During the 2021 legislature, the Georgia General Assembly passed key laws including compliance with federal tax law, the elimination of compliance with Treasury Department sub-regulatory interpretations, and the ability for passage agencies to opt for state income tax payment at the corporate level, temporary ad valorem Ease of use for manufacturers and major changes to existing income tax credits and sales tax exemptions.
Wednesday, March 31, 2021, was "Sine Die" or the 40th and last legislative day of the 2021 legislative period. Unless already signed by the governor, the bills passed by both chambers of the General Assembly will be forwarded to the governor, who will pass the legislation within 40 Can sign or veto days after the end of the legislative period. If the governor takes no action, the legislation will become law even after the 40-day period has passed.
HB 149 – Workaround for SALT caps
HB 149 provides that pass-through corporations (PTEs), including S-Corporations and Partnerships (including limited liability companies that are taxed as partnerships), can make an irrevocable choice to tax corporate income at the corporate level payable at the rate of 5.75%. If a PTE made this choice, shareholders and partners in the PTE would not recognize flow-through revenue on their individual returns. The choice is only available to a PTE that is 100% directly owned and controlled by natural persons (and not by companies or other entities). The option would be available for tax years beginning on or after January 1, 2022. According to the tax assessment, the legislation should have no impact on government revenue.
| Eversheds Sutherland observation: This legislation is similar to legislation passed or proposed in numerous states (such as Arkansas, Connecticut, Louisiana, Maryland, Michigan, Minnesota, New Jersey, New York, Oklahoma, Rhode Island, and Wisconsin) to limit the US $ 10,000 Dollars to Respond in U.S. The 2017 Federal Tax Cuts and Employment Act, imposed on individuals' state and local taxes (SALT), will be deducted. In 2020, the IRS issued a notice recognizing full corporate-level deductibility of state PTE taxes for federal income tax purposes, regardless of the individual SALT cap. See IRS Notice 2020-75, 2020-49, IRB 1453 (November 9, 2020). However, contrary to many suggestions from other states, this Georgian legislation provides for individuals to deduct PTE income from their individual earnings rather than applying a state tax credit on taxes paid by the PTE on their behalf. This may affect your use of certain Georgia income tax credits, such as: B. Credit for donations to student scholarship organizations made by individual partners and shareholders of qualified PTEs under the O.C.G.A. § 48-7-29.16. |
HB 265 – Annual IRS compliance legislation
As a permanent state of compliance, the Georgia General Assembly enacts a compliance law annually. On February 24, 2021, the Senate passed the in-house version of the Conformity Act. The legislation came into force on the same day with the signature of the governor. As such, HB 265 adapts Georgian tax legislation from January 1, 2021 to the IRC for tax years beginning on or after January 1, 2020 without a new decoupling from the existing Georgian law. By complying with the Consolidated Appropriations Act, 2021, dated December 21, 2020, HB 265 resolves any uncertainty as to whether expenses paid on Paycheck Protection Program loans made would be deductible for income tax purposes in Georgia. See also Georgia Department of Revenue Income Tax Federal Tax Changes (updated February 25, 2021).
HB 317 – Innkeepers with marketplace intermediaries
For the purposes of local lodging and lodging taxes, this legislation updates the definition of a "restaurateur" to include marketplace intermediaries and extends the nationwide hotel / motel fee from $ 5.00 to marketplace intermediaries to collect and remit the short-term rental fee . Efforts to centralize the collection and management of all local lodging and lodging tax returns have been unsuccessful this year. The requirements for collection and transfer in the market would go into effect on July 1, 2021.
HB 451 – Exemption from the COVID Freeport exemption
HB 451 offers Georgian manufacturers temporary property tax relief to help mitigate the economic and logistical disruptions caused by the COVID-19 pandemic. The legislation provides for temporary ad valorem property tax relief for manufacturers who have been forced to hold stocks of finished goods for more than a year. This is done by calculating the value of the inventory of finished goods that qualify for a Level 1 exemption on January 1, 2021, based on the permitted inventory amount on January 1, 2020 or January 2, 2021, depending on which taxpayer the Taxpayer chooses. The invoice is only valid for the calculation of the exemption for the inventory of finished goods manufactured or manufactured ad valorem in Georgia for the tax year 2021, and does not apply to other exemptions or other tax years.
HB 593 – Tax Relief Act of 2021
HB 593 increases the standard Georgian taxpayer deduction of $ 800 for a single taxpayer or head of household, $ 550 for a separately filed married taxpayer, and $ 1,100 for a married couple filing a joint tax return. Governor Kemp signed HB 593 (along with HB 114, which increases an income tax credit for families adopting a foster child). The standard deduction increases apply from tax year 2022.
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Eversheds Sutherland observation: The 2018 compliance draft lowered the state's highest marginal income rate from 6.00% to 5.75% for 2019 and included provisions to further lower the rate to 5.50% in 2020 after approval by the General Assembly and the governor. These efforts were effectively filed during the 2020 legislature due to the COVID-19 pandemic. The modest increase in the standard deduction within HB 593 provides a similar state income tax relief for those taxpayers who do not claim individual deductions. However, by increasing the standard deduction, Georgia risks maintaining (or receiving) the full amount of federal incentives allocated to the state under the recently passed American Rescue Plan Act of 2021 (HR 1319). The law prohibits states from using the federal stimulus funds to "offset, either directly or indirectly, a decrease in that state's net tax revenue … due to a change in law, regulation or administrative interpretation during the period covered by which taxes are reduced (by one Provide a reduction in the tax rate, rebate, deduction, credit, or otherwise, or delay the imposition of a tax or tax increase. "See Section 9901 (c) (2) (A). States are awaiting official clarification from the US – Ministry of Finance regarding the application of this provision. |
SB 6 – Tax Credit Return on Investment Act of 2021; Georgia Economic Renewal Act of 2021; Georgia Economic Recovery Act of 2021
This collective tax invoice combined three different legal acts that were considered at this meeting and added new changes to several existing credits and exemptions.
The Tax Credit Return on Investment Act of 2021 provides a process for reviewing a handful of tax credits annually. In particular, the Chair of the House Committee on Ways and Means and the Chair of the Senate Finance Subcommittee can each request an economic analysis for up to 5 current or proposed exceptions, exclusions, deductions, credits, deferrals, discounts, cuts or requests for preferential tax rates. Any economic analysis to be carried out by the Office of Planning and Budget would include a 5-year study of the direct or indirect effects of the tax provision, including: (i) the net change in government revenue; (ii) the net change in government expenditure (including administrative costs); (iii) net change in economic activity; and (iv) any net change in public benefits, if any. If a tax bill is requested in the next legislative period and a relevant economic analysis has been completed, a summary of the relevant economic analysis must be attached to the tax bill.
The Georgia Economic Renewal Act of 2021 provides a tax credit of $ 1,250 for each job created by a medical device and supplies manufacturer or a pharmaceutical and drug manufacturer. provides that excess port tax credits can be offset against a taxpayer's payroll; Removes 4,500 New Full-Time Jobs Cap for New Facility Tax Credit; Improves the job tax credit available to a company running a new high impact aerospace defense project; and grants a loan in connection with the maintenance of railroad tracks owned or leased from Class III Railway Undertakings.
Georgia Economic Recovery Act of 2021 extends sales tax exemptions for "Competitive Projects of Regional Importance" from June 30, 2021 to June 30, 2023; provides VAT exemption until December 31, 2022 for the sale of tickets, fees or charges for admission to a museum or an art or art exhibition or exhibition held in a facility that is part of an organization under 501 (c) ( 3) owned or operated by; eliminates sunset on sales tax exemption for energy used as part of a motor vehicle that mixes and transports concrete; and overrides the sales tax cap expiration date for certain boat servicing.
In addition, the collective invoice changes the tax credit for qualified research costs within O.C.G.A. Section 48-7-40.12 to provide that a company or a head office of such a business that otherwise meets the definition of a qualifying business is not considered a (unqualified) retail business due to the retail activities of its affiliates.
Finally, the collective draft has the exemption for high technology within O.C.G.A. Section 48-8-3 (68), which since 2001 has provided sales and use tax exemption for high technology companies that invest at least $ 15 million in eligible computer equipment in Georgia during a calendar year. The changes: (i) Updated NAICS codes for Qualifying Companies from 1997 codes to 2017 codes; (ii) require companies receiving an exemption certificate annually to report to the Treasury Department within 90 days of the end of the calendar year the amount of sales tax exempted under this provision; and (iii) change the existing exclusion of "switchboard equipment or other voice data transport technology" to "include a wired or wireless telecommunications system"; and (iv) add a full forfeiture of the exemption on June 30, 2023.
| Eversheds Sutherland observation: Items (iii) and (iv) just above the attempt to limit and ultimately eliminate the applicability of the high technology exemption were added at the last minute by a committee of the Legislative Conference during the final hours of the legislative period without prior notice or opportunity for more public Comment. We expect these to be re-examined in future legislative sessions. |
Unless otherwise specified in the legislation, the effective date of SB 6 is July 1, 2021.
SB 185 – Taxpayers Fairness Act
SB 185 allows judges more flexibility in tax disputes and relieves them of an administrative rule that requires them to postpone certain interpretations of ambiguous laws by the department. In particular, SB 185 provides that all legal issues resolved by a state court or the Georgia Tax Tribunal, including the interpretation of constitutional, statutory, and regulatory requirements, regardless of any written or unwritten sub-regulatory interpretations made by the tax authority. The legislation does not change the current level of respect given (under judicial doctrine) to the Department of Treasury's interpretations under the formal rules of the Georgia Administrative Procedure Act. The legislation would apply to tax cases brought after the Effective Date in the Georgia Tax Tribunal or state supreme court.
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Eversheds Sutherland observation: These regulations are designed to level the playing field in Georgia tax disputes and are similar to actions taken in recent years in Arizona, Arkansas, Florida, Mississippi, and Wisconsin under law, election initiative, or court decisions. In addition, Georgia will be aligned with the federal treatment of sub-regulatory deference. In a policy statement for 2019, the US Treasury Department and IRS stated that they will no longer advocate Auer's or Chevron's respect for administrative guidelines other than IRS regulations that require public disclosure and comment, as well as other regulatory processes , which are contained in the federal administration procedural law. This legislation is the result of several years of work by the Metro Atlanta Chamber and is supported by the Coalition to Reform Administrative Respect. The Georgia Tax Tribunal's goal of creating an independent forum for the settlement of disputes between a taxpayer and the Treasury Department continues. |
Bills that failed
SB 148 – Formation of a tax reform committee
SB 148 would have set up the Special Council on Tax Reform and Fairness for Georgians in 2021 and the Joint Special Committee on the Structure of Revenue in Georgia to conduct a systematic study of the state's revenue structure. A similar study was carried out in 2010. The proposed special council consisted of the governor or his agent, a bipartisan policy expert, the National Federation of Independent Business, members appointed by the lieutenant governor and the Speaker of the House, Metro Atlanta Chamber (non-voting) and the Commissioner of the Department for economic development or agent (not entitled to vote). The proposed Special Council would conduct a thorough study of the current state revenue system, make recommendations and produce a report later in 2021. The proposed joint special committee, composed of various legislators, would introduce a package of tax reform laws during the 2022 legislative period based on the recommendations of the special council.
HB 594 – Taxation of digital goods
In its original form, HB 594 would have levied state and local sales tax on any digital goods or services, including pre-written software delivered electronically, by changing the definition of tangible personal property subject to sales tax to “digital Goods or services ”. In a modified version, the exception for software that is written in advance, which is delivered electronically or via load and leave, and for software as a service (SaaS) has been retained, which, regardless of the way in which the software is delivered in advance, has been retained. sold to a trading company or used by them for commercial purposes. transmitted or accessed. "
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