SB 476: "Income Tax Reduction Act of 2026"; enact

Senate Bill 476

By: Senators Tillery of the 19th, Walker III of the 20th, Anavitarte of the 31st, Hufstetler of the 52nd, Robertson of the 29th and others

AS PASSED SENATE

A BILL TO BE ENTITLED

AN ACT

To amend Title 33 and Title 48 of the Official Code of Georgia Annotated, relating to insurance and revenue and taxation, respectively, so as to reduce the personal income tax rate; to remove provisions relative to annual reductions of the income tax; to reduce the rates of taxation on corporate and partnership income; to increase the amount of the standard deduction from state taxable income for individuals; to provide a sunset date for all credits against Georgia taxable net income; to repeal the abatement or reduction of gross premium tax levied against insurance companies, the dollar-for-dollar credit against state income tax liability for banks and other financial institutions, credits for manufacturers of medical equipment and supplies, pharmaceuticals, medicine, and personal protective equipment, optional income tax credits for existing manufacturing and telecommunications facilities in tier 3 and 4 counties, credits for alternative fuel, low-emission, and zero-emission vehicles and electric vehicle chargers, businesses headquartered in this state, businesses engaged in manufacturing cigarettes for exportation, business enterprises that purchase or lease a motor vehicle to provide transportation for employees, base year port traffic increases, and teleworking expenses; to modify such credits for low-income housing and qualified investments in a research fund; to repeal the state sales tax and use exemptions for the rental of videotape or motion picture film, the sale of aircraft, watercraft, and motor vehicles under certain circumstances; to repeal such exemptions for the sale to licensed commercial fishermen of bait for taking crabs, printed advertising inserts or supplements, the sale of machinery or equipment used to reduce air or water pollution, high-technology company computer equipment sales, data center equipment, sales of machinery, equipment, and materials used in the construction or operation of certain buildings, the sale of natural or artificial gas under certain circumstances, and the maintenance, refitting, and repair of any boat; to allow for the continued use of certificates of exemption issued prior to the date of repeal as they relate to certain sales and use tax exemptions; to provide for conforming changes; to provide for related matters; to provide for an effective date and applicability; to provide a short title; to repeal conflicting laws; and for other purposes.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:

PART I

SECTION 1-1.

This Act shall be known and may be cited as the "Income Tax Reduction Act of 2026."

PART II

SECTION 2-1.

Article 2 of Chapter 7 of Title 48 of the Official Code of Georgia Annotated, relating to the imposition, rate, computation, exemptions, and credits relative to income taxes, is amended by revising subsection (a.1) of Code Section 48-7-20, relating to individual tax rates, credit for withholding and other payments, and applicability to estates and trusts, as follows: "(a.1)(1) On and after January 1, 2025 For taxable years beginning on or after January 1, 2026, the tax imposed pursuant to subsection (a) of this Code section shall be 5.19 4.99 percent. for taxable years beginning on or after January 1, 2025; provided, however, that such rate shall be reduced by 0.10 percent annually beginning on January 1, 2026, until the rate reaches 4.99 percent, provided that such annual reductions in the tax rate shall be subject to delays as provided in paragraph (2) of this subsection.

(2) Each prospective annual reduction in the tax rate that would otherwise occur as provided in paragraph (1) of this subsection shall be delayed by one year for each year that any of the following are true as of December 1:

(A) The Governor's revenue estimate for the succeeding fiscal year is not at least 3 percent above the Governor's revenue estimate for the present fiscal year;

(B) The prior fiscal year's net revenue collection was not higher than each of the preceding three fiscal years' net tax revenue collection; or

(C) The Revenue Shortfall Reserve provided for in Code Section 45-12-93 does not contain a sum that exceeds the amount of the decrease in state revenue projected to occur as a result of the prospective reduction in the tax rates set to occur the following year.

(3) The Office of Planning and Budget shall make the determinations necessary to implement the provisions of paragraph (2) of this subsection and shall report its determinations by December 1 of each year to the department, the Speaker of the House of Representatives, the President of the Senate, and the chairpersons of the House Appropriations Committee, the House Ways and Means Committee, the Senate Appropriations Committee, and the Senate Finance Committee. This paragraph shall not be applicable after the final reduction to the rate of 4.99 percent occurs."

SECTION 2-2.

Said article is further amended by revising subsection (a) and division (b)(7)(C)(ii) of Code Section 48-7-21, relating to taxation of corporations, as follows: "(a) Every domestic corporation and every foreign corporation shall pay annually an income tax on equivalent to 4.99 percent of its Georgia taxable net income at the same rate of the tax imposed on individuals under subsection (a.1) of Code Section 48-7-20 for the corresponding taxable year. Georgia taxable net income of a corporation shall be the corporation's taxable income from property owned or from business done in this state. A corporation's taxable income from property owned or from business done in this state shall consist of the corporation's taxable income as defined in the Internal Revenue Code of 1986, with the adjustments provided for in subsection (b) of this Code section and allocated and apportioned as provided in Code Section 48-7-31." "(ii) Notwithstanding the provisions of subparagraph (B) of this paragraph, an electing Subchapter 'S' corporation, with respect to a taxable period, shall pay an income tax on equivalent to 4.99 percent of its net income at the same rate of the tax imposed on individuals under subsection (a.1) of Code Section 48-7-20 for the corresponding taxable year as computed pursuant to this Code section, and allocated and apportioned pursuant to Code Section 48-7-31, for such taxable period, and such shareholders shall not recognize their respective share of the portion of income on which tax was actually paid pursuant to this subparagraph."

SECTION 2-3.

Said article is further amended by revising paragraph (3) of subsection (b) of Code Section 48-7-23, relating to taxation of partnerships, computation of net income, disallowance of charitable contributions, individual liability of partners, individual returns of distributive shares, taxable years, and elections, as follows: "(3) Notwithstanding subsection (a) of this Code section, an electing partnership with respect to a taxable period shall pay an income tax on equivalent to 4.99 percent of its net income at the same rate of the tax imposed on individuals under subsection (a.1) of Code Section 48-7-20 for the corresponding taxable year as computed pursuant to this Code Section section, and allocated and apportioned pursuant to Code Section 48-7-31, for such taxable period, and such partners shall not recognize their respective share of the portion of income on which tax was actually paid pursuant to this subsection."

SECTION 2-4.

Said article is further amended by revising the introductory language and paragraph (1) of subsection (a) of Code Section 48-7-27, relating to computation of taxable net income, as follows:

"(a) Georgia taxable net income of an individual shall be the taxpayer's federal adjusted gross income, as defined in the United States Internal Revenue Code of 1986, less:

(1) At the taxpayer's election, either:

(A) The sum of all itemized nonbusiness deductions used in computing such taxpayer's federal taxable income; or

(B) A standard deduction in an amount as follows:

(i) In the case of a married couple filing a joint return, $24,000.00 $100,000.00; or

(ii) In the case of a single taxpayer, head of household, or married taxpayer filing a separate return, $12,000.00 $50,000.00;"

PART III

SECTION 3-1.

Chapter 7 of Title 48 of the Official Code of Georgia Annotated, relating to general provisions relative to revenue and taxation, is amended by adding a new Code section to read as follows:

"48-7-7.

Notwithstanding any other provision of this chapter, for each taxable year beginning on or after January 1, 2032, no credit shall be allowed against the Georgia taxable net income of any:

(1) Corporation, as provided under Code Section 48-7-20;

(2) Fiduciary, as provided under Code Section 48-7-22;

(3) Partnership, as provided under Code Section 48-7-23; or

(4) Individual, as provided under Code Section 48-7-27."

SECTION 3-2.

Chapter 7A of Title 48 of the Official Code of Georgia Annotated, relating to low-income tax credit, is amended by revising Code Section 48-7A-1, which is reserved, as follows:

"48-7A-1.

Reserved This chapter shall stand repealed on December 31, 2031."

PART IV

SECTION 4-1.

Chapter 1 of Title 33 of the Official Code of Georgia Annotated, relating to general provisions relative to insurance, is amended by revising Code Section 33-1-18, relating to housing tax credit for qualified projects and rules and regulations, as follows:

"33-1-18.

(a) As used in this Code section, the term:

(1) 'Affordable housing project' means a qualified low-income housing project as that term is defined in Section 42 of the Internal Revenue Code of 1986, as amended, that is located in Georgia.

(2) 'Federal housing tax credit' means the federal tax credit as provided in Section 42 of the Internal Revenue Code of 1986, as amended.

(2)(3) 'Median income' means those incomes that are determined by the federal Department of Housing and Urban Development guidelines and adjusted for family size. (3)(4) 'Project' means a housing project that has restricted rents that do not exceed 30 percent of median income for at least 40 percent of its units occupied by persons or families having incomes of 60 percent or less of the median income or at least 20 percent of the units occupied by persons or families having incomes of 50 percent or less of the median income.

(4)(5) 'Qualified basis' means that portion of the tax basis of a qualified Georgia an affordable housing project eligible for the federal housing tax credit, as that term is defined in Section 42 of the Internal Revenue Code of 1986, as amended.

(5) 'Qualified Georgia project' means a qualified low-income building as that term is defined in Section 42 of the Internal Revenue Code of 1986, as amended, that is located in Georgia.

(b)(1) A tax credit against the taxes imposed under Code Sections 33-5-31, 33-8-4, and 33-40-5, to be termed the Georgia affordable housing tax credit, shall be allowed with respect to each qualified Georgia affordable housing project placed in service after January 1, 2001. The amount of For initial applications received by the Department of Community Affairs prior to January 1, 2027, the amount of such credit shall not exceed an amount equal to the federal housing tax credit allowed for each affordable housing project. For initial applications received by the Department of Community Affairs on or after January 1, 2027, no such credit shall, when combined with the total amount of credit authorized under Code Section 48-7-29.6, in no event exceed an amount equal to 50 percent of the federal housing tax credit allowed with respect to such qualified Georgia affordable housing project.

(2)(A) If under Section 42 of the Internal Revenue Code of 1986, as amended, a portion of any federal housing tax credit taken on a project is required to be recaptured as a result of a reduction in the qualified basis of such project, the taxpayer claiming any state tax credit with respect to such project shall also be required to recapture a portion of any state tax credit authorized by this Code section. The state recapture amount shall be equal to the proportion of the state tax credit claimed by the taxpayer that equals the proportion the federal recapture amount bears to the original federal housing tax credit amount subject to recapture. The tax credit under this Code section shall not be subject to recapture if such recapture is due solely to the sale or transfer of any direct or indirect interest in such qualified Georgia affordable housing project.

(B) In the event that recapture of any Georgia affordable housing tax credit is required, any amended return submitted to the Commissioner as provided in this Code section shall include the proportion of the state tax credit required to be recaptured, the identity of each taxpayer subject to the recapture, and the amount of tax credit previously allocated to such taxpayer.

(3) In no event shall the total amount of the tax credit under this Code section for a taxable year exceed the taxpayer's tax liability under Code Sections 33-5-31, 33-8-4, and 33-40-5. Any unused tax credit shall be allowed to be carried forward to apply to the taxpayer's next three succeeding years' tax liability. No such tax credit shall be allowed the taxpayer against prior years' tax liability.

(4) The tax credit allowed under this Code section, and any recaptured tax credit, shall be allocated among some or all of the partners, members, or shareholders of the entity owning the project in any manner agreed to by such persons, whether or not such persons are allocated or allowed any portion of the federal housing tax credit with respect to the project.

(c)(1) Except for confidential taxpayer information pursuant to Title 48, all affordable housing project records associated with this Code section shall be subject to Article 4 of Chapter 18 of Title 50, relating to open records.

(2) The commissioner and the state department designated by the Governor as the state housing credit agency for purposes of Section 42(h) of the Internal Revenue Code of 1986, as amended, shall each be authorized to promulgate any rules and regulations necessary to implement and administer this Code section."

SECTION 4-2.

Chapter 7 of Title 48 of the Official Code of Georgia Annotated, relating to income taxes, is amended by revising Code Section 48-7-29.6, relating to tax credits for qualified low-income buildings, as follows:

"48-7-29.6.

(a) As used in this Code section, the term:

(1) 'Affordable housing project' means a qualified low-income housing project as that term is defined in Section 42 of the Internal Revenue Code of 1986, as amended, that is located in Georgia.

(2) 'Federal housing tax credit' means the federal tax credit as provided in Section 42 of the Internal Revenue Code of 1986, as amended.

(2)(3) 'Median income' means those incomes that are determined by the federal Department of Housing and Urban Development guidelines and adjusted for family size. (3)(4) 'Project' means a housing project that has restricted rents that do not exceed 30 percent of median income for at least 40 percent of its units occupied by persons or families having incomes of 60 percent or less of the median income, or at least 20 percent of the units occupied by persons or families having incomes of 50 percent or less of the median income.

(4)(5) 'Qualified basis' means that portion of the tax basis of a qualified Georgia an affordable housing project eligible for the federal housing tax credit, as that term is defined in Section 42 of the Internal Revenue Code of 1986, as amended.

(5) 'Qualified Georgia project' means a qualified low-income building as that term is defined in Section 42 of the Internal Revenue Code of 1986, as amended, that is located in Georgia.

(b)(1) A state tax credit against the tax imposed by this article, to be termed the Georgia affordable housing tax credit, shall be allowed with respect to each qualified Georgia affordable housing project placed in service after January 1, 2001. The amount of For initial applications received by the Department of Community Affairs prior to January 1, 2027, the amount of such credit shall not exceed an amount equal to the federal housing tax credit allowed for each affordable housing project. For initial applications received by the Department of Community Affairs on or after January 1, 2027, no such credit shall, when combined with the total amount of credits authorized under Code Section 33-1-18, in no event exceed an amount equal to 50 percent of the federal housing tax credit allowed with respect to such qualified Georgia affordable housing project.

(2)(A) If under Section 42 of the Internal Revenue Code of 1986, as amended, a portion of any federal housing tax credit taken on a project is required to be recaptured as a result of a reduction in the qualified basis of such project, the taxpayer claiming any state tax credit with respect to such project shall also be required to recapture a portion of any state tax credit authorized by this Code section. The state recapture amount shall be equal to the proportion of the state tax credit claimed by the taxpayer that equals the proportion the federal recapture amount bears to the original federal housing tax credit amount subject to recapture. The tax credit under this Code section shall not be subject to recapture if such recapture is due solely to the sale or transfer of any direct or indirect interest in such qualified Georgia affordable housing project.

(B) In the event that recapture of any Georgia affordable housing tax credit is required, any amended return submitted to the commissioner as provided in this Code section shall include the proportion of the state tax credit required to be recaptured, the identity of each taxpayer subject to the recapture, and the amount of tax credit previously allocated to such taxpayer.

(3) In no event shall the total amount of the tax credit under this Code section for a taxable year exceed the taxpayer's income tax liability. Any unused tax credit shall be allowed to be carried forward to apply to the taxpayer's next three succeeding years' tax liability. No such tax credit shall be allowed the taxpayer against prior years' tax liability.

(4) The tax credit allowed under this Code section, and any recaptured tax credit, shall be allocated among some or all of the partners, members, or shareholders of the entity owning the project in any manner agreed to by such persons, whether or not such persons are allocated or allowed any portion of the federal housing tax credit with respect to the project.

(c)(1) Except for confidential taxpayer information pursuant to this title, all affordable housing project records associated with this Code section shall be subject to Article 4 of Chapter 18 of Title 50, relating to open records.

(2) The commissioner and the state department designated by the Governor as the state housing credit agency for purposes of Section 42(h) of the Internal Revenue Code of 1986, as amended, shall each be authorized to promulgate any rules and regulations necessary to implement and administer this Code section."

PART V

SECTION 5-1.

Chapter 1 of Title 33 of the Official Code of Georgia Annotated, relating to general provisions relative to insurance, is amended in Code Section 33-1-25, the "Georgia Agribusiness and Rural Jobs Act," by adding a new subsection to read as follows: "(l) This Code section shall stand repealed on December 31, 2031."

SECTION 5-2.

Chapter 8 of Title 33 of the Official Code of Georgia Annotated, relating to fees and taxes relative to insurance, is amended by repealing Code Section 33-8-4.1, relating to state insurance premiums tax credits for insurance companies located in certain counties designated as less developed areas and authority of commissioner of community affairs and Commissioner.

SECTION 5-3.

Said chapter is further amended by repealing Code Section 33-8-4.2, relating to assignment, carryover, and liability regarding tax credits.

SECTION 5-4.

Said chapter is further amended by repealing and reserving Code Section 33-8-5, relating to abatement or reduction of tax on insurance premiums.

SECTION 5-5.

Said chapter is further amended by repealing subsections (e) and (f) of Code Section 33-8-8, relating to preemption of taxation of insurance companies by state, exceptions, and collection of license fees by municipal corporations.

SECTION 5-6.

Said chapter is further amended by revising paragraph (1) of subsection (b) of Code Section 33-8-8.1, relating to county and municipal corporation taxes on life insurance companies, as follows:

"(1) There is imposed a county tax for county purposes on each life insurance company doing business within the state, which tax shall be based solely upon gross direct premiums, as defined in Code Section 33-8-4, which are received during the preceding calendar year from policies insuring persons residing within the unincorporated area of the counties pursuant to the provisions of this Code section. The rate of such tax shall be 1 percent of such premiums, except that such tax shall not apply to the gross direct premiums of an insurance company which qualifies, pursuant to Code Section 33-8-5, for the reduction to one-half of 1 percent of the state tax imposed by Code Section 33-8-4. The tax imposed by this Code section shall not apply to annuity considerations; and"

SECTION 5-7.

Chapter 38 of Title 33 of the Official Code of Georgia Annotated, relating to the Georgia Life and Health Insurance Guaranty Association, is amended by repealing Code Section 33-38-22, relating to premium tax liability offsets and refunds offset against taxes.

SECTION 5-8.

Chapter 6 of Title 48 of the Official Code of Georgia Annotated, relating to taxation of intangibles, is amended by repealing and reserving subsection (e) of Code Section 48-6-93, relating to local business license tax on depository financial institutions, tax rate based on Georgia gross receipts, return required, and credits.

SECTION 5-9.

Said chapter is further amended by repealing subsection (e) of Code Section 48-6-95, relating to special state occupation tax on depository financial institutions, tax rate based on Georgia gross receipts, return required, annual reports, and credits.

SECTION 5-10.

Chapter 7 of Title 48 of the Official Code of Georgia Annotated, relating to income taxes, is amended by repealing and reserving Code Section 48-7-29.7, relating to tax credits for depository financial institutions.

SECTION 5-11.

Said chapter is further amended by repealing and reserving Code Section 48-7-29.11, relating to tax credits for eligible teleworking expenses.

SECTION 5-12.

Said chapter is further amended by repealing Code Section 48-7-40.1A, relating to tax credits for personal protective equipment manufacturers.

SECTION 5-13.

Said chapter is further amended by repealing Code Section 48-7-40.1B, relating to tax credits for manufacturers of medical equipment and supplies, pharmaceuticals, and medicine.

SECTION 5-14.

Said chapter is further amended by repealing and reserving Code Section 48-7-40.9, relating to optional tax credits for existing manufacturing and telecommunications facilities or manufacturing and telecommunications support facilities in tier 3 or 4 counties.

SECTION 5-15.

Said chapter is further amended by repealing and reserving Code Section 48-7-40.15, relating to tax credits for base year port traffic increases.

SECTION 5-16.

Said chapter is further amended by repealing Code Section 48-7-40.15A, relating to tax credit for employer with base year port traffic increases.

SECTION 5-17.

Said chapter is further amended by repealing and reserving Code Section 48-7-40.16, relating to tax credits for alternative fuel, low-emission, and zero-emission vehicles and electric vehicle chargers.

SECTION 5-18.

Said chapter is further amended by repealing and reserving Code Section 48-7-40.18, relating to tax credits for businesses headquartered in state and full-time jobs.

SECTION 5-19.

Said chapter is further amended by repealing and reserving Code Section 48-7-40.20, relating to tax credits for businesses engaged in manufacturing cigarettes for exportation.

SECTION 5-20.

Said chapter is further amended by repealing and reserving Code Section 48-7-40.22, relating to tax credits for business enterprises that purchase or lease a motor vehicle to provide transportation for employees.

SECTION 5-21.

Said chapter is further amended by revising paragraph (1) of subsection (a) of Code Section

48-7-40.27, relating to tax credits for qualified investments in a research fund, as follows: "(1) 'Credit' means a state income tax credit against the tax imposed pursuant to this article in an amount equal to 25 12.5 percent of the taxpayer's qualified investment."

SECTION 5-22.

Chapter 8 of Title 48 of the Official Code of Georgia Annotated, relating to general provisions relative to state sales and use taxes, is amended by repealing and reserving paragraphs (24), (32), (44), (48), (61), (69), and (70), repealing paragraph (33.1), and repealing and reenacting paragraphs (36), (68), and (68.1) of Code Section 48-8-3, relating to exemptions relative to state sales and use taxes, to read as follows: "(36) After the effective date of this Act, no new certificates of exemption from sales and use tax for the sale of machinery and equipment or repair, replacement, or component parts for such machinery and equipment which is used for the primary purpose of reducing or eliminating air or water pollution shall be issued pursuant to the former provisions of this paragraph as they existed prior to the effective date of this Act; provided, however, that any certificate of exemption issued prior to the effective date of this Act shall continue to be governed by the provisions of this paragraph as it existed immediately prior to the effective date of this Act;"

"(68) After the effective date of this Act, no new certificates of exemption from sales and use tax to a high-technology company shall be issued pursuant to the former provisions of this paragraph as they existed prior to the effective date of this Act; provided, however, that any certificate of exemption issued prior to the effective date of this Act shall continue to be governed by the provisions of this paragraph as it existed immediately prior to the effective date of this Act;

(68.1) After the effective date of this Act, no new certificates of exemption from sales and use tax to a high-technology data center or a high-technology data center customer shall be issued pursuant to the former provisions of this paragraph as they existed prior to the effective date of this Act; provided, however, that any certificate of exemption issued prior to the effective date of this Act shall continue to be governed by the provisions of this paragraph as it existed immediately prior to the effective date of this Act;"

SECTION 5-23.

Said chapter is further amended by repealing and reserving Code Section 48-8-3.4, relating to maximum amount of sales and use tax imposed and collected on the maintenance, refitting, and repair of any single boat.

PART VI

SECTION 6-1.

(a) Except as otherwise provided in subsection (b) of this section, this Act shall become effective on January 1, 2027, and shall be applicable to taxable years beginning on or after January 1, 2027.

(b) Except for Section 2-4, which shall be effective and applicable as provided in subsection (a) of this section, Part II of this Act shall become effective on July 1, 2026, and shall be applicable to all taxable years beginning on or after January 1, 2026.

SECTION 6-2.

All laws and parts of laws in conflict with this Act are repealed.