Georgia R&D Credit Update

Many Georgia companies have previously not been able to take advantage of the Georgia R&D tax credit either because they were in net operating losses or maximized the ability to use other Georgia tax credits.   The Georgia R&D credit is the last credit that can be utilized against Georgia income tax, however, it does carry forward 10 years.   Recent rule changes now allow the Georgia R&D credit to be utilized against Georgia payroll withholding taxes.  This means two opportunities, (1)  if the company is in losses they can now monetize the credit in 2013 against payroll tax;  (2) if the company is taxable and has exhausted all of the other credits against 50% of their taxable income and cannot use the R&D credit as well as other Georgia credits such as the Jobs credit, Film Credit, and Clean Energy Property tax credit, they can also monetize these credits in 2013 through payroll withholding tax reductions.

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, and then the company must wait to receive approval from the State to take advantage of this payroll tax withholding adjustment.  Our recommendation has been to have the company file the Georgia R&D credit application as soon as they know they cannot utilize these credits against income taxes in 2012.

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