Georgia Business Development Incentives

The statutory incentives described on these pages are available to new and existing businesses that qualify. Often, the most advantageous incentives are available at the local level. Be sure to investigate local incentives when evaluating sites for your business. The term tiers as used in this document refers to the economic well-being of a county. There are 4 tiers. Tier 4 is the most developed. Tier 1 is the least developed but offers the highest tax credits. Click here to view the 2005 Job Tax Credit Map.

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Job tax credits are available to a business or to its headquarters engaged in any of the following six categories [footnote 1]. Taxpayers may choose between job tax credits or investment tax credits.

• Manufacturing

• Telecommunications

• Warehouse Distribution

• Research & Development

• Processing

• Tourism

Job tax credits range from $4,000 to $750 per job each year for 5 years.

Example: Taxpayer creates 50 jobs in a tier 1 county offering a $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].

Job tax credits in a tier 1 or tier 2 county can be used against 100% of income tax liability [See Chart]. The excess over 100% is credited to Georgia withholding tax (with a limitation of $3,500 per job) in tier 1 counties only. Tier 3 & 4 counties are limited to 50% of tax liability in a given year. Unused job tax credits may be carried forward ten years.

For each of the four tiers, there is a certain minimum number of jobs required to claim the job tax credit. The chart below lists benefits and requirements for each tier.

Example: Taxpayer creating a minimum of 5 jobs in a tier 1 county would qualify for a $4,000 or $3,500 per job tax credit. Taxpayer in tier 4 would need to create 25 or more jobs to receive a $1,250 or $750 credit. The exact credit for each Georgia county is indicated on the tax credit map on pages 4-5.

Port Job Tax Credit Bonus. The port tax credit is a $1,250 per job bonus for taxpayers with large increases in shipments into and out of a Georgia port. The $1,250 is added to the job tax credit [above].

• Example: Taxpayer creates 50 jobs in a tier 1 county. Taxpayer is eligible to receive the port bonus, adding $1,250 to $4,000 job tax credit for total credit of $5,250 for each job. Taxpayer is eligible for $1,312,500 in tax credits spread over 5 years to reduce or eliminate Georgia income tax: [50 jobs x $5,250 x 5 years = $1,312,500].
  

• Footnote 1: Increased job tax credits equal to tier 1 credits are allowed for companies that create jobs in less developed pockets of metro areas regardless of the county's tier. Georgia has 40 counties that offer job tax credits to retail and to business operations other than those listed above. [To receive a list of 40 counties from the Department of Community Affairs (DCA) please email rmorriso@dca.state.ga.us or srobinso@dca.state.ga.us]

Source: Georgia.gov

INVESTMENT TAX CREDIT &
OPTIONAL INVESTMENT TAX CREDITS

Investment tax credits generally range from 5% to 1% of qualified capital investment. The exact credit [See Chart] depends on the tier level of the county where the investment occurs. Investment tax credits are available to an existing manufacturing or telecommunications business that has operated a facility in Georgia for three years prior to the investment and invests $50,000 or more. Higher level credits range from 8% to 3% [chart] for investment in recycled equipment, pollution control equipment, and for the conversion of a defense plant to manufacturing of a new product. The recycle, pollution control, and defense conversion options are available only for manufacturing plants. Taxpayers must choose either the investment tax credit or the job tax credit.

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 income tax. [$100 million x 5%] + [$25 million x 8%] = $7 million.

Investment tax credits can be used against 50% of income tax liability in a given year. Unused credits may be carried forward 10 years.

Port Investment Bonus is available to taxpayers with large increases of shipments in or out of a Georgia port. The port bonus increases the investment tax credit to 5% regardless of the tier level. The 5% is in lieu of the investment tax credit [above]. The port bonus is limited to 50% of income tax liability. Unused credits may be carried forward 10 years.

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 $5.75 million investment tax credit to reduce or eliminate Georgia income tax: [$100 million x 5% ] + [$25 million x 3% ] = $5.75 million. The port bonus cannot be added to the higher tax credits such as recycling. The investment bonus cannot exceed 5% in a tier 1 county.

Source: Georgia.gov

RETRAINING TAX CREDIT
The retraining tax credit is one-half the employer's approved direct retraining cost up to $500 per employee. The credit is available to all business categories. Before a taxpayer applies for the credits, its retraining program must be approved by the Georgia Department of Technical & Adult Education. The retraining program must be for new equipment, a new technology, or a new operating system.

The retraining tax credit can be used against 50% of taxpayer's income tax liability in a given year to reduce or eliminate Georgia income tax liability. Unused credits can be carried forward 10 years. These credits can be combined with other tax credits.

Source: Georgia.gov

Child Care Credits
Child care credits range from 100 percent to 75 percent of costs. 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. 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.

The credits are available to all businesses in the state. The child care program must be licensed by the state.

All child care credits can be used against 50 percent of taxpayer's income tax liability in a given year. Unused child care credits from the purchase or construction of a child care facility can be carried forward three years. The credit for the cost of construction over 10 years [10 percent each year]. Credits that are related to the operating cost of the facility may be carried forward five years.

Example: Taxpayer has direct child care cost of $400,000 in a given year; and is eligible to receive $300,000 tax credit [75% x $400,000]. Taxpayer invests $1 million in a building for the childcare and is eligible for a credit in the first year of $100,000 [10% x $1 million]. Taxpayer can add the $300,000 tax credit and the $100,000 credit if the total credits do not exceed 50% of the tax liability in a given year.

Source: Georgia.gov

RESEARCH & DEVELOPMENT TAX CREDIT
The R&D tax credit is a flat 10 percent of the additional R&D expense over a base amount. The base [detailed below] is computed from the previous three years' taxable income and research expenses.

Example: Taxpayer has base of $192,000. Current year's R&D expense is $5,192,000. Taxpayer is eligible to receive an income tax credit of $500,000 to reduce or eliminate Georgia income tax liability: [$5,192,000 - $192,000] x 10% = $500,000.

R&D tax credits are available to a business engaged in one of the categories to which the jobs tax credit is available (manufacturing, telecommunications, etc. Taxpayer must have positive net income for the previous three years. Taxpayer must qualify for a research credit under Section 41 of the 1986 IRS code to be eligible for the Georgia credit.

R&D tax credits can be used against 50 percent of the remaining income tax liability after all other credits have been applied in a given year. Unused R&D tax credits may be carried forward 10 years. These credits can be added to other tax credits.

The R&D base is the taxpayer's Georgia taxable net income in the current year multiplied by either (a) the average of the ratios of its qualified research expense to taxable net income for the preceding three taxable years, or (b) 30 percent, whichever is less.

Example: Taxpayer spends $100,000 on R&D in a given year and has net taxable income of $1 million. The ratio of R&D to taxable income is 10%. Taxpayer's expense to income ratios for the three preceding taxable years are: 10%, 9%, and 5% respectively. Average of the three ratios is 8%. If current year's income is $2,400,000, the base is 8% x $2,400,000 = $192,000.

Source: Georgia.gov

SMALL BUSINESS (FAST GROWTH) TAX CREDITS

Georgia income tax credits are available to a small business having Georgia net taxable income growth of 20 percent or more each year for three consecutive years. The credit in year 3 is the difference in the net taxable income of year 3 and year 2. Eligible companies include the same categories that can receive the job tax credit on page 1 except for retail businesses.

Example: Taxpayer's net taxable income increases by 20 percent or more for three consecutive years. In year 3, the net taxable income is $1 million. The net taxable income in year 2 was $300,000. Taxpayer is eligible to receive a $700,000 tax credit: [$1,000,000 - $300,000].

The small business credit can be used against 50 percent of the remaining Georgia income tax liability after all other credits have been applied in a given year. There is no carry forward provision. This process can continue until the taxpayer's Georgia income tax liability exceeds $1.5 million, at which time the taxpayer would no longer be considered a small business. This credit may be combined with other tax credits.

Source: Georgia.gov

INVESTMENT TAX CREDITS (Changes to existing law effective January 1, 2001)
Investment tax credits generally range from 5% to 1% of qualified capital investment. The exact credit [See Chart] depends on the tier level of the county where the investment occurs. Investment tax credits are available to an existing manufacturing or telecommunications business that has operated a facility in Georgia for three years prior to the investment and invests $50,000 or more. Higher level credits range from 8% to 3% [chart] for investment in recycled equipment, pollution control equipment, and for the conversion of a defense plant to manufacturing of a new product. The recycle, pollution control, and defense conversion options are available only for manufacturing plants. Taxpayers must choose either the investment tax credit or the job tax credit.

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 income tax. [$100 million x 5%] + [$25 million x 8%] = $7 million.

Investment tax credits can be used against 50% of income tax liability in a given year. Unused credits may be carried forward 10 years.

Port Investment Bonus is available to taxpayers with large increases of shipments in or out of a Georgia port. The port bonus increases the investment tax credit to 5% regardless of the tier level. The 5% is in lieu of the investment tax credit [above]. The port bonus is limited to 50% of income tax liability. Unused credits may be carried forward 10 years.

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 $5.75 million investment tax credit to reduce or eliminate Georgia income tax: [$100 million x 5% ] + [$25 million x 3% ] = $5.75 million. The port bonus cannot be added to the higher tax credits such as recycling. The investment bonus cannot exceed 5% in a tier 1 county.

Source: Georgia.gov

HEADQUARTERS TAX CREDIT 

• Companies establishing or relocating their headquarters [principal central administrative offices] in a Georgia community are eligible to receive an income tax credit of $5,000 per job per year for five years if the new jobs pay twice the county average wage rate.
  

• The $5,000 credit is available in all counties regardless of tier level. [see example 1] 
  

• $2,500 tax credit is available if the wages are greater than the county average. Each tier has a separate wage requirement based on the following chart. [see example 2 ]
  

• The tax credit is available to taxpayers that (1) establish or relocate their headquarters and the headquarters of a subsidiary in Georgia, (2) create 50 or more jobs, (3) invest $1 million, and (4) pay wages that exceed the county average wage rate. Headquarters taxpayer cannot take the job or investment tax credit.
  

• The headquarters tax credit can be used against 100% of tax liability regardless of where the taxpayer locates the headquarters. Credits not applied to income tax liability may be used to reduce withholding tax.

• Example 1: Taxpayer locates headquarters in a Georgia county, creates 160 corporate headquarter jobs paying over twice the county average wage, and receives a tax credit of $4 million to reduce or eliminate GA income tax and withholdings liability: [160 x $5,000 x 5 years] = $4 million.

• Example 2: Taxpayer locates headquarters in a tier 1 community, creates 160 corporate headquarter jobs paying a wage rate that is greater than the county average; and receives a tax credit of $2 million to reduce or eliminate GA income tax and withholdings liability:[160 x $2,500 x 5 years] = $2 million.

Source: Georgia.gov

SALES TAX EXEMPTIONS

MANUFACTURING MACHINERY AND COMPUTER SALES TAX EXEMPTIONS
Provides for an exemption from the sales and use tax for:

1. machinery used directly in the manufacture of tangible personal property when the machinery is bought to replace or upgrade machinery in a manufacturing plant presently existing in the state and machinery components which are purchased to upgrade machinery used directly in the manufacture of tangible personal property in a manufacturing plant;

2. machinery used directly in the manufacture of tangible personal property when the machinery is incorporated as additional machinery for the first time into a manufacturing plant presently existing in this state;

3. machinery which is used directly in the manufacture of tangible personal property when the machinery is incorporated for the first time into a new manufacturing plant located in this state;

4. machinery used directly in the remanufacture of aircraft engines, parts, and components on a factory basis;

5. on the first $150,000 on each part and phased in in 20% increments from January 1, 2001 to January 1, 2005, the sale or use of repair or replacement parts, machinery clothing or replacement machinery clothing, molds or replacement molds, dies or replacement dies, and tooling or replacement tooling for machinery used directly in the manufacture of tangible personal property in a manufacturing plant presently existing in this state;

6. overhead material consumed in the performance of certain contracts between the Department of Defense or NASA and a contractor employing 500 or more full-time employees engaged in manufacturing (this exemption has been phased in at a 25% increment rate each year from January 1, 1997 to January 1, 2000);

7. the sale or lease of computer equipment to be used at a facility or facilities in this state to any high-technology company classified under certain NAICS Codes where such sale of computer equipment for any calendar year exceeds $15 million, or, in the event of a lease of such computer equipment, the fair market value of such leased computer equipment for any calendar year exceeds $15 million; and

8. the sale of machinery, equipment, and materials incorporated into and used in the construction or operation of a clean room of Class 100 or less in Georgia, provided that such clean room is used directly in the manufacture of tangible personal property.

PRIMARY MATERIALS HANDLING SALES TAX EXEMPTION
Purchases of primary material handling equipment and racking systems which are used directly for the storage, handling, and moving of tangible personal property in a new or expanding warehouse or distribution facility when such new facility or expansion is valued at $5 million or more and does not have greater than 15% retail sales are exempt from sales and use taxes.

ELECTRICITY EXEMPTION
Electricity purchased that interacts directly with a product being manufactured is exempt from sales taxes when the total cost of the electricity exceeds 50% of the cost of all materials used, including electricity, in making the product. This exemption was phased in over five years beginning in 1995. It allows 20% exemption increments on the sales tax and is available for new and existing firms. By 1999, electricity used in this manner will be completely exempt.