Georgia enacts numerous tax bills; sets tax court referendum

Georgia enacts numerous tax bills; sets tax court referendum

May 8, 2024 | RSM US LLP

Executive summary

Georgia enacts several tax bills during most recent legislative session

Following the end of the legislative session, Georgia Gov. Brian Kemp signed several tax bills making changes to the state’s income and sales tax codes. Some notable amendments include updating Georgia’s conformity to the Internal Revenue Code (IRC), reducing income tax rates and changing the carryforward period for most income tax credits. The legislation also ensures voters will decide on whether a new Georgia Tax Court is created under the judicial branch this November. This article summarizes some of the key bills applicable to both business and individual taxpayers.

Income tax

Tax rates

House Bill 1015 expedites the reduction of the Georgia individual income tax rate. The bill reduces the applicable rate from 5.49% to 5.39% for tax years beginning on or after Jan. 1, 2024. Beginning Jan. 1, 2025, the rate will continue to decline by 0.10% annually until it reaches 4.99%. The legislature also passed House Bill 1023, coupling the corporate income tax rate (also applicable to the pass-through entity tax elections) to the individual tax rate reduction schedule as enacted under House Bill 1015, effective Jan. 1, 2024. Additionally, House Bill 1023 allows corporate taxpayers an additional month after the federal extension to file effective beginning on or after Jan. 1, 2025. Payment dates remain unaltered. Both House Bill 1015 and House Bill 1023 were signed by the governor on April 18, 2024.

Tax credit carryforward periods

House Bill 1181 amends numerous tax credit carryforward periods. Notably, the carryforward periods for the jobs tax credit, the investment tax credit, certain manufacturing and telecommunication facility tax credits, and the research and development tax credit are reduced from 10 years to five years. The carryforward period for other miscellaneous credits (including the film, gaming, or video production credit, certain green energy credits, and credits for donations, among others) is reduced from five years to three years. The reduced periods are applicable to credits earned after Jan. 1, 2025. Any unused credits generated by taxpayers in prior periods may still be carried forward for the period allowed under prior law. Taxpayers should note that dozens of credit periods have been reduced, many of which are not mentioned in this summary.

IRC conformity update

House Bill 1162 updates Georgia’s conformity to the IRC. The term “Internal Revenue Code” is now defined as the IRC as amended and in effect on Jan 1. 2024. This update is effective retroactively for tax years beginning on or after Jan. 1, 2023. Georgia enacts an IRC conformity update annually. The update for this year did not include decoupling from any additional IRC provisions from the prior year.

Sales tax

Sunsetting exemptions

House Bill 1181 also provides for the sunsetting of certain sales tax exemptions. Generally, the bill repeals the exemptions for sales of tangible property to certain nonprofit entities qualified under IRC section 501(c)(3). It also repeals other specific exemptions, including but not limited to exemptions for certain sales to special-purpose local government authorities, sales to agricultural commodities commissions, sales of certain machinery used in pollution reduction, and sales of certain fishing equipment. The repeal of these exemptions is effective beginning Dec. 31, 2029.

Georgia Tax Court

House Resolution 598 places a referendum on the November 2024 ballot proposing an amendment to the Georgia state constitution to create the Georgia Tax Court. The Tax Court would be an independent tax tribunal under the judicial branch and would replace the current tax appeal forum, the Georgia Tax Tribunal, which is a part of the executive branch. The tax court would have concurrent jurisdiction with Georgia superior courts, giving it broader authority than the tax tribunal. The court can hear all legal claims resulting from the appeal of a Georgia Department of Revenue action, assessment or denial. If voters approve the referendum, House Bill 1267 provides for the structure of the tax court including rules for qualifications, appointments and terms of judges, jurisdiction and venue of the court, as well as other procedural matters. The tax tribunal would transition to the tax court throughout 2026.

Takeaways

Georgia’s session was active for tax legislation, but ultimately provided taxpayers few major developments. What may be equally noteworthy is that the Georgia film tax credit remains unamended after receiving significant attention on the benefit of offering the incentive. Georgia has become a popular location for film and television production in recent years. House Bill 1180 would have capped the amount of credits that could be sold and created new requirements for the additional 10% credit. Many states are reviewing the return on investment for film tax credits as some may not be as beneficial to local economies as anticipated, although California recently expanded its own.

Also noteworthy, Gov. Kemp vetoed a bill that would have suspended new sales and use tax exemptions for certain high-technology data center equipment used in a high technology data center. The governor noted the recent extension of those exemptions through 2031 just two years ago in his veto message.

Georgia taxpayers with questions about this year’s tax legislation should consult with their state and local tax advisers.

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This article was written by Mark Siegel, Amy Letourneau, Rick Capossela, Mo Bell-Jacobs and originally appeared on 2024-05-08.
2022 RSM US LLP. All rights reserved.
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