September 8, 2016

Georgia Job Tax Credit

Georgia Job Tax Credit

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There are many incentives available to Georgia companies that may be considering enhancing or expanding their operations. Business owners and management are often surprised to discover the state’s various incentive programs for job training, research and development and other activities designed to encourage additional development. It should come as no surprise then that Georgia offers a Job Tax Credit. This credit provides employers with up to a $4,000 state tax credit annually for up to five years for hiring new full-time employees. It’s important to note that the value of the credit varies based on the location of the new position and total number of jobs created. Additionally, the credit applies to new jobs created anywhere in the company, regardless of whether it is an existing location such the company’s headquarters or a new manufacturing and distribution facility. To help clients, prospects and others understand how the Job Tax Credit works and how they can benefit from it, Wilson Lewis has provided a summary of key program details below.

Qualification Criteria

There are three primary requirements that must be met when determining if a new position qualifies for the credit, including:

  • Industry Focus – To qualify for the credit, a company must focus on one of the following areas: manufacturing, distribution, telecommunications, broadcasting, warehouse and distribution, research and development, processing or tourism.
  • Job Requirement – Only new jobs that are considered full time (a minimum of 35 hours per week) will qualify. In addition, the new hire must be classified as an employee, so any new positions that are filled by independent contractors are ineligible.
  • Compensation – The average wage paid to new workers must exceed the lowest average wage paid for any job in any industry within the state. The employer must also be able to provide proof that health insurance programs are available for the employee, but they are not required to pay any part of the cost of the program should an employee elect to participate.

Credit Calculation

Again, the Jobs Tax Credit value is based on two factors: the number of jobs created and where are they located within the state. The 2016 Georgia Jobs Tax Credit Tier is a map created by the state essentially classifying each county in an economic tier. These tiers are classified as one through four based on three key factors: the unemployment rate, per capita income and percentage of residents that live below the poverty line. This classification is essential because it determines the value of available tax credit. Naturally, the higher tax credits will go to those jobs created in Tier 1 zones (more economically challenged) and lower tax credits to those created in Tier 4 zones (less economically challenged).

A business must also create and maintain a set of number of new full-time jobs to be eligible for the credit, and the required number varies based upon the economic zone. In Tier 1 zones, companies need to create and maintain a minimum of two jobs to claim the credit, and in Tier 4, companies must create and maintain 25 new jobs to claim the credit.

Understanding the Benefit

If a manufacturing company increases operations and creates 50 new jobs in a Tier 1 zone, they would be eligible for a tax credit of $4,000 per new job. This means that the company would receive a yearly tax credit of $200,000. Because the tax credit is available for a five-year period, the same company would actually receive a total tax benefit of $1M, assuming they maintain those 50 new positions. What’s important to note is that credits generated from new jobs in Tier 1 and Tier 2 areas can be used 100% against state income tax. Depending on the tax situation of the company, they may elect to roll the credit forward for up to ten years in the future.

Contact Us

The Jobs Tax Credit is a useful tool for qualifying companies that are or will be seeking to expand operations in the state. However, it’s important to understand how to plan activities in order to receive the highest benefit for the investment. If your company is looking for assistance with tax credit planning, Wilson Lewis can help. For additional information, please call 770-476-1004, or click here to contact us. We look forward to speaking with you soon.

 

 

 

 

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