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Georgia Tax Credits

Georgia imposes a 6% corporate income tax, which is applied to a Company’s income earned within the State. Georgia utilizes a simplified single factor apportionment for allocating income that is subject to the 6% State corporate income tax. The sole factor used in the apportionment calculation is Gross Receipts (Sales) generated within Georgia. This single factor gross receipts method for allocating income is favorable to Companies that have a large proportion of sales to customers located outside Georgia.

Georgia offers a number of business tax credit incentives. In general, Georgia limits a Company’s tax credit to 50% of its State tax liability for any given tax year. However, State tax credits can be carried forward 10 years. In addition to the business tax credits discussed below, Georgia offers a couple of tax exemptions. First, purchases of qualified equipment used in a manufacturing process are exempt from Sales and Use Tax. Second, business inventory in Georgia is exempt from State property tax.

Research and Development Tax Credit

To be eligible for the Georgia R&D Tax Credit, a Company must first be eligible for the Federal Research and Experimentation (R&E) Tax Credit. The tax credit is applied by first calculating a base amount. An average research ratio is calculated based on Georgia Qualified Research Expenses (QREs) to Georgia Taxable Net Income occurring during the three most recent tax years. That ratio is multiplied by Georgia Taxable Net Income for the current year to arrive at the base amount.  If the current tax year’s research expenses exceed the base amount, the excess is eligible for a 10% State tax credit. The tax credit is claimed on the Georgia Tax Return through the Research Tax Credit Form IT-RD. A copy of the Federal Form 6765 must be attached.

Job Tax Credit

Job Tax Credits are available to Companies engaged in one of six industry segments in Georgia: manufacturing; tourism; R&D; broadcasting or telecommunications; warehousing & distribution; and processing. The Job Tax Credit is structured to incentivize Companies to help develop the most underdeveloped areas. Counties are ranked into Tier groups from 1 through 4. Tier 1 represents the least developed areas and Tier 4 represents the most developed areas. Tax Credit levels vary depending on the Tier group and the number of jobs created. A Company must create 5 new jobs in a Tier 1 area or 25 new jobs in a Tier 4 area in the first year of participation in the program. New jobs in Tier 1 qualify for a $3,500 – $4,000 tax credit per job. New jobs in Tier 4 qualify for a $750 – $1,250 tax credit per job. In Tiers 1 and 2, the tax credit may be used to offset up to 100% of the Company’s State tax liability. In Tiers 3 and 4 the tax credit may be used to offset up to 50% of the Company’s State tax liability. Unused tax credits may be carried forward 10 years. An additional benefit in Tier 1 areas is that the excess tax credit above 100% of the Company’s State tax liability may be applied to offset the Georgia withholding tax.

Investment Tax Credit

An Investment Tax Credit is available for manufacturing and telecommunications companies that have been located in Georgia for at least three years. Companies must choose to utilize either the Job Tax Credit or the Investment Tax Credit if they meet the criteria for both. The Investment Tax Credit is available when a manufacturing or telecommunications company makes a new capital investment of $50,000 or more. The credit rate ranges from 1 – 5% depending on the location of the investment based upon the Tier groupings described above. Also, a 3 – 8% credit is available for the installation of recycling and pollution control equipment. The Investment Tax Credit can offset up to 50% of the State income tax liability and unused amounts may be carried forward 10 years.

Port Tax Credit Bonus

The Port Tax Credit Bonus is an additional incentive available to be paired with either the Job Tax Credit or the Investment Tax Credit. The port bonus is applied when a Company increases imports or exports via a Georgia port by 10% over the prior year. When added to the Job Tax Credit, the port bonus will amount to an additional $1,250 tax credit per job that qualifies for the Job Tax Credit. When applied to the Investment Tax Credit, the bonus will qualify the Company for Tier 1 level credits even if the investment was placed in any other Tier grouping.

Quality Jobs Tax Credit

The Quality Jobs Tax Credit is separate from the Job Tax Credit program. A Quality Jobs Tax Credit is available when a Company meets two criteria. First, the Company must add 50 or more new jobs during a 12 month time frame; and second, those jobs must pay wages that are 110% or more of the current average for wages in the county in which the job is located. Additional Quality Jobs created within seven years of qualification may earn the Company additional Quality Jobs Tax Credits. The credit is worth $2,500 – $5,000 per job per year over a five year period. The level of credit is determined by an incremental scale of the wage rate of the jobs relative to average wages in the county. A Company must provide jobs that pay wages of 200% of the county wage average to receive the $5,000 credit level.