Georgia: Summary of Significant Tax Legislation During 2020 Session
The Georgia legislature produced several tax bills during 2020, including favorable changes to its jobs tax credits that should help companies in 2020 and 2021 that have experienced a workforce reduction due to COVID-19.
By Jeff Glickman, SALT Partner
Despite a 3-month suspension of the legislative session due to COVID-19, the Georgia state legislature enacted several notable tax bills.
HB 276 – Georgia Marketplace Facilitator Sales Tax Law
Effective April 1, 2020, Georgia joined about 40 states that impose sales tax obligations on marketplace facilitators. A marketplace facilitator is generally defined as a business that (i) facilitates a retail sale between a seller and a purchaser in any manner, such as by promoting, taking orders, or “providing the physical or electronic infrastructure that brings purchasers and marketplace sellers together” AND (ii) collects or processes payment for the sale.
Under the new rules, a marketplace facilitator is now responsible for collecting and remitting the sales tax on those transactions as well as filing sales tax returns when the revenue from sales in the state (whether from a sale facilitated on behalf of a marketplace seller or from a sale by the facilitator itself) is at least $100,000 in the current or prior calendar year.
These rules are generally meant to apply to companies such as Amazon, Etsy, eBay, and Uber Eats, but may capture other businesses that in some way facilitate a sale between two parties. Sellers on these platforms are typically relieved of sales tax obligations with respect to these sales.
For more information about marketplace facilitator rules, please see this article from our November/December 2019 SALT Newsletter and this article from our January 2020 SALT Newsletter.
HB 1037 – Film Tax Credit Mandatory Audit Requirement
This legislation phases in a mandatory audit requirement for all film and television projects over a three-year period, beginning in 2021. For more details about the new audit requirement, please click here. In addition to the mandatory audit requirement, the bill also places additional restrictions on claiming the additional 10% credit for promoting the state’s Department of Economic Development.
HB 846– Income Tax Conformity Date and Tax Credits
This bill made several changes to Georgia’s income tax code:
- The bill updates the state’s Internal Revenue Code conformity date to March 27, 2020, which is applicable for tax years beginning on or after January 1, 2019. Except as noted below, this update now includes all changes made to federal tax law by the SECURE Act and the CARES Act.
- The state did not adopt the CARES Act changes made to net operating losses under Section 172 and Excess Business Losses under Section 461(l). Therefore, use of Georgia net operating losses may be used to offset up to 80% of Georgia taxable net income (instead of 100%), and the state still requires noncorporate taxpayers to make an excess business loss adjustment as was required before the CARES Act.
- It is worth noting that the technical correction to the depreciable life of Qualified Improvement Property (QIP) made by the CARES Act is adopted by Georgia but only for tax years beginning on or after January 1, 2019 (the CARES Act made this correction effective for 2018 as well). However, Georgia still does not conform to bonus depreciation provisions. For more information about applying the QIP change in Georgia, please see the Department’s guidance on its website.
- For purposes of calculating a jobs tax credit (JTC) or quality jobs tax credit (QJTC) for tax years 2020 and 2021, taxpayer’s that claimed a JTC or QJTC in 2019 will have the option to utilize the number of new full-time employee jobs or new quality jobs (as the case may be) claimed in 2019 or to calculate such jobs as currently provided by such credit provisions. In other words, Georgia business that claimed one of those credits in 2019 should not end up being penalized for job losses sustained in 2020 or 2021 as a result of COVID-19.
- A new tax credit is established for manufacturers of “Personal Protective Equipment” (PPE). For tax years beginning on or after January 1, 2020, manufacturers that are otherwise eligible for a JTC may take an additional tax credit in the amount of $1,250 for each qualifying job that is engaged in the manufacture of PPE. This credit will be tracked separately from the regular JTC, is eligible to offset up to 100% of a taxpayer’s Georgia income tax liability, and any credit amount in excess of a taxpayer’s Georgia income tax liability may be applied against income tax withholding. Unused credits may be carried forward for ten years. Jobs created on or after January 1, 2025, are not eligible for this additional credit.
Next month we will provide a summary of North Carolina tax legislation during 2020. We constantly monitor these and other important state tax topics, and we will include any significant developments in future issues of the Aprio SALT Newsletter.
This article was featured in the September 2020 SALT Newsletter.