Business Strategies / Process and Operations

Layering credits and incentives for investment

According to this expert, 2011 may be one of the best years in recent memory for food processors to make capital investment.

By Tim Schram, Director of Incentive Services, State and Local Tax, Grant Thornton LLP

Calendar year 2011 may be one of the best years in recent memory for food processors to make capital investment. Companies making capital investment during calendar year 2011 are eligible to claim 100 percent federal bonus depreciation, and at the same time, take advantage of a host of other credit and incentive programs. Layering these credits and incentives will greatly enhance these companies’ return on investment.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was recently signed into law,  and provides 100 percent federal bonus depreciation for qualified capital investment made during 2011. The Act also provides 50 percent federal bonus depreciation for qualified purchases placed into service during 2012.

Food processors making capital investments can take advantage of this 100 percent depreciation and also utilize other federal, state and local credit and incentive programs. For example, if a company makes a qualified investment for new equipment at an eligible site, that company could feasibly use the following incentives in combination:
  • Federal New Markets Tax Credit. This credit provides a cash benefit that may be worth up to 18 percent of the capital investment.
  • State Investment Tax Credit. Many states offer manufacturing and other qualified businesses investment tax credits worth up to 10 percent on qualified investment.
  • Local Property Tax Abatement. Municipal jurisdictions may offer personal (and real) property tax abatement incentives. 
  • Other Discretionary Cash Grants/Incentives. Depending on the type of investment, local governments may also have the ability to provide discretionary grants. Public utility providers may also provide discretionary incentives for qualified purchases.

For food processors considering capital investment, there may be no time like the present to take advantage of available credits and incentives.