Sb 6: the Review, Creation, and Extension of Georgia Tax Credits and Deductions

• Jurisdiction: Georgia,United States
• Publication year: 2022
• Citation: Vol. 38 No. 1

SB 6: The Review, Creation, and Extension of Georgia Tax Credits and Deductions

Richard Hardeman
rhardeman3@student.gsu.edu

Aidan Zafar
azafar3@student.gsu.edu

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GENERAL ASSEMBLY

Amend Title 28 of the Official Code of Georgia Annotated, Relating to the General Assembly, so as to Provide for Economic Analyses to be Conducted for Certain Tax Benefits upon Request by the Chairpersons of the House Committee on Ways and Means and the Senate Finance Committee; Provide for Limits; Provide for Summaries to be Attached to Related Fiscal Notes; Amend Title 48 of the Official Code of Georgia Annotated, Relating to Revenue and Taxation, so as to Provide for a Tax Credit for Medical Equipment and Supplies Manufacturers and Pharmaceuticals and Medicine Manufacturers; Provide for Definitions; Provide for Conditions and Limitations on Certain Tax Credits; Provide for an Effective Date and Applicability; Change Job Limits and Revise the Requirements for such Tax Credit for Certain Projects; Provide for Tax Credits for High-Impact Aerospace Defense Projects; Revise a Job Tax Credit; Allow such Tax Credit to be Taken in Conjunction with Other Tax Credits; Revise a Manufacturing Tax Credit; Provide for Reporting; Amend Code Section 48-7-40.34 of the Official Code of Georgia Annotated, Relating to Tax Credits for Class III Railroads and Reporting, so as to Extend an Income Tax Credit for Expenditures on the Maintenance of Railroad Track Owned or Leased by Class III Railroads; Amend Title 48 of the Official Code of Georgia Annotated, Relating to Revenue and Taxation, so as to Extend the Sunset Date for the Exemption for Projects of Regional Significance; Exempt Sales of Tickets, Fees, or Charges for Admission to Certain Fine Arts Performances or Exhibitions from Sales and Use Taxes; Provide for Automatic Repeal; Renew a Sales Tax Exemption for Maintenance and Replacement Parts Used in Machinery or Equipment That Is Used to Mix, Agitate, and Transport Freshly Mixed Concrete; Extend the Sunset Provision for an Exemption for Sales Taxes on Certain Tangible Personal Property Sold or Used to Maintain, Refit, or Repair a Boat during a Single Event; Revise Certain Tax Credits for the Rehabilitation of Historic Structures; Revise the Aggregated Cap; Provide for Definitions; Repeal Section 2 of Ga. L. 2015, p. 1340, Approved May 12, 2015; Revise a Limitation on Business Enterprises Eligible for a Tax Credit for Research and

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Development; Revise an Exemption for the Sale or Lease of Certain Computer Equipment; Provide for Clarification, with Respect to a Sales Tax Exemption for Certain Computer Equipment, That the Exclusion for Telephone Central Office Equipment or Other Voice Data Transport Technology in Subdivision (68)(C)(ii)(I) of Code Section 48-8-3, which Became Effective October 1, 2002, Includes any Wireline or Wireless Telecommunication System; Provide for Reporting; Provide for an Automatic Repeal; Provide for Related Matters; Provide for Short Titles; Provide for an Effective Date; Repeal Conflicting Laws; and for Other Purposes

Code Sections: O.C.G.A. §§ 28-5-41.1 (new); 48-7-29.8 (amended); 48-7-40.1A (amended); 48-7-40.1B (new); 48-7-40.12 (amended); 48-7-40.24 (amended); 48-7-40.25 (amended); 48-8-3 (amended)

Bill Number: SB 6

Act Number: 166

Georgia Laws: 2021 Ga. Laws 289

Summary: The Act provides for the review of tax credits and deductions while extending or creating various tax credits and deductions. First, the Act allows certain government officials to request a review of up to five tax credits or deductions per year to evaluate their economic efficiency. Second, the Act creates or extends tax credits and deductions for medical and pharmaceutical manufacturers, high-impact aerospace defense projects, short-line railroads, ticket sales for fine arts performances, rehabilitation of historic structures, yacht maintenance, and projects of regional significance.

Effective Date: July 1, 2021

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History

Georgia has remained the number one state for business over the past eight years due, in part, to its favorable tax environment.¹ To ensure that the tax credits and incentives fostering this environment work as intended, it is necessary to periodically measure their effectiveness.² In 2017, the Georgia legislature passed Senate Resolution 222, creating the Senate Study Committee on Special Tax Exemption, which conducted a comprehensive analysis of six individual state tax credits.³ The Committee found three of those incentives to have a poor return on investment, setting the stage for the passage of Senate Bill (SB) 328, which eliminated those incentives.

Recognizing the need for a continuous monitoring system, Senators John Albers (R-56th), Chuck Hufstetler (R-52nd), and others introduced legislation in the 2019-2020 session of the Georgia General Assembly aimed at establishing an annual, independent economic analysis for up to five tax credits per year.⁴ SB 120 passed both houses of the Georgia legislature with overwhelming support but was vetoed by Governor Brian Kemp, who cited concerns about the lack of an independent body to conduct the economic analysis.⁵ Responding to the Governor's concerns, the bill's sponsors modified SB 120 to place the responsibility of conducting the economic analysis on the Office of Planning and Budget and reintroduced the bill in the 2021-2022 legislative session as SB 6.⁶

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After passage in the Senate, the House of Representatives turned SB 6 into a "Christmas Tree" by introducing a substitute which piled on several miscellaneous tax breaks.⁷ The House's substitute incorporated several other bills under consideration in the 2021-2022 legislative session, including House Bill (HB) 586, HB 587, and SB 148.⁸ Notably, SB 148 and parts of HB 587 were dropped from the final version of SB 6 passed by both houses.⁹

Bill Tracking of SB 6

Consideration and Passage by the Senate

Senator John Albers (R-56th) sponsored SB 6 in the Senate with Senator Chuck Hufstetler (R-52nd), Senator Jeff Mullis (R-53rd), Senator Steve Gooch (R-51st), Senator Brian Strickland (R-17th), Senator John Kennedy (R-18th), Senator Lindsey Tippins (R-37th), Senator Donzella James (D-35th), Senator Lee Anderson (R-24th), Senator Carden Summers (R-13th), Senator Sheila McNeill (R-3rd), Senator Billy Hickman (R-4th), Senator Nan Orrock (D-36th), Senator Butch Miller (R-49th), Senator Brandon Beach (R-21st), Senator Bruce Thompson (R-14th), and Senator Bill Cowsert (R-46th) cosponsoring.¹⁰

The bill was placed in the Senate hopper on January 13, 2021, and the Senate read the bill for the first time on January 14, 2021.¹¹ On the same day, the Senate referred the bill to the Finance Committee, who reported favorably on the bill on January 28, 2021.¹² The bill was read for a second time on January 29, 2021, before being engrossed prior to

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its third reading on February 1, 2021.¹³ The Senate passed the bill unanimously on February 1, 2021.¹⁴

Consideration and Passage by the House

Following the passage of SB 6 in the Senate, the House read the bill for the first time on February 2, 2021, after which it was referred to the House Ways and Means Committee.¹⁵ The House read the bill for the second time on February 3, 2021.¹⁶

On March 25, 2021, the House Ways and Means Committee reported favorably on the bill by introducing a substitute that significantly expanded the bill and added tax breaks for businesses and activities such as medical and pharmaceutical manufacturers, port traffic, high-impact aerospace defense projects, agribusiness, railroads, projects of regional significance, admission to fine arts performances or exhibitions, concrete companies, and boat maintenance.¹⁷ Almost immediately, on March 25, 2021, the House substitute was withdrawn and replaced by a second substitute that added the creation of a Special Counsel on Tax Reform and Fairness to provide a holistic review of Georgia's tax code and ensure Georgia's economic competitiveness for the next decade.¹⁸

The second House substitute passed after being read for the third time on March 25, 2021, by a vote of 152 to 14.¹⁹

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Conference Committee for SB 6

On March 25, 2021, the vote for the substitute of SB 6 carried the House, but the Senate disagreed with the substitute.²⁰ After the House insisted, both chambers agreed to establish a Conference Committee consisting of Senator Albers, Senator Hufstetler, Senator Ben Watson (R-1st), Representative Shaw Blackmon (R-146th), Representative Bruce Williamson (R-115th), and Representative Jon Burns (R-159th).²¹ The Conference Committee developed a substitute, which both the House and the Senate adopted on March 31, 2021.²² The Conference Committee substitute carried the Senate by a vote of 52 to 0 and carried the House by a vote of 146 to 25.²³ Notably, the Conference Committee substitute dropped the tax breaks for agribusiness and port traffic, as well as the creation of the Special Counsel on Tax Reform and Fairness, but added several additional tax breaks for activities such as the rehabilitation of historic structures and retail business.²⁴ Governor Brain Kemp signed SB 6 on May 4, 2021.²⁵

Bill Tracking of HB 586

Consideration and Passage by the House

Representatives Sam Watson (R-172nd), John Corbett (R-174th), Penny Houston (R-170th), Shaw Blackmon (R-146th), Bonnie Rich (R-97th), and Gregg Kennard (D-102nd) sponsored HB 586, also called the "Georgia Economic Recovery Act of 2021," and were instrumental in its passage.²⁶ The bill was placed in the House hopper on February 22, 2021.²⁷ The House read the bill for the first time on

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February 23, 2021, and for the second time on February 24, 2021.²⁸ Subsequently, the House referred the bill to the Ways and Means Committee, which reported favorably on February 26, 2021, by introducing a substitute that expanded some of the proposed sales exemptions.²⁹ Notably, the substitute removed the exclusion of Joint County...