Texas Tops the Nation with IT Employment Figures
Juxtaposed against the rest of the world, the United States appears to be mounting as an economic and techno-industrial power. In particular, close cooperation between the US Congress, industrial manufacturers, university research and the military establishment have contributed to the United States emergence as one of the most technologically advanced nations in the world. Take Texas, for example, where the plunging price of a barrel of oil has forced layoffs across the state. Despite the downward spiral of the oil and gas industry, the technology sector in Texas is thriving.
To elaborate, Texas leads the country with respect to employment in a variety of sectors within the IT industry – including telecommunications, computer and software wholesaling and electronic repair In fact, the Lone Star State boasts more than 585,000 technology workers across 34,100 businesses. Overall, the state’s tech community continues to enjoy rapid growth, adding 13,800 IT positions within the last year. Tech employers in Texas spend more than $58 billion on payroll annually, with IT employees earning nearly double the state’s average earnings at $99,700 annually.
In addition, because of the type of the work involved in the IT sector, companies involved in any kind of technology innovation may qualify for significant federal and state research and development (R&D) tax credits. Historically, many start-up companies and small businesses in the IT industry were unable to benefit from the research credit due to operating losses or alternative minimum tax limitations. However, in addition to making the research credit permanent, the Protecting Americans from Tax Hikes (PATH) Act added two new provisions that are effective January 1, 2016. These two provisions are designed to increase the number of startups and small to mid-sized businesses that can benefit from the credit. Now, start-ups (businesses with gross receipts of less than $5 million a year) will be able to take the credit, capped at $250,000 against their 2017 payroll taxes.
In addition to the direct start-up provision, starting in 2016, small businesses (businesses with less than $50 million in gross receipts) will now permanently be able to claim the R&D credit against their Alternative Minimum Tax (AMT). The removal of the AMT barrier may see a tenfold upsurge in the number of small businesses that can utilize the R&D Tax Credit. Combined, these two alterations will benefit start-ups and small businesses with approximately $2 billion in added tax savings.
It is imperative, nonetheless, that businesses recognize what kinds of costs are eligible in order to maximize the credit so that appropriate records can be sustained throughout the year. Texas Tax Credit’s R&D tax professionals are available to discuss the R&D tax credit and the changes in the new PATH Act – contact us today if you would like to know if your company now qualifies.