Corporate Tax Reforms to Encourage New Jobs and Investment
|Wednesday, April 6, 2005||
Contact: Office of Communications 404-651-7774
Governor Signs Legislation Simplifying Georgia’s Corporate Tax System
ATLANTA, GA - Georgia companies can look forward to a simplified corporate tax system that will create jobs and expand capital investment thanks to legislation signed today by Governor Sonny Perdue. House Bill 191, the Corporate Tax Reform Bill, restructures Georgia’s corporate tax system. The legislation phases out property and payroll taxes from the current corporate tax formula over the next three years and transitions to a 100 percent sales based corporate tax in 2008.
“One of my top priorities as Governor is to create jobs and opportunity for Georgians. As a business owner, I strongly believe the best way to do that is to encourage business growth in Georgia,” said Governor Sonny Perdue. “HB191 will move Georgia to a 100 percent sales based corporate tax, benefiting companies that are looking to increase investment and expand facilities and hiring. This bill will encourage businesses to grow in Georgia.”
Georgia’s current corporate tax formula uses three factors to determine corporate taxes – payroll, property and sales. It is complicated and often discourages new hiring and investment. The current formula is also cumbersome to administer with many exceptions, allowances and special categories to be considered by the Georgia Department of Revenue (DOR). These reforms modernize and streamline the current corporate tax formula by removing the payroll and property factors which penalize businesses for investing in new facilities and hiring more employees.
Another provision of the bill will close a loophole that currently exists in corporate tax law allowing companies to expense royalty payments for their own intellectual property to an affiliated company located outside Georgia, thus reducing their taxable income in Georgia. According to the DOR, the closure of this loophole is expected to save the state $40 million in the first year. Currently 14 states have already eliminated the loophole and 20 other states have tax codes that make the closure unnecessary.
Representative Larry O’Neal authored the bill, and carried it in the legislature along with Senator Casey Cagle and Representative Richard Royal. Georgia’s Chief Financial Officer Tommy Hills, DOR Commissioner Bart Graham and Department of Economic
Development Commissioner Craig Lesser helped draft the bill and worked with the General Assembly to ensure its passage. The bill is supported by the Georgia Chamber of Commerce, the Metro Atlanta Chamber of Commerce and many business organizations and leaders throughout the state.
Governor Perdue signed this bill during a ceremony at the Metro Atlanta Chamber of Commerce headquarters in downtown Atlanta.