Georgia Taxpayers to Benefit from Expanded Quality Jobs Tax Credit Rules

Significant changes to Georgia’s Quality Jobs Tax Credit allow more taxpayers to qualify and benefit from this credit beginning in the 2018 tax year.

By Jeff Glickman, SALT partner

Georgia’s Quality Jobs Tax Credit (QJTC) provides an income tax credit for taxpayers that create at least 50 net new quality jobs.[1]  A new quality job is a new job located in Georgia that has a regular work week of at least 30 hours and pays at or above 110 percent of the average wage of the county in which the job is located.  The credit amount ranges from $2,500-$5,000 per job depending on how high the average wages are above the county average.

The credit for each new quality job created and maintained can be taken for five years, and new quality jobs created and maintained during the first seven years, beginning the year in which the taxpayer first qualified for the QJTC, are eligible for the credit.

The QJTC may be used to offset 100 percent of the taxpayer’s income tax liability and any excess may be applied against the taxpayer’s payroll withholding.  Unused credits may be carried forward for 10 years.

During Georgia’s 2017 legislative session, the legislature passed House Bill 265 (HB 265), which Governor Deal signed on April 25, 2017.  HB 265 made two significant changes to the Quality Jobs Tax Credit (QJTC) that should allow more taxpayers to qualify and benefit from this credit beginning in the 2018 tax year.

Taxpayers May Reach 50 Job Threshold Over 24-Month Period

Under prior law, the 50 net new quality job creation requirement had to be met within 12-months from when the taxpayer first elected to qualify jobs as quality jobs.  Under HB 265, that period is expanded to 24 months provided that the first month in which the taxpayer elects to qualify jobs as quality jobs is on or after January 2017.  The revised regulations provide an example of how this new requirement works:

A calendar year taxpayer elects to have jobs qualify as new quality jobs in January of 2017. The average number of new quality jobs from January 2016 until December 2016 is 109. In August of 2018 the taxpayer has 160 new quality jobs and therefore meets the 50 new quality jobs requirement (160-109=51). Accordingly, the taxpayer may claim the credit in the tax year ending Dec. 31, 2018.

Prior to HB 265, the taxpayer in the above example would have been required to meet the 50 quality job threshold by Dec. 31, 2017.  Therefore, 2018 would be the first year that taxpayers may be eligible to claim the QJTC using the new 24-month period.

Taxpayers May Create a Subsequent Seven-Year Eligibility Period

Under prior law, new quality jobs created and maintained in the six years following the year in which the taxpayer first qualified for the QJTC (i.e., years two through seven) were eligible for the credit as well.  Once that seven-year period was complete, the only way for the taxpayer to qualify for another seven-year period was to meet the original requirements of the QJTC (i.e., create net new 50 quality jobs).

Under HB 265, taxpayers are now eligible to create a subsequent seven-year eligibility period even before the prior seven-year period is over.  For tax years beginning on or after Jan. 1, 2017, a new seven-year eligibility is established if a taxpayer (i) invests at least $2.5 million in a new qualified project and (ii) creates at least 50 net new quality jobs (above its single previous high yearly average number of new quality jobs during any prior seven-year period) at site of the new qualified project within 24 months.  Taxpayers are eligible to create more than one subsequent seven-year period.   Taxpayers will still get a QJTC for jobs created and maintained in the prior seven-year period, but new quality jobs will not count under the prior period once a subsequent period is established.  All new quality jobs are counted for the subsequent seven-year period.  A taxpayer that begins a subsequent seven-year period must notify the Department of Revenue by completing the applicable sections on Form IT-QJ and attaching that form to the filed Georgia tax return.

These amendments should allow more taxpayers to qualify for and claim benefits under the QJTC.  It is worth noting that any jobs that do not meet the requirements of a quality job are still eligible for the regular jobs tax credit.  However, once a job is claimed for either the regular jobs tax credit or the QJTC, they cannot be switched to the other credit.  Aprio’s SALT team is experienced at assisting businesses qualify for and claim these credits, and we can consult with you about how to get the most benefit from Georgia tax credits.  We constantly monitor these and other important state and local tax issues, and we will include any significant developments in future issues of the Aprio SALT Newsletter.

Contact Jeff Glickman, partner-in-charge of Aprio’s SALT practice, at jeff.glickman@aprio.com for more information.

This article was featured in the March 2018 SALT Newsletter

[1] O.C.G.A. § 48-7-40.17; Ga. Comp. R. & Regs. 560-7-8-.51.

Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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