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03 LC 18 2554
House Bill 559
By: Representative Royal of the 140th
By: Representative Royal of the 140th
A BILL TO BE
ENTITLED
AN ACT
AN ACT
To amend Code Section 48_7_31 of the Official Code of
Georgia Annotated, relating to allocation and apportionment of income with
respect to income taxation regarding corporations, so as to provide for the
comprehensive revision of the allocation and apportionment formulas used to
apportion income of corporations deriving income from business conducted both
within Georgia and elsewhere; to provide an effective date; to provide for
applicability; to repeal conflicting laws; and for other
purposes.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF
GEORGIA:
SECTION 1.
Code Section 48_7_31 of the Official Code of Georgia
Annotated, relating to allocation and apportionment of income with respect to
income taxation regarding corporations, is amended by striking paragraphs (1)
and (2) of subsection (d) and inserting in their place new paragraphs (1) and
(2) to read as
follows:
"(1) Where the net business income of the corporation is derived principally from the manufacture, production, or sale of tangible personal property, the portion of the net income therefrom attributable to property owned or business done within this state shall be taken to be the portion arrived at by application of the followingformula:
(A)
Property factor. The property factor is a fraction, the numerator of which is
the average value of the taxpayer´s real and tangible personal property
owned or rented and used in this state during the tax period and the denominator
of which is the average value of all the taxpayer´s real and tangible
personal property owned or rented and used during the tax
period;
(i) Property owned by the
taxpayer is valued at its original cost. Property rented by the taxpayer is
valued at eight times the net annual rental rate. Net annual rental rate is the
annual rental rate paid by the taxpayer less any annual rental rate received by
the taxpayer from subrentals;
(ii)
The average value of property shall be determined by averaging the values at the
beginning and end of the tax period, except that the commissioner may require
the averaging of monthly values during the tax period if such averaging is
reasonably required to reflect properly the average value of the taxpayer´s
property;
(B) Payroll factor. The
payroll factor is a fraction, the numerator of which is the total amount paid in
this state during the tax period by the taxpayer for compensation and the
denominator of which is the total compensation paid everywhere during the tax
period. The term 'compensation' means wages, salaries, commissions, and any
other form of remuneration paid to employees for personal services. Payments
made to an independent contractor or any other person not properly classified as
an employee are excluded. Compensation is paid in this state
if:
(i) The employee´s service
is performed entirely within this
state;
(ii) The employee´s
service is performed both within and outside this state and the service
performed outside this state is incidental to the employee´s service within
this state; or
(iii) Some of the
service is performed in this state and either the base of operations or the
place from which the service is directed or controlled is in this state or the
base of operations or the place from which the service is directed or controlled
is not in any state in which some part of the service is performed but the
employee´s residence is in this
state;
(C)(A) Gross
receipts factor. The gross receipts factor is a fraction, the numerator of
which is the total gross receipts from business done within this state during
the tax period and the denominator of which is the total gross receipts from
business done everywhere during the tax period. For the purposes of this
subparagraph, receipts shall be deemed to have been derived from business done
within this state only if the receipts are received from products shipped to
customers in this state or products delivered within this state to customers.
In determining the gross receipts within this state, receipts from sales
negotiated or effected through offices of the taxpayer outside this state and
delivered from storage in this state to customers outside this state shall be
excluded; and
(D)(B)
Apportionment formula. The property factor, the payroll factor, and the
gross receipts factor shall be separately determined and an apportionment
fraction shall be calculated using the following
formula:
(i) The property factor
shall represent 25 percent of the
fraction;
(ii) The payroll factor
shall represent 25 percent of the fraction;
and
(iii) The gross receipts factor
shall represent 50 percent of the
fraction.
The net income of
the corporation shall be apportioned to this state according to such
fraction gross receipts
factor;
(2) Except as otherwise provided in paragraph (2.1) or (2.2) of this subsection, where the net business income is derived principally from business other than the manufacture, production, or sale of tangible personal property, the net business income of the corporation shall be arrived at by application of the followingthree factor
formula:
(A) Property factor. The
property factor is a fraction, the numerator of which is the average value of
the taxpayer´s real and tangible personal property owned or rented and used
in this state during the tax period and the denominator of which is the average
value of all the taxpayer´s real and tangible personal property owned or
rented and used during the tax
period;
(i) Property owned by the
taxpayer is valued at its original cost. Property rented by the taxpayer is
valued at eight times the net annual rental rate. Net annual rental rate is the
annual rental rate paid by the taxpayer less any annual rental rate received by
the taxpayer from subrentals;
(ii)
The average value of property shall be determined by averaging the values at the
beginning and end of the tax period, except that the commissioner may require
the averaging of monthly values during the tax period if such averaging is
reasonably required to reflect properly the average value of the taxpayer´s
property;
(B) Payroll factor. The
payroll factor is a fraction, the numerator of which is the total amount paid in
this state during the tax period by the taxpayer for compensation and the
denominator of which is the total compensation paid everywhere during the tax
period. The term 'compensation' means wages, salaries, commissions, and any
other form of remuneration paid to employees for personal services. Payments
made to an independent contractor or any other person not properly classified as
an employee are excluded. Compensation is paid in this state
if:
(i) The employee´s service
is performed entirely within this
state;
(ii) The employee´s
service is performed both within and outside this state and the service
performed outside this state is incidental to the employee´s service within
this state; or
(iii) Some of the
service is performed in this state and either the base of operations or the
place from which the service is directed or controlled is in this state or the
base of operations or the place from which the service is directed or controlled
is not in any state in which some part of the service is performed but the
employee´s residence is in this
state;
(C)(A) Gross
receipts factor. The gross receipts factor is a fraction, the numerator of
which is the total gross receipts from business done within this state during
the tax period and the denominator of which is the total gross receipts from
business done everywhere during the tax period. Gross receipts are in this
state if the receipts are derived from customers within this state or if the
receipts are otherwise attributable to this state´s marketplace;
and
(D) The property factor, payroll
factor, and the gross receipts factor shall be separately determined and an
apportionment fraction shall be calculated using the following
formula:
(i) The property factor
shall represent 25 percent of the
fraction;
(ii) The payroll factor
shall represent 25 percent of the fraction;
and
(iii) The gross receipts factor
shall represent 50 percent of the
fraction.
(B) Apportionment formula. The net income of the corporation shall be apportioned to this state according to suchfraction gross receipts
factor;
(E) If the allocation and
apportionment provisions provided for in this paragraph do not fairly represent
the extent of the taxpayer´s business activity in this state, the taxpayer
may petition the commissioner for, or the commissioner may by regulation
require, with respect to all or any part of the taxpayer´s business
activity, if reasonable:
(i) Separate
accounting;
(ii) The exclusion of any
one or more of the factors;
(iii) The
inclusion of one or more additional factors that will fairly represent the
taxpayer´s business activity within this state;
or
(iv) The employment of any other
method to effectuate an equitable allocation and apportionment of the
taxpayer´s income.
The denial of
a petition under this paragraph shall be appealable pursuant to either Code
Section 48_2_59 or
50_13_12;".
"(1) Where the net business income of the corporation is derived principally from the manufacture, production, or sale of tangible personal property, the portion of the net income therefrom attributable to property owned or business done within this state shall be taken to be the portion arrived at by application of the following
(2) Except as otherwise provided in paragraph (2.1) or (2.2) of this subsection, where the net business income is derived principally from business other than the manufacture, production, or sale of tangible personal property, the net business income of the corporation shall be arrived at by application of the following
(B) Apportionment formula. The net income of the corporation shall be apportioned to this state according to such
SECTION 2.
This Act shall become effective January 1,
2005.
SECTION 3.
All laws and parts of laws in conflict with this Act are
repealed.