To enhance Georgia's tax incentive strategy and improve fiscal management, the Georgia legislature has passed House Bill 1181, which brings major changes to the state's tax credit programs starting January 1, 2025. This comprehensive reform aims to optimize the effectiveness of tax credits by modifying the duration and applicability of credit carryforward periods and instituting sunset provisions for certain credit programs. These adjustments are poised to impact both individuals and businesses, prompting a strategic reassessment of tax planning practices across Georgia.
Key Aspects of HB 1181
The changes introduced by HB 1181 primarily focus on two critical areas: the reduction of tax credit carryforward periods and the establishment of sunset dates for specific tax credits. The carryforward period refers to the length of time taxpayers can apply unused credits to offset future tax liabilities. By shortening these periods, the legislation seeks to encourage more immediate utilization of credits, thereby injecting more dynamic activity into the state's economy.
Additionally, the inclusion of sunset provisions for certain credits implies a predefined expiration date, after which these credits will no longer be available. This measure is intended to periodically assess the effectiveness and relevance of various credit programs, aiming to allocate the state's resources toward initiatives that yield the greatest economic benefit.
Implications for Taxpayers
For taxpayers in Georgia, these changes necessitate a proactive approach to tax planning. Businesses and individuals alike should consider accelerating the generation of tax credits before the new rules take effect, as credits generated before January 1, 2025, will retain their original carryforward periods. Moreover, exploring alternative strategies for maximizing tax credit utilization will become increasingly important under the revised framework.
As these changes take shape, taxpayers are advised to consult with tax professionals to navigate the new landscape effectively. Understanding the nuances of HB 1181 and aligning tax strategies with the updated regulations will be crucial to optimizing financial outcomes in the coming years.
Below is a summary of income tax credit changes:
10-Year Credit Carryforward Reduced to Five Years
|
HB 1181 Section |
Credit Program |
Pre-1/1/25 CF Period |
Post-1/1/25 CF Period |
Sunset Date |
|---|---|---|---|---|
| 1-23 | Research Tax Credit* | 10 | 5 | |
| 1-12-13 | Jobs Tax Credit* | 10 | 5 | |
| 1-14 | Personal Protective Equipment Manufacturer Jobs Tax Credit | 10 | 5 | |
| 1-15 | Life Sciences Manufacturing Job Tax Credit | 10 | 5 | |
| 1-16/17/18 | Manufacturer’s Investment Tax Credit* | 10 | 5 | |
| 1-20/21/22 | Optional Investment Tax Credit* | 10 | 5 | |
|
1-19 |
Retraining Tax Credit* | 10 | 5 | |
| 1-24 | Alternate Port Activity Tax Credit | 10 | 5 | |
| 1-25 | Port Activity Tax Credit* | 10 | 5 | |
| 1-4 | Land Conservation Credit | 10 | 5 | |
| 1-32 | Research Fund Investment Credit | 10 | 5 | 12/31/2029 |
| 1-33 | Limitation on the Aggregate Amount of Research Fund Investment Credit | 10 | 5 | 12/31/2029 |
* Indicates some of the most common programs used
Five-Year Credit Carryforward Reduced to Three Years
| HB 1181 Section | Credit Program | Pre-1/1/25 CF Period | Post-1/1/25 CF Period | Sunset Date |
| 1-30 | Film Tax Credit* |
5 |
3 | |
| 1-31 | Postproduction Film Tax Credit* | 5 | 3 | |
| 1-26 | Electric Vehicle Charger Credit | 5 | 3 | 12/31/2029 |
| 1-7 | Qualified Education Expense Credit* | 5 | 3 | |
| 1-9 | Qualified Education Donation Tax Credit* | 5 | 3 | |
| 1-10 | Qualified Foster Child Donation Credit | 5 | 3 | |
| 1-11 | Qualified Law Enforcement Donation Credit | 5 | 3 | |
| 1-2 | Credit for depository financial institutions that elected subchapter "S" status | 5 | 3 | |
| 1-27 | Credits for Businesses Engaged in Manufacturing Cigarettes for Export | 5 | 3 | |
| 1-34 | Credits for Certain Qualified Equipment that Reduces Business or Domestic Energy or Water Usage | 5 | 3 | |
| 1-35 | Credits for Certain Qualified Investments for Limited Period of Time | 5 | 3 | |
| 1-36 | Revitalization Zone Credit* | 5 | 3 |
* Indicates some of the most common programs used
Limits to Three-Year Credit Carryforward
| HB 1181 Section | Credit Program | Pre-1/1/25 CF Period | Post-1/1/25 CF Period | Sunset Date |
|
1-1 |
Disaster Assistance Credit | 3 | ||
| 1-3 | Georgia National Guard/Air National Guard Credit | 3 | ||
| 1-5 | Qualified Health Insurance Expense Credit | 3 | 12/31/2029 | |
| 1-6 | Clean Energy Property | 3 | ||
| 1-8 | Eligible Single-Family Residence Tax Credit | 3 | ||
| 1-28 | Business Enterprise Vehicle Credit | 3 | 12/31/2029 | |
| 1-37 | Railroad Track Maintenance Tax Credit | 3 |
15-Year Credit Carryforward Reduced to 10 Years
| HB 1181 Section | Credit Program | Pre-1/1/25 CF Period | Post-1/1/25 CF Period | Sunset Date |
| 1-29 | Credits for Investment in Expanding Existing Manufacturing Facilities, and Enhancements for High-Impact Aerospace Defense Projects | 15 | 10 |
HB 1181 also provides a sunset date for various sales and use tax and excise tax exemptions.
How Cherry Bekaert Can Help
Navigating the complexities of changing tax legislation can be daunting for businesses, but Cherry Bekaert's State Credits & Incentives team is here to provide clarity and guidance. With a deep understanding of the latest updates and a proactive approach to monitoring legislative changes, our team keeps your business informed and well-prepared to adapt to new tax policies. By partnering with Cherry Bekaert, you can focus on your core operations while we handle the intricacies of tax credit optimization. If you have any questions about how to benefit from these tax savings, reach out to your Cherry Bekaert tax advisor, and let us help you navigate the path to financial efficiency with confidence.
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