| HB 81 - Income tax; corporations; amend provisions |
First Reader Summary
A BILL to amend Article 2 of Chapter 7 of Title 48 of the
Official Code of Georgia Annotated, relating to imposition, rate,
and computation of income tax, so as to change certain provisions
regarding taxation of corporations; and for other purposes.
| House |
Action |
Senate |
| 1/13/99 |
Read 1st Time |
|
| 1/14/99 |
Read 2nd Time |
|
HB 81 LC 18 9134
A BILL TO BE ENTITLED
AN ACT
1- 1 To amend Article 2 of Chapter 7 of Title 48 of the Official
1- 2 Code of Georgia Annotated, relating to imposition, rate, and
1- 3 computation of income tax, so as to change certain
1- 4 provisions regarding taxation of corporations; to repeal
1- 5 conflicting laws; and for other purposes.
1- 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
1- 7 SECTION 1.
1- 8 Article 2 of Chapter 7 of Title 48 of the Official Code of
1- 9 Georgia Annotated, relating to imposition, rate, and
1-10 computation of income tax, is amended by striking Code
1-11 Section 48-7-21, relating to taxation of corporations, which
1-12 reads as follows:
1-13 "48-7-21.
1-14 (a) Every domestic corporation and every foreign
1-15 corporation shall pay annually an income tax equivalent to
1-16 6 percent of its Georgia taxable net income. Georgia
1-17 taxable net income of a corporation shall be the
1-18 corporation's taxable income from property owned or from
1-19 business done in this state. A corporation's taxable
1-20 income from property owned or from business done in this
1-21 state shall consist of the corporation's taxable income as
1-22 defined in the Internal Revenue Code of 1986, with the
1-23 adjustments provided for in subsection (b) of this Code
1-24 section and allocated and apportioned as provided in Code
1-25 Section 48-7-31.
1-26 (b)(1)(A) When interest income is derived from
1-27 obligations of any state or political subdivision
1-28 except this state and political subdivisions of this
1-29 state, the interest income shall be added to taxable
1-30 income to the extent that the interest income is not
1-31 included in gross income for federal income tax
1-32 purposes. Interest or dividends on obligations of any
1-33 authority, commission, instrumentality, territory, or
1-34 possession of the United States which by the laws of
-1-
2- 1 the United States are exempt from federal income tax
2- 2 but not from state income tax shall also be added to
2- 3 taxable income.
2- 4 (B) There shall be subtracted from taxable income
2- 5 interest or dividends on obligations of the United
2- 6 States and its territories and possessions or of any
2- 7 authority, commission, or instrumentality of the
2- 8 United States to the extent such interest or dividends
2- 9 are includable in gross income for federal income tax
2-10 purposes but exempt from state income taxes under the
2-11 laws of the United States. There shall also be
2-12 subtracted from taxable income any income derived from
2-13 the authorized activities of a domestic international
2-14 banking facility operating pursuant to the provisions
2-15 of Article 5A of Chapter 1 of Title 7, the 'Domestic
2-16 International Banking Facility Act,' and any income
2-17 arising from the conduct of a banking business with
2-18 persons or entities located outside the United States,
2-19 its territories, or possessions. Any amount
2-20 subtracted pursuant to this subparagraph shall be
2-21 reduced by any expenses directly attributable to the
2-22 production of the interest or dividend income.
2-23 (2) There shall be added to taxable income any taxes on,
2-24 or measured by, net income or net profits paid or
2-25 accrued within the taxable year imposed by the authority
2-26 of the United States or any foreign country, by any
2-27 state except the State of Georgia, or by any territory,
2-28 county, school district, municipality, or other tax
2-29 subdivision of any state, territory, or foreign country
2-30 to the extent such taxes are deducted in determining
2-31 federal taxable income.
2-32 (3) No portion of any deductions or losses which
2-33 occurred in a year in which the taxpayer was not subject
2-34 to taxation in this state including, but not limited to,
2-35 net operating losses may be deducted in any tax year.
2-36 When the federal adjusted gross income or net income of
2-37 a corporation includes such deductions or losses, an
2-38 adjustment deleting them shall be made under rules
2-39 established by the commissioner. The provisions of this
2-40 subsection shall not prohibit the carry-over of any
2-41 deductions or losses including, but not limited to, net
2-42 operating losses of any taxpayer which were incurred in
2-43 a year or years in which the taxpayer was subject to
-2-
3- 1 methods of taxation in this state other than the
3- 2 corporate income tax.
3- 3 (4) Income, losses, and deductions previously used in
3- 4 computing Georgia taxable income shall not again be used
3- 5 in computing Georgia taxable income. The commissioner
3- 6 shall provide for needed adjustments by regulation.
3- 7 (5) When on the sale or exchange of real or tangible
3- 8 personal property located in this state gain or loss is
3- 9 not recognized because the taxpayer receives or
3-10 purchases similar property, the nonrecognition shall be
3-11 allowed only when the property is replaced with property
3-12 located in this state.
3-13 (6) This article shall not be construed to repeal any
3-14 tax exemptions contained in other laws of this state not
3-15 referred to in this article. Those exemptions and the
3-16 exemptions provided for by federal law and treaty shall
3-17 be deducted on forms provided by the commissioner.
3-18 (7) All elections made by corporate taxpayers under the
3-19 Internal Revenue Code of 1954 or the Internal Revenue
3-20 Code of 1986 shall also apply under this article except
3-21 elections involving consolidated corporate returns and
3-22 Subchapter 'S' elections which shall be treated as
3-23 follows:
3-24 (A)(i) If two or more corporations file federal
3-25 income tax returns on a consolidated basis and all
3-26 of the corporations derive all of their income from
3-27 sources within this state, the corporations must
3-28 file consolidated returns for Georgia income tax
3-29 purposes. Affiliated corporations which file a
3-30 consolidated federal income tax return but which
3-31 derive income from sources outside this state must
3-32 file separate income tax returns with this state
3-33 unless they have prior approval or have been
3-34 requested to file a consolidated return by the
3-35 department.
3-36 (ii) No depository financial institution shall be
3-37 deprived of the benefit of any exemption, deduction,
3-38 or credit authorized by this title as a consequence
3-39 of its election to file otherwise lawful
3-40 consolidated returns with its parent organization or
3-41 any corporate subsidiaries with respect to any state
3-42 or local tax levied against such depository
-3-
4- 1 financial institution as a result of this title. As
4- 2 used in this division, the term:
4- 3 (I) 'Bank' means any financial institution
4- 4 chartered under the laws of this state or under
4- 5 the laws of the United States and domiciled in
4- 6 this state which is authorized to receive deposits
4- 7 in this state and which has a corporate structure
4- 8 authorizing the issuance of capital stock.
4- 9 (II) 'Depository financial institution' means a
4-10 'bank' or a 'savings and loan association.'
4-11 (III) 'Savings and loan association' means any
4-12 financial institution, other than a credit union,
4-13 chartered under the laws of this state or under
4-14 the laws of the United States and domiciled in
4-15 this state which is authorized to receive deposits
4-16 in this state and which has a mutual corporate
4-17 form;
4-18 (B) Subchapter 'S' elections apply only if all
4-19 stockholders are subject to tax in this state on their
4-20 portion of the corporate income. If all nonresident
4-21 stockholders pay the Georgia income tax on their
4-22 portion of the corporate income, the election shall be
4-23 allowed.
4-24 (8) There shall be subtracted from taxable income
4-25 dividends received by:
4-26 (A) A corporation from sources outside the United
4-27 States as defined in the Internal Revenue Code of
4-28 1986. For purposes of this subparagraph, dividends
4-29 received by a corporation from sources outside of the
4-30 United States shall include amounts treated as a
4-31 dividend and income deemed to have been received under
4-32 provisions of the Internal Revenue Code of 1986 by
4-33 such corporation if such amounts could have been
4-34 subtracted from taxable income under this paragraph,
4-35 had such amounts actually been received. Amounts to
4-36 be subtracted under this subparagraph shall include
4-37 the following, as defined by the Internal Revenue Code
4-38 of 1986:
4-39 (i) Qualified electing fund income;
4-40 (ii) Subpart F income; and
-4-
5- 1 (iii) Income attributable to an increase in United
5- 2 States property by a controlled foreign corporation.
5- 3 The amount subtracted under this subparagraph shall be
5- 4 reduced by any expenses directly attributable to the
5- 5 dividend income; and
5- 6 (B) Corporations from affiliated corporations within
5- 7 the United States, when the corporation receiving the
5- 8 dividends is engaged in business in this state and is
5- 9 subject to the payment of taxes under the income tax
5-10 laws of this state, to the extent that the dividends
5-11 have been included in net income under this Code
5-12 section. Dividends from affiliates shall be reduced
5-13 by any expenses directly attributable to the dividend
5-14 income.
5-15 (9) Where a corporation's salary and wage deductions are
5-16 reduced in computing federal taxable income because the
5-17 corporation has taken a federal jobs tax credit which
5-18 required, as a condition to using the federal jobs tax
5-19 credit, the elimination of salary and wage deductions,
5-20 the eliminated salary and wage deductions shall be
5-21 subtracted from taxable income.
5-22 (10) There shall be a dollar-for-dollar credit against
5-23 the state income tax liability of depository financial
5-24 institutions which shall be equal to the amount of
5-25 taxes, if any, paid by such taxpayers pursuant to Code
5-26 Section 48-6-93 and Code Section 48-6-95. If the
5-27 liability of any such institutions under the taxes
5-28 authorized by Code Section 48-6-93 and Code Section
5-29 48-6-95 exceeds the corporate income tax liability of
5-30 such institution for any year, the amount of any unused
5-31 credit under this Code section may be credited over a
5-32 period of five years from the tax year in which the
5-33 unused credit arose. If the assets of an institution
5-34 are acquired by another institution in a transaction
5-35 described in Section 381(a) of the Internal Revenue Code
5-36 of 1986, the acquiring institution shall succeed to and
5-37 take into account any unused credit of the distributor
5-38 or transferor institution.
5-39 (11) There shall be subtracted from taxable income a
5-40 portion of qualified payments to minority
5-41 subcontractors, as provided in Code Section 48-7-38.
-5-
6- 1 (12) Georgia taxable income shall, if the taxpayer so
6- 2 elects, be adjusted with respect to federal depreciation
6- 3 deductions as provided in Code Section 48-7-39.",
6- 4 and inserting in its place a new Code Section 48-7-21 to
6- 5 read as follows:
6- 6 "48-7-21.
6- 7 (a) Every domestic corporation and every foreign
6- 8 corporation shall pay annually an income tax equivalent to
6- 9 6 percent of its Georgia taxable net income. Georgia
6-10 taxable net income of a corporation shall be the
6-11 corporation's taxable income from property owned or from
6-12 business done in this state. A corporation's taxable
6-13 income from property owned or from business done in this
6-14 state shall consist of the corporation's taxable income as
6-15 defined in the Internal Revenue Code of 1986, with the
6-16 adjustments provided for in subsection (b) of this Code
6-17 section and allocated and apportioned as provided in Code
6-18 Section 48-7-31.
6-19 (b)(1)(A) When interest income is derived from
6-20 obligations of any state or political subdivision
6-21 except this state and political subdivisions of this
6-22 state, the interest income shall be added to taxable
6-23 income to the extent that the interest income is not
6-24 included in gross income for federal income tax
6-25 purposes. Interest or dividends on obligations of any
6-26 authority, commission, instrumentality, territory, or
6-27 possession of the United States which by the laws of
6-28 the United States are exempt from federal income tax
6-29 but not from state income tax shall also be added to
6-30 taxable income.
6-31 (B) There shall be subtracted from taxable income
6-32 interest or dividends on obligations of the United
6-33 States and its territories and possessions or of any
6-34 authority, commission, or instrumentality of the
6-35 United States to the extent such interest or dividends
6-36 are includable in gross income for federal income tax
6-37 purposes but exempt from state income taxes under the
6-38 laws of the United States. There shall also be
6-39 subtracted from taxable income any income derived from
6-40 the authorized activities of a domestic international
6-41 banking facility operating pursuant to the provisions
6-42 of Article 5A of Chapter 1 of Title 7, the 'Domestic
6-43 International Banking Facility Act,' and any income
-6-
7- 1 arising from the conduct of a banking business with
7- 2 persons or entities located outside the United States,
7- 3 its territories, or possessions. Any amount
7- 4 subtracted pursuant to this subparagraph shall be
7- 5 reduced by any expenses directly attributable to the
7- 6 production of the interest or dividend income.
7- 7 (2) There shall be added to taxable income any taxes on,
7- 8 or measured by, net income or net profits paid or
7- 9 accrued within the taxable year imposed by the authority
7-10 of the United States or any foreign country, by any
7-11 state except the State of Georgia, or by any territory,
7-12 county, school district, municipality, or other tax
7-13 subdivision of any state, territory, or foreign country
7-14 to the extent such taxes are deducted in determining
7-15 federal taxable income.
7-16 (3) No portion of any deductions or losses which
7-17 occurred in a year in which the taxpayer was not subject
7-18 to taxation in this state including, but not limited to,
7-19 net operating losses may be deducted in any tax year.
7-20 When the federal adjusted gross income or net income of
7-21 a corporation includes such deductions or losses, an
7-22 adjustment deleting them shall be made under rules
7-23 established by the commissioner. The provisions of this
7-24 subsection shall not prohibit the carry-over of any
7-25 deductions or losses including, but not limited to, net
7-26 operating losses of any taxpayer which were incurred in
7-27 a year or years in which the taxpayer was subject to
7-28 methods of taxation in this state other than the
7-29 corporate income tax.
7-30 (4) Income, losses, and deductions previously used in
7-31 computing Georgia taxable income shall not again be used
7-32 in computing Georgia taxable income. The commissioner
7-33 shall provide for needed adjustments by regulation.
7-34 (5) When on the sale or exchange of real or tangible
7-35 personal property located in this state gain or loss is
7-36 not recognized because the taxpayer receives or
7-37 purchases similar property, the nonrecognition shall be
7-38 allowed only when the property is replaced with property
7-39 located in this state.
7-40 (6) This article shall not be construed to repeal any
7-41 tax exemptions contained in other laws of this state not
7-42 referred to in this article. Those exemptions and the
-7-
8- 1 exemptions provided for by federal law and treaty shall
8- 2 be deducted on forms provided by the commissioner.
8- 3 (7) All elections made by corporate taxpayers under the
8- 4 Internal Revenue Code of 1954 or the Internal Revenue
8- 5 Code of 1986 shall also apply under this article except
8- 6 elections involving consolidated corporate returns and
8- 7 Subchapter 'S' elections which shall be treated as
8- 8 follows:
8- 9 (A)(i) If two or more corporations file federal
8-10 income tax returns on a consolidated basis and all
8-11 of the corporations derive all of their income from
8-12 sources within this state, the corporations must
8-13 file consolidated returns for Georgia income tax
8-14 purposes. Affiliated corporations which file a
8-15 consolidated federal income tax return but which
8-16 derive income from sources outside this state must
8-17 file separate income tax returns with this state
8-18 unless they have prior approval or have been
8-19 requested to file a consolidated return by the
8-20 department.
8-21 (ii) No depository financial institution shall be
8-22 deprived of the benefit of any exemption, deduction,
8-23 or credit authorized by this title as a consequence
8-24 of its election to file otherwise lawful
8-25 consolidated returns with its parent organization or
8-26 any corporate subsidiaries with respect to any state
8-27 or local tax levied against such depository
8-28 financial institution as a result of this title. As
8-29 used in this division, the term:
8-30 (I) 'Bank' means any financial institution
8-31 chartered under the laws of this state or under
8-32 the laws of the United States and domiciled in
8-33 this state which is authorized to receive deposits
8-34 in this state and which has a corporate structure
8-35 authorizing the issuance of capital stock.
8-36 (II) 'Depository financial institution' means a
8-37 'bank' or a 'savings and loan association.'
8-38 (III) 'Savings and loan association' means any
8-39 financial institution, other than a credit union,
8-40 chartered under the laws of this state or under
8-41 the laws of the United States and domiciled in
8-42 this state which is authorized to receive deposits
-8-
9- 1 in this state and which has a mutual corporate
9- 2 form;
9- 3 (B) Subchapter 'S' elections apply only if all
9- 4 stockholders are subject to tax in this state on their
9- 5 portion of the corporate income. If all nonresident
9- 6 stockholders pay the Georgia income tax on their
9- 7 portion of the corporate income, the election shall be
9- 8 allowed.
9- 9 (8) There shall be subtracted from taxable income
9-10 dividends received by:
9-11 (A) A corporation from sources outside the United
9-12 States as defined in the Internal Revenue Code of
9-13 1986. For purposes of this subparagraph, dividends
9-14 received by a corporation from sources outside of the
9-15 United States shall include amounts treated as a
9-16 dividend and income deemed to have been received under
9-17 provisions of the Internal Revenue Code of 1986 by
9-18 such corporation if such amounts could have been
9-19 subtracted from taxable income under this paragraph,
9-20 had such amounts actually been received. Amounts to
9-21 be subtracted under this subparagraph shall include
9-22 the following, as defined by the Internal Revenue Code
9-23 of 1986:
9-24 (i) Qualified electing fund income;
9-25 (ii) Subpart F income; and
9-26 (iii) Income attributable to an increase in United
9-27 States property by a controlled foreign corporation.
9-28 The amount subtracted under this subparagraph shall be
9-29 reduced by any expenses directly attributable to the
9-30 dividend income; and
9-31 (B) Corporations from affiliated corporations within
9-32 the United States, when the corporation receiving the
9-33 dividends is engaged in business in this state and is
9-34 subject to the payment of taxes under the income tax
9-35 laws of this state, to the extent that the dividends
9-36 have been included in net income under this Code
9-37 section. Dividends from affiliates shall be reduced
9-38 by any expenses directly attributable to the dividend
9-39 income.
9-40 (9) Where a corporation's salary and wage deductions are
9-41 reduced in computing federal taxable income because the
-9-
10- 1 corporation has taken a federal jobs tax credit which
10- 2 required, as a condition to using the federal jobs tax
10- 3 credit, the elimination of salary and wage deductions,
10- 4 the eliminated salary and wage deductions shall be
10- 5 subtracted from taxable income.
10- 6 (10) There shall be a dollar-for-dollar credit against
10- 7 the state income tax liability of depository financial
10- 8 institutions which shall be equal to the amount of
10- 9 taxes, if any, paid by such taxpayers pursuant to Code
10-10 Section 48-6-93 and Code Section 48-6-95. If the
10-11 liability of any such institutions under the taxes
10-12 authorized by Code Section 48-6-93 and Code Section
10-13 48-6-95 exceeds the corporate income tax liability of
10-14 such institution for any year, the amount of any unused
10-15 credit under this Code section may be credited over a
10-16 period of five years from the tax year in which the
10-17 unused credit arose. If the assets of an institution
10-18 are acquired by another institution in a transaction
10-19 described in Section 381(a) of the Internal Revenue Code
10-20 of 1986, the acquiring institution shall succeed to and
10-21 take into account any unused credit of the distributor
10-22 or transferor institution.
10-23 (11) There shall be subtracted from taxable income a
10-24 portion of qualified payments to minority
10-25 subcontractors, as provided in Code Section 48-7-38.
10-26 (12) Georgia taxable income shall, if the taxpayer so
10-27 elects, be adjusted with respect to federal depreciation
10-28 deductions as provided in Code Section 48-7-39."
10-29 SECTION 2.
10-30 All laws and parts of laws in conflict with this Act are
10-31 repealed.
-10-
Clerk of the House
Robert E. Rivers, Jr., Clerk
Last Updated on 02/24/99
