Research & Development Tax Credit
A Research and Development Tax Credit is available to businesses engaged in manufacturing, warehousing & distribution, information processing, telecommunications, tourism, and research & development industries. In addition, these businesses must qualify for the federal research credit established under Section 41 of the 1986 IRS code. The R&D tax credit is a flat 10% of additional R&D expenses over a calculated “base amount”. The base amount is computed from a company’s previous three years’ taxable income and research expenses. R&D tax credits can be used to offset 50% of a business’s remaining income tax liability after all other tax credits have been applied in a given year. In other words, R&D tax credits can be used in addition to other available State tax credits. Unused R&D tax credits may be carried forward for 10 years.
Example: A qualifying company has a calculated R&D base of $150,000. Current year’s R&D expenses amount to $470,000. The company would thus be eligible to receive an R&D tax credit of $32,000 to reduce its State income tax liability: [$470,000 - $150,000] x 10% = $32,000.
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Georgia’s Research & Development Tax Credit |
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Requirement to Qualify |
Forward Time |
Credit can Off-Set… |
$ Amount of Credit |
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$$$ Investment in Research & Development |
10 Years |
Up to 50% of State tax liability |
10% of Additional R&D Expenditures over “Base Amount”** |
** The base amount is computed from a company’s previous three years’ taxable income and research expenses.