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Friday, August 04, 2017

NOTES FROM THE SENATE, AUGUST 4, 2017

NINE (COUNT'EM) TAX CREDIT/EXEMPTION BILLS PASSED IN 2017

There's a saying that nothing is safe when the Legislature is in Session and that may go double for tax bills. My experience is that where there is a tax bill, there's a lobbyist not far away. Sometimes there is altruism and a legislator is trying to promote certain behavior that may result if a tax credit or exemption is offered. The Drivers Training Tax credit is an example. The credit encourages parents to enroll teenagers in drivers training courses which ultimately have a life-saving and accident prevention effect.

This year, nine different bills were eventually passed offering some type of tax credit to Georgia taxpayers. In addition there were three bills affecting Ad Valorem taxes or Land Use Agreements (CUVA).

A number of the tax credit bills were passed in the name of economic development. They were intended to promote certain activities that are perceived to build the economy in Georgia or in the case of rural Georgia, to help create economic activity where there is little or none presently.

Tax bills are controversial. Some theorize that a flatter tax rate for all would increase investment across the board and result in economic growth without picking "winners and losers." And anytime you touch Ad Valorem taxes there is an argument that when you reduce property taxes on one segment, you simply increase them somewhere else. And as noted earlier, there is almost always an advocacy group, business association or lobbyist representing either, working to make their tax break happen. Usually there is a cap set on the amount of tax revenue the State is willing to give up. Also, most tax credit bills are given a definite time to expire or "sunset".

There was a time when virtually no tax break bills made it out of the Ways and Means Committee. Leadership was very protective of the state's tax structure and it was a big deal when a tax credit was passed. Not so today. That's not necessarily a bad thing if you believe that tax policy can be an instrument to create economic activity where it would not happen otherwise.

So here are the nine Tax Credit bills passed by the Legislature this year with a brief explanation of the intent of each. Caution, though, tax bills, by their very nature, are complicated and do not lend themselves to short explanations. And they can be complicated to take advantage of as well. I would highly advise the services of an accountant or tax advisor in attempting to take advantage of any of these.

I appreciate the Senate Research Office's assistance in providing this information, particularly, their projections on the fiscal impact of the bills.

SUMMARY/FISCAL IMPACT IN MILLIONS OVER 5 YEARS

--SB 133-Reduces Corporate Net Worth Taxes; Tax Credit for Agribusiness Investment

Small businesses under $100,000 net worth relieved of corp. net worth tax

$18.7 million-Reduction in Corporate net worth taxes

$22.5 million-For the tax credit for investments in a rural fund (From an outdated fiscal note)

--SB 180-Revises Rural Hospital Tax Credit Changed to 90% of liability (donation amount) and changed the cap to $60 million per year for three years

Fiscal Impact unknown but capped at $60 million yearly for 3 years

--HB 73-Creates three tax credits for reviving rural downtown areas

$14.5 million Over 5 years

--HB 125--Caps sales taxes for Yacht Repair Materials

Exempts only repair amounts exceeding $35,000

Fiscal Impact Unknown - Outdated Fiscal Note showed $1.5 million but likely increased as the sunset date for the sales tax cap was delayed by an additional 5 years

--HB 155--Georgia Musical Investment Act

Tax credit pertaining to state certified musical or theatrical productions/performances.

Fiscal Impact Unknown-Outdated Fiscal Note showed $50.3 million but this is likely reduced by an unknown amount

--HB 199-Expand Interactive Entertainment Tax Credit and create Postproduction Tax Credit

Fiscal Impact Unknown-Outdated Fiscal Note showed $110.1 million but this is likely reduced by an unknown

--HB 237-Tax Credit for Donations to the Public Education Innovation Fund Foundation

$25 million Over 5 years

--HB 247-Concrete Machinery Sales and Use Tax Exemption for cement produced in transport

$4.1 million over 5 years

--HB 265-Modify Quality Jobs Tax Credit; Sales Tax Exemptions for Theater Renovations

- New 7 year window for employee benefit

- $750,000 cap on theater renovation exemption
Portion of Fiscal Impact cannot currently be calculated; $13.5 million over 5 years for the portion of the bill regarding sales tax exemptions

AD VALOREM TAX CHANGES

--HB 238-Expands the list of permissible activities for land held in Conservation Use Valuation Assessment (CUVA) to include solar generation and farm labor housing. Property owner must pay accumulated tax liabilities plus interest on property to be used for solar generation.

--HB 196-Miscellaneous changes to Ad Valorem Taxation Assessment, Exemption and Refund Statutes. Revises criteria used by tax assessors to determine the fair market value of real property. Allows partners in a limited liability corporation to qualify for the Ad Valorem tax exemption for nonprofit homes for the mentally disabled. Refunds Ad Valorem taxes to disabled veterans who receive a final determination of disability containing a retroactive period of eligibility.

--SB 156 - Implements restrictions in equalized homestead option sales tax

If you would like a more detailed explanation of these bills/credits, contact my office and we will send an information sheet. Full transcripts of bills may be found at http://www.legis.ga.gov/en-US/default.aspx . As always, I welcome any questions you may have.

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