After an asset acquisition, can the buyer continue the seller's Georgia Quality Jobs Tax Credit and Jobs Tax Credit carryforwards?

Plain-English summary

A parent formed Subsidiary 1 to acquire another taxpayer's assets, take over its contracts, continue its Georgia operations, and retain substantially all of the jobs that had generated Quality Jobs Tax Credits (QJTC) and Jobs Tax Credits (JTC). A related Subsidiary 2 handled payroll and charged those costs to Subsidiary 1. The group asked whether Subsidiary 1 could use the acquired taxpayer's existing credits and carryforwards.

The Department treated the two credit programs differently:

• Quality Jobs Tax Credit: no transfer. O.C.G.A. § 48-7-40.17 did not contain a sale, merger, acquisition, or bankruptcy provision allowing the unused credit to pass to a transferee. The acquired taxpayer's QJTC and carryforward were lost and could not be used by Subsidiary 1 or another taxpayer. If Subsidiary 1 independently qualified for QJTC, it still could not count the jobs previously claimed by the acquired taxpayer because they were transferred jobs.
• Jobs Tax Credit: transfer allowed conditionally. O.C.G.A. § 48-7-40(g) and the cited regulations allowed the acquired taxpayer's unused JTC carryforward to transfer if every statutory and regulatory requirement was satisfied. Subsidiary 1 could also continue earning JTC in later years for full-time jobs the acquired taxpayer created, to the same extent the seller could have, if Subsidiary 1 maintained those jobs and met all other requirements.

What this means for you

Buyers evaluating tax-credit value

Do not treat Georgia job-related credits as interchangeable deal assets. In this ruling, the QJTC disappeared in the acquisition, while the ordinary JTC had an express statutory and regulatory continuation path. Identify the exact credit and its transfer language before assigning value to a carryforward.

Successors retaining the seller's workforce

Keeping the same jobs was not enough to preserve QJTC. For JTC, however, maintaining the seller-created full-time jobs was central to continuing future-year eligibility, along with satisfying every other applicable requirement.

Accountants and tax professionals

Track the seller's unused carryforward separately from credits earned after the acquisition. The ruling conditions JTC transfer and continuation on statutory and regulatory compliance, and says a successor claiming its own QJTC may not count jobs already claimed by the acquired taxpayer.

Common questions

Q: Can an asset buyer use the seller's unused Quality Jobs Tax Credit?

A: No. The Department said § 48-7-40.17 then lacked a transfer provision, so the QJTC was lost in the acquisition and could not be used by any taxpayer.

Q: Can the buyer start a new QJTC claim using the acquired employees?

A: Not for the jobs previously claimed by the seller. The ruling treated those positions as transferred jobs and excluded them from the buyer's own QJTC calculation.

Q: Can the seller's unused Jobs Tax Credit carryforward transfer?

A: Yes, if all statutory and regulatory requirements are satisfied. The ruling relied on the express continuation rule in O.C.G.A. § 48-7-40(g) and related regulations.

Q: Can the buyer earn Jobs Tax Credits in later years for jobs the seller created?

A: Yes, to the same manner and extent the seller could have, provided the buyer maintains those full-time jobs and meets all other legal and regulatory requirements.

Q: Did placing payroll and operations in separate related subsidiaries change the result?

A: The facts disclosed that structure, but the holdings turned on each credit program's transfer rules, the status of the jobs, and the successor's compliance with the applicable requirements.

Q: Can another buyer rely on this ruling?

A: No. The ruling says it has no precedential value except for the recipient and the specific transaction, and it may become invalid if the circumstances materially change.

Citations and references

Statutes and regulations:

• O.C.G.A. § 48-7-40.17(b) -- Quality Jobs Tax Credit
• O.C.G.A. § 48-7-40(g) -- unused Jobs Tax Credit transfer and continuation
• Revenue Regulation 560-7-8-.51(2)(b) -- new quality job definition
• Revenue Regulation 560-7-8-.51(7) -- claiming the Quality Jobs Tax Credit
• Revenue Regulation 560-7-8-.36(10) -- claiming the Jobs Tax Credit
• Revenue Regulation 560-7-8-.36(9)(d) -- business succession rule cited in the ruling
• Department of Community Affairs Regulation 110-9-1-.03(9) -- Jobs Tax Credit continuation after succession

Source

• Landing page: Georgia Income Tax Letter Rulings
• Original PDF: LR IT-2016-01

Original ruling text

Georgia Letter Ruling:
LR IT-2016-01
Topic: Quality Jobs Tax Credit and Jobs Tax Credit
Date Issued:
March 15, 2016
This letter is in response to your letter requesting a ruling that Subsidiary 1 can claim Acquired Taxpayer’s quality
jobs tax credit and jobs tax credit, and Acquired Taxpayer’s quality jobs tax credit carry forward and jobs tax credit
carry forward.
Facts as Presented by the Taxpayer
Your letter to the Department states: “Parent and its related entities are companies .
“.
“ Parent created a new company, Subsidiary 1, for the purpose of acquiring Acquired Taxpayer’s assets,
taking over Acquired Taxpayer’s supply and other contracts and continuing the business of operations of Acquired
Taxpayer by using Acquired Taxpayer’s assets and employing certain of Acquired Taxpayer’s employees. All of the
payroll and payroll-related activities for Subsidiary 1 are performed by Subsidiary 2, and Subsidiary 1 gets cross
charged for the payroll cost via intercompany transactions. Though they are separate entities, they are related; both
Subsidiary 2 and Subsidiary 1 are wholly-owned subsidiaries of Parent. Parent opted to separate the payroll functions
and business operations related to the Georgia operations into different entities for business purposes. In Georgia,
Parent continued operations into different facilities, including an facility located in , Georgia and
a facility in , Georgia. By doing so, Parent protected substantially all of the jobs that Acquired Taxpayer had
previously brought to Georgia; the same jobs that gave rise to the Georgia QJTC and JTC that are the subject of this
ruling request. Despite the fact that the payroll functions and business operations have been placed into two separate
but related entities, the substance of the arrangement has not changed and Parent’s intention of continuing operations
in Georgia and retaining substantially all of the jobs initially created by Acquired Taxpayer remains the same.”
Background of the Georgia Credits in Question
“ Acquired Taxpayer applied for and qualified for two Georgia tax credits; the Georgia QJTC and the
Georgia JTC. The information about the qualifying jobs for tax years through are as follows:
Quality Jobs Tax Credit

Jobs Tax Credit

Issue # 1
Whether Subsidiary 1 can claim Acquired Taxpayer’s quality jobs tax credit and whether Subsidiary 1 can utilize
Acquired Taxpayer’s quality jobs tax credit carry forward?
Issue # 2
Whether Subsidiary 1 can claim Acquired Taxpayer’s jobs tax credit and whether Subsidiary 1 can utilize Acquired
Taxpayer’s jobs tax credit carry forward?
Authorities
O.C.G.A. § 48-7-40.17 (b) provides that:
“(b) A taxpayer establishing new quality jobs in this state or relocating quality jobs into this state
which elects not to receive the tax credits provided for by Code Sections 48-7-40, 48-7-40.1, 48-7-

LR IT-2016-01
Quality Jobs Tax Credit and Jobs Tax Credit
March 15, 2016
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40.2, 48-7-40.3, 48-7-40.4, 48-7-40.7, 48-7-40.8, and 48-7-40.9 for such jobs and investments
created by, arising from, related to, or connected in any way with the same project and, within one
year of the first date on which the taxpayer pursuant to the provisions of Code Section 48-7-101
withholds wages for employees in this state and employs at least 50 persons in new quality jobs in
this state, shall be allowed a credit for taxes imposed under this article:
(1) Equal to $2,500.00 annually per eligible new quality job where the job pays 110 percent or
more but less than 120 percent of the average wage of the county in which the new quality job is
located;
(2) Equal to $3,000.00 annually per eligible new quality job where the job pays 120 percent or
more but less than 150 percent of the average wage of the county in which the new quality job is
located;
(3) Equal to $4,000.00 annually per eligible new quality job where the job pays 150 percent or
more but less than 175 percent of the average wage of the county in which the new quality job is
located;
(4) Equal to $4,500.00 annually per eligible new quality job where the job pays 175 percent or
more but less than 200 percent of the average wage of the county in which the new quality job is
located; and
(5) Equal to $5,000.00 annually per eligible new quality job where the job pays 200 percent or
more of the average wage of the county in which the new quality job is located; provided, however,
that where the amount of such credit exceeds a taxpayer's liability for such taxes in a taxable year,
the excess may be taken as a credit against such taxpayer's quarterly or monthly payment under
Code Section 48-7-103 but not to exceed in any one taxable year the credit amounts in paragraphs
(1) through (5) of this subsection for each new quality job when aggregated with the credit applied
against taxes under this article. Each employee whose employer receives credit against such
taxpayer's quarterly or monthly payment under Code Section 48-7-103 shall receive a credit against
his or her income tax liability under Code Section 48-7-20 for the corresponding taxable year for
the full amount which would be credited against such liability prior to the application of the credit
provided for in this subsection. Credits against quarterly or monthly payments under Code Section
48-7-103 and credits against liability under Code Section 48-7-20 established by this subsection
shall not constitute income to the taxpayer. For each new quality job created, the credit established
by this subsection may be taken for the first taxable year in which the new quality job is created
and for the four immediately succeeding taxable years; provided, however, that such new quality
jobs must be created within seven years from the close of the taxable year in which the taxpayer
first becomes eligible for such credit. Credit shall not be allowed during a year if the net
employment increase falls below the 50 new quality jobs required. Any credit received for years
prior to the year in which the net employment increase falls below the 50 new quality jobs required
shall not be affected except as provided in subsection (f) of this Code section. The state revenue
commissioner shall adjust the credit allowed each year for net new employment fluctuations above
the 50 new quality jobs required.”
Revenue Regulation 560-7-8-.51 (2)(b) provides that:
“(b) New quality job. The term ‘new quality job’ means employment for an individual located in
this state which:

1. Has a regular work week of thirty (30) hours or more;
2. Is not a job that is or was already located in Georgia regardless of which taxpayer the individual
   performed services for;

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Quality Jobs Tax Credit and Jobs Tax Credit
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3. Pays at or above 110 percent of the county average wage. For purposes of determining the 110%
   requirement in years one through seven, the job must pay at or above 110% of the county average
   wage as reported in the most recent annual issue of the Georgia Employment and Wages Averages
   Report of the Department of Labor that is available as of the last day of the tax year in which the
   taxpayer first elected jobs to qualify as new quality jobs; thus the 110% county average wage
   threshold remains constant over the life of the credit; and
4. For a taxpayer that initially claimed the credit in a taxable year beginning before January 1, 2012,
   the job has no predetermined end date.”
   Revenue Regulation 560-7-8-.51 (7) provides that:
   “Claiming the credit. The quality jobs tax credit shall be claimed on an income tax return for the
   first taxable year in which the taxpayer first becomes eligible for the credit. The quality jobs tax
   credit must be claimed within one year of the earlier of the date the original return was filed or the
   date such return was due, including extensions.
   (a) Income tax. For a taxpayer to claim the quality jobs tax credit, the taxpayer must submit Form
   IT-QJ and a listing of new quality jobs employees, which includes the name of the employee, social
   security number, wages, and any other information that the Commissioner may request, with the
   taxpayer's Georgia income tax return.”
   O.C.G.A. § 48-7-40 (g) provides that:
   “(g) The sale, merger, acquisition, or bankruptcy of any business enterprise shall not create new
   eligibility in any succeeding business entity, but any unused job tax credit may be transferred and
   continued by any transferee of the business enterprise. The commissioner of community affairs
   shall determine whether or not qualifying net increases or decreases have occurred and may require
   reports, promulgate regulations, and hold hearings as needed for substantiation and qualification.”
   Revenue Regulation 560-7-8-.36 (10) provides that:
   “Claiming the Credit. For a business enterprise to claim the job tax credit, the business enterprise
   must submit Form IT-CA with its Georgia income tax return for each year in which the credit is
   claimed. For any business enterprise that creates a new year one under DCA regulations for any
   taxable year beginning on or after January 1, 2009, the job tax credit must be claimed within one
   year of the earlier of the date the original return was filed or the date such return was due, including
   extensions.”
   Revenue Regulation 560-7-8-.36 (9)(d) provides that:
   “(c) Sale, Merger, Acquisition, Reorganization, or Bankruptcy of a Business
   Enterprise. The sale, merger, acquisition, or transfer or liquidation or bankruptcy of a business
   enterprise will not create new eligibility in any succeeding taxpayer, but any unused credits may be
   transferred and continued by any transferee of the taxpayer. When a business enterprise merely
   changes its name, recapitalizes, or liquidates unrelated subsidiaries; however, no new eligibility
   need be established.”
   Department of Community Affairs Regulation 110-9-1-.03 (9) provides that:
   “(9) The Sale, Merger, Acquisition, Reorganization, or Bankruptcy of any Business Enterprise
   Shall Not Create New Eligibility in any Succeeding Business Entity. The sale, merger,
   acquisition, reorganization, or bankruptcy of any business enterprise shall not create new eligibility
   in any succeeding business entity. Any unused job tax credit may be transferred by a business

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Quality Jobs Tax Credit and Jobs Tax Credit
March 15, 2016
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enterprise to any transferee of that business enterprise. New tax credits may be earned by any
transferee of a business enterprise for new, full-time jobs created by the original business enterprise
as long as those new, full-time jobs are maintained by the transferee of the business enterprise and
as long as the transferee meets other applicable requirements in law and regulation.”
Ruling
Ruling on Issue #1
The Department’s records indicate that Acquired Taxpayer claimed the quality jobs tax credit by attaching Form ITQJ and the required employee information to their Georgia income tax returns. No quality jobs tax credit
was utilized by Acquired Taxpayer against income tax liability on these income tax returns. Based on the facts stated
herein, it is the opinion of this Department that Subsidiary 1 cannot claim Acquired Taxpayer’s quality jobs tax credit
and cannot utilize Acquired Taxpayer’s quality jobs tax credit carry forward. Unlike certain other Georgia income
tax credit statutes, the quality jobs tax credit statute, O.C.G.A. § 48-7-40.17, does not contain the sale, merger,
acquisition, or bankruptcy provision which allows unused income tax credit to be transferred and continued by the
transferee. Therefore, when there is a sale, merger, acquisition, or bankruptcy of the taxpayer, the quality jobs tax
credit cannot be transferred and used by the transferee. When there is a sale, merger, acquisition, or bankruptcy of
the taxpayer, the quality jobs tax credit is lost and cannot be utilized by any taxpayer.
Please note that if Subsidiary 1 meets all the statutory and regulatory requirements for the quality jobs tax credit and
claims the credit, they cannot include any of the jobs claimed by Acquired Taxpayer. (The jobs claimed by Acquired
Taxpayer are transferred jobs and cannot be included by Subsidiary 1 if Subsidiary 1 meets the quality jobs tax credit
requirements on its own.)
Ruling on Issue #2
The Department’s records indicate that no jobs tax credit was utilized by Acquired Taxpayer against income tax
liability on their Georgia income tax returns. Based on the facts stated herein, it is the opinion of this
Department that if all statutory and regulatory requirements of the jobs tax credit have been satisfied then the unused
jobs tax credit carry forward which was generated by Acquired Taxpayer may be transferred to Subsidiary 1.
For future years, jobs tax credit can be earned by Subsidiary 1 for full-time jobs created by Acquired Taxpayer as long
as those jobs are maintained by Subsidiary 1. Therefore, Subsidiary 1 will be eligible to claim jobs tax credits in tax
years for jobs created by Acquired Taxpayer in the same manner and to the same extent as Acquired Taxpayer
would have been eligible to claim such credits, provided Subsidiary 1 maintains the jobs and meets all other applicable
requirements in law and regulation.
The opinions expressed in this ruling are based upon the information contained in your request and are limited to the
specific transactions and taxpayer in question. A ruling has no precedential value except to the person to whom the
ruling was issued and then only for the specific transaction addressed in the ruling. Should the circumstances
regarding this transaction change, or differ materially from those represented, then this ruling may become invalid. In
addition, please be advised that subsequent statutory or administrative rule changes or judicial interpretations of the
statutes and rules upon which this advice is based may subject similar future transactions to a different tax treatment
than those expressed in this response.