Unlocking Tax Benefits: A Guide to Working with an MBE Certified Company

TL;DR

A simple, direct tax credit for using an MBE is a common myth. The real financial benefits are far more significant:

1. Indirect Tax Advantages: Using an MBE helps you qualify for large government contracts, which often have their own tax incentives.
2. Massive ROI: Studies show top-performing supplier diversity programs generate a 133% return on investment through increased efficiency and competition.
3. New Revenue: Your “Tier 2” spend (the money you spend with an MBE like Payscout) helps you win new corporate clients who have their own diversity goals.

For companies looking to optimize their finances, the term “supplier diversity” is often linked to a vague promise of “tax benefits.” This perceived benefit is one of the most compelling—and most misunderstood—reasons for partnering with a Minority-Business Enterprise (MBE).

While the idea of a simple, direct tax credit for all your MBE supplier spend is a common misconception, the real financial advantages are far more substantial and strategically powerful.

This article clears up the confusion. We will explore the tangible tax advantages and the massive, verifiable ROI that comes from partnering with an MBE-certified company.

The Myth vs. The Reality of “MBE Tax Credits”

Let’s address the most common question first: “Is there a specific IRS form I can file to get a tax credit for using an MBE supplier?”

The short answer is no. There is no broad, federal tax credit simply for procuring goods or services from a minority-owned business. The financial benefits are not that simple—they are much more integrated into your entire business strategy.

The real financial benefits are twofold:

1. Indirect Tax Advantages: These are specific, project-based incentives, often tied to government contracts.
2. Hard-Dollar ROI: This is the massive, measurable return on investment your company gains in efficiency, market access, and innovation.

1. The Real Tax Advantage: Unlocking Government & Funded Projects

The most significant tax benefits are typically indirect and tied to doing business with the government or on projects funded by federal or state grants.

Here’s how it works:

• Federal-Funded Projects: When your company works on a project funded by a federal or state grant, you may be eligible for reduced tax liabilities. A common requirement for these reductions is that you demonstrate a “good faith effort” to use diverse suppliers, including certified MBEs, for your own procurement on that project.
• State & Local Incentives: Many states have established goals for spending with diverse businesses. For example, New York’s Minority and Women-Owned Business Enterprise (MWBE) program and Texas’s Historically Underutilized Business (HUB) program set state-wide goals for agency spending. While this doesn’t give you a direct credit, it makes your company—as one that partners with an MBE—a far more attractive and qualified bidder for lucrative state contracts.

In this context, your MBE partner isn’t a “tax write-off”; they are a strategic key to unlocking new revenue streams that carry their own tax advantages.

2. The Verifiable ROI: Beyond Taxes, Into Profitability

While the tax benefits are project-specific, the overall financial ROI of supplier diversity is massive, verifiable, and impacts your bottom line directly.

The 133% Return on Investment

Research from the renowned business advisory firm The Hackett Group has consistently shown that companies with a strong focus on supplier diversity outperform their peers.

• The Finding: Their data shows that top-performing procurement organizations with strong supplier diversity programs generate a 133% higher return on investment than typical organizations.
• What This Means: These companies generate $3.6 million in additional value for every $1 million in procurement operating costs. Their diverse suppliers provide better performance, lower costs through increased competition, and drive innovation.

Attributing Sales to Supplier Diversity

The Hackett Group’s data also shows that companies dedicating 20% or more of their spend to diverse suppliers can attribute as much as 15% of their total annual sales to their supplier diversity program.

How? This comes from the “Tier 2” spend advantage. When you bid for a contract with a Fortune 500 company, they will ask about your company’s supplier diversity. By using an MBE-certified company like Payscout, you can report your processing fees as “Tier 2 diverse spend,” making your bid dramatically more competitive.

3. The NMSDC Data: A $360 Billion+ Economic Engine

The National Minority Supplier Development Council (NMSDC) is the gold standard for MBE certification. Their economic impact reports quantify the undeniable financial power of the businesses in their network.

According to the NMSDC’s 2023 Economic Impact Report:

• NMSDC-certified MBEs generated over $363.6 billion in annual revenue.
• This economic output created or preserved over 1 million jobs.

When you partner with an NMSDC-certified MBE, you are not just ticking a box. You are engaging with a high-performing, economically significant enterprise that is part of a multi-billion dollar network. These businesses are engines of innovation and are often more agile and responsive than larger, legacy competitors, saving you time and money.

Your Financial Strategy: From “Tax Credit” to “Competitive Advantage”

It’s time to shift the financial conversation around MBEs. Stop searching for a small tax credit and start building a massive competitive advantage.

While you should always consult a qualified CPA to explore project-specific tax incentives in your state, the real financial strategy is clear:

1. Win More Business: Use your MBE partnership (and your Tier 2 spend) to win large corporate and government contracts.
2. Drive Higher ROI: Leverage the innovation and agility of your MBE partner to make your procurement and operations more efficient, as proven by The Hackett Group’s 133% ROI finding.
3. Partner with Strength: Engage with the proven economic power of the NMSDC network, which represents over $360 billion in annual economic impact.

When you partner with an MBE-certified company like Payscout, the financial benefit isn’t a line item on your tax return. It’s a core strategy that impacts your sales, your efficiency, and your entire bottom line.

Data Verification & Sources

The information in this article is based on publicly available data from industry-leading research and governing bodies.

• The Hackett Group Supplier Diversity ROI Data:
• Source: The Hackett Group (Various Reports on Supplier Diversity).
• Verification: This data has been widely cited by procurement industry publications and organizations. Reports state that companies with mature supplier diversity programs generate a 133% greater ROI and drive an additional $3.6 million to the bottom line for every $1 million in procurement operating costs.
• NMSDC Economic Impact Data:
• Source: National Minority Supplier Development Council (NMSDC) 2023 Minority Businesses Economic Impact Report.
• Verification: This official report, available from the NMSDC, states that NMSDC-certified MBEs generated $363.6 billion in annual revenue.
• State-Level Program Information:
• Source: Official state government websites, such as the New York Empire State Development (ESD) and the Texas Comptroller’s Office (HUB Program).
• Verification: These sites confirm the existence and goals of state-level programs that incentivize supplier diversity primarily through government contracting requirements, not direct tax credits for supplier spend.
• Federal Tax Incentives:
• Source: IRS.gov.
• Verification: A review of federal tax credits shows programs like the Work Opportunity Tax Credit (WOTC) are for hiring individuals from targeted groups, not procuring from businesses. Benefits related to supplier spend are generally tied to specific federal-funded projects and are not a blanket credit.

Disclaimer: This article is for informational purposes only and does not constitute tax or financial advice. All organizations should consult with a qualified CPA or tax professional to understand the specific tax implications and advantages available to them.