Tax Credit for Minority Business
Other one of the controversial tax credits out there is the tax credit for minority business. Tax credits for minority business come in a variety of forms from both the Federal and many State Governments.
Federal and State Governments have a long history of using tax credits to advance social programs that are deemed to be in the public interest. Today, two areas that are getting much attention are the Green or environmental movement and minority business ownership. The idea behind minority business tax credits is that minorities suffer unfair disadvantages in starting and operating business and doing so would help bring a more equal country. The tax credit for minority business can be from the Federal or State Government and applies to either Federal or State taxes.
From the Federal Government, the New Market Tax Credit program has been expanded to include investments in minority business. This program, known as the NMTC, awards a credit spread over seven years that amounts to roughly 39% of the investment made in a qualified entity. The new minority provision opens up millions of dollars of investments for use in businesses run by minorities including women.
Many States have passed a tax credit for minority business also. The provisions and limitations of these credits vary from State to State. Many of them resemble the New Market Tax credit and give tax credits against State income tax to investments that are used to support minority building projects or encourage minority business ownership. As with the Federal programs, minority business can include a business owned by a female in some cases. The tax payer must examine the terms and conditions of the individual State programs if their State is one that offers a tax credit for minority business.
A tax credit for minority business is one of the more controversial tax credits in the eyes of some critics of the policy of using tax credits to address social issues. They point out that they address what is a wrong in society by doing the same wrong thing. They see the encouragement of investment in one business as discrimination against the competition that is not minority owned. There is some truth to this claim since the New Market Tax credit is fairly substantial even when spread over its seven year span.
However, there is a difference between taxation issues and political issues from the point of view of the individual tax payer. When looking at an issue from the taxation angle, it is only important to know what the credit is and can you qualify for it. The individual tax payer has as his primary goal paying only his fair amount of tax and any legal way he can reduce his tax burden is fair to him. If anyone has a problem with the political issues of the tax code the ballot box is the place to address them and not the tax return.