Georgia R&D Tax Credit Filing Instructions
To claim the Research and Development (R&D) tax credit in Georgia, a business must demonstrate qualified research expenses (QREs) conducted within the state that exceed a calculated base amount. Eligibility generally requires the business to also claim the federal R&D credit under Internal Revenue Code Section 41. The Georgia credit is typically 10% of the QREs that surpass this base amount. Once calculated, the credit can be used to offset up to 50% of the business’s net Georgia income tax liability, after all other credits have been applied. Any remaining unused credit can be carried forward for up to ten years or, with proper election, applied against state payroll withholding taxes. To make the state R&D tax credit claim, businesses must file Georgia Form IT-RD, the “Research Tax Credit” form, along with their Georgia corporate income tax return. It is also required to attach Federal Form 6765. If electing to apply the credit against payroll withholding, Form IT-WH, “Notice of Intention to Claim Withholding Benefit,” must be filed electronically within 30 days after the filing of a timely Georgia income tax return.
Georgia Patent of the Year – 2024/2025
MobileMind Technologies Inc. has been awarded the 2024/2025 Patent of the Year for its innovative “Guided, In-Application Learning” technology. Their invention, detailed in U.S. Patent No. 12093794, titled ‘Education learning environment and methods for using same’, introduces a transformative approach to professional development by embedding real-time, interactive training directly within the applications educators already use.
This patented system integrates a dynamic “challenge box” within platforms like Google Slides or Microsoft Teams, delivering step-by-step instructions and hands-on tasks without requiring users to switch between applications. By monitoring user inputs and identifying when learners encounter difficulties, the system provides contextual guidance and feedback, ensuring a seamless learning experience within the workflow.
MobileMind’s approach emphasizes competency-based learning, enabling educators to acquire practical skills relevant to their roles. This method not only enhances engagement but also fosters immediate application of new knowledge in real-world scenarios. The integration of automated and human feedback mechanisms further supports continuous improvement and mastery of skills.
By eliminating the need for separate training modules and reducing the cognitive load associated with switching between tools, MobileMind’s innovation streamlines the professional development process. This advancement represents a significant leap forward in educational technology, offering a more efficient and effective way for educators to enhance their skills and, consequently, improve student outcomes.
Study Case
Raceway Engineering (Raceway) is an automotive company that specializes in building engines for off-road speedway sprint cars.
To stay at the top of the market, Raceway is always conducting R&D work to assist in the creation of innovative ideas and products. Raceway decided it wanted to come up with a new modified version of its V8 super engine to use in its first futuristic car. The new engine would be based on the company’s previous engine, with updates and improvements.
Raceway launched an R&D project with the following hypothesis:
“The V8 super engine can be improved in terms of performance and fuel economy, while meeting safety regulations and outperforming competitors’ engines.”
Raceway needed to determine the eligibility of its proposed R&D activities in order to know if they qualified for the Research and Experimentation Tax Credit. To be eligible, Raceway had to be certain that its “qualified research” met four main criteria, known and developed by Congress as the Four-Part Test. After self-assessing, Raceway decided to register four R&D activities.
Design and development of a series of prototypes to achieve the technical objectives and prove the hypothesis (design of the modifications to the V8 super engine).
The hypothesis for this activity stated that it was feasible to design an improved and highly functioning V8 super engine that could outperform its competitors.
To try and prove the hypothesis, Raceway designed and redesigned multiple methods and engine parts during this phase.
Trials and analysis of data to achieve results that can be reproduced to a satisfactory standard (prototype development and testing of the V8 super engine).
Raceway’s hypothesis stated that the theoretical conclusions from the design phase could be realized through comprehensive and valid testing.
Raceway trialed the engine in a workshop environment and in the field to test for functionality, efficiency, accuracy and safety.
Background research to evaluate current knowledge gaps and determine feasibility (background research for the modification of the V8 engine).
Raceway conducted the following experiments during its research phase:- Literature search and review, including maintaining awareness of changing legislation in the different states and zones
- Consultation with industry professionals and potential customers to determine the level of interest and commercial feasibility of such a project
- Preliminary equipment and resources review with respect to capacity, performance and suitability for the project
- Consultation with key experts to determine the factors they considered important in the design, and to gain an understanding of how the design needed to be structured accordingly
Ongoing analysis of customer or user feedback to improve the prototype design (feedback R&D of the modifications of the V8 engine).
Raceway’s eligible R&D work during this phase of experimentation included:
- Ongoing analysis and testing to improve the efficiency and safety of the project.
- Ongoing development and modification to interpret the experimental results and draw conclusions that served as starting points for the development of new hypotheses.
- Commercial analysis and functionality review.
These activities were considered “qualified research” because they were necessary to evaluate the performance capabilities of the new design in the field and to improve any flaws in the design.
Qualified research consists of research for the intent of developing new or improved business components. A business component is defined as any product, process, technique, invention, formula, or computer software that the taxpayer intends to hold for sale, lease, license, or actual use in the taxpayer’s trade or business.
The Four-Part Test
Activities that are eligible for the R&D Credit are described in the “Four-Part Test” which must be met for the activity to qualify as R&D.
- Permitted Purpose: The purpose of the activity or project must be to create new (or improve existing) functionality, performance, reliability, or quality of a business component.
- Elimination of Uncertainty: The taxpayer must intend to discover information that would eliminate uncertainty concerning the development or improvement of the business component. Uncertainty exists if the information available to the taxpayer does not establish the capability of development or improvement, method of development or improvement, or the appropriateness of the business component’s design.
- Process of Experimentation: The taxpayer must undergo a systematic process designed to evaluate one or more alternatives to achieve a result where the capability or the method of achieving that result, or the appropriate design of that result, is uncertain at the beginning of the taxpayer’s research activities.
- Technological in Nature: The process of experimentation used to discover information must fundamentally rely on principles of hard science such as physical or biological sciences, chemistry, engineering or computer science.
What records and specific documentation did Raceway keep?
Similar to any tax credit or deduction, Raceway had to save business records that outlined what it did in its R&D activities, including experimental activities and documents to prove that the work took place in a systematic manner. Raceway saved the following documentation:
- Literature review
- Meeting notes
- Sketches/drawings
- Photos
- Screen shots
- Test protocols
- Test results and analysis
- Customer feedback
- Field-test results
By having these records on file, Raceway confirmed that it was “compliance ready” — meaning if it was audited by the IRS, it could present documentation to show the progression of its R&D work.
A company in Atlanta designs and develops industrial components for the auto industry. The Company started R&D activities in 2017 and is claiming Tax Credits each year for the development activities of its engineers. This project involved a multi-year study covering the tax years 2022 – 2025.
The Company qualified for federal R&D Tax Credits of $166,217 utilizing the Alternative Simplified Method and an additional $180,300 of state R&D Tax Credit in Georgia.
| FEDERAL | GEORGIA | ||||||
| Year | Total QREs | Credit | Georgia QREs | Gross Receipts | Credit | ||
| 2022 | $350,000 | $21,000 | $350,000 | $150,000 | $22,500 | ||
| 2023 | $455,000 | $27,300 | $455,000 | $280,000 | $30,800 | ||
| 2024 | $750,000 | $45,000 | $750,000 | $650,000 | $65,000 | ||
| 2025 | $800,000 | $72,917 | $800,000 | $600,000 | $62,000 | ||
| Total | $2,355,000 | $166,217 | $2,355,000 | $1,680,000 | $180,300 | ||
Choose your state
Never miss a deadline again
Stay up to date on IRS processes
Discover R&D in your industry
[…]
[…]
