560-7-8-.40 Optional Investment Tax Credit.

(1) Definitions. (a) Qualified Investment Property. The meaning of the term "qualified investment property" as used in this regulation is identical to the meaning of "qualified investment property" provided in O.C.G.A. Sections 48-7-40.2, 48-7-40.3, and 48- 7-40.4, as well as Department of Revenue Regulation 560-7-8-.37. (b) As used in this regulation, the meaning of the terms "manufacturing facility", "manufacturing support facility", "expansion of an existing manufacturing facility", "cost of qualified investment property", and "project" are identical to the meaning of "manufacturing facility", "manufacturing support facility", "expansion of an existing manufacturing facility", "cost of qualified investment property", and "project" provided in Department of Revenue Regulation 560-7-8-.37. (c) First Places in Service. The term "first places in service" as used in this regulation means the first regular placement of qualified investment property in the manufacturing process of a manufacturing facility located in a county designated as a tier 1, tier 2, or tier 3 less developed area under O.C.G.A. Section 48-7-40. It does not mean merely physically placing regularly inactive or surplus property on the manufacturing facility site. (d) Remains in Service. The term "remains in service" as used in this regulation means the continued and regular use of qualified investment property in the manufacturing process in a manufacturing facility. (e) Base Year. The term "base year" as used in this regulation means the taxable year in which qualified investment property is first placed in service by the taxpayer. (f) Base Year Average. The term "base year average" as used in this regulation means the amount of state income tax owed by the taxpayer for the base year and each of the two immediately preceding taxable years (determined without regard to any credits) added together and divided by three. (g) Aggregate Credit Amount Allowed. The term "aggregate credit amount allowed" as used in this regulation means 10 percent, 8 percent, or 6 percent of the cost of all qualified investment property purchased or acquired by the taxpayer and first placed in service during a taxable year, depending on whether the taxpayer first places such property in service in a tier 1, tier 2, or tier 3 county. If the taxpayer first places such property in service in a tier 1, tier 2, or tier 3 county, then the taxpayer's aggregate amount of credit allowed will be 10 percent, 8 percent, and 6 percent, respectively. (2) Calculation of Credit. (a) Timing. The taxpayer may begin to take the credit in the year following the year in which qualified investment property is first placed in service. (b) Life of Credit. The taxpayer may claim a credit for qualified investment property placed in service in any one of the ensuing years authorized under O.C.G.A. §§ 48-7-40.7, 48-7-40.8, or 48-7-40.9, following the taxable year in which the qualified investment property is first placed in service, so long as such property remains in service. (c) Annual Amount of Credit. Against state income tax liability for a taxable year, the taxpayer will apply the lesser of the following amounts: 1. Ninety percent of the excess of the taxpayer's state income tax liability for the applicable year (determined without regard to any credits) over the taxpayer's base year average tax liability, or 2. The excess of the taxpayer's aggregate credit amount allowed for the applicable year over the sum of the credits under this regulation already used by the taxpayer in the years following the base year. (3) Establishing Eligibility for the Credit. (a) Three-Year Threshold. Taxpayers must have operated an existing manufacturing facility or related manufacturing support facility in this state for three years and must have previously filed any required state tax returns in order to become eligible for the tax credit. Only qualified investment property which is purchased or acquired by taxpayers and first placed in service after the three-year eligibility requirement is met may be used to compute the tax credit. Qualified investment property purchased or acquired or first placed in service by taxpayers in taxable years prior to establishing the three-year eligibility requirement may not be claimed for those years by filing an amended tax return. (b) Approval of Project Plan. 1. Eligibility and Application Procedure; General Rule. To be eligible for the credit provided for in O.C.G.A. Sections 48-7-40.7, 48-7-40.8, and 48-7- 40.9, a taxpayer must purchase and acquire qualified investment property and place it in service pursuant to a project plan. The taxpayer must submit a written application requesting approval of the project plan within thirty (30) days of the completion of the project. Such application must include a written narrative describing the project and a listing of the type, quantity, and cost of all qualified investment property purchased or acquired and placed in service pursuant to the project plan and for which tax credits will be claimed. 2. Procedure for Claiming Credit Before Completion of Project. In the event the taxpayer elects to claim the credit before the completion of the project, but after the purchase or acquisition and placing in service of qualified investment property in excess of the minimum threshold amount, the taxpayer may submit an application for approval of the project plan along with the tax return on which the credit will be claimed. This preliminary application must be amended within thirty (30) days of the completion of the project. 3. Amendment of Application for Approval of Project Plan. If necessary, a taxpayer may amend any application for approval of project plan by submitting additional project information. 4. Permission to File Late Application. In the event a taxpayer is unable to submit an application for approval of project plan within thirty (30) days of the completion of a project, the taxpayer may petition the Commissioner for express written approval to file its application after the thirty (30) day period has passed. 5. Certificate of Approval. If the project plan satisfies the requirements of this subparagraph, the Commissioner shall issue to the taxpayer a certificate of approval. 6. Minimum Threshold Amount. Before the credit may be claimed, the cost of all qualified investment property purchased or acquired by the taxpayer and placed in service pursuant to a project plan must exceed a minimum threshold amount which varies according to whether the taxpayer's manufacturing facility is located in a county designated as a tier 1, tier 2, or tier 3 county under O.C.G.A. Section 48-7-40. Depending on whether the manufacturing facility is located in a tier 1, tier 2, or tier 3 county, the aggregate cost of the qualified investment property purchased or acquired by the taxpayer pursuant to the project plan must exceed $5 million, $10 million, and $20 million, respectively. 7. Timing of Eligibility. The taxpayer shall be eligible to claim the credit for qualified investment property purchased or acquired and first placed in service pursuant to the project plan in the year immediately following the taxable year in which the requisite minimum threshold amount is reached by the taxpayer. 8. Duration of Project. The duration of a project shall not exceed 3 years unless expressly approved in writing by the Commissioner. 9. Documentation. At the time the credit is claimed, the taxpayer must submit to the Commissioner certification of the total cost of all qualified investment property purchased or acquired and placed in service pursuant to the project plan. Such certification shall be on forms provided by the Commissioner and shall be attached to the taxpayer's state income tax return. (c) Earliest Date of Eligibility. In order to qualify as a basis for the credit or contribute towards establishing the requisite minimum threshold amount, the qualified investment property must be purchased or acquired by the taxpayer and first placed in service no sooner than January 1, 1996. (4) Coordination with the Investment Tax Credit and the Job Tax Credit. The credit allowed under this Section is an optional investment tax credit in lieu of the regular investment tax credit allowed under O.C.G.A. Sections 48-7-40.2, 48-7-40.3, and 48-7- 40.4. Taxpayers who elect to claim this credit for a given project make an irrevocable election and may not thereafter claim either the job tax credit or the regular investment tax credit for a given project. Taxpayers who have previously claimed credits under O.C.G.A. Sections 48-7-40, 48-7-40.1, 48-7-40.2, 48-7-40.3, or 48-7-40.4 for a given project in any taxable year are not eligible for the optional investment tax credit for the same project in any subsequent year. (5) Leases of Qualified Investment Property. Any lease for a period of five years or more of any real or personal property used in the construction or expansion of a manufacturing facility which would otherwise constitute qualified investment property will be treated as the purchase or acquisition of qualified investment property by the lessee. Such property will be treated as having been purchased or acquired by the taxpayer in the taxable year in which the lease becomes binding on the taxpayer and the lessor. In establishing eligibility and calculating the credit based on such property, the taxpayer will use the fair market value of the leased property as the cost of qualified investment property. (6) Pass-Through of Credit. (a) "S" Corporations. Business enterprises that are "S" corporations will apply the optional investment tax credit to corporate income tax liability at the entity level if one exists. Any remaining credit will then be apportioned to shareholders based on their percentage share of ownership of the corporation in the same manner as other pass-through items. (b) Partnerships. Where the business enterprise is a partnership, the optional investment tax credit will be apportioned to partners in the same manner as partnership income based on each partner's distributive share. If the partnership makes the election to pay tax at the entity level under O.C.G.A. § 48-7-23, the optional investment tax credit will be applied to the tax liability at the entity level if one exists. The electing partnership may elect to apportion any remaining credit to partners based on their percentage ownership of the partnership. (c) Limited Liability Companies. Business enterprises that are limited liability companies will apportion the optional investment tax credit to members based on their percentage ownership of the limited liability company. Authority: O.C.G.A. §§ 48-2-12, 48-7-40.7, 48-7-40.8, 48-7-40.9. History. Original Rule entitled "Optional Investment Tax Credit" adopted. F. Feb. 23, 1996; eff. Mar. 14, 1996. Amended: F. June 4, 2025; eff. June 24, 2025.