Seven Tax Incentives Georgia Businesses Should Consider
Authors: Stacey Martin, CPA; Elizabeth Michaels; Jonathan Levens, CPA
The state of Georgia offers a variety of tax incentives that make investing and expanding your business in Georgia attractive. As we approach the end of 2022 and look ahead to next year, the following are a few incentives that you should consider.
Income Tax Credits for Georgia Businesses
1. New and expanding companies may earn the Georgia Job Tax Credit for creating new full-time jobs in Georgia. A qualifying job must have a 35-hour work week, offer health insurance and pay more than the county’s average wage with the lowest average wage in the state ($602/week as of June 2022). The employer generating the jobs must be in a specified industry, including manufacturing, warehousing, software development, data centers, contact centers, telecommunications, and research and development. Employers can use the credit to offset income tax or to reduce a payroll withholding obligation. The county in which the job is created determines the amount of the credit, which ranges from $750 - $4,000.
2. The Investment Tax Credit is available to existing manufacturing and telecommunication companies. Depending on the county, the credit ranges from 1% - 5% of qualified investment expenses. Eligible expenses include land acquisitions, improvements, buildings, machinery and equipment. To qualify, a company must have operated a manufacturing or telecommunications facility in Georgia for at least three years and make a minimum $100,000 investment. Companies in certain designated counties may be able to apply the excess credits to payroll withholding.
3. The Retraining Tax Credit can mitigate the cost of a company’s investment in new technologies and retraining existing employees on the technology or software. The credit is calculated as 50% of the employer’s direct retraining costs, up to $500 per employee per approved retaining program. The total amount of the credit per employee can be at most $1,250 per year, and the Technical College System of Georgia must approve the training program for it to be eligible for the credit.
4. The Research & Development Tax Credit is available to companies performing research and development (R&D) in Georgia. To qualify for the credit, the Georgia facility must be engaged in, or the headquarters of, a specified industry, including manufacturing, warehousing and distribution, tourism, telecommunications, broadcasting, and research and development. The value of the credit is determined based on qualifying expenditures each year in Georgia. Qualifying expenditures can include (but are not limited to): the purchase of materials and supplies, fees for Georgia-based contract work, and the portion of wages and salaries of the personnel, direct management and direct support dedicated to the R&D activities that occur in the state. The credit equals 10% of qualified R&D expenditures over a base amount.
The base amount is calculated by multiplying the company’s current year Georgia sales by the average of the ratios of its aggregate qualified R&D expenses to sales in Georgia for the preceding three taxable years, or 0.300, whichever is less. If the company had no sales in Georgia in one or more of the three preceding tax years, then multiply the current year Georgia sales by 0.300.
5. The Employer Child Care Assistance / Facilities Tax Credit is available to employers who provide or sponsor childcare at a state-licensed facility. The credit is equal to 75% of the direct costs associated with the childcare services.
Selected Tax Exemptions for Georgia Businesses
6. Georgia provides an exemption from sales and use tax for certain expenditures that manufacturing facilities, data centers and distribution centers must make for their operations. Expenses include manufacturing machinery and equipment, repair to industrial machinery, consumables, energy used in manufacturing, primary material handling equipment, pollution control, clean room equipment, and data centers.
7. Many counties and municipalities offer a personal property tax exemption for inventory held within Georgia under the Freeport Exemption. The exemption generally applies to manufacturers, distributors and fulfillment centers. The exemption amount varies by county and municipality. Companies can claim the exemption with the filing of their annual business personal property tax return.
Stacey Martin, CPA, is a Senior Manager in the firm’s Tax Services Practice. Stacey’s primary focus is on tax compliance and planning for large corporate clients across various industries.
Elizabeth Michaels is a Senior Associate in the Tax Services practice at Moore Colson. Elizabeth has a Master’s Degree in Tax Accounting from the University of Alabama, and she enjoys researching and analyzing current tax issues to determine client impact.
Jonathan Levens, CPA, is a Partner with Moore Colson’s Tax Services practice. Jonathan’s primary focus is on tax compliance and consulting services for private equity-owned as well as closely-held businesses and their owners in the manufacturing and distribution, retail, service, restaurant, healthcare, staffing and financial services industries.