Our recent real estate and construction survey focused primarily on Metro Atlanta, but Georgia’s small towns are getting some attention, too. This year the State Legislature approved House Bill 73, a tax credit created to help revive fading rural towns. Known as the RURAL (Revitalizing Underdeveloped Rural Areas Legislation) bill, the intent behind the incentive is to build new opportunities for rural economic development.
What is considered a rural area or revitalization zone?
The population in a qualified town must not exceed 15,000. According to the Georgia Department of Economic Affairs, there are 473 towns in Georgia with a population of 15,000 or less. In addition, there must be a concentration of commercial buildings that are at least 50 years old and the local government must provide evidence of economic distress. Economic distress is based on poverty rate, downtown vacancies or blight, among other criteria.
The approved bill offers incentives for job creation, commercial investment and business activity in rural downtown areas through a series of tax credits: a job tax credit, an investment tax credit and a rehabilitation tax credit. Those investing in a qualified area must do one of three things:
- Buy real estate
- Revitalize real estate
- Employ workers in that rural and qualified area
The Job Tax Credit (JTC) provides $2,000 per new full-time equivalent job per year. This means two or more employees must work at least 40 hours per week. The JTC lasts up to 5 years and is not to exceed $200,000 total or $40,000 per year. This credit is for the small business owner who opens a business and creates jobs.
The Investment Credit will be 25% of the building purchase price, which is not to exceed $125,000 total or $25,000 per year. This credit is for people who purchase a building downtown. The Investment Credit cannot be taken unless jobs are created and JTC is taken.
The Rehabilitation Credit is equivalent to 30% of the qualified rehabilitation, not to exceed $150,000 total or $30,000 per year. This credit is to offset development costs associated with the rehabilitation of a certified investor property.
Multiple sources can benefit from the RURAL bill or small town tax credit. For example, a new bakery might provide job tax credits for the local business owners, an investment tax credit to the investor and rehabilitation credit to the contractor. However, keep in mind that these tax credits work off one another.
Much like the Opportunity Zones and Tourism Development Act, the RURAL bill will be a joint responsibility between the Georgia Department of Community Affairs (DCA) and the Georgia Department of Economic Development (GDED). Commissioners from both the DCA and GDED will review Revitalization Zone requests, while the DCA will oversee the program for approved areas. The duration of the credits lasts five years.
If you are considering purchasing or developing property in the near future, give us a call. It is important to be aware of your tax credit options as you seek to increase your business as well as the state’s economic development. As with any tax matter, you should consult with your tax advisor prior to taking any action. For the full text of House Bill 73, visit this page.