Incentives & Financing
Incentives: Georgia Taxes
Single Factor ApportionmentIn 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. Georgia is one of only 13 states currently using Single Factor Apportionment. Most states 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 have that tax income. Example: Assume for the 2011 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 percent Accordingly, in 2011, 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%]
Corporate Tax Credits
Job Tax CreditCompanies and their headquarters that are engaged in strategic industries such as manufacturing, warehousing and 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 for 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 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. 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, the Tier 1 counties, excess credits may be credited to Georgia payroll withholding taxes (with a limitation of $3,500 per job, per year). Example: Taxpayer creates 50 jobs in Tier 1 county offering $4,000 credit, receives $1 million in tax credits over 5 years to reduce or eliminate Georgia income tax [50 jobs x $4,000 x 5 years - $1 million].
Port Tax Credit BonusThe 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. Port Tax Credit Bonus for JOB Tax Credits - This “port bonus” is an additional $1,250 per job credit for tax payers with qualified increases in shipments through a Georgia port. The $1,250 is added to the Job Tax Credit. Example: Taxpayer that increases 50 jobs in the Tier 1 county and increases its ports 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 Tax Credit This “port bonus” increases the investment Tax Credit to the equivalent of 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 conversation. 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 Jobs Tax CreditCompanies 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. New quality jobs created within seven years can quaalify 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 towards the Jobs Tax Credit Program if they meet the eligibility requirements for that program separately. For Current Average County Wages, visit http://explorer.dol.state.ga.us/mis/Current/ewcurrent.pdf Research & Development - Georgia offers an incentive to new and existing business entities performing qualified research and development in Georgia. Companies claim a 10 percent tax credit of increased &RD 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 preseding 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.
Mega Project Tax CreditCompanies that employ at least 1,800 new 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.
Child Care Tax CreditsEmployers 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 [ten 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 the employer’s 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.
Work Opportunity Tax Credit Program (WOTC)The Georgia Department of Labor (GDOL) coordinates the federal Work Opportunity Tax Credit Program. 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 qaulified 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 for 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. www.doleta.gov/business/incentives/opptax/
Sales and Use Tax ExemptionQualified equipment purchases or leases are exempt from sales tax when the equipment purchased is used in the manufacturing process. Under certain conditions, primary material handling equipment (in warehouses and distribution centers), computer equipment and Class 100 (or less) clean room machinery, equipment and materials can also be exempted.
Inventory Tax ExemptionEffective January 1, 2011, business inventory is exempt from state property taxes (0.25 mills). Many Georgia counties also exempt from property tax up to 100 percent of qualified raw material, work-in-process and finsihed goods inventory under Georgia’s local-option “Freeport” law. In most of these counties, distribution fenter and warehouse inventories are exempt if the inventory is destined to be shipped out of state.
Foreign-Trade Zone (FTZ)Georgia is home to multipole FTZ sites and is a recognized leader in working with companies to facilitate use of the program. Importing and exporting are central to many businesses’ success, and thr program streamline those activities and lowers costs. The FTZ program allows qualified companies to defer, decrease, or eliminate duties on materials inported from overseas that are used in products assembled in Georgia. Whether your company’s needs are best served by locating in one of Georgia’s industrial parks with FTZ designation, or applying for FTZ designation of an individual facility located elsewhere in Georgia, we can connect you with the right contacts to assist you with the process.
Hiring, Training, & Education
Assistance for Small Businesses & Entrepreneurs
Assistance for Georgia's Existing IndustriesExisting Georgia firms may qualify for many of these programs and can also take advantage of several unique programs. Investment Tax Credit - Existing Georgia companies that have operated a manufacturing or telecommunications support facility in Georgia for at least three years, and that make a minimum $50,000 additional qualified capital investment, may claim from one to five percent (depending on tier status) of the new investment directly related to manufacturing or providing telecommunications services as a tax credit. Higher credits (three to eight percent, depending on tier status) are available for investments in recycling or pollution control equipment and for defense plant manufacturing conversion to a new product. Taxpayers must choose either the investment tax credit or the job tax credit. This credit may be applied against 50 percent of state corporate income tax liability and carried forward for 10 years. Example: Taxpayer in a Tier 1 county invests $100 million in a manufacturing plant plus $25 million in recycling equipment. Taxpayer is eligible for a $7 million tax credit to reduce or eliminate Georgia corporate income tax. [$100 million x 5%] + [$25 million x 8%] = $7 million. Optional Investment Tax Credits - The optional investment tax credit can be taken in lieu of the investment tax credit. The credits range from six to 10 percent of qualified capital investment. This credit is available to taxpayers that qualify for investment tax credits, with the minimum investment ranging from $5 million 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 after the year the property was first placed in service, provided the property remains in service. The optional investment tax credit is a calculated risk. Without large increases each year in income tax liability, the usable tax credit could be very small and possibly zero. Centers of Innovation - Georgia’s six Centers of Innovation provide unique, technology-oriented support to businesses and start-ups in the areas of Aerospace, Agribusiness, Energy, Life Sciences, Logistics and Advanced Manufacturing. Each center provides direct access to university and technical college applied research, commercialization resources, technology connections, matching grant funds, potential investor networks and key government agencies. Client companies are connected with industry-specific experts who are on the leading edge of technology and new ideas. A common goal across all of the centers is to cut red tape, streamline connections and seek technology solutions to industry-led challenges. Within this framework the centers create a pro-growth, innovative business environment for industries critical to Georgia’s expansion. www.georgiainnovation.org Georgia Film Tax Credit - The Georgia Entertainment Industry Investment Act offers an across-the-board flat tax credit of 20 percent based on a minimum investment of $500,000 on qualified productions in Georgia. An additional 10 percent uplift can be earned by including an imbedded animated Georgia logo on approved projects. Qualified expenditures include materials, services and labor. Eligible productions include feature films; television movies, pilots or series; commercials; music videos; and certain interactive projects including types of animation, special effects and video game development. The $500,000 minimum expenditure threshold can be met with one or the total of multiple projects aggregated. The income tax credit may be used against Georgia income tax liability or the company’s Georgia withholding. If the production company chooses, they may make a one-time sale or transfer of the tax credit to one or more Georgia taxpayers.
Historically Underutilized Business ZoneProvides federal contracting preferences to small businesses that obtain HUB Zone certification
- Business must be owned and controlled at least 51 percent by U.S. citizen(s); community development corporation; agricultural cooperative; or Indian tribe
- 35 percent of business staff must live in a HUB Zone
- Business must maintain principal office in zone
- Program of U.S. Small Business Administration
Military Zone$3,500 job tax credit per job; minimum two jobs created for at least five years Incentives available to businesses of any nature located within designated military zone (in Albany-Dougherty County, these are Census tracts 1, 101, 107)
- Area must display pervasive poverty of 15 percent or more
- Area must be adjacent to military base
- Program of Georgia Department of Community Affairs
Opportunity Zone$3,500 job tax credit per job; minimum two jobs created for at least five years. Incentives available to businesses within zone regardless of industry
- Area must display pervasive poverty of 15 percent or more; underdevelopment; general distress; blight
- Area must be within an urban redevelopment plan area or state enterprise zone
- Program of Georgia Department of Community Affairs