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Sunday, March 14, 2010

Citique/Analysis of Georgia Jobs Bill of 2010 (HB 1023)

I have had several people ask about the Georgia Angel Tax Credit bill since the BBJ article, so I thought this was as good of a place as any to cover it.

Georgia HB 1023 - Jobs, Opportunity, and Business Success Act of 2010 also known as the Jobs Bill of 2010 is designed to use tax credits, cuts and incentives to create, expand and attract new businesses. The bill has several parts, namely:

1. Creation of the “Year for Georgia Entrepreneurs”: Allows Georgians the opportunity to start a new business with no state fees.

2. “Angel Investor” Tax Credit: An income tax credit of up to 50% of an investment made in small or start up businesses with 20 or fewer employees. The income tax credit would be available 2 years from the date of investment. The total “Angel Investor” tax credit pool would be limited to $10 Million per year (adjusted for inflation) and dispensed on a first come-first served basis.

3. Quarterly Credit Towards Unemployment Insurance Tax: For each eligible employee hired who is receiving State Unemployment benefits, a company will receive a $25-125 quarterly credit towards their unemployment tax.

4. $2,400 Tax Credit for the Hiring of the Most Difficult to Employ: Any Georgia company which hires a person, in a net new job, who has been eligible to receive unemployment benefits for at least 13 weeks, can receive a tax credit of $2,400 after 24 months of consecutive employment.

5. Elimination of the Net Worth Tax: The net worth or intangible tax (held over from a 1930’s law and only retained by a handful of states) that taxes wealth accumulation is eliminated.

6. A Triggered 50 Percent Reduction of the Capital Gains Tax for all Georgia Taxpayers: Georgia currently has the 15th highest Capital Gains tax in the country and the 2nd highest in the Southeast, with two neighboring states at 0%.

My Thoughts -

I like the elimination of the state fees for creation of an entity, that is a small hurdle, but can be a big deal to small businesses and I think most businesses would be better served in a liability limiting entity rather than as a sole proprietorship.

I would like to see some narrowing of the "qualifying business" definition for purposes of the angel tax credit, mainly to include some version of a related party exclusion. Otherwise, I think it is at serious risk of being somewhat wasted and used in intra-family gifting/estate planning strategies.

Also, the new jobs creation/hiring credit is probably a bit ill conceived, since I doubt many small businesses will let a $2400 tax credit (or similar stipends) drive hiring decisions.

Overall though, Alabama could well use a similar bill and it takes guts to make a proposal (any proposal) because it is some much easier to sit on the sidelines and complain. We should support those that are trying to come up with good solutions and applaud those efforts.

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