Thursday, July 27, 2017
NOTES FROM THE SENATE, JULY 27, 2017
TAX EXEMPTION STUDY COMMITTEE
Passed during the 2017 Legislative Session, SR 222 established the Special Tax Exemption Study Committee. The purpose of this study committee is to examine current tax exemptions and to explore different options for evaluating tax credits to determine how well they work. The study committee met for the first time July 18 at the Capitol.
An in-depth examination can assure consistent, effective, and equitable distribution of tax exemptions and make recommendations for the repeal, modification, or addition to these provisions. While tax exemptions are designed to promote certain activities which are beneficial to Georgia, without such evaluations, businesses and the overall economy may be hurt by outdated or flawed tax exemptions. The economy can also be aided by the expansion and addition of tax exemptions which are proven to work.
WHAT IS A SPECIAL TAX EXEMPTION?
A tax exemption is a form of special treatment within the Georgia Tax Code which reduces an individual's or a business' tax liability. This helps offset the cost of certain activities which ultimately help the economy but which may not happen otherwise, due to high costs. Special tax exemptions include tax credits for employment, investment, economic development, housing, education, healthcare, and insurance and disaster relief. A purpose of some tax credits may be to influence behavior or prompt an action as in the Driver Training tax credit.
Some of the most well-known tax credits in Georgia are designed to boost economic development and employment. The Employer's Jobs tax credit provides between $750 and $3,500 in tax credits per job, depending on the tier level of the county, to businesses which hire new full time employees with benefits who earn a wage higher than the median wage in the county in Georgia with the lowest median wage. Businesses must also hire a certain number of employees based on the tier level of the county ranging from two employees in Tier 1 counties to 25 employees in Tier 4 counties.
The Qualified Business Expansion Tax Credit provides up to $5 million in tax credits to businesses which have operated in Georgia for at least five years and plan to hire at least 500 new full time employees within the taxable year. Applicable businesses must be in the manufacturing, warehousing and distribution, processing, telecommunications, broadcasting, tourism, or research and development industries and cannot be retail businesses. The application for the tax credit can only be made when the amount of the credit exceeds 50% of the existing business' income tax liability.
Here is a partial list of the higher value tax exemptions currently in law. Of course, revised tax returns are routinely filed so the amount listed is not complete.
Tax Credit 2015 Cost Subject to Amended Returns
Employers Credit for Approved Employee Retraining
Employer's Job Tax Credit and 118-Mega Credit
Low Income Housing Credit
Research Tax Credit
Bank Tax Credit
Zero Emission Vehicle Credit
Film Tax Credit
Qualified Education Expense Credit
Seed Capital Fund Credit
Qualified Health Insurance Expense Credit
Qualified Interactive Entertainment Production Company
Child and Dependent Care Expense Credit
Driver Education Credit
Other State Tax Credits
Individual Low Income Tax Credit
Incomplete total usage of Tax Credits for 2015
FIRST HEARING BEGINS THE PROCESS
The Pew Charitable Trusts, a nonpartisan organization, has studied efforts to evaluate tax exemptions in each state. The Pew presentation to the committee covered the benefits of evaluating tax incentives and provided three steps that Georgia can take to effectively examine special tax exemptions.
The presentation recommends designing a plan for examination by knowledgeable agencies or individuals for a rotating, regular review of tax credits. A second step is to measure the impact and the effectiveness of the credit in accomplishing the objectives of the plan always evaluating what might have occurred had no credit been initiated. Thirdly, the results of planning and measuring should be shared with policy makers to make decisions concerning the present and future of the credit. Forms and evaluation criteria for Indiana, Alabama and Minnesota were examined.
The study committee also received information on all of the current tax credits from the Fiscal Research Center at Georgia State University and the amounts for each tax credit from 2011 to 2015 from the Georgia Department of Revenue.
The Study Committee plans to meet around the state with the following schedule:
August 22 - North Georgia
September 29 - Savannah
October 27 - Southwest Georgia
November 14 - Atlanta
Specific information will be released by the Study Committee Chairman, Senator John Albers.
Georgia citizens deserve a close look at every tax credit that reduces the funding for state government. A measured evaluation process will insure every credit meets the objectives that the Legislature intended when they were passed.
Full transcripts of bills may be found at http://www.legis.ga.gov/en-US/default.aspx . Simply type the bill number into the box at the top left-hand corner of the screen and specify if it is in the House or the Senate. The FY 2018 budget (H.B. 44) may be found at http://www.senate.ga.gov/sbeo/en-US/AppropriationsDocuments.aspx. As always, I welcome any questions you may have.