The Georgia Department of Revenue (DOR) has released information on the individual and corporate tax provisions of HB 265, legislation that updates 2020 state law to conform with federal tax legislation. The legislation addresses the tax provisions of the CAREs Act and other 2020 federal laws, including Sec. 179 expensing limits, net operating losses, qualified improvement property and the excess business loss limitation.
Key Differences with Federal Tax Law
Georgia has adopted all of the CARES Act for taxable years beginning on or after January 1, 2019, (including the 2020 year) but did not adopt the relaxed net operating loss (NOL) provisions or the one-year delay in the application of the excess business loss limitation. The CAREs Act allows NOLs arising in 2018, 2019 or 2020 to be carried back five years. The Act also temporarily removes the 80% of taxable income limitation to allow an NOL to fully offset income. Georgia will not allow these changes.
Georgia has adopted the PPP loan forgiveness exclusion from income and the deductibility of expenses forgiven by the PPP rules for all tax years.
Georgia also has adopted the increased Sec. 179 expensing limits of $1,040,000 as well as the higher $2,590,000 phase-out amount. Georgia does not, however, allow 179 expensing for qualified improvement property (QIP), upgrades to the interior of a building. The CARES Act changed the depreciable life of QIP from 39 years to 15 years, and Georgia adopted this change but does not allow bonus depreciation.
Not Adopted in Georgia
Georgia also has not adopted the following federal tax provisions:
- bonus depreciation
- domestic production deduction
- 20% qualified business income deduction
- 30% restriction on the business interest
Georgia taxpayers will have depreciation differences due to various federal tax acts. The DOR has explained that, if a taxpayer has depreciation differences from more than one federal tax act, it is not necessary to make a separate adjustment for each act. Taxpayers will fill out both a federal depreciation Form 4562 and a Georgia depreciation form.
Gain from Asset Sales
Also, Georgia requires separate reporting for the gain from asset sales for which a Sec. 179 deduction was claimed. This gain should not be reported directly on the S corporation or partnership return, but the gain, along with any Georgia adjustment to the gain, should be reported separately to the shareholders or partners.
Georgia will not give retroactive effect to recent federal tax changes. For taxable years beginning on or after January 1, 2018, and before January 1, 2019, Georgia has not adopted any of the 2019 or 2020 federal changes, including the federal CARES Act. If an amended federal return is filed due to these federal changes, an amended Georgia return is not required.
The State enacts conformity laws every year and picks and chooses which federal changes to accept. Because Georgia does not have full conformity with the federal tax laws, the computation of Georgia income tax is subject to these yearly pronouncements. Your Frazier & Deeter tax advisor can provide the expertise needed to comply with these complex rules and help you accurately report your Georgia income.