On April 9, 2008, the Governor signed House Bill 926. For taxable years beginning on or after January 1, 2007 and January 1, 2008, except as discussed below, Georgia has now adopted the provisions of all federal acts (as they relate to the computation of Federal taxable income) that were enacted on or before January 1, 2008.
For tax years beginning on or after January 1, 2007, Georgia has adopted the increased I.R.C. Section 179 deduction ($125,000 in 2007) and the related phase out ($500,000 in 2007) that was enacted as part of the Small Business and Work Opportunity Act of 2007. Georgia currently has not adopted the changes included in the Economic Stimulus Act of 2008 that was signed into Federal law on February 13, 2008, which includes increased Section 179 expensing amounts.
Georgia has not adopted I.R.C. Section 168(k) (the 30% and 50% bonus depreciation rules) except for I.R.C. Section 168(k)(2)(A)(i) (the definition of qualified property), I.R.C. Section 168(k)(2)(D)(i) (exceptions to the definition of qualified property), and I.R.C. Section 168(k)(2)(E) (special rules for qualified property).
Georgia has also not adopted I.R.C. Section 199 (deduction for income attributable to domestic production activities), I.R.C. Section 1400L (New York Liberty Zone Benefits), I.R.C. Section 1400N(d)(1) (post 8/28/2006 Gulf Opportunity Zone (GOZ) property), I.R.C. Section 1400N(j) (GOZ public utility casualty losses), and I.R.C. Section 1400N(k) (NOLs attributable to GOZ losses).
Federal deduction for income attributable to domestic production activities (IRC Section 199). This adjustment should be entered on the addition line of the applicable return. An adjustment to the Georgia partnership or S Corporation return is not required if the partnership or S Corporation is not allowed the Section 199 deduction directly, but instead passes through the information, needed to compute the deduction, to the partners or shareholders.
Depreciation Differences. Depreciation differences due to the Federal acts mentioned above should be handled as follows: (If the taxpayer has depreciation differences from more than one Federal act, it is not necessary to make a separate adjustment for each act.)
A. Depreciation must be computed one way for Federal purposes and another way for Georgia purposes. To compute depreciation for Federal purposes, taxpayers should use the 2007 IRS Form 4562 and attach it to the Georgia return. The IRS has also released a new Form 4562-FY which reflects the changes made by the Economic Stimulus Act of 2008. This form is intended for fiscal year filers whose tax year begins in 2007 and ends in 2008.
B. Depreciation must also be computed for Georgia purposes. Taxpayers should use Georgia Form 4562 to compute depreciation for Georgia purposes and attach it to the Georgia return. For further information, please see the Georgia form instructions which specify the line numbers where the adjustments should be made.
All flowthrough entities (partnerships, S Corporations, limited liability companies, limited liability partnerships, fiduciaries) that own property in Georgia, do business in Georgia, receive income from Georgia sources, or that have Georgia resident owners/beneficiaries should notify them of the required adjustments. Depreciation differences may also be reported to you by these types of entities.
Additionally, the provisions listed above may have an indirect effect on the calculation of Georgia taxable income. Adjustments for the items listed below should be added or subtracted on your Georgia income tax form.
1. When property is sold, for which the bonus depreciation was claimed, there will be a difference in the gain or loss on the sale of the property.
2. The depreciation adjustment may be different if the taxpayer is subject to the passive loss rules and is not able to claim the additional depreciation on the Federal return.
3. Other Federal items that are computed based on Federal Adjusted Gross Income or Federal Taxable Income will have to be recomputed if the provisions of the Federal Acts are claimed. Some examples are itemized deductions, student loan interest deduction, self-employed health insurance deductions, contributions, etc.
Furthermore, in 2003 the IRS started requiring separate reporting, to shareholders of S Corporations and partners of partnerships, for the gain from asset sales for which an I.R.C. Section 179 deduction was claimed. Georgia follows the separate reporting treatment of the gain and the Section 179 deduction. Accordingly, the gain should not be reported directly on the S Corporation or partnership return, but the gain, along with any Georgia adjustment to the gain (due to the Federal acts), should be reported separately to the shareholders or partners.
Taxpayer Services Division Homepage |