Georgia Tax Credits - Tim Clancy

GEORGIA TAX CREDITSTim Clancy, CPANovember 13, 2014

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Georgia Tax Credits

• Georgia offers a range credits that enable companies to minimize or completely eliminate their income tax

• Some credits based on the “tier status” of the community

• Credit opportunities exist for individuals – Directly available– Pass through investment– Purchased

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Film and Entertainment Credits

• Purpose: Entice film and game producers to come to Georgia– Additional benefits obtained from 2014 legislation for

game development– Future legislation

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Film Production Company– Provided 20% tax credit on qualified expenditures• $500,000 minimum expenditures (i.e. labor, materials

services)– Additional 10% credit for use of Georgia promotional

logo in finished production– Obtain credits upon completion of production

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Film Production Company– May sell credits in multiple blocks – One time transferability– Obtains comfort letter or state certified audit– Recognizes income on the sale of the credits

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Taxpayers • Purchase credits through broker or CPA assistance• Rates vary - $.86 - $.91• Form IT-TRANS• Deemed to be paid ratably over year • Carry forward - 5 years• Short term capital gain recognition on federal return

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Taxpayer Considerations– Timing of purchase and use of credit– Timing of deduction for state tax paid – Capital gain recognition – Holding period– Risk/transferability– Risk • Comfort letter• State certified audit• Recapture

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Low Income Housing Tax Credit

• Purpose: To encourage the development of low income housing in Georgia– 15 states currently offer housing credits– Georgia • 2001 - Adopted credit• 2003 – Credits first available • Allows bifurcation of state credits from federal credit

– Available to individuals, corporations or trusts– Beneficial regardless of AMT position• Larger benefit for AMT taxpayers

– Carry forward – 3 years

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Taxpayer– Purchase through broker or CPA assistance– Investment in entity taxable as partnership– Receive K-1 with allocation of credits– Attach K-1 to Georgia return

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Taxpayer Considerations– Rates vary $.75 - $.85– BUY EARLY for lower rates– Consider tax position and time value of money– Years required in investment

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Georgia Education Expense Credit

• Purpose– Allows parents

• To seek a private K-12 school that provides the best education they can find

• Obtain a scholarship to prevent financial barrier for obtaining education for the child

• Maximum annual scholarship capped at per pupil cost in Georgia public schools $8,983 for 2014

– Allows Taxpayers• Contribution to non-profit K-12 scholarship organization in

exchange for a state tax credit• May designate the private school where contribution is used• May not designate the child the scholarship is awarded to• 125 participating schools

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– Individual and corporate taxpayers receive Georgia income tax credits for contributions to qualified student scholarship organization (SSO) up to:• $1,000 (single)• $2,500 (married filing jointly)• $10,000 (individuals with ownerships in S Corp, LLC or

partnership)– Contributions are also eligible for federal income tax

deduction but added back for Georgia taxable income

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New for 2013– Owners of S-corps, LLCs and Partnerships allowed

contribution of $10,000• If both spouses earn income from pass through entities -

each can contribute up to $10,000 ($20,000 in total)– May select which pass-through entities to include

when computing Georgia income

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– May combine all Georgia income, loss and expense regardless of ownership in multiple entities

– May combine W-2 income from the pass-through as well as K-1 income

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Georgia Education Expense CreditEconomic Cost or Economic Benefit

Single taxpayer - $1,000 maximum deduction

Standard deduction $0 maximum cost

Itemized deduction $60 maximum costAlternative minimum tax $290 possible maximum economic benefit

Married Filing Jointly - $2,500 maximum deduction

Standard deduction $0 maximum cost

Itemized deduction $150 maximum costAlternative minimum tax $725 possible maximum economic benefit

Individual member of LLC shareholder of S corporation or Partner in Partnership $10,000 max donation

Itemized deduction $600 maximum costAlternative minimum tax $2,900 possible maximum economic benefit

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– Corporate limitation to 75% of tax liability– Trusts may not pass credit through to beneficiaries– Carry forward provisions– Payment within 60 days of approval

APPLY EARLY!!!!

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Retraining Tax Credit

• Purpose– Foster profitability and competitiveness of existing

Georgia businesses– Encourages workforce development– Offset costs of retraining employees • Implementation of new equipment • New technology• Operating systems

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• Available credit– One half of the direct cost of retraining– Up to $500 per approved training program per year for

each employee; may not exceed $1,250 per year per full-time employee

– Up to 50% of the tax liability

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• Eligible retraining programs– Newly installed equipment– Newly implemented technology• Computers• Platforms• Software implementations and upgrades• Total quality management• ISO 9000• Self directed work teams

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• Programs that are not eligible– Executive training– Management development training– Career development– Personal enrichment– Cross training of employees

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• Eligible costs– Instructor salaries– Employee wages during the retraining– Development of retraining program– Materials and supplies– Instructional media– Equipment used for retraining (not production)– Reasonable travel costs

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• Costs that are not eligible – Sales taxes– Training space– Employee paid training

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• Eligible employees– Georgia residents– First line employees or immediate supervisor– Continuously employed with company for minimum

16 weeks– Full time employees (25+ hours per week)

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– Carry forward – 10 years– Training over multiple years are claimed based on the

costs incurred for each year– Prior year training may be also approved

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• Administration– Technical college system of Georgia• Fulton – Atlanta Tech. Gwinnett Tech• DeKalb – Georgia Piedmont Tech• Gwinnett – Gwinnett Tech

– Vice President of Economic development determines eligibility and if documentation is adequate and complete

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• Procedures for Approval• Documentation requirements– Description of changes or new equipment– Purpose/objectives– Employees– Qualification of training provider– Employee performance evaluation– Training outline– Hours, costs incurred

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Job Tax Credit

• Available to new and expanding companies in certain industries– Manufacturing – Warehousing and Distribution– Processing– Telecommunications– Broadcasting– Tourism– Research and Development– Biomedical Manufacturing– Services for the elderly and Persons with Disabilities

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Job Tax Credit

– Based on calculation of increase in headcount – Calculate per location– Credits may be applied against • Income tax liabilities or • Withholding tax (limited)

– Utilizes “county tier” based on • Unemployment rate• Per capita income • Poverty rate

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Job Tax Credit

Tier 1

Tier 2

Tier 3

Tier 4

2014 County Tier map

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Job Tax Credit

Tier Credit (for 5yrs) Min New Jobs Use of Credit Carry Forward

1 $4,000* 2 100% tax/withholding 10 years

2 $3,000* 10 100% tax liability 10 years



MZ/OZ $3,500 2 100% tax liability 10 years

LDCT $3,500 5 100% tax liability 10 years

* Includes $500 bonus for Joint Development Authority

MZ = Military zoneOZ = Opportunity zoneLDCT = Less Developed Census Tract

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Job Tax Credit

• Year 1 establishes 5 year period• Additional credits are accrued for additional jobs in

years 2-5• Jobs created outside of year 5 must meet new

threshold for job creation

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Job Tax Credit

• Special Zones– Less Developed Census Tract (LDCT)– Opportunity Zones (OZ)– Military Zones (MZ)

• Additional benefits– Eligible for $3,500 tax credit– Use against 100% of tax liability– Excess credit applied to payroll withholding– Available to all businesses including retail

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Job Tax Credit

• Employee qualifications– Full time employees– Offered health insurance benefits similar to existing

employees– Pay more than average wage of county with the lowest

average wage in state ($426/week for 2014)

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Job Tax Credit

ExampleFacts: In Year 1, Create-It Corp has three locations. It increased its headcount by– Location #1 – 50 in Macon County (Tier 1) – Location #2 – 30 in Gwinnett County (Tier 4)– Location #3 – 20 in Gwinnett County (Tier 4)

In Year 2 an additional 3 employees were added at location #2.

What is the amount of credit earned by Create-it Corp?

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Job Tax Credit

Determination is based on location NOT county

Location #1 – 50 jobs x $4,000 x 5 years = $1,000,000Location #2 – 33 jobs x $1,250 x 5 years = $206,250Location #3 – Does not qualify for credits

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Investment Tax Credit

• Available to manufacturers and telecommunications businesses– Operate in Georgia for 3 years– Investment of $50,000 minimum

• Planned Project – Planned purchases– New facility or expansion of existing facility– Directly related to taxpayer’s manufacturing– < 3 years – Results in expansion of asset base

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• Qualified capital investments– Land acquisition– Improvements– Buildings– Machinery & Equipment– Leased equipment may be eligible

• Purchases not qualified– Safety items– Materials used in repair, refurbishment– Furniture – Computer hardware or software

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• Credit based on county tiers – Tier 1 – 5%– Tier 2 – 3%– Tier 3 – 2%– Tier 4 – 1%

• Recycling or pollution control equipment (3%-8%) • Optional investment tax credit – Purchases from $5 - $20 million– Range 6% - 10%

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• Application due within 30 days of the completion of the project

• Project - < three years• 50% tax offset• 10 year carry forward • Generally can not be combined with – jobs credit – optional investment credit – headquarters credit

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Port Tax Credit Bonus

• Eligible taxpayers– Increase import/export by 10% through Georgia ports– Claimed jobs credit or investment credit

• Credit available– Additional $1,250 per job up to 5 years– Increased investment credit rate to Tier 1 status (5%)

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Quality Jobs Tax Credit

• Eligible taxpayers– Establish or relocate 50 new jobs within one year

• Credit available– Range between $2,500 - $5,000 – Based on the wages paid to employees compared to

county average wage– Claimed for 5 years– Apply to 100% of tax liability and payroll withholding– Carry forward – 10 years

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Low Emission / Alternative Fuel Credit

Alternative Fuel Credit• Eligible taxpayers– Purchase of alternative fuel heavy-duty and medium-duty

vehicles– Purchases between July 1, 2015 and June 30, 2017– Purchase and registration occurs in Georgia

• Credit available – Equal to amount of purchased vehicle

• $20,000 per heavy-duty vehicle• $12,000 per medium-duty vehicle• Capped at $250,000

– NO Carry forward

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• Heavy duty vehicle – > 26,001 pounds• Medium-duty vehicle – 8,500 - 26,000 pounds• Fuel usage – 90% alternative fuel – 10% or less gasoline

• Application required for approval of credit• State cap $2.5 million for each fiscal year

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Low emission vehicles• Credit available– 10% or vehicle cost or $2,500 per low-emission vehicle– 10% of vehicle cost or $5,000 per zero-emission vehicle

• Credits also available for – Conversion of conventionally fueled vehicles– Purchases of electric vehicle chargers

• Claim up to 100% of tax liability• Carry forward 5 years

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Child Care Tax Credit

• Eligible taxpayers– Purchase or build qualified child care facilities or– Provide or sponsor child care

• Credit available – 75% of employer’s direct cost – May claim up to 50% of tax liability– Carry forward 5 years

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Other Tax Credits

• Research and Development credit– 10% credit of increased R&D expenses

• Qualified Health Insurance Expense Credit– $250 credit per employee• 50 or fewer employees• Provide high deductible health plan under IRC

Section 223• Taxes paid to other states (Individuals)

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Other Tax Credit Considerations

Assignability of credit• Member of affiliated group under IRC section 1504 • Entity affiliated with an entity which– Owns or leases the land – Provides capital for construction of project and– Is grantor or owner under a management agreement

with the managing company

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Assignability of credit• No carryover of previously claimed credits may be

assigned• Remaining carryover transferred back if member

leave affiliated group• Election must be filed• Irrevocable election• Jointly liable

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Application for refundsCredits must be claimed within one year of the earlier of– Date the original return was filed – Date return due including extension

Contact Information

Tim [email protected]

mailto:[email protected]

Georgia Tax Credits - Tim Clancy

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