A Grain of SALT: May State Focus – Georgia

Georgia was one of the first states to enact comprehensive legislation in response to the federal tax reform bill, known as the Tax Cuts and Jobs Act (TCJA). As a preliminary matter, the Georgia bill provides conformity to the IRC as of February 9, 2018, with certain exceptions. Before the bill’s enactment, the Georgia Code had conformed to the IRC as of January 1, 2017, and, in turn, did not conform to the TCJA.

The new legislation contains numerous exceptions to Georgia’s conformity with the current IRC. For example, the tax bill explicitly provides that Georgia will decouple from the new interest expense limitations in IRC § 163(j) and also from the new provisions in IRC § 118 that provide inclusion in gross income of certain capital contributions.

With respect to the international provisions of the TCJA, Georgia’s dividend-received deduction for dividends received from foreign corporations seems to apply to the global intangible low taxed income (GILTI), included in the federal tax base under IRC § 951A, and to the deemed repatriated foreign earnings, included in the federal tax base under IRC § 965(a). The legislation provides that the deductions in IRC § 250 for a portion of the GILTI and in IRC § 965(c) for a portion of the deemed repatriated foreign earnings will be disallowed to the extent such income is excluded from the Georgia tax base pursuant to the dividend received deduction.

Finally, the Georgia bill provides that the new federal net operating loss (NOL) provisions (including the restriction that the NOL cannot exceed 80 percent of taxable income and the new federal carryback and carryforward provisions) apply for purposes of computing the Georgia net operating loss deduction with the specification that the 80 percent limitation is computed based on Georgia taxable net income (not federal taxable income).