Research & Development Tax Credit

Georgia offers an incentive to new and existing business entities performing qualified research and and development in Georgia Qualified research expenses are defined in Section 41 of the Internal Revenue Code of 1986, as amended, except that all wages paid and all purchases of services and supplies must be for research conducted within the state of Georgia. Companies may claim a 10 percent tax credit of increased R&D expenses subject to a base amount calculation.

The base amount = Current Year Georgia Gross Receipts x [(the average of the ratios of the company’s qualified Georgia research expenses to Georgia gross receipts for the preceding three taxable years) OR 0.300, whichever is less]. For new Georgia companies with no prior R&D expenditures in Georgia, the base amount is 30 percent of the current year’s Georgia gross receipts.

The credit is determined by taking the current year’s qualified R&D expenses, subtracting the base amount, and multiplying by 10 percent. The R&D credit is applied to 50 percent of the company’s net Georgia income tax liability after all other credits have been applied. Any excess R&D credits can then be applied to the company’s state payroll withholding. Any unused credits can be carried forward for up to 10 years from the close of the taxable year in which the qualified research expenses were made.