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Banking & Finance

Jan. 30 – General Assembly considers bill to add “a type of investor” eligible for tax credits

Category: Banking & Finance

By Lou Phelps, Savannah Business Journal

January 30, 2017 – A bill as been filed in the Georgia House that would amend Chapter 7 of Title 48 of the Official Code of Georgia Annotated, relating to income taxes, to add a type of investor eligible for certain tax credits.

It’s goal is to aid entrepreneurial businesses, and encourage individual investors to invest in early stage, innovative, wealth-creating businesses; increase “the number of high quality, high paying jobs within this state … and to retain young people educated in Georgia's universities and colleges.”

The principal headquarters of the company must be located in Georgia.

The tax credits would reduce 'Net income tax liability,” and would be available to a 'Pass-through entity',’ which means a partnership, an S-corporation, or a limited liability company taxed as a partnership.

The types of businesses eligible for the tax credit would be 'Professional services,’ which the bill states means those services specified in paragraph (2) of Code Section 14-7-2 or any service which requires as a condition precedent to the rendering of such service the obtaining of a license from a state licensing board pursuant to Title 43.”

And, any corporation can apply that has been organized no more than three years before the qualified investment was made; employes 20 or fewer people in this state at the time it is registered as a qualified

business; has had $500,000.00 or less revenue on a consolidated basis in the year the company was organized;  and has not obtained during its existence more than $1 million in aggregate gross cash proceeds from the issuance of its equity or debt investments, not including commercial loans from chartered banking or savings and loan institutions.

Qualifying companies must be “primarily engaged in manufacturing, processing, online and digital warehousing, online and digital wholesaling, software development, information technology services, or research and development or is a high growth business providing services other than:

- Retail sales;

- Real estate or construction;

- Professional services;

- Gambling;

- Natural resource extraction;

- Financial, brokerage, or investment activities or insurance; or

- Entertainment, amusement, recreation, or athletic or fitness activity for which an admission or membership is charged.

'Qualified investment' is defined to mean “an investment by a qualified or sophisticated investor

of cash in a qualified business for common or preferred stock or an equity interest or a purchase for cash of qualified subordinated debt in a qualified business; provided, however, that funds constituting a qualified investment cannot have been raised or be raised as a result of other tax incentive programs. Furthermore, no investment of common or preferred stock or an equity interest or purchase of subordinated debt shall qualify as a qualified investment if a broker fee or commission or a similar remuneration is paid or given directly or indirectly for soliciting such investment or purchase.”

And, a pass-through entity is one that is formed for investment purposes, has no business operations, has committed capital under management of equal to or less than $5 million, and is not capitalized with funds raised or pooled through private placement memoranda directed to institutional investors.”

The complete bill can be viewed at www.house.ga.gov, HB 89.

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