JOB TAX CREDIT
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.
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].
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.
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.
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.
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.
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.
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.
SALES TAX EXEMPTIONS
MANUFACTURING MACHINERY AND COMPUTER SALES TAX EXEMPTIONS
Provides for an exemption from the sales and use tax for:
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;
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;
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;
machinery used directly in the remanufacture of aircraft engines, parts, and components on a factory basis;
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;
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);
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
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.
OPTIONAL INVESTMENT TAX CREDIT- (Changes to existing law
effective January 1, 2001)
Taxpayers qualifying for the investment tax credit may choose an optional
investment tax credit with the following threshold criteria:
| Designated Area |
Minimum Investment |
%Tax Credit |
| Tier 1 | $5 Million | 10% |
| Tier 2 | $10 Million | 8% |
| Tier 3 or Tier 4 | $20 Million | 6% |
The credit may be claimed for 10 years, provided the qualifying property remains in service throughout that period. A taxpayer must choose either the regular or optional investment tax credit. Once this election is made, it is irrevocable.
The optional investment tax credit is calculated based upon a three-year tax liability average. The annual credits are then determined using this base year average. The credit available to the taxpayer in any given year is the lesser of the following amounts:
90% of the increase in tax liability in the current taxable year over that in the base year, or
The excess of the aggregate amount of the credit allowed over the sum of the amounts of credit already used in the years following the base year.
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 $500 per employee per approved retraining program per year. 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.
CHILD CARE CREDITS
Employers who provide or sponsor child care for employees are eligible for a tax
credit of up to 75% of the employers' direct costs. The credit cannot be more
than 50% of the taxpayer's total state income tax liability for that taxable
year. Any credit claimed but not used in any taxable year may be carried forward
for five years from the close of the taxable year in which the cost of the
operation was incurred. In addition, employers who purchase qualified child care
property will receive a credit totaling 100% of the cost of such property. The
credit is claimed at the rate of 10% a year for 10 years. The qualified property
credit may be carried forward for three years from the close of the taxable year
in which the qualified property is placed in service, and the limitation on the
use of the credit in any one year is 50%. Recapture provisions apply if the
property is transferred or committed to a use other than child care within 14
years after the property is placed in service. These two child care credits can
be combined.
RESEARCH & DEVELOPMENT TAX CREDIT
A tax credit is allowed for research expenses for research conducted within
Georgia for any business or headquarters of any such business engaged in
manufacturing, warehousing and distribution, processing, telecommunications,
tourism, or research and development industries. The credit shall be 10% of the
additional research expense over the "base amount," provided that the business
enterprise for the same taxable year claims and is allowed a research credit
under Section 41 of the Internal Revenue Code of 1986. The credit may be carried
forward 10 years but may not exceed 50% of the business's net tax liability in
any one year. (Note that the base amount must contain positive Georgia taxable
net income for all years.)
SMALL BUSINESS GROWTH COMPANIES TAX CREDIT
A tax credit is granted for any business or headquarters or any such business
engaged in manufacturing, warehousing and distribution, processing,
telecommunications, tourism, or research and development industries having a
state net taxable income which is 20% or more above that of the preceding year
if its net taxable income in each of the two preceding years was also 20% or
more. The credit shall be the excess over 20% of the percentage growth and shall
not exceed 50% of the business's Georgia net income tax liability. The credit is
available to companies whose total tax liability does not exceed $1.5 million.
PORTS ACTIVITY JOB TAX & INVESTMENT TAX CREDITS (Changes
to existing law effective January 1, 2001)
Businesses or the headquarters of any such businesses engaged in manufacturing,
warehousing and distribution, processing, telecommunications, tourism, or
research and development that have increased their port traffic tonnage through
Georgia ports during the previous 12-month period by more than 10% over their
1997 base year port traffic, or by more than 10% over 75 net tons, five
containers or 10 20-foot equivalent units (TEU's) during the previous 12-month
period are qualified for increased job tax credits or investment tax credits.
NOTE: Base year port traffic must be at least 75 net tons, five containers, or
10 TEU's. If not, the percentage increase in port traffic will be calculated
using 75 net tons, five containers, or 10 TEU's as the base. Companies must meet
Business Expansion and Support Act (BEST) criteria for the county in which they
are located.
The job tax and investment tax credits are as follows:
Tier 1 companies:
An additional $1,250 per job, or 5% investment tax credit, or 10% optional
investment tax credit.
Tier 2 companies:
An additional $1,250 per job, or 5% investment tax credit, or 10% optional
investment tax credit.
Tier 3 companies:
An additional $1,250 per job, or 5% investment tax credit, or 10% optional
investment tax credit.
Tier 4 companies:
An additional $1,250 per job, or 5% investment tax credit, or 10% optional
investment tax credit.
Companies that create 400 or more new jobs, invest $20 million or more in new and expanded facilities, and increase their port traffic by more than 20% above their base year port traffic may take both job tax credits and investment tax credits.
HEADQUARTERS TAX CREDIT (New Beginning January 1, 2001)
Companies establishing their headquarters or relocating their headquarters to Georgia may be entitled to a tax credit if the following criteria are met: 1) headquarters is defined as the principal central administrative offices of a company; 2) new jobs created at a new headquarters must be full-time (as defined by law and regulation) and must pay above the average wage for Tier 1 counties, at least 105% of the average wage for Tier 2 counties, at least 110% of the average wage for Tier 3 counties, and at least 115% of the average wage for Tier 4 counties; 3) within one year, a company must invest $1 million and create 100 jobs at a new headquarters facility; and 4) the company must elect not to take the job or investment tax credits. The credit is equal to $2,500 annually per new full-time job or $5,000 if the average wage of the new full-time jobs is 200% or more of the average wage of the county in which the new jobs are located. The credits apply for five years beginning with the year in which jobs are placed in service. The credit may be taken against Georgia income tax liability and a company's withholding taxes. Credits may be carried forward for 10 years. Other requirements include: 1) no new full-time jobs created after seven years from the close of the taxable year in which the taxpayer first becomes eligible for the credit may receive credits; and 2) the number of new full-time jobs shall be determined by comparing the monthly average of full-time jobs subject to Georgia income tax withholding for the taxable year with the corresponding average for the prior taxable year.
SALES TAX EXEMPTIONS
MANUFACTURING MACHINERY AND COMPUTER SALES TAX EXEMPTIONS
Provides for an exemption from the sales and use tax for:
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;
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;
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;
machinery used directly in the remanufacture of aircraft engines, parts, and components on a factory basis;
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;
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);
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
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.
Contact Mr. Kip Purvis, President
Meriwether County Development Authority
Phone: (706) 655-2558 Fax (706) 655-2812
email: kippurvis@alltel.net