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Georgia Tax Credits - Tim Clancy
- 1. GEORGIA TAX CREDITS TimClancy, CPA November 13, 2014
- 2. 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 2
- 3. Film and EntertainmentCredits • Purpose: Entice film and game producers to come to Georgia – Additional benefits obtained from 2014 legislation for game development – Future legislation 3
- 4. Film and EntertainmentCredits 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 4
- 5. Film and EntertainmentCredits 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 5
- 6. Film and EntertainmentCredits 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 6
- 7. Film and EntertainmentCredits 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 7
- 8. Low Income HousingTax 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 8
- 9. Low Income HousingTax Credit 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 9
- 10. Low Income HousingTax Credit Taxpayer Considerations – Rates vary $.75 - $.85 – BUY EARLY for lower rates – Consider tax position and time value of money – Years required in investment 10
- 11. Georgia Education ExpenseCredit • 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 11
- 12. Georgia Education ExpenseCredit – 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 12
- 13. Georgia Education ExpenseCredit 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 13
- 14. Georgia Education ExpenseCredit – 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 14
- 15. Georgia Education ExpenseCredit Economic Cost or Economic Benefit 15 Single taxpayer - $1,000 maximum deduction Standard deduction $0 maximum cost Itemized deduction $60 maximum cost Alternative minimum tax $290 possible maximum economic benefit Married Filing Jointly - $2,500 maximum deduction Standard deduction $0 maximum cost Itemized deduction $150 maximum cost Alternative 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 cost Alternative minimum tax $2,900 possible maximum economic benefit
- 16. Georgia Education ExpenseCredit – Corporate limitation to 75% of tax liability – Trusts may not pass credit through to beneficiaries – Carry forward provisions – Payment within 60 days of approval 16 APPLY EARLY!!!!
- 17. 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 17
- 18. Retraining Tax Credit •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 18
- 19. Retraining Tax Credit •Eligible retraining programs – Newly installed equipment – Newly implemented technology • Computers • Platforms • Software implementations and upgrades • Total quality management • ISO 9000 • Self directed work teams 19
- 20. Retraining Tax Credit •Programs that are not eligible – Executive training – Management development training – Career development – Personal enrichment – Cross training of employees 20
- 21. Retraining Tax Credit •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 21
- 22. Retraining Tax Credit •Costs that are not eligible – Sales taxes – Training space – Employee paid training 22
- 23. Retraining Tax Credit •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) 23
- 24. Retraining Tax Credit –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 24
- 25. Retraining Tax Credit •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 25
- 26. Retraining Tax Credit •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 26
- 27. 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 27
- 28. 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 28
- 29. Job Tax Credit 29 Tier1 Tier 2 Tier 3 Tier 4 2014 County Tier map
- 30. Job Tax Credit 30 TierCredit (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 3 $1,750* 15 50% tax liability 10 years 4 $1,250* 25 50% 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 zone OZ = Opportunity zone LDCT = Less Developed Census Tract
- 31. 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 31
- 32. 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 32
- 33. 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) 33
- 34. Job Tax Credit Example Facts: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. 34 What is the amount of credit earned by Create-it Corp?
- 35. Job Tax Credit Determinationis based on location NOT county Location #1 – 50 jobs x $4,000 x 5 years = $1,000,000 Location #2 – 33 jobs x $1,250 x 5 years = $206,250 Location #3 – Does not qualify for credits 35
- 36. 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 36
- 37. Investment Tax Credit •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 37
- 38. Investment Tax Credit •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% 38
- 39. Investment Tax Credit •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 39
- 40. Port Tax CreditBonus • 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%) 40
- 41. Quality Jobs TaxCredit • 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 41
- 42. 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 42
- 43. Low Emission /Alternative Fuel Credit • 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 43
- 44. Low Emission /Alternative Fuel Credit 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 44
- 45. Child Care TaxCredit • 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 45
- 46. 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) 46
- 47. Other Tax CreditConsiderations 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 47
- 48. Other Tax CreditConsiderations 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 48
- 49. Other Tax CreditConsiderations Application for refunds Credits must be claimed within one year of the earlier of – Date the original return was filed – Date return due including extension 49
- 50.