Ga. Comp. R. & Regs. R. 560-7-4-.01 - Net Taxable Income (Individual). Amended
(1)
The Georgia taxable net income of an individual shall be computed pursuant to
O.C.G.A. §
48-7-27.
(2) There shall be added to "net income" the
amount of deductions reflected therein which resulted from transactions
occurring in years in which the individual was not subject to Georgia income
tax. Such deductions shall include but not be limited to, contribution
carryovers, capital loss carryovers, and net operating loss
carryovers.
(3) Net Operating
Losses
(a) An appropriate adjustment shall be
made to such "net income" for a net operating loss carryover.
(b) For any taxable year in which the
taxpayer claims a net operating loss deduction on the Federal income tax
return, the amount of such deduction shall be added back to "net income". There
shall be allowed as a separate deduction from "net income" an amount equal to
the aggregate of the Georgia net operating loss carryovers to such year, plus
the Georgia net operating loss carrybacks to such year if such carrybacks are
allowed by the Internal Revenue Code of 1986. Any limitations included in the
Internal Revenue Code of 1986 on the amount of net operating loss that can be
used in a taxable year shall be applied; provided, however, that such
limitations, including, but not limited to, the 80 percent limitation, shall be
applied to Georgia taxable net income.
(c) For any taxable year in which the
taxpayer has a Federal net operating loss, the Georgia net operating loss for
such taxable year shall be computed by making the same adjustments to the
Federal net operating loss that are made to Federal adjusted gross income to
determine Georgia taxable net income. In the case of nonresident individuals,
trusts, and estates doing business both within and without Georgia, the loss
attributable to operations within Georgia shall be computed as provided in
O.C.G.A. §
48-7-30. The term "Georgia net
operating loss" shall mean the loss computed as provided in this subparagraph.
In the event the net Georgia adjustments completely offset the federal net
operating loss, there shall be no Georgia net operating loss for the taxable
year, and any excess of net Georgia adjustments over the Federal net operating
loss shall constitute Georgia taxable net income.
(d) The procedural sequence of taxable years
to which a Georgia net operating loss may be carried back or carried over, and
the number of years for which a net operating loss may be carried back or
carried over, shall be the same as provided in the Internal Revenue Code as
adopted for Georgia purposes. The extent to which Georgia adopts the Internal
Revenue Code is set forth in the definition of "Internal Revenue Code" in
O.C.G.A. §
48-1-2. The terms "Georgia net
operating loss carryback" and "Georgia net operating loss carryover" shall mean
the Georgia net operating loss carried back or carried over in the manner and
for the number of years as provided in this subparagraph.
(e) In the event the net operating loss is
allowed to be carried back and the taxpayer elects to forgo the carryback
period for the federal net operating loss as allowed under the Internal Revenue
Code, the taxpayer shall also forgo the carryback period for Georgia purposes.
If the taxpayer does not have a federal net operating loss, the taxpayer may
make an irrevocable election to forgo the carryback period for the Georgia net
operating loss, provided the loss is allowed to be carried back and an
affirmative statement is attached to the Georgia return for the year of the
loss. Such election (the affirmative statement) must be made on or before the
due date for filing the income tax return for the taxable year wherein the loss
was incurred, including any extensions which have been granted. Form 500-NOL
must also be separately filed when the taxpayer forgoes the carryback so that
the net operating loss can be established on the Department's system for future
years. Such filing must occur on or before the due date for filing the income
tax return for the taxable year wherein the loss was incurred, including any
extensions which have been granted. Form 500-NOL cannot be filed as an
attachment to Form 500. If the net operating loss is allowed to be carried back
and if the taxpayer does not elect to forgo the carryback period for the
federal net operating loss, the election to forgo the net operating loss period
shall not be allowed for Georgia purposes.
(f) Claim for Refund.
1. In the event the taxpayer is entitled to a
refund of income taxes by reason of a net operating loss carryback, a net
operating loss carryback adjustment claim for refund will be filed on Form
500-NOL and in accordance with O.C.G.A. §
48-7-21(b)(10.1).The
taxpayer must file such claim for refund within three years after the due date
for filing the income tax return for the taxable year wherein the loss was
incurred (including any extensions which have been granted) as prescribed in
O.G.C.A. §
48-7-21(b)(10.1).Such
claim for refund shall constitute a claim for credit or refund for purposes of
O.C.G.A. §
48-2-35. Within a period of ninety
(90) days from the last day of the month in which such claim for refund is
filed, the Commissioner shall make, to the extent he or she deems practicable
in such period, an examination of the claim for refund to determine the amount
of tax decrease attributable to such carryback adjustment upon the basis of the
claim for refund and the examination. The decrease so determined shall be
applied against any unpaid amount of the tax and the remainder shall, within
such ninety (90) day period, be either credited against any income tax then due
from the taxpayer, or refunded to the taxpayer. Any such credit or refund made
within such ninety (90) day period shall be without interest as provided in
O.C.G.A. §
48-7-21(b)(10.1)
and shall be subject to further examination as provided in subparagraph
(3)(f)3.
2. If such claim for
refund contains errors of computation which the Commissioner deems cannot be
corrected within such ninety (90) day period or which contains material
omissions, the Commissioner may disallow without further action any such claim
for refund. Alternatively, the Commissioner may request that the taxpayer
correct such errors or omissions. In either case, the date upon which the
taxpayer later corrects such errors or omissions shall be considered the filing
date for the claim for refund for purposes of the aforementioned (90) day no
interest period.
3. The
Commissioner may further examine, subject to the applicable statute of
limitations, such claim for refund at a later time and assess as
necessary.
(4) The subtraction provided by subsection
(d) of O.C.G.A. §
48-7-27 shall be allowed for the
Texas Franchise Tax and for other states which have a tax on the entity which
is on or measured by income. Such subtraction shall not be available for a tax
on the entity which is on or measured by gross receipts and other taxes which
are not on or measured by income. Such subtraction shall be computed as
provided in this paragraph. First, determine the Georgia taxable net income
before apportionment of the entity. For purposes of this paragraph, Georgia
taxable net income shall include income, gains, losses, and deductions from the
entity which are separately reported and included on the partners',
shareholders', or members' returns. For purposes of this paragraph, Georgia
taxable net income shall not include wages paid to the partner, shareholder, or
member. However, if such wages are taxed by another state, the partner,
shareholder, or member may be eligible for the credit provided by O.C.G.A.
§
48-7-28. Second, multiply such
Georgia taxable net income by the entity's apportionment ratio in Texas or such
other state. Third, multiply such result by the partner's, member's, or
shareholder's direct or indirect distributive share percentage used for Federal
income tax purposes. Provided, however, if any separately reported item (such
as guaranteed payments) is allocated directly to a partner, shareholder, or
member, such item shall be excluded from the above computation and allocated to
such partner, member, or shareholder and multiplied by the entity's
apportionment ratio in Texas or such other state and then combined with the
result above.
(a) For example, an individual
has a 50% distributive share percentage of partnership A which paid the Texas
Franchise Tax. Partnership A's apportionment ratio in Texas was 80%.
Partnership A's Georgia taxable net income before directly allocated items and
before apportionment was $10,000. $2,000 of guaranteed payments were deducted
to arrive at the $10,000 and were paid to the individual. 50% of partnership
A's income of $10,000 was included on the individual's federal income tax
return. Partnership B also has a 50% distributive share percentage of
Partnership A. As such, 50% of partnership A's income of $10,000 was reported
on Partnership B's return. The individual who has a distributive share
percentage of Partnership A also has a 40% distributive share percentage of
Partnership B. 40% of partnership B's income was included on the individual's
federal income tax return. The percentage the individual would be allowed is
70% (50% for Partnership A plus 40% of 50% for Partnership B). As such, $5,600
(70% x $10,000 x 80%) of the Georgia taxable net income before directly
allocated items could be subtracted by the individual. The individual would
also include $1,600 of the guaranteed payment ($2,000 x 80%). As such, a total
of $7,200 could be subtracted by the individual.
Notes
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