Investment Tax Credits for Georgia Manufacturers

Georgia is one of the more business-friendly states in the country for corporate incentives, and the state continues to help taxpayers succeed with new legislation for manufacturing and telecommunications businesses that invest in the state. On December 30, 2019, the Georgia Department of Revenue released revised Regulations on Rule 560-7-8-.37 of the Rules and Regulations of the State of Georgia. These revised regulations affect manufacturing and telecommunications businesses that are eligible to claim Georgia Manufacturing Investment Tax Credits.

The Georgia Manufacturing Investment Tax Credit is available to new or existing manufacturing or telecommunications facilities* that purchase qualified investment property in the state, through construction or purchase of real or personal property. The credit is calculated as a percentage of the qualifying investment property, which ranges from one percent to five percent, depending on the county in which the facility is located. While this tax credit program is not new to Georgia, the new regulations provide an opportunity for certain businesses to use the tax credits to offset Georgia payroll withholding tax liabilities, where before it was only used to offset income tax. The payroll offset is effective for tax years beginning after January 1, 2020, and is irrevocable once made.

The Georgia payroll withholding offset is only available to business enterprises whose operations are located within counties that are ranked as Tier 1 or Tier 2 counties in the state. Georgia county rankings for 2020 are listed here. Businesses in Tier 3 or 4 counties may only utilize the credits against their corporate income tax liability.  The new regulation further provide an additional benefit to businesses in Tier 1 and Tier 2 counties by allowing them to request approval to use carryforwards of Investment Tax Credits generated and claimed before January 1, 2020, against payroll withholding.

Applicants for the payroll tax offset must apply to the Department of Revenue between April 1, and May 31, of the year the credit will be claimed on the return. Approved amounts are treated as a credit against future withholding payments. The election has the effect of converting a deferred income tax benefit to an “above the line” financial statement benefit.

If your Georgia manufacturing and telecommunication businesses is interested in evaluating the tax savings opportunities, contact Cherry Bekaert’s State Credits and Incentives practice.

* Georgia 560-7-8-.37 defines a manufacturing facility as any business engaged in manufacturing as classified by the North American Industry Classification System (“NAICS”) codes that belong to Sectors 31-33.  A telecommunications facility is defined as businesses, under certain NAICS codes (517312, 517311, 517911, 517410, and 517919) who are primarily engaged in providing communication via the airwaves, providing the transmission of  voice, data, text or sound and video communication, and satellite technologies, to name a few.