2022 Update: Georgia Employer Tax Credits Compliance
Employers conducting business in Georgia have new credits and related compliance requirements to consider in 2022, related to recent legislation.
Here are some highlights of things employers in Georgia need to consider to help make the most of credits for which they may be eligible, and other impacts to tax compliance.
Georgia annual county rankings and tax credits impact
Every year Georgia ranks its counties, census tracts, and special zones to determine the amount and type of tax credits available to employers within those counties/tracts across the state. These rankings impact jobs and investment credits, and can be the difference between a $750/job credit and a $4,000/job credit (or the difference between a 1% or 5% investment credit).
At the beginning of each year, Georgia's Department of Community Affairs (DCA) publishes a list of these rankings, highlighting any locations that are changing and therefore may lose benefits available in the previous year. Georgia allows businesses in affected locations to submit a Notice of Intent (NOI) with DCA not later than March 31st, allowing employers to apply the previous year's ranking/status for three additional years.
For example, an NOI filed by 3/31/2022 would preserve the 2021 ranking/status for 2022, 2023, and 2024. Without a timely NOI, businesses in locations with changing rankings/status will only be allowed to claim credits at the 2022 ranking/status level.
Employers planning to expand headcount or invest in business in Georgia anytime in the next three years should review the annual list and file an NOI if their location is within an area with decreasing benefits. There are no downsides to filing, as businesses are not required to commit to growth or even to remaining in a specific location.
Georgia COVID-19 legislation highlights
In an effort to provide economic relief for businesses during the COVID-19 pandemic, the Georgia legislature passed House Bill 846 in 2020. This relief allows businesses already claiming the Job Tax Credits or Quality Job Credits, whose headcounts dropped in 2020 or 2021, to claim their 2019 headcounts for the purposes of calculating their 2020 and 2021 Job Tax Credits or Quality Jobs Tax Credits.
Georgia added an enhanced benefit for personal protective equipment manufacturers. The state also specifically outlined temporary changes to the definition of "telecommuter employee job" in a way that generally allows employees temporarily working from home to be included in location-based headcounts for 2020 and 2021.
Tax credits available to offset state payroll withholding taxes
Georgia continues to expand the availability of tax credits that can offset both income tax liability and withholding taxes, depending on location. This includes Job Credits for Tier 1 counties, less developed census tracts, opportunity zones, and military zones. For tax years beginning 1/1/2020, it also includes Investment Credits for investments made in rural counties.
Additionally, research credits may be used to offset withholding tax, and select other credits like film and music production credits, among others, may also be used to offset withholding tax.
It's important to note that there are special steps required to use these credits to offset withholding. To speed up the application and approvals processes, the Department of Revenue has established new, time-sensitive procedures that must be carried out through the Georgia Tax Center in order to claim any credits against withholding tax.
These steps include:
- Credit approval
- Claiming of credit on income tax return
- Notification of intent to utilize credit against withholding tax
- Offsetting payments of withholding tax
Georgia annual filing considerations
Below are a few filing considerations when claiming credits:
- Returns must be filed via e-file in order to claim any credits in Georgia
- Most credits have a 1-year statute of limitations for claiming credits (so businesses only have 1 year from the original filing date to go back and amend to claim a credit)
- Credit assignments to affiliated entities must take place on a timely-filed original income tax return
- Credits offsetting withholding must FIRST be claimed on a timely-filed original income tax return (and a request to utilize against withholding must be made separately within 30 days of filing the income tax return)
- Businesses filing a consolidated return must adhere to special instructions for consolidated returns when claiming tax credits
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