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Georgia Hurricane Timber Tax Credits: Limited Opportunity

The State of Georgia has been out front in helping businesses affected by  Hurricane Michael, which hit the state in October 2018 and damaged an estimated 2 million acres of timberland. To help property owners and aid in reforestation, the Georgia legislature enacted a special refundable timber tax credit for landowners who replant timber on their property.

The Georgia Department of Revenue (DOR) has opened the pre-approval process for credit applications. A taxpayer seeking pre-approval must file electronically through the Georgia Tax Center, and a corporate, fiduciary, partnership/LLC or individual income tax account is required.

Applications being accepted through May 30th

The Georgia DOR has adopted regulation §560-7-8-.65, which provides detailed rules for claiming and using the credit. The credit is claimed on Form IT-TIM-AP. A separate form must be used for each eligible county (see list below). The first round of applications must be submitted by May 30, 2019. Within 30 days of submission, the DOR will let the taxpayer know if the application is complete. Taxpayers who submit a complete application will be notified by June 30, 2019, of the tax credits approved and allocated to them.

If all $200 million of credits are not claimed in the first round, the second round of applications will be accepted between July 1, 2019, and December 31, 2019.

Replanting Requirements

Taxpayers who receive pre-approval for the credit must certify that they have replanted sufficient timber to yield at maturity at least 90% of the value of the timber casualty loss claimed. This 90% requirement must be met separately for each county.

Carryforwards, Passthroughs

Unused credits can be carried forward for 10 years. When the taxpayer is a passthrough entity and has no income tax liability of its own, the tax credits will pass to its members, shareholders, or partners. The credit forms will initially be filed with the tax return of the entity to establish the amount of the credit available for pass through. The credit will then pass through to shareholders, members, or partners to be applied against their individual tax liability. If the property is leased by the taxpayer, the taxpayer must be eligible to claim the federal casualty loss deduction for the timber property, and the owner of the property cannot claim the credit.

Selling the Credits

A taxpayer may sell or transfer any tax credit not used in full. The taxpayer may only make a one-time sale to a single Georgia taxpayer and must sell the credit for at least 60% of the credit amount.

Example: Taxpayer A receives pre-approval. Taxpayer A completes the replanting of timber in year 1 and submits the required reporting in year 1. Taxpayer A claims a $100,000 credit on Taxpayer A’s year 1 income tax return. In year 1, Taxpayer A sells another $100,000 of the credit to Taxpayer B. Taxpayer B is not allowed to resell the credit since the credit can only be sold one-time.

The carry-forward period of the timber tax credit for the transferee will be the same as it was for the taxpayer. For example, if a taxpayer met the requirements for the credit in 2019 and sells the timber tax credit on February 1, 2020, the credit may be claimed by the transferee on their 2019-2029 return and the carry-forward period for this tax credit will expire on December 31, 2029.

Eligible counties

Only casualty losses that occurred between October 9, 2018, and December 31, 2018, are eligible for the credit. All tax credits must be claimed in a tax year ending on or before December 31, 2024.

Eligible timber properties must be located in the disaster area which includes the following counties:

Baker Bleckley Brooks Calhoun Clay Colquitt Crisp
Decatur Dodge Dooly Dougherty Early Grady Laurens
Lee Lowndes Miller Mitchell Pulaski Randolph Seminole
Sumter Terrell Thomas Tift Turner Wilcox Worth

 

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