A Practical Way to Reduce State Income Tax Exposure

Many companies and high-net-worth individuals assume state income tax liability is fixed. In many cases, it is not.

Several states operate long-standing, lawful transferable tax credit programs tied to economic development and entertainment production. These programs allow qualified taxpayers to purchase state income tax credits at a discount and apply them dollar-for-dollar against taxes owed.

For companies and individuals with meaningful state income tax exposure, the savings can be substantial.

 

Who This Applies To

These programs are particularly relevant for:

• Companies with ongoing state income tax liability

• Founders or shareholders who have recently sold a business

• Individuals coming out of corporate exits, recapitalizations, or liquidity events

• Executives with significant bonus, equity, or deferred compensation income

In the right circumstances, the use of transferable tax credits can reduce state income tax liability by millions of dollars.

 

How It Works

Production companies earn state-issued income tax credits based on qualified in-state spending. Once certified by the applicable Department of Revenue, those credits may be transferred to taxpayers who owe state income tax.

Credits are typically purchased at a discount and applied directly against taxes owed. Because credits are certified prior to transfer, transactions that follow regulatory compliance result in virtually no downside risk. This is not a deferral or a timing strategy. It is a direct offset.

 

Our Experience

Hall Booth Smith has extensive experience structuring and overseeing tax credit transfers for companies and individuals across a wide range of transaction sizes, from modest purchases to single transactions involving tens of millions of dollars.

We regularly advise clients on these programs in Georgia, New Jersey, Illinois and Connecticut, and other states where transferable credit programs are available.

 

A Simple Question Worth Asking

If you or your clients have significant state income tax exposure, the question is straightforward: Are you paying more state tax than you are legally required to pay?

We are happy to discuss whether these programs are worth exploring in your particular situation. For assistance, please reach out to Don Mandrik or Michael Price.

About Hall Booth Smith

Established in 1989, Hall Booth Smith, P.C. is a full-service law firm headquartered in Atlanta, Georgia. Experienced across a wide range of legal disciplines, HBS attorneys pride themselves on providing knowledgeable, proactive, client-specific counsel to individuals, domestic and international corporations, state and federal agencies, and nonprofit organizations. The firm’s promise: “Serving to Achieve Excellence.” To learn more, please visit: www.hallboothsmith.com or connect with us on LinkedIn.