Bringing the Economy Home

Idaho’s 5 Most Popular Business Tax Incentives

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Idaho offers nine different tax credit programs for businesses.  We’re highlighting the five most popular.  The investment tax credit is used far more than any other credit-type incentive.  In 2009, businesses collected more than $26 million under that credit alone, according to the Division of Financial Management.

Here’s a look at the other most frequently used business tax credits:

  • Research Activity Credit: Enacted in 2001, it’s a five percent credit for expenses related to research completed by a small business, university or federal government entity.  The research must be done in Idaho to qualify.
  • Broadband Investment Credit: This is a three percent credit for purchases of qualified broadband equipment in Idaho.  The credit is limited to no more than $750,000 per tax year, and no more than the taxpayer’s liability after all other credits in a single tax year.  It can be sold to other taxpayers.  It was enacted in 2001.
  • Small Employer Capital Investment Credit: This credit can be used in lieu of the investment tax credit for qualifying small businesses.  It provides an income tax credit of 3.75 percent on new equipment purchased in Idaho.  This credit is limited to 62 percent of the company’s income tax liability for one year, rather than the 50 percent limit under the investment tax credit.  It was enacted in 2005.
  • Small Employer New Jobs Credit: This provides an income tax credit ranging from $1,500 to $3,000 for each eligible new job created from 2006 to 2020.  The average wage for people hired under this credit must be at least $15.50 an hour.  This credit was enacted in 2005.  The state believes employers will begin to turn to a new program called the Hire One Act instead, because the benefits are better.

This table shows the breakdown of all nine business tax credits for 2009, the most current actual data available.  In total, businesses received almost $28 million in tax credits that year.

[spreadsheet key=”0AiLU6Cs5LWZIdHdCZUYyZ2VZV2JQTXpzSkxjNWhqMVE” source=”Division of Financial Management” sheet=0 filter=0 paginate=0 sortable=0]

The numbers for 2010 and 2011 are still projections.  Here’s a look at the state’s prediction for business tax credit claims for 2011.

[spreadsheet key=”0AiLU6Cs5LWZIdFkzZEtjV2RtalBLSzZld1dvb3RaeUE” source=”Division of Financial Management” sheet=0 filter=0 paginate=0 sortable=0]

Dan John manages tax policy at the Idaho Tax Commission.  He says the state doesn’t just give out credits for the sake of giving credits.  “The theory is that the amount that comes in tax from either other businesses that purchases are being made from, or from the employees of the businesses that made those, more than offsets the credits that are given.”

But the state doesn’t really have a way of confirming that.  John says the only hard data he sees is what’s on a company’s tax return.  “We don’t know all of the upsides of the tax credits and things,” John says.  “We don’t know what all of the people these companies are dealing with…how much more they paid because the company received the incentive and put something into the economy.”


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