R&D Tax Credit in Georgia
Georgia Research & Development Tax Credit
The Georgia Research & Development Tax Credit is available to companies developing new products and services in the State of Georgia. Georgia adopts the federal definition of qualified research expenses and the R&D project must follow the federal guidelines for being technology-oriented.
Eligibility
To qualify for the Georgia Research & Development Tax Credit, the taxpayer must have acquired qualified research expenses in Georgia in a taxable year exceeding a base amount, and have claimed and received a federal research tax credit for that taxable year.
As stated in the Georgia State Tax Code, a “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; provided, however, that a business enterprise need not have had a positive taxable net income for the preceding three taxable years in order to claim the credit provided.”
Tax Credit Rate and Limitations
- The credit rate is 10% of a company’s increase in qualified research expenses. The increase is in excess of the above-mentioned base amount.
- The credit cannot exceed 50% of net tax liability after all other credits have been applied. If the amount of the credit exceeds this limit, the credit may be used against payroll withholding.
- Any unused credit can be carried forward for 10 years.
- Georgia requires that the taxpayer file an application with the George Department of Revenue at least 30 days before filing their company’s state income tax return, including extensions.
Tax Credit Form
The state credit is claimed on Georgia Form IT-RD.
Case Study
An Atlanta-based company designs and manufactures parts for the aerospace and aviation industry. The company began claiming both the federal and state R&D tax credit in 2015.
Summary of credits:
| FEDERAL | GEORGIA STATE | ||||
| Year | Total QREs | Credit | Total QREs | Total GA Gross Receipts | Credit |
| 2016 | $880,000 | $52,800 | $880,000 | $680,000 | $34,000 |
| 2015 | $560,000 | $33,600 | $560,000 | $360,000 | $18,000 |
| Total | $1,440,000 | $86,400 | $1,440,000 | $1,040,000 | $52,000 |
