25 LC 50 0946
House Bill 8
By: Representative Kendrick of the 95
th
A BILL TO BE ENTITLED
AN ACT
To amend Chapter 7 of Title 48 of the Official Code of Georgia Annotated, relating to
1
income taxes, so as to renew and revise an income tax credit for certain investments in2
qualified businesses; to remove the requirement that the investment be made by a qualified3
investor; to provide for an aggregate cap; to allow such credit to be transferred; to provide4
a reporting requirement; to provide for definitions; to provide for sunset; to provide for an5
effective date and applicability; to provide for related matters; to repeal conflicting laws; and6
for other purposes.7
BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:8
SECTION 1.9
Chapter 7 of Title 48 of the Official Code of Georgia Annotated, relating to income taxes,10
is amended by revising Code Section 48-7-40.30, relating to tax credits for certain qualified11
investments for limited period of time, as follows:12
"48-7-40.30.13
(a) The General Assembly finds that entrepreneurial businesses significantly contribute14
to the economy of this state. The intent of this Code section is to achieve the following:15
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(1) To encourage individual investors to invest in early stage, innovative, wealth-creating
16
businesses;17
(2) To enlarge the number of high quality, high paying
high-paying jobs within this state18
both to attract qualified individuals to move to and work within this state and to retain19
young people educated in Georgia's universities and colleges;20
(3) To expand the economy of Georgia by enlarging its base of wealth-creating21
businesses; and22
(4) To support high-growth business and other businesses seeking to commercialize23
technology invented in Georgia's universities and colleges.24
(b) As used in this Code section, the term:25
(1) 'Allowable credit' means the credit as it may be reduced pursuant to paragraph (3) of26
subsection (i) of this Code section.27
(2) 'Headquarters' means the principal central administrative office of a business located28
in this state which conducts significant operations of such business.29
(3) 'Investor' means:30
(A) A person who is a resident of this state or a nonresident who is obligated to pay31
taxes imposed by this chapter; or32
(B) A pass-through entity which is formed for investment purposes, has no business33
operations, has committed capital under management of equal to or less than $5 million,34
and is not capitalized with funds raised or pooled through private placement35
memoranda directed to institutional investors. A venture capital fund or commodity36
fund with institutional investors or a hedge fund shall not qualify as an investor.37
(3)(4) 'Net income tax liability' means income tax liability reduced by all other credits38
allowed under this chapter.39
(4)(5) 'Pass-through entity' means a partnership, an S-corporation, or a limited liability40
company taxed as a partnership.41
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(5)(6) 'Professional services' means those services of a profession specified in42
paragraph (2) of Code Section 14-7-2 or any service which requires as a condition43
precedent to the rendering of such service the obtaining of a license from a state licensing44
board pursuant to Title 43.45
(6)(7) 'Qualified business' means a registered business that:46
(A) Is either a corporation, limited liability company, or a general or limited47
partnership located in this state;48
(B) Was organized no more than three years before the qualified investment was made;49
(C) Has its headquarters located in this state at the time the investment was made and50
has maintained such headquarters for the entire time the qualified business benefited51
from the tax credit provided for pursuant to this Code section;52
(D) Employs 20 or fewer people in this state at the time it is registered as a qualified53
business;54
(E) Has had in any complete fiscal year before registration gross annual revenue as55
determined in accordance with the Internal Revenue Code of $500,000.00 or less on a56
consolidated basis;57
(F) Has not obtained during its existence more than $1 million in aggregate gross cash58
proceeds from the issuance of its equity or debt investments, not including commercial59
loans from chartered banking or savings and loan institutions;60
(G) Has not utilized the tax credit described in Code Section 48-7-40.26;61
(H) Is primarily engaged in manufacturing, processing, online and digital warehousing,62
online and digital wholesaling, software development, information technology services,63
or research and development or is a high-growth business providing services other than64
those described in subparagraph (I) of this paragraph; and65
(I) Does not engage substantially in:66
(i) Retail sales;67
(ii) Real estate or construction;68
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(iii) Professional services;
69
(iv) Gambling;70
(v) Natural resource extraction;71
(vi) Financial, brokerage, or investment activities or insurance; or72
(vii) Entertainment, amusement, recreation, or athletic or fitness activity for which73
an admission or membership is charged.74
A business shall be substantially engaged in one of the above
activities listed in75
subparagraph (H) or (I) of this paragraph if its gross revenue from such activity exceeds76
25 percent of its gross revenues in any fiscal year or it is established pursuant to its77
articles of incorporation, articles of organization, operating agreement, or similar78
organizational documents to engage in such activity as one of its primary purposes.79
(7)(8) 'Qualified investment' means an investment by a qualified an investor of cash in80
a qualified business for common or preferred stock or an equity interest or a purchase for81
cash of qualified subordinated debt in a qualified business; provided, however, that funds82
constituting a qualified investment cannot have been raised or be raised as a result of83
other tax incentive programs. Furthermore, no investment of common or preferred stock84
or an equity interest or purchase of subordinated debt shall qualify as a qualified85
investment if a broker fee or commission or a similar remuneration is paid or given86
directly or indirectly for soliciting such investment or purchase. Investment of common87
or preferred stock or an equity interest or a purchase of qualified subordinated debt that88
contains or involves a broker fee or commission or a similar remuneration paid or given,89
directly or indirectly, for soliciting such investment or purchase shall qualify as a90
qualified investment. However, the investor shall be allowed the tax credit under this91
Code section only on the amount of the direct investment in the qualified investment and92
not on the broker fees or commissions or similar remunerations paid or given, directly or93
indirectly, for soliciting such investment or purchase.94
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(8) 'Qualified investor' means an accredited investor as that term is defined by the United95
States Securities and Exchange Commission who is:96
(A) An individual person who is a resident of this state or a nonresident who is97
obligated to pay taxes imposed by this chapter; or98
(B) A pass-through entity which is formed for investment purposes, has no business99
operations, has committed capital under management of equal to or less than $5 million,100
and is not capitalized with funds raised or pooled through private placement101
memoranda directed to institutional investors. A venture capital fund or commodity102
fund with institutional investors or a hedge fund shall not qualify as a qualified investor.103
(9) 'Qualified subordinated debt' means indebtedness that is not secured, that may or may104
not be convertible into common or preferred stock or other equity interest, and that is105
subordinated in payment to all other indebtedness of the qualified business issued or to106
be issued for money borrowed and no part of which has a maturity date less than five107
years after the date such indebtedness was purchased.108
(10) 'Registered' or 'registration' means that a business has been certified by the109
commissioner as a qualified business at the time of application to the commissioner.110
(c) A qualified business shall register with the commissioner for purposes of this Code111
section. Approval of such registration shall constitute certification by the commissioner112
for 12 months after being issued. A business shall be permitted to renew its registration113
with the commissioner so long as, at the time of renewal, the business remains a qualified114
business.115
(d) Any individual person making a qualified investment directly in a qualified business116
in the 2011, 2012, 2013, 2014, 2015, 2016, 2017, or 2018 calendar year shall be allowed117
a tax credit of 35 percent of the amount invested against the tax imposed by this chapter118
commencing on January 1 of the second for the taxable year following the year in which119
the qualified investment was made as provided in this Code section.120
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(e) Any pass-through entity making a qualified investment directly in a qualified business
121
in the 2011, 2012, 2013, 2014, 2015, 2016, 2017, or 2018 calendar year
shall be allowed122
a tax credit of 35 percent of the amount invested against the tax imposed by this chapter123
commencing on January 1 of the second for the taxable year following the year in which124
the qualified investment was made as provided in this Code section. Each individual who125
is a shareholder, partner, or member of an entity shall be allocated the credit allowed the126
pass-through entity in an amount determined in the same manner as the proportionate127
shares of income or loss of such pass-through entity would be determined. If an128
individual's share of the pass-through entity's credit is limited due to the maximum129
allowable credit under this Code section for a taxable year, the pass-through entity and its130
owners may not reallocate the unused credit among the other owners.131
(f) Tax credits claimed pursuant to this Code section shall be subject to the following132
conditions and limitations:133
(1) The qualified investor shall not be eligible for the credit for the taxable year in which134
the qualified investment is made but shall be eligible for the credit for the second taxable135
year beginning after the qualified investment is made as provided in subsection (d) or (e)136
of this Code section;137
(2) The aggregate amount of credit allowed an individual for one or more qualified138
investments in a single taxable year under this Code section, whether made directly or by139
a pass-through entity and allocated to such individual, shall not exceed $50,000.00;140
(3)(2) In no event shall the amount of the tax credit allowed an individual under this141
Code section for a taxable year exceed such individual's net income tax liability. Any142
unused credit amount shall be allowed to be carried forward for three years from the close143
of the taxable year in which the qualified investment was made. No such credit shall be144
allowed against prior years' tax liability;145
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(4)(3) The qualified investor's basis in the common or preferred stock, equity interest,146
or qualified subordinated debt acquired as a result of the qualified investment shall be147
reduced for purposes of this chapter by the amount of the allowable credit; and148
(5) The credit shall not be transferrable transferable by the qualified investor except to149
the heirs and legatees of the qualified investor upon his or her death and to his or her150
spouse or incident to divorce.151
(4) Any tax credit earned and previously claimed but not used against its income tax may152
be transferred or sold, in whole or in part, by the investor to another Georgia taxpayer.153
(g) The registration of a business as a qualified business shall be subject to the following154
conditions and limitations:155
(1) If the commissioner finds that any of the information contained in an application of156
a business for registration under this Code section is false, the commissioner shall revoke157
the registration of such business. The commissioner shall not revoke the registration of158
a business solely because it ceases business operations for an indefinite period of time,159
as so long as the business renews its registration;160
(2) A registration as a qualified business may not be sold or otherwise transferred, except161
that, if a qualified business enters into a merger, conversion, consolidation, or other162
similar transaction with another business and the surviving company would otherwise163
meet the criteria for being a qualified business, the surviving company retains the164
registration for the 12 month registration period without further application to the165
commissioner. In such a case, the qualified business must shall provide the166
commissioner with written notice of the merger, conversion, consolidation, or similar167
transaction and such other information as required by the commissioner; and168
(3) The commissioner shall report to the House Committee on Ways and Means and the169
Senate Finance Committee each year all of the businesses that have registered with the170
commissioner as a qualified business. The Such report shall include the name and171
address of each business, the location of its headquarters, a description of the types of172
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business in which it engages, the number of jobs created by the business during the period
173
covered by the report, and the average wages paid by these
such jobs.174
(h) Any credit claimed under this Code section shall be recaptured in the following175
situations and shall be subject to the following conditions and limitations:176
(1) If within two years after the qualified investment was made, the qualified investor177
transfers any of the securities or qualified subordinated debt received in the qualified178
investment to another person or entity, other than a transfer resulting from one of the179
following:180
(A) The death of the qualified investor;181
(B) A transfer to the spouse of the qualified investor or incident to divorce; or182
(C) A merger, conversion, consolidation, sale of the qualified business's assets, or183
similar transaction requiring approval by the owners of the qualified business under184
applicable law, to the extent the qualified investor does not receive cash or tangible185
property in such merger, conversion, consolidation, sale, or other similar transaction;186
(2) Except as provided in paragraph (1) of this subsection, if within five years after the187
qualified investment was made, the qualified business makes a redemption with respect188
to the securities received or pays any principal of the qualified subordinated debt;189
(3) If within two years after the qualified investment was made, the qualified investor190
participates in the operation of the qualified business. For the purpose purposes of this191
paragraph, a qualified an investor participates in the operation of a qualified business if192
the qualified investor, or the qualified investor's spouse, parent, sibling, or child, or a193
business controlled by any of these individuals, provides services of any nature to the194
qualified business for compensation, whether as an employee, a contractor, or otherwise. 195
However, a person who provides uncompensated professional advice to a qualified196
business, whether as an officer, a member of the board of directors or managers or197
otherwise, or participates in a stock or membership option or stock or membership plan,198
or both, shall be eligible for the credit;199
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(4) The amount of the credit recaptured shall apply only to the qualified investment in
200
the particular qualified business in which the investment was made;201
(5) The amount of the recaptured tax credit determined under this subsection shall be202
added to the qualified
investor's income tax liability for the taxable year in which the203
recapture occurs under this subsection; and204
(6) In the event the credit is recaptured because the qualified business ceases business205
operations, dissolves, or liquidates, the qualified investor may claim either the credit206
authorized under this Code section or any capital loss the qualified investor otherwise207
would be able to claim regarding that qualified business, but shall not be authorized to208
claim and be allowed both.209
(i)(1) A qualified An investor seeking to claim a tax credit provided for under this Code210
section shall submit an application to the commissioner for tentative approval of such tax211
credit between September 1 and October 31 of the year for which the tax credit is claimed212
or allowed. The commissioner shall promulgate the rules and forms on which the213
application is to be submitted. Amounts specified on such application shall not be214
changed by the qualified investor after the application is approved by the commissioner. 215
The commissioner shall review such application and shall tentatively approve such216
application upon determining that it meets the requirements of this Code section.217
(2) The commissioner shall provide tentative approval of the applications by the date218
provided in paragraph (3) of this subsection as follows:219
(A) The total aggregate amount of all tax credits allowed to qualified investors or220
pass-through entities for investments made in the 2011 calendar year and claimed and221
allowed in the 2013 taxable year shall not exceed $10 million in such year;222
(B) The total aggregate amount of all tax credits allowed to qualified investors or223
pass-through entities for investments made in the 2012 calendar year and claimed and224
allowed in the 2014 taxable year shall not exceed $10 million in such year;225
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(C) The total aggregate amount of all tax credits allowed to qualified investors or226
pass-through entities for investments made in the 2013 calendar year and claimed and227
allowed in the 2015 taxable year shall not exceed $10 million in such year;228
(D) The total aggregate amount of all tax credits allowed to qualified investors or229
pass-through entities for investments made in the 2014 calendar year and claimed and230
allowed in the 2016 taxable year shall not exceed $5 million in such year;231
(E) The total aggregate amount of all tax credits allowed to qualified investors or232
pass-through entities for investments made in the 2015 calendar year and claimed and233
allowed in the 2017 taxable year shall not exceed $5 million in such year;234
(F) The total aggregate amount of all tax credits allowed to qualified investors or235
pass-through entities for investments made in the 2016 calendar year and claimed and236
allowed in the 2018 taxable year shall not exceed $5 million in such year;237
(G) The total aggregate amount of all tax credits allowed to qualified investors or238
pass-through entities for investments made in the 2017 calendar year and claimed and239
allowed in the 2019 taxable year shall not exceed $5 million in such year; and240
(H) The total aggregate amount of all tax credits allowed to qualified investors or241
pass-through entities for investments made in the 2018 calendar year and claimed and242
allowed in the 2020 taxable year shall not exceed $5 million in such year.243
The aggregate amount of tax credits allowed pursuant to this Code section shall not244
exceed $5 million in a calendar year.245
(3) The commissioner shall notify each qualified investor of the tax credits tentatively246
approved and allocated to such qualified investor by December 31 of the year in which247
the application was submitted. In the event that the credit amounts on the tax credit248
applications filed with the commissioner exceed the maximum aggregate limit of tax249
credits under this subsection, then the tax credits shall be allocated among the qualified250
investors who filed a timely application on a pro rata basis based upon the amounts251
otherwise allowed by this Code section. Once the tax credit application has been252
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approved and the amount approved has been communicated to the applicant, the qualified253
investor may then apply the amount of the approved tax credit to its tax liability for the254
tax year for which the approved application applies.255
(j) The commissioner shall report annually to the House Committee on Ways and Means256
and the Senate Finance Committee on the percentage of tax credits for the previous taxable257
year utilized under this Code section.258
(k) The commissioner shall promulgate any rules and regulations necessary to implement259
and administer this Code section.260
(l) This Code section shall stand repealed and reserved on December 31, 2031."261
SECTION 2.262
This Act shall become effective on July 1, 2025, and shall be applicable to taxable years263
beginning on or after such date.264
SECTION 3.265
All laws and parts of laws in conflict with this Act are repealed.266
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