Contributor: Nick Cousino, CPA, Senior Manager, State Tax Credits & Incentives Advisory
Understanding the Credit Transfer Provisions
To remain competitive against other states and a favorable state for businesses to operate in, Georgia has offered a Manufacturing Investment Tax Credit. These provisions give industrial and telecommunications companies operating in Georgia a limited opportunity to apply for an advantageous manufacturing investment tax credit to offset their payroll withholding tax liabilities within the state.
Claiming the Georgia Investment Tax Credit
To qualify for the Georgia investment tax credit, an industrial or telecommunications company must:
- Have operated in Georgia for the prior three years;
- Have made qualified investments in the state;
- Submit an application, including a project plan and capital expenditure budget to the Department of Revenue (GA DOR); and
- Receive an approval letter from the GA DOR.
How Does the Georgia Investment Tax Credit Work?
The tax credit is calculated as a percentage of the qualified investment, ranging from 1- 8%, depending on the location and the investment type. Qualified investments include real and personal property that are used in the manufacturing process or in telecommunications operations. Investments related to recycling, defense conversion or pollution control may earn a higher rate of credit.
Applying for the Credit Transfer to Payroll Withholding Tax
This time-sensitive opportunity to transfer credit to withholding tax is only available to companies located in Tier 1 and Tier 2 with a rural county designation. A rural county has a population of less than 50,000 with 10% or more of its population living in poverty. Companies must first apply this credit against 50% of their income tax, then a request may be made to transfer up to $1 million of excess credit against their payroll withholding tax.
To request the credit transfer, companies must submit Form IT-WHRZ-APP through the Georgia Tax Center before May 31, 2024. Total credit transfer from all taxpayers is capped at $10 million per year; taxpayers received an 85% proration on the credit in 2023.
How to Use the Georgia Investment Tax Credit?
Credit transfer is available for credits generated and approved pre- and post-tax year 2020. To transfer pre-2020 approved credits, additional requirements related to current-year employment level and new investments must be met. The transfer provisions apply to tax years before January 1, 2025.
The ability to transfer credit to payroll withholding tax brings immediate cash benefits to businesses. It allows them to monetize the credit faster and prevents some credits from expiring. Tax credits provide dollar-for-dollar benefits. They are a great vehicle for businesses to reduce operating costs, increase cash flow and reinvest in their operations.
Exploring the Benefits of the Georgia Investment Tax Credit
To learn more about the impact of the Georgia Investment Tax Credit, see Investment Tax Credits for Georgia Manufacturers and Communications Companies.
How Cherry Bekaert Can Help
Reach out to a member of Cherry Bekaert’s State Credit & Incentives team to learn if you are eligible for the Georgia Manufacturing Investment Credit and how to maximize the benefits of the credit.
