HB1472: HB1472 Income tax; term "small business"; revise definition

Georgia law currently gives businesses a state income tax deduction for certain payments made to 'classified subcontractors,' which are small businesses certified as minority owned, women owned, or veteran owned. The law that creates this deduction, O.C.G.A. Section 48-7-38, currently defines 'small business' by referring to a separate code section (50-5-121). This bill rewrites that definition directly inside the tax code section itself, defining a small business as one that is independently owned and operated with 300 or fewer employees or $30 million or less in gross annual receipts. The rest of the deduction rules stay the same: the deduction equals 10 percent of qualifying payments, capped at $100,000 per taxpayer per year. The change would take effect July 1, 2026, and apply to tax years beginning on or after January 1, 2027.

• Rewrites the definition of 'small business' in Georgia's tax code (O.C.G.A. Section 48-7-38) to spell out specific size limits instead of pointing to another code section.
• Sets the small business threshold at 300 or fewer employees or $30 million or less in yearly gross receipts.
• Leaves unchanged the existing 10 percent income tax deduction for qualified payments to certified minority, women, or veteran owned subcontractors.
• Keeps the $100,000 per year cap on the total deduction any taxpayer can claim under this section.
• Sets the change to take effect July 1, 2026, applying to tax years starting on or after January 1, 2027.

Businesses that hold state contracts and make payments to subcontractors certified as minority owned, women owned, or veteran owned businesses, as well as those certified subcontractors themselves and the Georgia Department of Revenue, which administers the deduction.

By defining 'small business' directly in the tax law rather than cross-referencing another statute, the bill could change which subcontractors qualify as 'classified subcontractors,' affecting which businesses can generate the tax deduction for their prime contractor partners on state contracts.

• Section 1 amends O.C.G.A. Section 48-7-38 to redefine 'small business' as independently owned and operated with 300 or fewer employees or $30 million or less in gross receipts per year, rather than deferring to Code Section 50-5-121.
• Section 1 retains the existing definitions of 'classified subcontractor' and 'state contract' and the 10 percent deduction formula for qualified payments.
• Section 1 keeps the $100,000 per year cap on the total deduction a taxpayer may claim.
• Section 2 sets the effective date as July 1, 2026, applying to taxable years beginning on or after January 1, 2027.
• Section 3 repeals conflicting laws.

1. 2026-03-04House Second Readers (House)
2. 2026-03-03House First Readers (House)
3. 2026-02-26House Hopper (House)

• Marvin Lim (D, HD-098)Primary sponsor

• small business tax deduction
• state income tax
• minority business enterprise
• state contracting