TAX NEWS - August 2009

C-Corporations Tax FAQ - State of Georgia tax

Q. What is the corporate tax rate?

A. The corporate tax rate is 6 %.


Q. Does Georgia have a minimum corporate income tax?

A. There is no minimum corporate income tax required. However, there is a minimum net worth tax of $10.


Q. Does Georgia require estimated tax payments?

A. Yes, if Georgia taxable income exceeds $25,000.


Q. Does Georgia require these tax payments to be submitted electronically?

A. Georgia law requires corporate estimated taxpayers with quarterly payments of $10,000 or more to make those payments via electronic funds transfer. Additionally, you can now voluntarily participate in our electronic funds transfer program. For more information, please click here, call (404) 417-2220 or 1-800-659-1855, or send an email to doreft@dor.ga.gov.


Q. What number goes in line 1 of Schedule 1 of the Georgia 600?

A. Federal Taxable Income, which is generally line 30 of the Federal 1120 Form.


Q. How does Georgia treat a Net Operating Loss (NOL)?

A. Losses can be carried back two years (with special rules for farmers and casualty losses) and forward 20 years. An election made with the IRS to relinquish the entire carry back period and carry a loss forward is a binding election with Georgia. If the company has a separate company Georgia NOL and the Federal consolidated return has positive income the separate Georgia company has to carry the loss back unless they attach a written statement electing to forgo the carry back period. Alternatively they could also check Box 14, Schedule K of their pro forma Federal return they file with the Georgia return to forego the carry back period.


Q. Is it possible to have a Georgia NOL and not a Federal NOL?

A. Yes, adjustments to Federal income could create a Georgia NOL.


Q. Is it possible to have a Federal NOL and not a Georgia NOL?

A. Yes, adjustments to Federal income could change the income so that there was not a Georgia NOL.


Q. What is Georgia's treatment for net operating loss carryforwards when c-corporations merge?

A. If both c-corporations before the merger are subject to taxation in Georgia, then the corporation with the net operating loss carry forward at the time of the merger can carry forward its Georgia loss into the new entity if the loss is allowed to be carried forward for Federal income tax purposes. If the c-corporation with the carry forward loss was not subject to taxation in Georgia, then it would not have a Georgia net operating loss.


Q. A corporation that is a member of an affiliated group is sold and becomes a member of a new affiliated group. The IRS requires the corporation to file two short period returns so that each can be included on different consolidated tax returns. For Georgia purposes the corporation is filing separate tax returns (not as part of a consolidated return). How should they file with Georgia?

A. The Department will accept one full year tax return or they can file two short period tax returns. If two short period tax returns are filed, the due date for the first short period is the 15th day of the third month following the close of the short period (up to a six month extension is available, but late payment penalties and interest will accrue). If the taxpayer cannot file the tax return in time (due to lack of information), we recommend that sufficient payments be sent so that when the return is submitted, penalty and interest charges will not apply.


Q. A corporation that is a member of an affiliated group is merged into another corporation. The new corporation is part of a different affiliated group. The IRS requires the corporation that was merged to file a short period tax return for the period before the merger but since it is filing as a member of a consolidated group the return is not due until the 15th day of the third month following the end of the consolidated group's year end. For Georgia purposes the corporation is filing separate returns (not as part of a consolidated return). How should they file tax with Georgia?

A. They should file a short year tax return. The due date is the 15th day of the third month following the close of the short period (up to a six month extension is available, but late payment penalties and interest will accrue). If the taxpayer cannot file the tax return in time (due to lack of information), we recommend that sufficient payments be sent so that when the return is submitted, penalty and interest charges will not apply.


Q. Does having an employee in Georgia create NEXUS (requiring the corporation, or the shareholders in the case of an s-corporation, to pay Georgia income taxes) for a company based in another state which sells tangible personal property?

A. Yes. In general having an employee in Georgia does create NEXUS. However, Public Law 86-272 provides an exemption from taxation in the following circumstances. If the employee merely solicits orders for sales of tangible personal property that are sent outside Georgia for approval and are filled and shipped from outside Georgia (from a state other than Georgia where the employee's corporation conducts its business) then the exemption from taxation applies. It must be noted that if an employee goes beyond mere solicitation then the exemption does not apply. Additionally, the Public Law 86-272 exemption does not apply to the net worth tax, so a Form 600 or 600S must be filed with Georgia and the net worth tax must be paid. Even when the exemption applies, we recommend that the corporation complete all schedules on the Georgia return relating to income tax and attach a copy of their Federal Form 1120 or 1120S. However, on line 8, Schedule 1 of Form 600 or on the face of page 1 of the 600S they should indicate their belief that they fall under the protection of Public Law 86-272 and show -0- tax due.


Q. I file a Form 1120-H with the Federal government. What form should I file with Georgia?

A. File Form 600 to report income tax information. If not organized for pecuniary gain or profit, a homeowners association is not liable for net worth tax. Write "not organized for profit" in schedule 2 of Form 600. If organized for profit, a homeowners association is liable for net worth tax.