- Georgia Legislature Enacts Significant Income, Sales, and Property Tax Legislation
- April 12, 2018 | Authors: Alla Raykin; Michele Borens; Evan M. Hamme; Jonathan A. Feldman; Andrew D. Appleby; Jeffrey A. Friedman; Chelsea E. Marmor; Charles C. Kearns; Scott Wright; Todd A. Lard; Ted W. Friedman; Carley A. Roberts; Nicholas J. Kump; Douglas Mo; Suzanne M. Palms; Eric J. Coffill; Marc A. Simonetti; Open Weaver Banks; Debra Vance; Timothy A. Gustafson; Jessica A. Eisenmenger; Jessica N. Allen; Dmitrii Gabrielov; Christopher Beaudro; Michael J. Kerman; Todd G. Betor; Huy Mike N. Le; Nicole D. Boutros; Robert P. Merten; Justin T. Brown; Hanish S. Patel; Charles C. Capouet
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The Georgia legislative session concluded on March 29, 2018. In addition to two major bills relating to federal tax reform, Georgia enacted several other pieces of notable tax legislation.1
HB 918 – IRC Conformity.2 Georgia’s annual IRC conformity bill this year took on more weight in light of federal tax reform. The legislation provides for general conformity with the Internal Revenue Code of 1986 as provided for in federal law enacted on or before February 9, 2018. HB 918 specifically provides that Georgia will decouple from the federal Tax Cuts and Jobs Act (TCJA) for the contributions of capital (IRC § 118), full expensing (IRC § 168) and the interest deduction limitation provisions (IRC § 163(j)). HB 918 also lowers the top marginal income tax rate from 6% to 5.75% for 2019 with a provision for further reduction to 5.5% by 2020.
SB 328 – GILTI Not Taxable in Georgia.3 After passage of HB 918, the General Assembly made a technical correction to decouple from the new federal taxation of Global Intangible Low Tax Income (“GILTI”). SB 328 treats GILTI as Subpart F income for purposes of the deduction under O.C.G.A. § 48-7-21(b)(8) and prevents Georgia from taxing the income of controlled foreign corporations owned by Georgia taxpayers. Therefore, all GILTI will be excluded from Georgia taxable income. See more coverage here.
HB 61 – Remote Sellers. HB 61 changes the definition of a “dealer” required to collect tax by creating a bright-line nexus rule for any seller that has either more than $250,000 of Georgia revenue or 200 separate sales of tangible personal property, delivered physically or electronically in Georgia within the current or previous calendar year. Sellers meeting this threshold must collect sales tax or submit to certain reporting requirements. This bill becomes effective January 1, 2019, by which point the US Supreme Court presumably will have ruled on the currently pending Wayfair case,4 which challenges the constitutionality of a similar South Dakota statute.
Eversheds Sutherland Observation: HB 61 includes sales of “tangible personal property” delivered electronically towards the nexus threshold. However, Georgia exempts electronically delivered computer software (as broadly defined) from sales and use tax. O.C.G.A. § 48-8-3(91). Georgia has also defined the sale of computer software electronically delivered as “intangible,” not tangible personal property. See Ga. Comp. R. & Reg. § 560-12-2-.111(4).
HB 61 also provides a procedural mechanism for the Department of Revenue (“Department”) to enforce this provision by seeking a declaratory judgment from superior court, with a direct appeal to the Georgia Supreme Court.
HB 696 – Data Center Exemption. HB 696 adds a new sales tax exemption for “high-technology data centers” that meet the minimum investment threshold. The minimum threshold is the creation of 20 new “quality jobs” and a minimum investment over a seven-year consecutive period of between $100 million to $250 million (depending on the population of the county in which the data center is located). A high-technology data center receiving the sales tax exemption is not eligible for the quality jobs income tax credits.
Eversheds Sutherland Observation: This new exemption is separate from and broader than the existing high-technology equipment exemption (O.C.G.A. § 48-8-3(68)), which exempts purchases of equipment by qualifying high-technology companies spending more than $15 million in a calendar year.
HB 811 – Data Analytics Confidentiality Exemption. HB 811 amends Georgia’s tax confidentiality statute (O.C.G.A. § 48-2-15) to add an exception to allow the Department to share confidential taxpayer information with “data analytics services” to assist the Department in identifying taxpayers that are non-compliant with Georgia sales & use tax law. This exception authorizes the Department to compensate such data analytics services on a “contingency basis” for the amount of revenue they help collect. Thus, for the first time, the Department would be authorized to use a third party for audit selection services, and to pay such services on a contingency basis.
Eversheds Sutherland Observation: Although it is not clear how data analytics services will earn contingency payments, the authorization of audit selection services receiving contingency payments may be inconsistent with other Georgia policy and law. The Georgia Supreme Court has held that a county’s contract with auditors on a contingency basis is void because it violates public policy.5 Moreover, O.C.G.A. § 48-2-7(c) states that “[a]ll employees of the department shall be compensated upon a fixed salary basis and no person shall be compensated for services to the department on a commission or contingent fee basis.”
HB 93 – Direct Pay Permits failed to pass. HB 93 would have legislatively amended the Department’s regulation that requires direct pay permit applicants to waive their entitlement to interest on sales & use tax refunds. After versions of the bill passed both the Georgia House and the Senate nearly unanimously, the two chambers failed to agree to a version that included unrelated provisions added through the committee process. The last version produced by a House/Senate conference committee is here. For more coverage of this issue, see here and here.
HB 374 – Appeals Process. HB 374 makes several updates to the property tax appeal process, which was previously overhauled during the 2015 legislative session. It lowers the threshold for the value of real property appeals eligible for hearing by a hearing officer, instead of the board of equalization or an arbitrator. Additionally, if a county board of assessors does not respond to a taxpayer’s appeal within 180 days, the taxpayer’s opinion of value is deemed accepted. The bill would also change several other deadlines in the appeals process.
HB 888 Freeport Exemption. HB 888 requires that the board of assessors respond to a taxpayer’s application for freeport exemption within 180 days, or the exemption is deemed accepted. The bill also clarifies that the assembly of component parts is manufacturing, and therefore qualifies for the freeport exemption.
1 Unless otherwise indicated, the enacted legislation discussed awaits execution or veto by the Governor. The legislation will also become effective within 40 days if no action is taken by the Governor.
2 Act 284, H.B. 918, 154th Gen. Assem., Reg. Sess. (Ga. 2018) was signed by the Governor on March 2, 2018.
3 Act 284, S.B. 328, 154th Gen. Assem., Reg. Sess. (Ga. 2018) was signed by the Governor on March 26, 2018.
4 South Dakota v. Wayfair, No. 17-494, cert. granted, 901 N.W.2d 754 (Jan. 12, 2018).5 Sears, Roebuck and Co. v. Parsons, 260 Ga. 824 (1991).