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Corporate income and franchise taxes

Taxable income

How is taxable income determined in your state? To what extent is the state income tax base aligned with the federal income tax base?

A corporation’s taxable income for Georgia purposes “consists of the corporation’s taxable income as defined in the Internal Revenue Code” plus adjustments (Ga. Code Ann. § 48-7-21(a)). In other words, corporations start with their taxable income for federal income tax purposes, and then apply Georgia-specific modifications.

How is in-state income apportioned for multi-state businesses? Does your state regulate transfer pricing?

Corporations apportion income to Georgia using a single-factor sales formula.  

Georgia regulates transfer pricing. A statute grants the Georgia Department of Revenue broad authority to redress improper “shifting of income” (Ga. Code Ann. § 48-7-58). Adjustments may be made “when the commissioner has reason to believe that any taxpayer conducts his or her trade or business so as to evade taxes, distort directly or indirectly his or her true net income, or distort directly or indirectly the net income properly attributable to” Georgia (Ga. Code Ann. § 48-7-58(a)). Auditors often invoke this provision when there are deductible payments being made by a Georgia taxpaying corporation to an out-of-state, related entity. In several cases, taxpayers have successfully resisted application of the provision in the courts.

Nexus

How is nexus determined for corporate income tax purposes?

Corporate nexus is determined based on facts and circumstances. The Georgia “doing business” nexus statute is vague and broad. A corporation is considered “doing business” in Georgia, and hence subject to Georgia corporate income tax, if it owns property in Georgia or “engages within this state in any activities or transactions for the purpose of financial profit or gain” (Ga. Code Ann. § 48-7-31(a)).

An interpretive regulation adds that a corporation can be considered doing business in Georgia through agents and also can be considered doing business in Georgia through ownership of a limited liability company or pass-through entity that operates in Georgia (Ga. Comp. R. & Regs. 560-7-7-.03(1)).

Corporations that fit within the parameters of Public Law (86-272) can rely on it to shield them from Georgia corporate income tax.

Is affiliate nexus recognized in your state? If so, to what extent? Has there been any notable case law in this area?

A corporation can be considered doing business in Georgia through “agents” and “representatives,” which presumably could include affiliates, per a Georgia corporate tax regulation (see Ga. Comp. R. & Regs. 560-7-7-.03(1)).

Georgia has adopted both an affiliate nexus statute and a click-through nexus statute for sales and use tax. Under the affiliate nexus statute, a business is a “dealer” required to collect Georgia sales and use tax if an in-state dealer engages in advertising, marketing, sales, or other services on its behalf (Ga. Code Ann. § 48-8-2(8)(J)). Under the click-through nexus statute, an out-of-state seller must collect Georgia sales and use tax if it receives over $50,000 in referrals from Georgia residents to whom it pays a commission or other consideration (Ga. Code Ann. § 48-8-2(8)(M)).

With respect to agency nexus case law, there is a recent case holding that teachers soliciting sales of books to students creates nexus for an out-of-state book seller, as do related entities that maintain an office, warehouse, and distribution center in Georgia (see Scholastic Book Clubs, Inc. v. GA Dep’t of Rev., Georgia Tax Tribunal Docket No. 1552367 (February 14, 2017)).

Rates

What are the applicable corporate income tax rates?

The corporate income tax rate is 6% for 2018 and 5.75% for 2019.

Exemptions, deductions and credits

What exemptions, deductions, and credits are available?

Georgia offers a significant number of credits, deductions, and exemptions. The credits offered in Georgia are particularly desirable and can produce significant tax savings. Anyone seeking to claim Georgia credits should take care to ensure that the statutory and regulatory requirements needed to receive the credits are satisfied. Care should likewise be taken in documenting that all requirements are satisfied, as credits are commonly audited. Noteworthy Georgia credits include:

  • employer’s jobs tax credit;
  • manufacturer’s investment tax credit; 
  • research tax credit;
  • new manufacturing facilities property credit;
  • conservation easement tax credit; and
  • historic rehabilitation tax credit.  

Filing requirements

What filing requirements and procedures apply? Are there special filing requirements for groups of company?

All corporations that own property or do business in Georgia, or that have income from Georgia sources, are required to file Form 600, the Georgia Corporation Tax Return. Taxpayers that remit payments by electronic funds transfer must file all associated returns electronically. Corporations that file a consolidated return for federal income tax purposes can petition for permission to file a consolidated return for Georgia corporate income tax purposes (note that the consolidation occurs on a post-apportionment basis)  (Ga. Comp. R. & Regs. 560-7-3-.13). There is no separate form for filing an amended Georgia corporate income tax return. Rather, the amended return block should be checked on Form 600 to indicate that an amended return is being filed.

Corporate franchise tax If your state imposes a corporate franchise tax, please stipulate:

(a) The applicable tax base.

The applicable tax base for the net worth tax is a corporation’s net worth based on its balance sheet. That net worth is then apportioned to Georgia (assuming the corporation is incorporated in a state other than Georgia).  

(b) Tax rates.

There are not rates for the net worth tax. Rather, the tax is imposed at flat dollar amounts depending on a corporation’s apportioned net worth. The tax range is from $125 to $5,000.

(c) Any exemptions or deductions.

Non-profit corporations and insurance companies are exempt from the net worth tax.

(d) Filing formalities.

The net worth tax is filed on the same form, Form 600, as is the Georgia corporate income tax.

Does your state impose a corporate franchise tax? If so, is it imposed in lieu of or in addition to corporate income tax?

Georgia imposes a net worth tax (like a franchise tax) in addition to the corporate income tax. The net worth tax is based on a corporation’s issued capital stock, paid-in surplus, and earned surplus employed within Georgia. 

Personal income taxes

Taxable income

How is taxable personal income determined in your state?

The Georgia personal income tax base is the taxpayer’s federal adjusted gross income as defined in the Internal Revenue Code, plus adjustments (Ga. Code Ann. § 48-7-27).

Tax residence

Under what circumstances is an individual deemed resident in your state for personal income tax purposes?

An individual is a resident of Georgia if the individual:

  • is a legal resident of Georgia on the last day of the tax year;
  • resides within Georgia on a more or less regular or permanent basis, and not on a temporary or transitory basis, and resides within Georgia at the end of the tax year; and
  • resides within Georgia for at least 183 days or part-days of the immediately preceding 365 days as of the last day of the tax year (Ga. Code Ann. § 48-7-1(10)(A)).

Rates

What are the applicable personal income tax rates?

The Georgia tax rates for 2018 are set forth below. For 2019, the top rate is lowered to 5.75% (see Ga. Code Ann. § 48-7-20(b)(1)).

Single person

Georgia taxable net income

Tax

Not over $750

1%

Over $750but not over $2,250

$7.50 plus 2% of amount over $750

Over $2,250 but not over $3,750

$37.50 plus 3% of amount over $2,250

Over $3,750 but not over $5,250

$82.50 plus 4% of amount over $3,750

Over $5,250 but not over $7,000

$142.50 plus 5% of amount over $5,250

Over $7,000

$230 plus 6% of amount over $7,000

Married person filing a separate return

Georgia taxable net income

Tax

Not over $500

1%

Over $500 but not over $1,500

$5 plus 2% of amount over $500

Over $1,500 but not over $2,500

$25 plus 3% of amount over $1,500

Over $2,500 but not over $3,500

$55 plus 4% of amount over $2,500

Over $3,500 but not over $5,000

$95 plus 5% of amount over $3,500

Over $5,000

$170 plus 6% of amount over $5,000

Head of household and married persons filing a joint return

Georgia taxable net income

Tax

Not over $1,000

1%

Over $1,000 but not over $3,000

$10 plus 2% of amount over $1,000

Over $3,000 but not over $5,000

$50 plus 3% of amount over $3,000

Over $5,000 but not over $7,000

$110 plus 4% of amount over $5,000

Over $7,000 but not over $10,000

$190 plus 5% of amount over $7,000

Over $10,000

$340 plus 6% of amount over $10,000

Exemptions, deductions and credits

What exemptions, deductions, and credits are available?

Personal ExemptionsGeorgia law provides for the following personal exemptions:

  • married filing jointly—$7,400;
  • married filing separately—$3,700;
  • not married—$3,000;
  • dependants—$3,000 for each dependent;
  • estates—$2,700 in lieu of a personal exemption deduction; and  
  • trusts—$1,350 in lieu of a personal exemption deduction.

Deductions Georgia law provides for the following deductions:

  • Standard deduction—$4,600 for single taxpayers and taxpayers with head of household service, $3,000 for married taxpayers filing separate returns, and $6,000 for married taxpayers filing a joint return; and
  • Itemized deduction—the sum of all itemized non-business deductions used in computing federal taxable income if the taxpayer used non-business deductions in computing federal taxable income; otherwise, the Georgia standard deduction is used.   

Credits Georgia law provides for a number of different credits, including the following credits available against the personal income tax:

  • agribusiness and rural jobs credit;
  • conservation easement credit;
  • credit for tax paid to other states;
  • historic rehabilitation credit;
  • investment in qualified manufacturing property credit;
  • jobs tax credit; and
  • revitalization zone tax credit.

Filing requirements

What filing requirements and procedures apply?

Natural persons file the Form 500, Individual Income Tax return. The return is due by April 15.

Employer obligations

What obligations are imposed on the employer in relation to the collection and remittance of state personal income taxes (eg, withholding)?

Employers are responsible for withholding Georgia personal income tax on wages paid to Georgia residents for services performed inside or outside Georgia, and from Georgia non-resident employees for services performed in Georgia. Employers are liable for the payment of the tax required to be deducted and withheld (Ga. Code Ann. § 48-7-108(a)).  

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