Form It-Rd - Research Tax Credit Page 2
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2IT-RD (10/08)
Department of Revenue
Income Tax Division
Example
Section 48-7-40.12
This example is based on the following assumptions:
1. The current year's (2001) Georgia Taxable Net Income = $800,000
2. 2001 Research expenses in Georgia
=$325,000
3. The total of all other credits was
=$ 30,000
4. The credit carry-over from prior year is
=$ 10,000
Section 2. Ratio Calculation
(A) Previous 3 Years
(B) Georgia Research Expense
(C) Georgia Taxable
Equals Ratio (D)
Net Income
(Col. B - Col.C)
2000
300,000
750,000
0.4000
1999
200,000
600,000
0.3333
1998
150,000
500,000
0.3000
(E) Total from Column (D)
1.0333
Section 3. Calculation of Average
Total from (E)
Divided by 3
Equals Average Research Ratio (F)
1.0333
0.3444
3
Section 4. Calculation of Base Amount
Current Year Georgia Taxable Net Income
Multiplied by (F) or .300, whichever is less
Base Amount (G)
$800,000
$240,000
0.300
Section 5. Calculation of Tax Credit
Current Year Research
Minus Base Amount (G)
Equals (H)
Multiply (H) by .10
Equals Tax Credit (I)
Expense
$
325,000
$
240,000
$
85,000
$
8,500
0.10
Section 6. Application of Credit and Carry-Forward
$
48,000
(1) Current Tax Liability without any Credits
$
30,000
(2) Value of All other Credits Claimed
$
18,000
(3) Subtract line (2) from line (1), this is the remaining tax liability
$
9,000
(4) Multiply line (3) by 50%, maximum credit allowed
$
8,500
(5) Enter Research Tax Credit from line (I) above
$
10,000
(5a) Enter amounts of tax credit carried over from prior year
(6) Total available Research Tax Credit, line 5 & 5a
$
18,500
$
9,000
(7) Credit to be claimed on return, lessor or line (4) or line (6)
$
9,500
(8) If line (6) exceeds line (7), Unused Credit or Carry-Forward
In the instance of an S Corporation or other pass-through entity, the credit on line 7 above would first be applied to any income
tax at the entity level and then apportioned to shareholders or partners. For the purposes of the calculation, such a business
enterprise’s “Georgia taxable net income” shall be its total net income as allocated and /or apportioned to Georgia. The term
“business enterprise” is defined in O.C.G.A. § 48-7-40-.12. Column (C) Section 2 must show positive Georgia Taxable Net
Income for all three years in order to qualify. (See Reg. 560-7-8-.42)
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