Georgia Nonprofits: You May be Eligible for Certain Georgia Jobs Tax Credits

By: Betsy Goldstein, SALT Manager

At a glance

• The main takeaway: Nonprofits may be eligible for certain jobs tax credits that can offset some of their income and/or payroll withholding tax liability.
• Why it matters: If eligible, tax-exempt businesses can use these incentives to relocate or hire new employees in the state.
• Next steps: Aprio’s State and Local Tax (SALT) team are well-prepared to assist you with determining your eligibility to claim valuable tax credits and put cash back into your organization’s operations.

Schedule a free consultation today to learn more!

The full story:

The Georgia Jobs Tax Credit (JTC) and Georgia Quality Jobs Tax Credit (QJTC) are great incentives for businesses looking to relocate or hire new employees in the state. Eligible businesses may use these credits to offset some or all of their income tax liability. In addition, in the case of the QJTC and in the case of the JTC for businesses located in certain qualifying zones in the state, a business can elect to use credits in excess of its income tax liability to offset its Georgia withholding taxes. On September 22, 2021, the Georgia Tax Tribunal (Tribunal) issued an opinion that a tax-exempt organization is eligible to claim the QJTC for employees hired related to the organization’s tax-exempt activity.[1]

Several years ago, in Letter Ruling IT-2017-03, the Georgia Department of Revenue (DOR) ruled that a tax-exempt organization was not eligible for the JTC or QJTC based on its tax-exempt activity, but that those organizations may claim those credits with respect to their unrelated business income (UBI) activity provided that the requirements with respect to each credit were otherwise satisfied. This Tribunal decision reaches a contrary conclusion with respect to the facts of this case.

Floyd HCM (“the Company”) is a not-for-profit corporation with its principal place of business in Floyd County Georgia. The Company operates various medical centers in the Floyd County area. The Company is exempt from federal corporate income tax pursuant to IRC Section 501(c)(3); however, since it does conduct an unrelated trade or business that generates UBI, it files both Federal Forms 990 and 990-T. Therefore, it files Georgia Form 600-T (Exempt Organization Unrelated Business Income Tax Return) to report and pay tax on its UBI generated in Georgia.

For each of the tax years between 2014 – 2016, the Company filed a Georgia Form 660-T to report and pay tax on its Georgia UBI. Subsequently, the Company amended those returns to claim a QJTC, resulting in a refund of its UBI tax paid for those years. In addition, the Company included a letter with each amended return requesting that it be allowed to apply any excess credits against payroll withholding taxes.

The DOR initially granted the refunds and withholding benefit requests and then later issued a letter stating that it has erroneously approved them because the new or relocated jobs provided “do not appear to be from unrelated business income activities.”

At an earlier hearing in this case, the Tribunal addressed two threshold legal issues:

• Whether a Georgia-based nonprofit entity is a taxpayer eligible to claim the QJTC?
• If so, can the QJTC apply to jobs that do not produce unrelated business income?

The Tribunal ruled the Company is an eligible taxpayer to claim the QJTC, explaining that the term “Taxpayer” means “any person required by law to file a return or to pay taxes”[2] and that nothing in the statutes or the regulations limits this provision to refer solely to corporate income tax. Therefore, as long as a business is required to file “any return” or pay “any taxes,” that business qualifies as a taxpayer under the QJTC.

Further, the Tribunal concluded that the QJTC applies to all jobs, not just those that produce UBI, noting that no provision in the statute or regulation defining “New Quality Job” requires that the employment produce UBI.

Accordingly, the Tribunal ordered the DOR to reinstate the Company’s refunds and withholding tax offset eligibility letters.

The bottom line

Tax-exempt entities in Georgia should review their eligibility to claim a QJTC or even a JTC, although the ability to claim a JTC will likely be more limiting due to certain additional requirements based on the tax credit zone in which the employees work. Aprio’s SALT team has extensive experience with these Georgia tax credits and we are well-prepared to assist you with determining your eligibility to claim valuable tax credits and put cash back into your organization’s operations. We constantly monitor these and other important state tax topics, and we will include any significant developments in future issues of the Aprio SALT Newsletter.

Contact Betsy Goldstein, SALT Manager, at betsy.tuck@aprio.com or Jeff Glickman, Partner-in-Charge of Aprio’s SALT practice, at jeff.glickman@aprio.com for more information.

This article was featured in the October SALT newsletter.

[1] Floyd Healthcare Management, Inc. v. Commissioner, Georgia Dep’t of Rev., Docket No.: TAX-CIT-200300, Sept. 22, 2021.

[2] Ga. Code Ann. § 48-7-40.17(a)(7).

Disclosure

Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.