Georgia Manufacturing Investment Tax Credit

The Georgia Manufacturing Investment Tax Credit is a financial incentive aimed at supporting businesses in the manufacturing and telecommunications sectors. By making capital improvements more affordable, this state credit encourages companies to expand and upgrade facilities, promoting economic growth and job creation throughout the state. The credit can offset up to 50% of a company’s Georgia corporate income tax liability, and any unused portion can be carried forward for up to 10 years. To help clients, prospects, and others, Wilson Lewis has summarized the key details below.

Program Overview

Introduced in 1994, the Georgia Manufacturing Investment Tax Credit was established to make it more affordable for businesses to expand and modernize their operations. Initially, the program required a minimum investment of $50,000 to qualify for the credit. 

Over time, the program evolved to address the changing economic landscape. Significant updates in 2020 included increasing the minimum investment threshold to $100,000 for new or existing facilities. This change aimed to incentivize more substantial investments and support larger-scale projects that could drive significant economic impacts.

Additionally, provisions were added to benefit businesses in economically distressed rural counties, allowing excess credits to offset withholding taxes. This provided more flexibility and support for companies investing in these areas.

Eligibility 

To be eligible for the credit, a company must meet specific criteria:

• Manufacturing or Telecommunications Facility: The company should have been operating a manufacturing or telecommunications facility in Georgia for at least three years and must make a minimum qualified investment of $100,000 in a new or existing facility for tax years beginning on or after January 1, 2020.
• Corporate Office or Supporting Facility: Alternatively, a company operating a corporate office or another supporting facility for a manufacturing or telecommunications company in Georgia for at least three years is eligible. This assumes will make a minimum investment of $100,000 in a new or existing facility.

Qualified investment expenses include land acquisition, improvements, buildings, and the purchase of machinery and equipment to be used in these facilities.

Credit Amount 

The tax credit amount ranges from 1% to 8% of the qualified capital investments, depending on the geographic location and the type of investment made. Those focused on pollution control, recycling equipment, or converting a defense plant can earn higher credits (3% to 8%), while general manufacturing or telecommunications equipment investments earn lower credits (1% to 5%).

Special Provisions 

The tax credit can offset up to 50% of a company’s Georgia corporate income tax liability. If the earned credit exceeds this limit, the unused credit can be carried forward for up to 10 years, allowing businesses to apply it to future tax liabilities.

For facilities located in tier 1 or tier 2 rural counties, excess credits may be used to offset withholding taxes after first applying to 50% of income tax liability. Preapproval from the Georgia Department of Revenue (GA DOR) is required to utilize this provision. This mainly benefits companies operating in economically distressed areas, providing additional financial support to encourage investment in these regions.

Additionally, companies that increase their import/export activity through Georgia ports by 10% can qualify for a Port Activity Tax Credit Bonus, which increases the credit up to 5%. This incentivizes businesses to engage in international trade and utilize Georgia’s port infrastructure.

The total amount of tax credits that can be used against payroll withholding taxes is capped at $1 million per company per year and $10 million for all companies statewide.

How to Claim the Credit

To claim the credit, taxpayers must submit Form IT-APP to the Georgia Department of Revenue (GA DOR) and a detailed project plan and capital expenditure budget. The credit can be claimed on the appropriate tax return only after approval from the GA DOR. Once approved, the company will receive an approval letter from the GA DOR. All forms must be submitted within 30 days of project completion. 

Companies cannot claim the job tax credit or the optional investment tax credit for the same project. This ensures that the tax credit’s benefits are not duplicated for a single investment.

Illustrative Case Study

Consider the following hypothetical example to better understand how the Georgia Manufacturing Investment Tax Credit works. A manufacturing company has been operating in a tier 2 rural county for the past five years. In 2023, the company invested $200,000 in new manufacturing equipment and pollution control devices. The company submitted Form IT-APP, including a detailed project plan and capital expenditure budget, to the Georgia Department of Revenue (GA DOR). Upon approval, they received an approval letter to claim the credit. 

Based on the type of investment and geographic location, the company earned a tax credit of 6% of the $200,000 investment, totaling $12,000. They used the credit to offset 50% of their state corporate income tax liability for 2023, carrying forward the remaining unused credit to offset future tax liabilities. The company reduced its tax burden by leveraging the tax credit, freeing up capital for further improvements and expansions. 

Contact Us

The Georgia Manufacturing Investment Tax Credit is a valuable incentive for those in facilities expansion. Since claiming the credit is complicated, it’s important to consult with a qualified tax advisor who can determine eligibility and guide you through the process. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Wilson Lewis can help. For additional information, call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.