Weekly Update March 1, 2013

HB 395 proposes to create a costly new tax break for insurance companies that invest in “qualified community development entities” (CDEs). The bill passed the House Insurance committee this week. Dubbed the “New Market Tax Credit (NMTC) Program,” the proposal is modeled in part on a similar federal tax credit designed to increase private sector investment in economically distressed areas. If approved, the tax break would allow Georgia insurance companies to claim up to $45 million in tax credits over five years by investing in CDEs. State-certified CDEs are private companies that would invest the money in Georgia businesses. That investment would theoretically leveraging additional private dollars, creating jobs in the process. The Georgia Budget and Policy Institute will publish a full analysis of the bill next week.

SB 224 calls for the creation of a new program called “Invest Georgia,” designed to increase Georgia businesses’ access to venture capital. The bill received a favorable vote in the Senate Insurance and Labor Committee Thursday and moved closer to a floor vote. The legislation is almost a mirror version of HB 285, which proposes the same concept but appears to be stalled in the House. Both versions of the bill would fund the new program at $100 million over five years, though they differ on how that would be done:  HB 285 would fund Invest Georgia by selling tax credits to insurance companies in exchange for cash, while SB 224 would fund it mainly through direct appropriations. We will publish a full analysis of the legislation next week.

HB 266, known as the Internal Revenue Code update, is this year’s version of annual legislation where the General Assembly adapts Georgia’s tax code to relevant tax changes enacted on the federal level. The bill was approved by the Senate Friday after passing the House earlier in the week. This year, the federal “fiscal cliff’ agreement created dozens of federal tax revisions that will impact Georgians’ state tax bills. The changes will cause a revenue loss of $79 million over the next five budget years, most of it in 2014. However, in a highly unusual move, a Senate committee altered the bill by attaching a completely unrelated piece of legislation, HB 80, to it before passage. Due to its complexity, the IRC update is rarely, if ever, changed from what the House’s tax-writing committee proposes.

HB 80 is a series of mostly technical changes to Georgia’s new system of taxing cars that proposes to reduce the tax liabilities of Georgians who lease cars. The bill passed the House last week and passed Senate Friday after senators merged it with HB 266 (see previous summary). While the highest profile change to HB 80 is the section about vehicle leases, several other changes that will affect how the new tax system is implemented. In its original form, the new law would have brought in about $141 million in new revenue over five years. But because of a last minute change by the senate to how some car lenders are taxed it may wind up reducing revenues by up to $100 million over five years.

Legislation Progress Report from Previous Updates

HB 164 would extend until 2015 the sales tax exemption for engines and parts used in the maintenance of aircraft not registered in Georgia. The bill passed the House Ways and Means Committee Thursday.

Created in 2007, the exemption allows companies that have airplanes serviced in Georgia to avoid paying sales taxes on the parts involved in that repair. Savannah-based Gulfstream and a few smaller aerospace companies would benefit if the bill passes. It is expected to cost the state between $5 million and $6 million per year.

HB 193 would restore sales and use tax exemptions for qualified food banks and certain nonprofit health centers. The bill cleared the House Ways and Means committee Thursday. Both were exempted from state sales and use taxes prior to 2011, when their specific exemptions were allowed to expire. The restored exemptions would run from 2013 to 2016 at a combined estimated cost of about $2 million per year.

HB 272 would extend Georgia’s Angel Investor Tax Credit, which allows businesses and individuals to reduce their tax liability in exchange for investing in Georgia-based startup companies. The bill cleared the House Ways and Means committee Thursday. Currently scheduled to expire at the close of 2013, the new bill would extend the credit through 2015 while reducing its maximum annual cost to $5 million from $10 million.

HB 128, or the “Georgia Renaissance Act,” proposes the creation of $30 million worth of tax credits to help revitalize Georgia’s municipal downtowns. The bill had a first hearing before the Income Tax Subcommittee of the House Ways and Means Committee earlier in session but has not received a second hearing. It would become Georgia’s third largest economic development tax credit. For additional information, download the HB 128 (LC 34 3600) Bill Analysis.

HB 140 proposes to significantly expand Georgia’s controversial tax credit scholarship for private school students by increasing its annual cap to $80 million from $50 million. It had a first hearing before the Income Tax Subcommittee of House Ways and Means Committee earlier this session but has not received a second hearing. For additional information, download the HB 140 Bill Analysis.

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