The Sustainable Business Tax Credit is offered to companies whose business practices support environmental and human well-being. The Office of Sustainability reviews applications and determines whether a business meets all eligibility criteria. Companies that receive the credit can apply it against the Business Income and Receipts Tax (BIRT).
To prove eligibility for the Sustainable Business Tax Credit, you must either:
- Show current certification by B Lab Company indicating that your business is a B Corporation.
- Submit evidence that your business conducts itself as a “sustainable business.” To be considered a sustainable business, a business must give substantial consideration to employee, community, and environmental interests in its practices, products, and services.
What qualifies as a sustainable business
The Office of Sustainability looks at the following factors when determining whether an applicant has or represents a “sustainable business:”
Business type and related behavior
Sustainability will consider the line of business you’re in and how you conduct business. Their criteria include:
- The product or services provided by the applicant.
- The applicant’s business model.
- How the applicant interacts with its employees and community.
- The applicant’s impact on the environment.
- Transparency in the applicant’s corporate governance structures and processes.
How—and how well—the business promotes sustainability
Applicants must also show the manner in which their core business purposes meet the following sustainability criteria:
- Providing low-income or underserved individuals or communities with beneficial products or services
- Promoting economic opportunity for individuals or communities, beyond the creation of jobs in the normal course of business
- Preserving the environment
- Improving human health
- Promoting the arts, sciences, or advancement of knowledge
- Increasing funding to organizations whose purpose benefits the public
A business can only receive this credit if it is up-to-date on all applicable City and School District taxes. The only exception to this is for businesses that have a payment agreement for their delinquent taxes. In this case, a business may be eligible to receive the credit if they are in compliance with the terms of their payment agreement.
For tax years 2012 through 2015, an eligible business shall receive a tax credit of $4,000, which may only be used against the BIRT based on annual receipts. Any unused tax credits may not be carried forward.
For tax years 2016 through 2022, an eligible business shall receive a tax credit against the applicant’s total Business Income and Receipts Tax liability (i.e. both gross receipts and net income bases).
Applying for the credit
To apply for the credit, you must submit your application directly to the Office of Sustainability.
Applications are accepted through April 15 of the year that follows the tax year for which the credit is applied. As an example, if your business met the eligibility criteria for tax year 2015 and you wanted to apply the credit against your BIRT liability for 2015, you had to submit your application no later than April 15, 2016.
Number of allowed applicants
For tax years 2012 through 2016, no more than 25 applicants were allowed to participate in this credit program. For tax years 2017 and 2018, up to 50 applicants will be allowed to participate. For tax years 2019 through 2022, the number of applicants is increased to 75. All applicants will be certified as eligible on a “first-come, first-served” basis.
Receiving the credit
The Office of Sustainability reviews applications on a rolling basis. Once they have granted all the available certifications for a given year, they will provide notice of each certification to the applicant and to the Department.
A business certified as a “sustainable business” must attach a copy of its Office of Sustainability certification to its BIRT return in order to have the Sustainable Business Tax Credit applied.
Renewing the credit
A sustainable business certification expires at the end of the tax year for which it was granted, unless the applicant submits a renewal form by December 1 of the year prior to the tax year for which renewal is sought.
A made-up business, which we’ll call “Green Biz,” doesn’t have B Corporation status but does encourage many sustainable practices that help the community. In early 2016, Green Biz’s owner finds out about the Sustainable Business Tax Credit. The owner applies to have Green Biz certified as a sustainable business in March 2016. The application is accepted, and Green Biz is certified as a sustainable business for the previous tax year, 2015.
Green Biz continued its sustainable business practices in 2016, so its owner decides to apply for renewal so they can receive the tax credit again for their 2016 taxes. The business owner must submit a renewal application by December 1, 2016, to determine continued eligibility for the Sustainable Business Tax Credit.