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TAX NEWS - August 2009

Net Worth Tax for Corporations FAQ - State of Georgia tax

Q. What is the tax rate for net worth tax?

A. The tax is a graduated tax, ranging from a minimum $10 up to $5,000 depending on the taxable net worth of the corporation. To determine the appropriate tax, the net worth tax table must be used. The table can be found in the 611 or 611S instruction booklets.


Q. What dates should I use on the corporate return under net worth tax beginning and ending dates?

A. Net worth tax is computed on the net worth of the corporation from the ending balance sheet and is due at the beginning of the year for the upcoming tax year. The beginning and ending dates for net worth tax would be one year later than the income tax beginning and ending dates. For example, the income tax beginning and ending dates are 1/1/00 through 12/31/00. The net worth tax beginning and ending dates would be 1/1/01 through 12/31/01.


Q. How is the net worth tax determined for a short-period income tax return?

A. For short periods other than initial or final returns, the tax is computed on the net worth of the corporation from the ending balance sheet of the short period return. The tax is then prorated based on the number of months included in the short period return.


Q. How is the net worth tax determined for an initial or final return?

A. The Initial Net Worth tax return is due the 15th day of the third month after incorporation or qualification. The net worth reported on this tax return is as of the date of incorporation or qualification. No income tax information is reported on the Initial Net Worth return. The net worth tax paid on this return covers the period beginning with the date of incorporation or qualification and ending with the end of the first income tax year. If this period is less than 6 months, only the tax as shown in the net worth tax table is due. The second tax return that is required to be filed is used to report income tax for the period beginning with the date of incorporation or qualification and ending with the corporation's chosen year end and to report net worth tax for the next full year. This return is due on the 15th day of the third month after the end of the income tax year. A full year's net worth tax is always due with this first income tax return. The following example illustrates this. Date of incorporation or qualification, 3/18/00. Accounting year end chosen, 10/31/00. Initial net worth return is due, 6/15/00. This covers 3/18/00 through 10/31/00 and since this is greater than 6 months, a full year net worth tax is due. First income tax return is due, 1/15/01. This covers income tax year 3/18/00 through 10/31/00 and net worth tax year 11/01/00 through 10/31/01.


Q. How can I file the initial net worth tax return two and one half months after incorporation when the IRS has not issued my FEI #?

A. File the return showing "Applied For" in the box for the Federal Employer ID No.


Q. How are a Qualified Subchapter S Subsidiary (QSSS) and its parent treated for Georgia Net worth tax purposes?

A. The QSSS and the parent would file separate net worth tax returns. If the parent is not registered with the Secretary of State and does not do business or own property in Georgia or receive income from Georgia sources (other than thru the QSSS) they would not be required to file a net worth tax return. Alternately, a QSSS that is not registered with the Secretary of State and does not do business or own property in Georgia or receive income from Georgia sources would not be required to file a net worth return, even if the parent is required to do so.


Q. Is a disregarded single member LLC subject to the Georgia net worth tax?

A. No. The single member LLC is not subject to the Georgia net worth tax. However, if the owner of the single member LLC is a corporation, the corporation is subject to the Georgia net worth tax if the single member LLC does business or owns property in Georgia.


Q. Is an LLC who files as a partnership subject to Georgia Net Worth tax?

A. No. There is no Net Worth tax on partnerships.


Q. Is an LLC who files as a corporation subject to Net Worth tax in Georgia?

A. Yes.


Q. How is net worth tax determined on a corporation incorporated in Georgia that does business both inside and outside the state?

A. A Georgia corporation or a domesticated foreign corporation is liable for net worth tax on 100% of the taxable net worth. For corporations incorporated in states other than Georgia, a ratio is computed using property and gross receipts within Georgia and the total everywhere.


Q. The property factor for income tax apportionment and net worth tax apportionment are computed differently. What kinds of property are included in the net worth apportionment?

A. The property portion of the net worth ratio is computed as follows. For the "everywhere figure", the ending balance sheet asset figure from the Federal income tax return should be used. For the "within Georgia figure" a "Georgia" balance sheet must be calculated from assets owned in Georgia. The difference between net worth tax apportionment and income tax apportionment is that for net worth tax purposes tangible and intangible assets, like cash, accounts receivable, allowance for bad debts, accumulated depreciation, etc. are included.


Q. Does a corporation have to file a net worth return on Form 600 or 600S even if the corporate income tax portion of the return does not have to be filed?

A. Yes, if you do business, own property in Georgia, or are registered with the Secretary of State you must file the net worth portion of the Georgia Form 600 or 600S every year.


Q. Can a BEST credit be applied towards the net worth tax?

A. No.


Q. What is meant by "foreign" corporation?

A. A corporation incorporated in another state, territory, or nation.


Q. Are homeowners associations liable for the net worth tax?

A. If not organized for pecuniary gain or profit, a homeowners association is not liable for the 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.


Q. For a corporation which has a partnership interest, does the pro rata share of the partnership's receipts and assets also get added to the numerator (if applicable) and the denominator for calculating the net worth tax of the corporation as they do for the calculation of income tax?

A. Yes. O.C.G.A. Section 48-13-72 imposes a net worth tax on a foreign corporation which is doing business or owning property in this state. The language is nearly identical to the language in O.C.G.A. Section 48-7-31 and Regulation 560-7-7-.03 and as such the same principles apply. Regulation 560-7-7-.03 requires a corporation which is involved in a business joint venture, or which is a partner in a partnership to includes its pro rata share of the joint venture or partnership property, payroll, and gross receipts in its own apportionment formula.
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