Many Federal and Georgia tax credits are available to manufacturers and distributors, though they are often overlooked and go unused. With proper planning and assessment, these credits can go a long way toward improving the bottom line. Following is a summary of some of the more recognizable credits available. In the coming months we will delve into the details of each type of credit.
Research & Development (“R&D”) Tax Credit
The R&D Tax Credit is a Federal credit introduced in 1981 as a boost of the economy. Usage became so prolific that many states, including Georgia, created their own version of the R&D Tax Credit. In general, the R&D Tax Credit is to help a company offset dollar-for-dollar incremental research expenses. Manufacturers and distributors may be eligible for the credit, for example, if new processes or materials are being used in manufacturing and distribution of products. This credit was made permanent with the passage of the Protecting Americans from Tax Hikes Act of 2015.
Work Opportunity Tax Credit (“WOTC”)
The WOTC is a Federal credit provided to employers hiring persons belonging to specific groups, and there are special guidelines with extended credit for qualified veterans. In general, the credit can be equal to 40% of first-year wages up to $6,000. The Protecting Americans from Tax Hikes Act of 2015 extended the hiring deadline to January 1, 2020, meaning the employee must be hired and start working before that date to be counted as part of this credit.
Georgia Retraining Tax Credit
The Georgia Retraining Tax Credit is only a Georgia credit. The purpose is to encourage employers to continually invest in their employees by upgrading equipment, acquiring new technology, and completing ISO 9000 training. The annual maximum credit is $1,250 per employee. This credit is available to any business that files a Georgia income tax return.
The three credits described above are not an exhaustive list and there may be more Federal and Georgia credits that apply specifically to your business. HLB Gross Collins, P.C. has been serving some of the Southeast’s most prominent manufacturers and distributors for nearly 50 years. Our Manufacturing and Distribution Practice works closely with clients to ensure that they are taking advantage of all available credits and savings opportunities.