Georgia R&D Tax Credit

Research and development (R&D) tax credits are available to any company that increases its qualified research spending for developing new products and services in Georgia.

Georgia defines "qualified research expenses" with the same definition as in Section 41 of the Internal Revenue Code of 1986, as amended, except that all wages paid and all purchases of services and supplies must be for research conducted within the State of Georgia.

Rule 560-7-8-.42. Tax Credit for Qualified Research Expenses

An eligible business is an enterprise that has qualified research expenses in Georgia and is also allowed a research credit under Section 41 of the Internal Revenue Code of 1986, as amended shall be eligible for the credit.  For a business enterprise to claim the research tax credit, the business enterprise must submit Form IT-RD and Federal Form 6765, from the entity generating the credit, with its Georgia income tax return for each tax year in which the qualified research expenses were incurred.

The research tax credit shall be allowed a tax credit equal to 10 percent of the excess of the qualified research expenses over the base amount. The term "base amount" means the product of a business enterprise's Georgia gross receipts in the current taxable year and the average of the ratios of its aggregate qualified research expenses to Georgia gross receipts for the preceding three taxable years, or 0.300, whichever is less.

The credit can be used to offset up to 50 percent of net Georgia income tax liability, after all other credits have been applied.  Any unused R&D tax credits can be carried forward for up to 10 years.  Georgia definition also states that any excess R&D tax credits can be used against state payroll withholding.

Payroll Withholding Tax Benefit

A business enterprise whose credit amount exceeds 50 percent of the business enterprise's remaining Georgia net income tax liability after all other credits have been applied may elect to take the excess credit as a credit against such business enterprise's quarterly or monthly withholding payments under Code Section 48-7-103. The withholding tax benefit may only be applied against the withholding tax account used by the business enterprise for payroll.

A business enterprise must notify the commissioner each year of their irrevocable election to take all or a part of the credit against the quarterly or monthly withholding tax payment for such business enterprise. When this election is made, the excess research tax credit will not pass through to the shareholders, partners, or members of the business enterprise if the business enterprise is a pass-through entity.