New Georgia Law Expands Tax Credits in Rural Counties and Oregon Enacts New Business Tax

May 31, 2019

Recent legislation in Georgia expands certain tax credits for taxpayers locating in designated rural counties, and Oregon enacts a new modified gross receipts tax that is imposed on all taxpayers with nexus in the state.

By Jeff Glickman, SALT Partner

Below is a summary of recently signed legislation in Georgia that expands certain tax credits for taxpayer located in certain designated rural counties and in Oregon that establishes a new commercial activity tax based on modified gross receipts.


On May 6, 2019, Governor Kemp signed HB 224, which includes amendments to the quality jobs tax credit and the investment tax credit for manufacturing and telecommunications facilities, both effective for taxable years beginning on or after Jan. 1, 2020.

First, the legislation lowers the threshold for new quality jobs in order to be eligible for the credit.  The lower thresholds apply to such jobs created in a single rural county that is also a Tier 1 county or a Tier 2 county.  The normal threshold is 50 new quality jobs, but for rural counties that are Tier 1 or Tier 2 counties, the thresholds are 10 and 25, respectively.  As a reminder, new quality job must pay a wage that is at least 110 percent of the average wage for the county in which the job is located and has a regular work week of at least 30 hours.

A “rural county” is defined as “county that has a population of less than 50,000 with 10 percent or more of such population living in poverty based upon the most recent, reliable and applicable data published by the United States Bureau of the Census.”  Georgia’s commissioner of the Department of Community Affairs will publish a list of such counties on or before Dec. 31 of each year.

Next, for the investment tax credit, the bill raises the qualified property investment threshold from $50,000 to $100,000.  In addition, for qualifying investments made on or after Jan. 1, 2020, in a rural county that is also a Tier 1 or Tier 2 county, taxpayers may use excess credits (after first applying the credit to offset 50 percent of the taxpayer’s Georgia income tax liability) to offset payroll withholding liability.  This payroll withholding offset is limited to $1 million per taxpayer, and there is also a $10 million aggregate statewide limit for all taxpayers in qualifying Tier 1 and Tier 2 counties.[1]  The commissioner is charged with setting forth an application procedure, so taxpayers should expect a regulation to explain this process.  A “rural county” has the same definition as summarized above for the quality jobs tax credit.


On May 16, 2019, Governor Brown signed HB 3427, which, among other things, establishes a commercial activity tax (“CAT”) similar to Ohio’s, for tax years beginning on or after Jan. 1, 2020.  The tax is imposed on individuals and entities (including disregarded entities) that have nexus with Oregon at the rate of .57 percent of the taxpayer’s “taxable commercial activity” in excess of $1 million (plus a $250 flat fee).

To calculate “taxable commercial activity” the taxpayer must first compute its “commercial activity,” which is the total amount realized arising from transactions and activity in the regular course of the taxpayer’s trade or business (without regard to geographic source).[2]   “Taxable commercial activity” is then determined by first sourcing the taxpayer’s commercial activity (e.g., sales of tangible property or services delivered to the state) and then subtracting an amount equal to the greater of cost of goods sold or labor costs after apportioning those amounts to the state under the same rules for apportioning income (i.e., sales factor only).[3] However, the subtraction may not exceed 95 percent of the Oregon-sourced revenues, meaning that a taxpayer will pay tax on at least 5 percent of its Oregon-source commercial activity (assuming that is in excess of $1 million).

Nexus includes having at least $50,000 of property or payroll in the state, or at least $750,000 of Oregon-sourced revenues, or where at least 25 percent of the taxpayer’s property, payroll or revenues are in Oregon.  Returns are due annually on April 15 of the following year, and payments are due quarterly on the last day of January, April, July and October for the prior calendar quarter.  Taxpayers with at least 50 percent common ownership and that are conducting a unitary business must file as a unitary group, and may exclude receipts from transactions among members of the group.

Based on Oregon rules, there is a chance that this legislation could be put on the ballot to be voted on by Oregon voters.  We constantly monitor these and other important state tax topics, 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 for more information.

This article was featured in the May 2019 SALT Newsletter.

[1] Taxpayers that have unused investment tax credits generated prior to January 1, 2020, may, under certain conditions, be able to offset the unused amounts against payroll withholding through 2024.

[2] The bill provides numerous exclusions for amounts that are not considered “commercial activity.”

[3] Costs of goods sold is calculated pursuant to section 471 of the Internal Revenue Code, and labor costs are total compensation paid to employees excluding compensation paid to any single employee in excess of $500,000.

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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About the Author

Jeff Glickman

Jeff Glickman is the partner-in-charge of Aprio, LLP’s State and Local Tax (SALT) practice. He has over 18 years of SALT consulting experience, advising domestic and international companies in all industries on minimizing their multistate liabilities and risks. He puts cash back into his clients’ businesses by identifying their eligibility for and assisting them in claiming various tax credits, including jobs/investment, retraining, and film/entertainment tax credits. Jeff also maintains a multistate administrative tax dispute and negotiations practice, including obtaining private letter rulings, preparing and negotiating voluntary disclosure agreements, pursuing refund claims, and assisting clients during audits.