Are R&D Tax Credits Available in Georgia?

Yes. The state of Georgia provides the Research and Development (R&D) Tax Credit which is a valuable benefit for companies developing new products and services. The R&D Tax Credit is available to any company that increases its qualified research spending. New companies, start-ups, and existing and established companies embarking on R&D for the first time or expanding their R&D budget are all eligible for the R&D Tax Credit. Below are the R&D Tax Credit details for the state of Georgia:

  • Qualified Research Expenses (QREs) have the same meaning as in IRC § 41, except that such expenses must be for research conducted within Georgia.
  • The credit is equal to 10 percent of the excess of the QREs over the base amount.
  • The credit can be used to offset up to 50 percent of net Georgia income tax liability after all other credits have been applied.
  • Excess R&D Tax Credit can be used against state payroll withholding.
  • Any unused R&D Tax Credit can be carried forward for up to 10 years.
  • To claim the credit, a company must submit Form IT-RD and Federal Form 6765 with its Georgia income tax return for each tax year in which the QREs were incurred.

Georgia R&D Tax Credit Case Study

A company in Atlanta designs and develops industrial components for the auto industry. The Company started R&D activities in 2018 and is claiming 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. 

Total QREs
Georgia QREs Georgia
Gross Receipts
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

You can read more about this Georgia tax credit case study here.

Four-Part Test

Qualified research activities are defined by the four-part test outlined below

Technological in Nature
Activities must fundamentally rely on the principles of physical or biological science, engineering, or computer science.

Permitted Purpose
Activities must be performed in an attempt to improve the functionality, performance, reliability, or quality of a new or existing business component.

Eliminate Uncertainty
Activities intended to discover information that could eliminate technical uncertainty concerning the development or improvement of a product.

All activities must include a process of experimentation including testing, modeling, simulating, and systematic trial and error.