Georgia has adopted legislation that:
- updates the corporate and personal income tax federal Internal Revenue Code (IRC) conformity date to February 9, 2018, with certain exceptions;
- doubles the standard deduction, effective January 1, 2018 and expiring December 31, 2025;
- lowers the top income tax rate for businesses and individuals from 6% to 5.75%, effective January 1, 2019 and expiring December 31, 2025; and
- if the General Assembly and governor provide further approval, the top income tax rate would decrease to 5.5% effective January 1, 2020 and expiring December 31, 2025.
The previous IRC conformity date was January 1, 2017. The IRC conformity update applies to tax years beginning on or after January 1, 2017.
IRC §179 Deduction
The federal and Georgia IRC §179 deduction maximum dollar limitation and investment limitation is:
- limited to $510,000, with a $2,030,000 phase out in 2017;
- limited to $1 million, with a $2.5 million phaseout in 2018.
Georgia has not adopted the Section 179 deduction for certain real property. However, Georgia follows the separate reporting requirement to shareholders of S corporation and partners of partnerships for:
- the gain from asset sales for which a §179 deduction was claimed; and
- the §179 deduction.
The gain should not be reported directly on the S corporation or partnership return. The gain should be reported separately to the shareholders or partners.
Net Operating Losses
For net operating losses incurred in taxable years ending on or after December 31, 2017, Georgia follows the new federal laws regarding:
- no carryback and unlimited carryforward;
- 2 year carryback for farming losses; and
- the 2 year carryback and 20 year carryforward for certain insurance company net operating losses.
For losses incurred after January 1, 2018, Georgia follows the 80% limitation on the usage of net operating losses (the state 80% limitation is based on Georgia taxable net income). The federal and state 80% limitation does not apply to certain insurance company net operating losses.
IRC Exceptions
Georgia has not adopted the following IRC sections:
- “bonus depreciation” (§168(k));
- income attributable to domestic production activities (§199);
- 20% qualified business income deduction (§199A);
- federal deferral of debt income from reacquisitions of business debt at a discount in 2009 and 2010 for five years (§108(i));
- modified rules for high yield original issue discount obligations (§163(e)(5)(F) and 163(i)(1)).
- tax benefits for particular property (New York Liberty Zone (§1400L), Gulf Opportunity Zone (§1400N(d)(1), §1400N(f), §1400N(j), §1400N(k), and §1400N(o));
- special allowance for certain reuse and recycling property (§168(m));
- special allowance for qualified disaster assistance property (§168(n));
- increased first-year depreciation limit for passenger automobiles if the passenger automobile is “qualified property,” (§168(k));
- classification of property (§168(e)(3)(B)(I), 168(e)(3)(E)(ix), and 168(e)(8));
- modified rules relating to the 15 year straight-line cost recovery for qualified restaurant property (allowing buildings to now be included) (§168(e)(7)); and
- 5 year depreciation life for most new farming machinery and equipment (§168(e)(3)(B)(vii));
Parts of the IRC that are treated as they were in effect before the enactment of the Tax Cuts and Job Act address:
- limitation of business interest (§163(j)); and
- contributions to the capital of a corporation (§118).
Depreciation Differences
Depreciation differences due to the federal tax being computed differently for Georgia purposes should be treated as follows:
- taxpayers should attach the current year IRS Form 4562 to the Georgia return and add federal depreciation by entering it on the other addition line;
- then compute depreciation on Georgia Form 4562 and enter it on the other subtraction line of the return.
Domestic Production Activities
Taxpayers should enter this adjustment on the addition line of the applicable return. If the partnership or S corporation is not allowed the Section 199 deduction directly an adjustment is not required. The partnership or S corporation should pass through the information needed to compute the deduction to the partners or shareholders.
Other Differences
Decoupling from certain federal provisions may have other effects on the calculation of Georgia income. Adjustments for the items listed below should be added or subtracted on the Georgia income tax form:
- if property is sold, after federal bonus depreciation was claimed, there will be a difference in the gain or loss on the sale for Georgia purposes; and
- the depreciation adjustment may be different if the taxpayer is subject to the passive loss rules and is not able to claim the additional bonus depreciation on the federal return.
Finally, Georgia has adopted certain federal provisions enacted to assist combat-injured veterans to recover income taxes that were improperly collected by the Department of Defense. The legislation extends the 3-year period for filing a refund claim with Georgia to the same date that is allowed federally.