Tax Credit DANGER!
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The governor has announced plans for major changes to the tax credits (click here for the press release). On the surface, this effort to "enhance and update" the tax program appears to be favorable. It would be great to participate in the "Discretionary Withholding Option" (click here for HB 438). Does this is sound like something coming out of Washington DC lately? However, the details of House Bill 439 reveal a different story (click here for HB 439).
Here's how it could adversely impact your clients:
Job tax credit
- Claw backs if headcount dips below tier minimum - 20% penalty + 12% interest PER YEAR. Could force amended returns up to 5 years in the past. Who would risk taking this credit? Would be a nightmare to administer, especially for S-Corp clients.
- Off the top reductions of 13% - 40% by eliminating the Joint Development Authority (JDA) $500 bonus.
- Must claim the credit within 1 year. This is a major change from the current 3 year window.
Retraining tax credit
- Restricts use to "Business Enterprises" (manufacturing, distribution, processing, telecom, info technology). Shuts out all retail, community banks, health care providers, engineers and other professional service firms.
- Restriction on software that can count as new technology. One example is "data base software." All application software contains a data base; therefore, all software such as accounting, inventory control, shipping and others will not be allowed.
- Max $500 per employee per year cap. This is a major change from the existing $500 per employee per program per year. Cuts help for employees taking more than one training program.
- Become effective retroactively Jan. 1, 2009. If your clients are using these tax credits as part of their program ROI, they will fall short of their goals and may stop their investments.
Another critical element is the unknown regulation that will result after the promulgation "wash cycle" is completed. In summary, these change will have major impacts on most businesses in Georgia that plan to invest for the future. Let you legislator know your feeling about this bill!
Other related bills under consideration this session include HB 481, which gives credits for hiring unemployed workers and also proposes gradual elimination of the corporate income tax, and HB 482, which eliminates the yearly inventory tax.
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About Us
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Alpharesults has assembled a team with the specialized knowledge and approach required to obtain Georgia income tax credits. We are not a public accounting firm. Rather, our services complement those of public accounting firms and do not create conflicted loyalties, because our professionals do not perform attestation work or other external audit functions.
We focus on small to medium-sized businesses and work exclusively in Georgia with a wide variety of in-state and out-of-state accounting firms. For more information on our services, follow this link.
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