New Criteria for Tax Credits
Legislative leaders in Georgia have unveiled their plans to revise the criteria for companies to receive tax credits. The proposal suggests that companies must meet at least four out of nine goals to qualify for the top 30% credit on Georgia income taxes. These goals include shooting in rural areas, hiring more local workers, and supporting production studios within the state. House Ways and Means Committee Chairman Shaw Blackmon emphasized that the aim is not to limit the credit but to provide more value and a better return on investment for taxpayers while sustaining the credits.
Reviewing All Tax Breaks
The announcement follows a comprehensive review of all the tax breaks offered by Georgia to various industries. Lawmakers also expressed their intention to temporarily suspend the sales tax exemption on equipment for data centers. The rapid expansion of data centers in the state has strained the power grid, leading to the urgent need for new electrical generation capacity. Georgia Power Co. has urged the construction or contracting of additional capacity to meet the growing demand.
Protecting Tax Revenue
Republican Lt. Gov. Burt Jones stated that the review of tax credits and incentives is crucial to safeguarding tax revenue. By assessing and adjusting existing credits, Jones believes Georgia can further reduce the income tax rate for residents and businesses. Jones emphasized that ongoing reviews will continue to ensure the effectiveness of these measures.
Debating Film Tax Credits
While there were discussions about capping the number of film tax credits issued each year, industry groups strongly defended the breaks, arguing that they stimulate economic activity. House lawmakers have been supportive of these tax incentives. Nevertheless, state-sponsored evaluations have shown that the cost of the film tax credit outweighs its economic benefit. A study from Georgia State University indicated a return of less than 20 cents on the dollar. The proposed legislation aims to raise the spending threshold required to claim credits from $500,000 to $1 million.
Limits on Transferred Credits and Data Centers
To address concerns about potential spikes in redemptions of transferred credits, lawmakers want to limit redemption to 2.5% of the previous year’s state revenue, currently estimated at around $900 million. Additionally, the sales tax exemption on equipment used in data centers may be suspended due to concerns about electricity consumption. Georgia Power testified that 80% of the projected increase in electricity demand would come from data centers. However, studies have shown that data centers contribute positively to Georgia’s economy.
Ensuring Balance and Resources
House Speaker Jon Burns emphasized the need to balance energy consumption and resources. With numerous data centers being developed or expanded in Georgia, these facilities are currently consuming a disproportionate amount of the state’s energy. The suspension of the sales tax exemption on data center equipment is aimed at mitigating this imbalance. If the exemption is reinstated, lawmakers propose requiring data center employees to earn double the state’s average wage, up from the current requirement of 110%.
The proposed changes to tax incentives and credits in Georgia reflect lawmakers’ efforts to optimize returns for taxpayers, support sustainable growth in various industries, and address concerns about energy consumption. The legislation aims to strike a balance between promoting economic development and ensuring the prudent use of resources.