Tax credits are incentives offered by state and local municipalities to perpetuate economic growth in the region. Here are the main tax credits and incentives offered by the state of Georgia that can significantly offset your company’s state tax liability. For more information, please contact your Metro Atlanta Chamber of Commerce Economic Development expert.
Job Creation Tax Credits QUALITY JOBS TAX CREDIT The Quality Jobs Tax Credit
is job tax credit for higher paying jobs. It can give Georgia companies a significant tax break and help drive growth. The Quality Jobs Tax Credit rewards companies that create at least 50 jobs in a 12-month period - provided the jobs pay wages that are at least 10 percent higher than the county average for wages. Establishing or relocating your higher wage paying operations to Georgia can qualify your firm for an advanced job tax credit (up to $5,000 per job per year for five years, if the new jobs pay 110 percent or more the county average wage rate). The tax credit can be used against 100 percent of corporate income tax liability regardless of where the taxpayer locates. Credits not applied to income tax liability may be monetized through retention of employee quarterly withholding taxes. JOB TAX CREDIT/OPPORTUNITY ZONES The Georgia job tax credit
is a statewide job tax credit for any business or headquarters of any such business engaged in manufacturing, warehousing and distribution, processing, telecommunications, tourism, or research and development industries, but does not include retail businesses. If other requirements are met, job tax credits are available to businesses of any nature, including retail businesses, in counties recognized and designated as the 40 least developed counties.
Counties and certain census tracts in the state are ranked and placed in economic tiers using the following factors:
1. highest unemployment rate
2. lowest per capita income
3. highest percentage of residents whose incomes are below the poverty level. MEGA PROJECT TAX CREDIT The Mega Project Tax Credit
is available for 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. These qualifying companies 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, and then any excess credits are eligible for use against payroll withholding. Credits may be carried forward for 10 years.
Research & Development Tax Credit Research and development (R&D) tax credits
are available to any company that increases its qualified research spending. New, existing and expanding companies, whether venturing into R&D for the first time or taking on a new R&D venture are eligible for R&D tax credits. The tax credit earned is a portion of the increase in R&D spending. The credit can be used to offset up to 50 percent of net Georgia income tax liability after all other credits have been applied. Any unused R&D tax credits can be carried forward for up to 10 years. In addition, excess R&D tax credits can be used against state payroll withholding.
Workforce Tax Credits WORK OPPORTUNITY TAX CREDITS
Work Opportunity Tax Credits (WOTC)
are federal tax credits awarded to Georgia companies that hire individuals who have consistently faced significant barriers to employment. The Georgia Department of Labor (GDOL) coordinates the WOTC program which provides employers financial incentives when hiring workers from targeted groups of job seekers by reducing an employer’s federal income tax liability. The tax credit can be from $1,200 to $9,600 per qualified employee, depending on the target group. The most frequently certified WOTC is $2,400 for each adult new hire.
Targeted groups include:
• Recipients of the Temporary Assistance for Needy Families (TANF) program
• Recipients of Supplemental Nutrition Assistance Program benefits
• Residents who live within Empowerment Zones or Rural Renewal Counties
• Recipients of vocational rehabilitation from a qualifying agency
• Recipients of Supplemental Security Income benefit
• Summer youth employee RETRAINING TAX CREDIT The retraining tax credit
allows some employers to claim certain costs of retraining employees to use new equipment, new technology, or new operating systems. The credit can be worth 50% of the direct costs of retraining full-time employees up to $1,250 per employee for all approved retraining per year (new in 2009). The credit cannot be more than 50% of the taxpayer’s total state income tax liability for a tax year. Credits claimed but not used may be carried forward for 10 years.
GEORGIA QUICK START Quick Start
is Georgia's internationally acclaimed program providing customized training free-of-charge to qualified new, expanding and existing businesses. Quick Start is one of Georgia's most important economic development incentives for attracting new investment to the state and promoting job creation. The program has worked with entrepreneurial start-ups as well as international, Fortune 500 corporations. For over 40 years the program has provided customized training for industries ranging from biotech to warehousing and distribution.
Additional Tax Credits or Exemptions PORT TAX CREDIT The port tax credit bonus
rewards new or expanding Georgia companies that increase imports or exports through a Georgia port by at least 10 percent over the previous or base year.
To be eligible for the port tax credit bonus:
- Companies must first meet the requirements of either the job tax credit or investment tax credit programs.
- Base year port traffic must be at least 75 net tons; or five containers; or 10 TEUs (Twenty-foot Equivalent Units). If base year traffic is lower, then these minimums automatically become the base upon which traffic increases are calculated.
*The port tax credit bonus is calculated as follows according to which program it is used with:
1. Job Tax Credit:
An addition of $1,250 (per job) to the job tax credit, which can be taken for five years to reduce or eliminate Georgia corporate income tax liability; or
2. Investment Tax Credit
: Companies in manufacturing or telecommunications support that have operated in Georgia for at least three years are eligible to earn investment tax credits for upgrades or expansions. Credit earned amounts to 1 percent to 8 percent of qualified capital investments of $50,000 or more.
INVESTMENT TAX CREDIT Investment tax credits
help Georgia businesses expand and improve facilities. Companies in manufacturing or telecommunications support that have operated in Georgia for at least three years are eligible to earn investment tax credits for upgrades or expansions. Credits earned are in tiered amounts from 1 percent to 8 percent of qualified capital investments of $50,000 or more. The credits are calculated based on geographic location and type of investment.
OPTIONAL INVESTMENT TAX CREDITS Optional investment tax credits
- Companies that locate in the less prosperous counties receive larger credits.
- Companies that invest in recycling equipment, pollution control or in converting a defense plant manufacturing facility to a new product earn tax credits of 3 percent to 8 percent of their capital outlay.
- Investment in general equipment for manufacturing or telecommunications services earns tax credits of 1 percent to 5 percent.
- Investment tax credits can be used to offset up to 50 percent of a company’s Georgia corporate income tax liability.
- If the earned credit exceeds that limit, then the unused credit can be carried forward for up to 10 years and applied to future years’ tax liability.
- Companies should compare the benefits of the investment tax credit with those of the job tax credit, as taxpayers are allowed to claim one or the other, but not both.
can potentially provide a long-term, significant tax benefit that rewards growing companies for making major investments in Georgia. The exact value of the optional investment tax credits depends on three factors: how much is invested; where the investment is made in Georgia; and the change in a company’s tax liability.
FILM, TELEVISION AND DIGITAL ENTERTAINMENT TAX CREDIT Film, television and digital entertainment tax credits
of up to 30 percent are available for companies producing feature films, television series, music videos and commercials, as well as interactive games and animation. Georgia’s Entertainment Industry Investment Act provides a 20 percent tax credit for companies that spend $500,000 or more on production and post-production in Georgia, either in a single production or on multiple projects. An additional 10 percent tax credit is granted by the state if the finished project includes a promotional logo provided by the state. If a company has little or no Georgia tax liability, it can transfer or sell its tax credits.
TAX ALLOCATION DISTRICTS
Many local governments within metro Atlanta and certain other municipalities have created Tax Allocation districts to encourage development in areas not currently experiencing growth. A Tax Allocation District (TAD), typically referred to as Tax Increment Financing, is a tool used to publicly finance redevelopment activities in underdeveloped or blighted areas. TADs derive their funding from the increase in the redevelopment area's ad valorem and/or sales taxes levied by the city, county, and school system. These revenues are placed in a special redevelopment fund for the area and are used to directly pay for the redevelopment costs or to issue bonds to pay for redevelopment costs. There are many TADs
in the metro Atlanta area and the number of them is always growing. Your MAC Economic Development expert
can help your company evaluate potential advantages by locating in such a district. SALES TAX AND USE TAX EXEMPTIONS
Georgia helps companies lower their cost of doing business by offering the ability to purchase various types of goods and services tax free through sales and use tax exemptions INVENTORY (FREEPORT) TAX EXEMPTION
Business inventory is exempt from state property taxes (0.25 mills). More than sixty percent of Georgia counties and cities have also adopted a Level One Freeport Exemption
set at 20, 40, 60, 80 or 100 percent of the inventory value. A Level One Freeport Exemption may exempt the following types of tangible personal property:
PROPERTY TAX RELIEF
- Inventory of goods in the process of being manufactured or produced including raw materials and partly finished goods
- Inventory of finished goods manufactured or produced in Georgia held by the manufacturer or producer for a period not to exceed 12 months
- Inventory of finished goods on January 1 that are stored in a warehouse, dock, or wharf that are destined for shipment outside of Georgia for a period not to exceed 12 months
Many local governments in metro Atlanta can offer multi-year periods of property tax relief, negotiated on a case-by-case basis. Typically offered only in conjunction with the use of revenue bonds, this type of incentive is predicated based on a number of criteria including the number and quality of jobs, wages and investment.