Corporate Tax Credits
Georgia Business Incentives
Georgia continues to attract successful companies due to a pro-business environment, a talented workforce, world-class infrastructure and unparalleled access to the world market. State-level performance-based assistance packages, along with incentives offered by local municipalities and counties, help new and expanding ventures get the good start needed for their future success.
GEORGIA CORPORATE INCOME TAX FORMULA ADVANTAGE
Single Factor Apportionment Tax Formula-
In 2005, Georgia became the first state in the Southeast to adopt a "Single Factor Gross Receipts" apportionment formula. This apportionment formula treats a company's gross receipts, or sales in Georgia, as the only relevant factor in determining the portion of that company's income subject to Georgia's six percent corporate income tax. In Georgia, a company's Georgia is one of only 12 states currently using Single Factor Apportionment. Most states still use a traditional apportionment formula in which a company's in-state property and payroll factor into the calculation of a company's corporate income tax. Single Factor Apportionment significantly reduces the effective rate of Georgia income taxation of companies with substantial sales to customers outside Georgia.
In addition, Georgia does not use the so-called "Throw Back Rule," which many states use to tax income from sales of goods or services to out-of-state customers if the customer's state does not already tax that income.
Example: Assume for the 2012 tax year, In-State Manufacturing Co., Inc. has the following total overall taxable income and gross receipt sales in Georgia as compared to total gross receipts:
Taxable Income: $10 million
Percent of Gross Receipts in Georgia: 13%
Accordingly, in 2012, only $1.3 million of In-State Manufacturing Co., Inc.'s income would be subject to Georgia's six percent corporate income tax, making its corporate income tax liability $78,000. [($10 million x 13%) x 6%]
GEORGIA CORPORATE TAX CREDITS
Georgia offers a range of corporate tax credits that enable companies to minimize or completely eliminate state corporate income taxes which, at six percent, are already among the lowest in the nation.
For some of the credits, the amounts are dependent on the "tier status" of the community. Tier status refers to an annual four-tier ranking of the economic vitality of Georgia's counties . The highest credits are offered in the counties with the greatest need (Tier 1 and 2 counties), while the most prosperous counties (Tier 3 and 4 counties) offer lesser amounts.
Please see the 2013 Georgia Job Tax Credit Tiers by County Map at the link at the bottom of the page.
Job Tax Credits
Companies and their headquarters that are engaged in strategic industries such as manufacturing, warehousing & distribution, processing, telecommunications, broadcasting, tourism, and research and development may qualify for Georgia's Job Tax Credit Program. Depending on the community's tier, companies must create between five and 25 net new full-time jobs in the first year to qualify. Credits may also be accrued for additional jobs created in years 2-5.
Jobs created outside of year five may not be claimed unless a new threshold job creation (year 1) is met. Qualified companies can claim a tax credit with a value of $750 - $3,500 per job, per year beginning with the first taxable year in which the new job is created and for the following four years the job is maintained. An additional $500 credit is offered in counties that participate in a multi-county Joint Development Authority (JDA). Increased job tax credits, equal to Tier 1 credits, are also allowed for companies that create jobs in Less Developed Census Tracts (LDCT), Opportunity Zones (OZ), or Military Zones (MZ). Opportunity Zones, Military Zones, as well as Georgia's 40 least developed counties offer job tax credits to businesses of any nature, including retail businesses. The credit value for each county is indicated on the 2013 Georgia Job Tax Credit Tiers by County Map at the link at the bottom of the page.
Credits may be taken against 100 percent of state corporate income tax liability in Tier 1 and 2 counties, or against 50 percent of state corporate income tax liability in Tier 3 and 4 counties. Credits that are claimed but not used in any taxable year may be carried forward for 10 years from the close of the taxable year in which qualified jobs were established. Additionally, in Tier 1 counties, excess credits may be credited to Georgia payroll withholding taxes (with a limitation of $3,500 per job, per year).
Port Tax Credit Bonus
The Port Tax Credit Bonus is available to taxpayers who increase imports or exports through a Georgia port by 10 percent over the previous or base year. Base year port traffic must be at least 75 net tons, five containers or 10 TEUs (twenty-foot equivalent units); if not, the percentage increase in port traffic will be calculated using 75 net tons, five containers, or 10 TEUs as the base. The port tax credit bonus can be used with either the Job or the Investment Tax Credit program, provided that the company meets the requirements for one of those programs. Port Tax Credits may be used to offset up to 50 percent of the company's corporate income tax liability. Unused credits may be carried forward for 10 years, provided that the increase in port traffic remains above the minimum level and that the company continues to meet the job or investment tax credit requirements. Note that the Port Tax Credit Bonus cannot be utilized with the Quality Jobs Tax Credit and can only be used in Opportunity Zones, Military Zones and Less Developed Census Tracts in limited cases by existing large distribution centers. The Georgia Ports are indicated on the 2013 Georgia Job Tax Credit Tiers by County Map at the link at the bottom of the page.
- Port Tax Credit Bonus for Job Tax Credits
This "port bonus" is an additional $1,250 per job credit for taxpayers with qualified increases in shipments through a Georgia port. The $1,250 is added to the job tax credit.
Example: Taxpayer that creates 50 jobs in a Tier 1 county and increases their port traffic by at least 10 percent is eligible to receive the port bonus. Taxpayer is eligible for $1,312,500 in tax credits spread over five years to reduce or eliminate Georgia income tax:
[50 jobs x ($4,000 job tax credit + $1,250 port tax credit bonus) x 5 years] = $1,312,500
- Port Tax Credit Bonus for Investment Credits
This "port bonus" increases the investment tax credit to the equivalent of a Tier 1 location regardless of the tier level. The port bonus would therefore be equal to five percent of the qualified investment in expenses directly related to manufacturing or providing telecommunication services with the credit increasing to eight percent for recycling, pollution control and defense conversion.
Example: Taxpayer qualifies for a port bonus in a Tier 4 county, invests $100 million in a manufacturing plant plus $25 million in recycling equipment. Taxpayer is eligible for a $7 million investment tax credit to reduce or eliminate Georgia income tax:
[$100 million x 5%] + [$25 million x 8%] = $7 million
Quality Job Tax Credits The Port Tax Credit Bonus is available to taxpayers who increase imports or exports through a Georgia port by 10 percent over the previous or base year. Base year port traffic must be at least 75 net tons, five containers or 10 TEUs (twenty-foot equivalent units); if not, the percentage increase in port traffic will be calculated using 75 net tons, five containers, or 10 TEUs as the base. The port tax credit bonus can be used with either the Job or the Investment Tax Credit program, provided that the company meets the requirements for one of those programs. Port Tax Credits may be used to offset up to 50 percent of the company's corporate income tax liability. Unused credits may be carried forward for 10 years, provided that the increase in port traffic remains above the minimum level and that the company continues to meet the job or investment tax credit requirements. Note that the Port Tax Credit Bonus cannot be utilized with the Quality Jobs Tax Credit and can only be used in Opportunity Zones, Military Zones and Less Developed Census Tracts in limited cases by existing large distribution centers. The Georgia Ports are indicated on the
Companies that create at least 50 jobs in a 12-month period where each job pays wages at least 110 percent of the county average are eligible to receive a tax credit of $2,500-$5,000 per job, per year, for up to five years, based on the scaled system below. New quality jobs created within seven years can qualify for the credit. Credits may be used to offset the company's payroll withholding once all other tax liability has been exhausted, and may be carried forward for 10 years. New jobs that do not meet the requirements for the Quality Jobs Tax credit may count toward the Jobs Tax Credit Program if they meet the eligibility requirements for that program separately. For Current Average County Wages, see Georgia Employment and Wages 2011 Averages.
Mega Project Tax Credit
Companies that employ at least 1,800 net new employees, and either invest a minimum of $450 million or have a minimum annual payroll of $150 million may claim a $5,250 per job, per year tax credit for the first five years of each net new job position. Credits are first applied to state corporate income tax, with excess credits eligible for use against payroll withholding. Credits may be carried forward for 10 years.
The Georgia Department of Labor (GDOL) coordinates the federal Work Opportunity Tax Credit Program (WOTC). The WOTC program is a federal tax credit incentive that the U. S. Congress provides to private-sector businesses for hiring individuals from nine target groups who have consistently faced significant barriers to employment. Among others, target groups include certain TANF (Temporary Assistance for Needy Families) and food stamp recipients, and certain residents of an Empowerment Zone (EZ) or Rural Renewal County (RRC). Participating companies are compensated by being able to reduce their federal income tax liability with a tax credit between $1,200 to $9,000 per qualified employee, depending on the target group. The most frequently certified WOTC is $2,400 for each adult new hire. An employer must request and receive certification from the Georgia Department of Labor that the new Hire is a member of at least one of the nine WOTC target groups before the employer can claim the WOTC on its federal income tax return.
Research and Development
Georgia offers an incentive to new and existing business entities performing qualified research and development in Georgia. Companies may claim a 10 percent tax credit of increased R&D expenses subject to a base amount calculation.
The base amount = Current Year Georgia Gross Receipts x (the average of the ratios of the company's qualified Georgia research expenses to Georgia gross receipts for the preceding three taxable years) or 0.300, whichever is less. For new Georgia companies or for companies with no prior R&D expenditures in Georgia, the base amount is 30 percent of the current year's Georgia gross receipts.
The credit is determined by taking the current year's qualified R&D expenses, subtracting the base amount, and multiplying by 10 percent. The R&D credit is applied to 50 percent of the company's net Georgia income tax liability after all other credits have been applied. In the first five years of a newly formed business entity in Georgia, any excess R&D credit can then be applied to the company's state payroll withholding. Any unused credits can be carried forward for up to 10 years from the close of the taxable year in which the qualified research expenses were made.
Companies that create or relocate a North American or international corporate headquarters, hire at least 50 qualified headquarters employees and invest $1 million can qualify for a tax credit of $2,500 or $5,000 per job (depending on the wages paid), per yar for 5 years. The credit can offset up to 100% of the company's Georgia corporate income tax liability. Excess credits may be taken as a credit against payroll withholding taxes.
Retraining Tax Credits
A company's direct investment in training can be claimed as a tax credit of 50 percent of the employer's direct cost up to $500 per, per approved training program. The total amount of credit cannot exceed $1250 per employee per year. Training programs must be approved by the Technical College System of Georgia. This tax credit can be used to offset up to 50 percent of a company's state corporate income tax liability. The credit is available to all Georgia businesses that file a Georgia income tax return. The retraining program must be for quality and productivity enhancements and certain software technologies. Unused credits can be carried forward 10 years. These credits can be combined with other tax credits.
Child Care Tax Credits
Employers who purchase or build qualified child care facilities are eligible to receive Georgia income tax credits equal to 100 percent of the cost of construction. The credit for the cost of construction is spread over 10 years [10 percent each year]. Unused child care credits from the purchase or construction of a child care facility can be carried forward three years. The child care facility must be licensed by the state.
Employers who provide or sponsor child care for employees are eligible for a credit against Georgia income tax equal to 75 percent of employers' direct costs. Credits that are related to the operating cost of the facility may be carried forward five years. All child care credits can be used against 50 percent of the taxpayer's income tax liability in a given year.
The optional investment tax credit can be taken in lieu of the investment tax credit. The credits range from 10 percent to 6 percent of qualified capital investment. This credit is available to taxpayers that qualify for investment tax credits. The requirements are the same except for the minimum investment ranging from $5 to $20 million. A taxpayer can use the tax credits up to the calculated amount for a given year. The credit may be claimed up to 10 years following the year the property was first placed in service provided the property remains in service. The optional investment tax credit equals 90 percent of the difference between (1) the taxpayer's Georgia income tax liability for the current year and (2) the taxpayer's base tax liability.
Opportunity Zone Job Tax Credits
Local governments which undertake redevelopment and revitalization efforts in certain older commercial and industrial areas can now qualify those areas for the State's maximum state job tax credit of $3,500 per job. The credits are available for areas designated by the Georgia Department of Community Affairs (GA DCA) as "Opportunity Zones". The incentive which is available for new or existing businesses which create two or more jobs are credits which can be taken against 100% of the business' income tax liability and state payroll withholding. Job Tax Credits (JTCs) awarded in an Opportunity Zone are applicable to all businesses/industries.
2013 Job Tax Credit Tiers by County Map
2013 Job Tax Credit Ranking by County