Single Factor Apportionment
In 2005, Georgia became the first state in the Southeast to adopt a "Single Factor Gross Receipts" apportionment formula. This apportionment formula treats a company's gross receipts or sales in Georgia as the only relevant factor in determining the portion of that company's income subject to Georgia's 6 percent corporate income tax. Georgia is one of only 12 states currently using Single Factor Apportionment. Single Factor Apportionment significantly reduces the effective rate of Georgia income taxation of companies with substantial sales to customers outside Georgia.
Example: Assume for the 2011 tax year, In-State Manufacturing Co., Inc. has the following gross receipt sales in Georgia as compared to total gross receipt sales:
Total Gross Receipts: $10 million
Percent of Gross Receipts in Georgia: 13 percent
Accordingly, in 2011, only $1.3 million of In-State Manufacturing Co., Inc.'s income would be subject to Georgia's 6 percent corporate income tax, making their corporate income tax liability $78,000. [($10 million x 13%) x 6%]
Corporate Tax Credits
Georgia offers a range of corporate tax credits that enable companies to minimize or completely eliminate state corporate income taxes. For some of the credits, the amounts are dependent on the "tier status" of the community. Tier status refers to an annual
four-tier ranking of the economic vitality of Georgia's counties. The highest credits are offered in the counties with the greatest need (Tier 1 and 2 counties), while the most prosperous counties (Tier 3 and 4 counties) offer lesser amounts.
Job Tax Credit Companies and their headquarters that are engaged in strategic industries such as manufacturing, warehousing and distribution, processing, telecommunications, broadcasting, tourism, and research and development may qualify for Georgia's Job Tax Credit Program. Depending on the community's tier, companies must create between five and 25 net new full-time jobs in the first year to qualify. Credits may also be accrued for additional jobs created in years 2-5.
Jobs created outside of year five may not be claimed unless a new threshold job creation (year one) is met. Qualified companies can claim a tax credit with a value of $750-$3,500 per job per year beginning with the first taxable year in which the new job is created and for the following four years the job is maintained. An additional $500 credit is offered in counties that participate in a multi-county Joint Development Authority (JDA). Increased job tax credits equal to Tier 1 credits are also allowed for companies that create jobs in Less Developed Census Tracts (LDCT), Opportunity Zones (OZ), or Military Zones (MZ). Opportunity Zones, Military Zones, and Georgia's 40 least-developed counties offer job tax credits to businesses of any nature, including retail businesses.
Credits may be taken against 100 percent of state corporate income tax liability in Tier 1 and 2 counties, or against 50 percent of state corporate income tax liability in Tier 3 and 4 counties. Credits that are claimed but not used in any taxable year may be carried forward for 10 years from the close of the taxable year in which qualified jobs were established. Additionally, in Tier 1 counties, excess credits may be credited to Georgia payroll withholding taxes (with a limitation of $3,500 per job, per year).
Port Tax Credit Bonus
The Port Tax Credit Bonus is available to taxpayers who increase imports or exports through a Georgia port by 10 percent over the previous or base year. Base year port traffic must be at least 75 net tons, five containers, or 10 TEUs (twenty foot equivalent units); if not, the percentage increase in port traffic will be calculated using 75 net tons, five containers, or 10 TEUs as the base. The port tax credit bonus can be used with either the Job or the Investment Tax Credit program, provided that the company meets the requirements for one of those programs. Port Tax Credits may be used to offset up to
50 percent of the company's corporate income tax liability. Unused credits may be carried forward for 10 years, provided that the increase in port traffic remains above the minimum level and that the company continues to meet the job or investment tax credit requirements.
Note that the Port Tax Credit Bonus cannot be utilized with the Quality Jobs Tax Credit and can only be used in Opportunity Zones, Military Zones, and Less Developed Census Tracts in limited cases by existing large distribution centers.
Port Tax Credit Bonus for JOB Tax Credits
This "port bonus" is an additional $1,250 per job credit for taxpayers with qualified increases in shipments through a Georgia port. The $1,250 is added to the job tax credit.
Example: Taxpayer that creates 50 jobs in a Tier 1 county and increases their port traffic by at least 10 percent is eligible to receive the port bonus. Taxpayer is eligible for $1,312,500 in tax credits over five years to reduce or eliminate Georgia income tax: [50 jobs x ($4,000 job tax credit + $1,250 port tax credit bonus) x 5 years] = $1,312,500.
Port Tax Credit Bonus for Investment Tax Credit
This "port bonus" increases the investment tax credit to the equivalent of a Tier 1 location regardless of the tier level.
The port bonus would therefore be equal to 5 percent of the qualified investment in expenses directly related to manufacturing or providing telecommunication services with the credit increasing to 8 percent for recycling, pollution control, and defense conversion.
Example: Taxpayer qualifies for a port bonus in a Tier 4 county, invests $100 million in a manufacturing plant, plus $25 million in recycling equipment. Taxpayer is eligible for a $7 million investment tax credit to reduce or eliminate Georgia income tax: [$100 million x 5%] + [$25 million x 8%] = $7 million.