Georgia R&D Tax Credit Case Study
The R&D tax credit is one of the most valuable credits leveraged by companies. The R&D credit yields billions of dollars in federal and state benefits to companies engaged in qualifying research. The R&D tax credit can provide a significant reduction to current and future tax liabilities and a source of cash.
Georgia R&D Tax Credit Benefits
- Up to 10 cents of R&D tax credit for every qualified dollar
- Dollar-for-dollar reduction in your federal and state income tax liability
- Credit carried forward up to 10 years
Qualifications
More companies in Georgia can now qualify for the R&D tax credit. The Georgia R&D credit is available to corporations, partnerships, limited liability companies, and sole proprietorships, which engaged in manufacturing, warehousing and distribution, processing, telecommunications, broadcasting, and research and development. For the purpose of determining which businesses are engaged in qualifying activities, classifications will be made for individual establishments defined pursuant to Department Rule 110-9-1-.01(6)(d) using the North American Industry Classification System (NAICS Code), United States, 2017, with the business being eligible for the tax credit based on the individual establishment. Companies are able to qualify R&D activities beginning with the development of concepts and extend to the point where a product, process, formula, or other business component is ready to be commercially released. If you are engaged in any research activities, looking into a potential R&D tax credit may be a great benefit. In addition, look back studies can recognize unclaimed credits for open tax years.
Common Qualified NAICS Code Sectors:
- Manufacturing – classified by the NAICS Code that belong to Sectors 31-33
- Warehousing & Distribution – classified by the NAICS Code that belongs to Subsectors 423, 424, & 493
- Transportation – classified by the NAICS Code that belong to Sector 48
- Processing – classified by the NAICS Code that belong to Sectors 31-33
- Telecommunications – classified by the NAICS Codes that belong to Sector 51
- Broadcasting – classified by the NAICS Codes that belong to Subsector 512
- Research & Development – classified by the NAICS Codes 54171 & 541720
Check your company’s NAICS Code at https://www.naics.com/search/#naics
Case Study
A company in Columbus designs and develops industrial components for the auto industry. The Company started R&D activities in 2018 and is claiming the Tax Credits each year for the development activities of its engineers. This project involved a multi-year study covering the tax years 2018 – 2021. The Company qualified for federal R&D Tax Credits of $247,500 utilizing the Alternative Simplified Method and an additional $195,000 of state R&D Tax Credit in Georgia.
| Year | Total QREs |
FEDERAL Credit |
Georgia QREs | Georgia Gross Receipts |
GEORGIA Credit |
||
| 2018 | $450,000 | $27,000 | $450,000 | $250,000 | $37,500 | ||
| 2019 | $575,000 | $34,500 | $575,000 | $400,000 | $45,500 | ||
| 2020 | $650,000 | $39,000 | $650,000 | $500,000 | $50,000 | ||
| 2021 | $800,000 | $72,917 | $800,000 | $600,000 | $62,000 | ||
| Total | $2,475,000 | $247,500 | $2,475,000 | $1,750,000 | $195,000 |