Georgia R&D Tax Credit Can Now Be Used to Offset Payroll Taxes

Posted by Jeffrey M. Feingold on 02.07.14

Legislators have recently opened up many new opportunities for Georgia companies to claim the R&D tax credit on a state level.  Because of the limitations placed on qualifications, many Georgia companies have not been able to take advantage of the tax credit in the past. Companies were stopped because they were in net operating losses, or they had used other Georgia tax credits to their maximum. (The R&D tax credits must be the last tax credits used in Georgia.)

Using the Georgia R&D tax credit against payroll withholding

New legislation now allows the Georgia R&D tax credit to be used against payroll withholding taxes in Georgia. Now if the company is in net operating losses, they can use the credit against payroll tax starting in 2013.  Another change is that if the company has exhausted all of the other credits against 50% of their taxable income and cannot use the R&D credit, they can use the credit in 2013 through payroll withholding tax reductions. Other tax credits affected are: jobs credit, film credit, and the clean energy Property tax credit.  They can also be used against payroll withholding taxes beginning in 2013.

Unique features of the Georgia R&D tax credit

Each state has their own rules for using R&D tax credits for state income taxes.  Georgia is no exception.  It differs from the federal rules as well. Here are some important things to know:

  • Unused R&D tax credit does carry forward up to 10 years.
  • There is a requirement to file an application with the Georgia Department of Revenue at least 30 days prior to filing the company's Georgia income tax return, including extensions.
  • The company must wait to receive approval from the State to take advantage of this payroll tax withholding adjustment.
  • A business enterprise that has established eligibility for the research tax credit is allowed a tax credit equal to 10% of the excess of the qualified research expenses over the base amount on their state taxes.
  • The credit taken in any one taxable year cannot exceed 50% of the business enterprise's remaining Georgia net income tax liability after all other credits have been applied.

The purpose of an R&D tax credit

The Federal government established the R&D tax credit in 1981 to encourage business innovations and to create good, high-paying jobs for a struggling economy. It was deemed necessary to keep America technologically savvy by offering companies incentives to develop new products and new processes. Over time this legislation has become better defined and expanded to include more businesses and more methods. Now many businesses can qualify even if they aren't developing a new product. Using a new design or a new method can qualify even mom and pop shops if the method is new to them.  It doesn't have to be new to the industry. Even if everyone else is using this method, if your company is new at it, it can qualify you for a huge tax credit.

How to see if you qualify

Call Tax Point Advisors for a risk-free, no obligation analysis to see if you qualify to save hundreds or  even thousands of dollars with this tax credit. We will give you an estimate of how much you can save, as well as what your fee would be to have us handle this for you. All of Georgia is served from our office in Atlanta. Request the best. We have a industry-leading audit success rating. We have never had a credit denied under audit.


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