical location within the state for purposes of meeting wage requirements and the work performed by the employee. In addition, employers should be aware of cross-border state and local tax issues that can stem from having a remote workforce. Start preparing as soon as possible and review the process carefully to help use these incentives to your advantage.
How we can help
Credit and incentive program requirements can be complex, particularly in light of recent changes in response to the COVID-19 pandemic. CLA works closely with you to evaluate opportunities that could potentially lower your tax burden. Let our business incentive consulting professionals help you assess your eligibility and navigate the application process.