I want to share some insights from my recent conversation with Brian Wages from the Specialty Tax Group about an incredible opportunity for Tennessee manufacturers: the Tennessee Job Tax Credit.
Editor's Note: This blog post is adapted from a transcript of our Manufacturing Minute podcast episode featuring Brian Wages of Specialty Tax Group. The content reflects the conversational nature of the original recording.
Understanding the Basics
If you're a manufacturer in Tennessee, you're considered a qualified business enterprise or preferred industry. Why does this matter? Because every state is actively trying to attract manufacturers to their area, and Tennessee offers substantial tax credits to incentivize growth and investment.
The Tennessee Job Tax Credit rewards companies that are doing two specific things: growing their workforce and investing in their facilities. But here's the important part—these activities must happen together, not separately.
What Are the Requirements?
To qualify for this credit, your company needs to meet two key criteria:
Job Creation Requirements
The number of jobs you need to create depends on your county's economic status. Tennessee ranks counties annually based on economic factors like unemployment rates and average wages:
- Tier Four Enhancement Counties (most economically distressed): Minimum of 10 new jobs
- Tier Three Counties: Minimum of 20 new jobs
- Tier One or Two Enhancement Counties: Minimum of 25 new jobs
The good news? These jobs can be any full-time W-2 positions—production, oversight, administrative, or any other role within your company.
Capital Investment Requirement
In addition to job creation, you must make a capital investment of at least five hundred thousand dollars within three years. This requirement is designed to support facility expansions, renovations, or relocations.
What's the Credit Worth?
Here's where it gets exciting: the credit is forty-five hundred dollars per qualified job. But it's not just a one-time benefit. You can claim this credit for up to five years, as long as you maintain that increased headcount. That's substantial savings that can significantly impact your bottom line.
The Pre-Approval Process
One critical aspect that Brian emphasized during our conversation is timing. You must receive pre-approval before beginning your expansion or hiring activities. Here's what that process involves:
You'll need to submit a business plan to the Tennessee Department of Economic and Community Development that includes:
- A description of your business activity
- The project location and county
- Your expected capital investment amount
- Wage information for the new positions
- Your project timeline, including when you'll start construction and complete hiring
Once your application is approved, you can proceed with your expansion and job creation. After the jobs are created, you'll claim the credit based on the difference between your monthly average headcount before and after the project.
Why This Matters for Tax Planning
As we head into year-end tax planning season, this is exactly the type of opportunity you should be discussing with your trusted CPA. If you're even thinking about an expansion, relocation, or significant growth, let your tax advisor know immediately. Advanced planning is crucial because activities completed before receiving pre-approval won't qualify for the credit.
These aren't grants you have to compete for—they're statutory tax credits. If you're meeting the requirements and doing the qualifying activities, you're entitled to this credit as of right.
The Bottom Line
Tennessee wants manufacturers to thrive here, and they're putting real money behind that commitment. If you're planning growth, make sure you're taking full advantage of these opportunities. The combination of job creation credits and the potential for additional industrial machinery credits (which I'll discuss in another post) can create meaningful tax savings for your business.
Remember, communication with your CPA is key. We're here to help you navigate these programs and ensure you're maximizing every available benefit.
Megan Meador is an audit and assurance partner at Brown Edwards and currently serves as the industry leader for manufacturing and distribution.
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