Thursday, Governor Nathan Deal lauded the passage of the tax reform legislation (HB 386). The bill will undoubtedly have several implications for Georgia manufacturers and the forestry industry in the future.
The state sales tax on energy used in manufacturing featured in the bill was among the many incentives that lured Caterpillar’s new manufacturing plant in Athens, Georgia.
At least with respect to the energy sales tax paid by manufacturers, Georgia will no longer be at a competitive disadvantage when it comes to attracting new jobs and investments. Arguably, the exemption could even help retain existing jobs for some manufacturers.
“This package is good news,” Governor Deal said. “It means our state is more competitive and is a state where we can grow jobs.”
HB 386, which passed by overwhelming margins in both the House and the Senate, provides for a 4-year phase in of the energy sales tax exemption. The bill provides a mechanism for local governments to retain the local option sales tax components (as an excise tax).
In order to do so, the bill requires that the county or city to take affirmative action to do so by using a local referendum. This is a major victory for manufacturers, the mining industry, the poultry industry and agricultural and forestry-related industries.
Also important to the forestry community, the legislation maintains all of the sales tax exemptions on agricultural and forestry inputs, such as fertilizer, pesticides, fuel used for irrigation, etc.
The legislation will also broaden the sales tax exemptions for all other agriculture inputs, such as farm equipment parts, implements, farm use equipment, and it will establish a sales tax exemption on diesel, gasoline and other energy used in agricultural production or processing starting January 1, 2013.
Unfortunately for forest and farm conservation, HB 386 places some limitations on qualifying for the conservation tax credit program when placing property in a conservation easement.
Eligibility has been tightened, limitations have been placed of the amount of tax credits available in some instances, and the transferability option has also been limited. Even so, at one point it was feared that the fate of the conservation tax program could have been much worse.
On a cautionary note, there are undoubtedly going to be many questions raised concerning the implementation of HB 386. Many of these questions will have no final answer until the Department of Revenue completes its writing of the rules associated with the reforms, a mammoth task given the staff and resource limitations of the department and the complexity of the legislation.
The Georgia Forestry Association will follow the rulemaking process as carefully as we did with the legislation to be sure that the most favorable regulatory treatment is contained in the rules that will guide implementation and enforcement of those aspects of the bill that impact GFA members.