Senate Passes Sweeping Income Tax Reform

On February 12, the Senate passed several measures aimed at restructuring Georgia’s income tax system.  SB 476 cuts the income tax rate to 4.99%, dramatically increases the standard deduction, and eliminates nearly all tax credits no later than 2032.  The legislation eliminates the following bank-related incentives: 

• Dollar-for-dollar income tax credit for depository financial institutions, 

• Credits tied to local business license taxes on banks, 

• Credits tied to special state occupation taxes on banks. 

Of particular concern for banks is the proposed repeal of the dollar-for-dollar state income tax credit for financial institutions, which could significantly affect how banks are taxed.  Georgia taxes banks differently than most businesses.  In addition to the state income tax, banks pay special state and local taxes on gross receipts known as the bank tax.  The bank tax credit exists to prevent double taxation by ensuring banks are not required to pay both.  They currently pay the greater of the bank tax or income tax.  If SB 476 passes both the House and Senate in its current form, Georgia banks could be looking at a $55 million annual increase in taxes owed to the state and local governments.  Click here to read the whitepaper, The Necessity of the Georgia Income Tax Credit for Depository Financial Institutions.  The bill now moved to the House where there will likely be differing views on how best to deliver tax relief to Georgians. 

SB 477 takes a more modest approach, reducing the income tax rate to 3.99% by 2028 and slightly increasing the standard deduction.  It does not call for the wholesale elimination of tax incentives.  Income tax reform is a priority of the Senate, and many of its members who are seeking higher office.  These measures are expected to receive less fanfare in the House, where leaders have prioritized property tax reform.