Georgia Issues Guidance on Claiming the Quality Jobs Tax Credit
Two recent letter rulings illustrate the circumstances under which Georgia’s Quality Jobs Tax Credit cannot be claimed.
By Jeff Glickman, SALT partner
The Georgia Department of Revenue recently released two letter rulings addressing certain circumstances under which a taxpayer may not claim the Quality Jobs Tax Credit (“QJTC”).
The first letter ruling, IT-2015-02, was issued on Sept. 15, 2015, and made available by the Department on its website on March 14, 2016. In that ruling, the taxpayer had been claiming the regular Jobs Tax Credit (“JTC”) for several years beginning with its tax year ending June 30, 2009. Due to limited Georgia income tax liability, the taxpayer did not use its JTC and had been carrying the credit forward, nor did the taxpayer foresee utilizing the JTC in future years. For its tax year ending June 30, 2012, the taxpayer first qualified for the QJTC, but did not claim it; instead, it continued to claim the JTC, as it also did for its tax year ending June 30, 2013. Presumably realizing at some point that it could claim the QJTC against its withholding obligations, the taxpayer decided to amend its return for the tax year ending June 30, 2013, in order to (a) establish the QJTC for that year and (b) revise the JTC calculation to remove jobs that it was using in its QJTC calculation.  The taxpayer requested guidance regarding this process.
The Department concluded that the taxpayer could not claim the QJTC for jobs for which it had already taken the JTC and that it could not subsequently remove jobs from the JTC and transfer them over the QJTC. The regulations for both the JTC and the QJTC provide that the election to treat a job as eligible for the JTC or the QJTC is deemed to have been made on the return and that the credits are not interchangeable.  A taxpayer is eligible to claim both credits in the same year provided that no job included in the calculation for one credit is included in the calculation for the other.
The second letter ruling, IT-2015-03, was issued on Dec. 14, 2015, and made available by the Department on its website on June 10, 2016. In that ruling, a taxpayer (“target”) was claiming QJTC in connection with a new plant it had established and was utilizing those credits against its withholding obligations. In a subsequent year, another taxpayer (“acquirer”) purchased substantially all of the assets of the target, and it acquired all of the target’s labor force. A ruling was requested on whether the acquirer could utilize the target’s QJTC carryforwards.
The Department concluded that the target’s QJTC carryforwards did not carry over to the acquirer. In reaching that decision, the Department noted that the QJTC statute (O.C.G.A. § 48-7-40.17) does not contain a “sale, merger, acquisition, or bankruptcy provision which allows unused income tax credit to be transferred and continued by the transferee.” 
These two rulings highlight the following considerations. First, a taxpayer should consider whether it should claim a JTC if it believes that the next year it will meet the requirements for the QJTC and that the QJTC will provide a greater benefit. Second, during due diligence, companies must not only identify any tax benefits currently being received by the target, but also whether or not such benefits will be available after the transactions so that they do not place any value on benefits that cannot be utilized.
Aprio’s SALT team has extensive experience in advising taxpayers with regard to Georgia tax credits and can assist taxpayers in determining which credits they may be eligible for, as well as which of those credits will provide the most value. In addition, our SALT due diligence services assist purchasers in identifying the tax attributes of a target and which of those attributes will transfer and provide value after the transaction.
This article was featured in the June 2016 SALT Newsletter. To view the newsletter, click here.
 The JTC may only be claimed against withholding if the taxpayer is located in an opportunity zone, a less-developed census tract or a Tier One county. The QJTC is allowed to be claimed against withholding regardless of the taxpayer’s location. It is important to note that the taxpayer was not able to utilize the QJTC against withholding for the tax year ending June 30, 2013, since the election to utilize the QJTC against withholding must be made on Form IT-WH at least 30 days prior to filing the original return for the tax year (taking into account extensions). However, the taxpayer could utilize QJTC claimed in future years provided the election form was submitted timely.
 Ga. Reg. 560-7-8-.36(12) and 560-7-8-.51(4)(d).
 For example, the JTC statute contains the following provision: “The sale, merger, acquisition, or bankruptcy of any business enterprise shall not create new eligibility in any succeeding business entity, but any unused job tax credit may be transferred and continued by any transferee of the business enterprise.” O.C.G.A. §48-7-40(g). Other Georgia tax credits that do not contain this provision could be subject to the same limitations set forth in this ruling.
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