Georgia’s 2023 Regular Legislative Session Ends with Several Notable Tax Bills

May 31, 2023

By: Jeff Glickman, SALT Partner

At a glance

  • The main takeaway: Several notable tax law changes passed in Georgia, including expanding pass-through entity tax eligibility, decoupling from IRC Section 174, and imposing sales tax on digital goods. 
  • Assess the impact: Some of these changes apply retroactively to the 2022 tax year and others will take effect at a future date so, it’s crucial to address any potential tax consequences now with your tax advisor. 
  • Take the next step: Aprio’s State and Local Tax (SALT) team can help you understand the implications these state tax law changes may have on you and your business. 

Schedule a free consultation today to learn more!

The full story

The Governor of Georgia signed several notable tax bills following the conclusion of the state’s 2023 regular legislative session. Below are brief summaries of each tax bill and how they can impact you and your business.

House Bill 412 – Expansion of PTET Eligibility

When Georgia enacted its pass-through entity tax (PTET) as a workaround to the federal $10,000 limitation on the deduction of state and local taxes, it included a provision that limited which partnerships could make the election.1 Specifically, a partnership was permitted to make the PTET election provided that it was “100 percent directly owned and controlled by persons eligible to be shareholders of an ‘S’ corporation under Section 1361 of the Internal Revenue Code.” In other words, if a partnership was owned 99.9% by an individual and 0.1% by a corporation, it was ineligible to make the PTET election since a corporation is not an eligible ‘S’ corporation shareholder. Thus, the 99.9% individual owner lost out on the federal tax benefit afforded by the PTET.

House Bill 412 removes that limitation to allow all partnerships to make a PTET election. However, it’s important to note that this amendment is effective only for tax years beginning on or after January 1, 2023, so the limitation is still in effect for the 2022 tax year.

Senate Bill 56 – Decoupling from IRC Section 174 and Sales Tax on Digital Goods

Senate Bill 56 makes the following changes to Georgia tax law: 

  • Georgia’s IRC conformity date has been updated to January 1, 2023, for tax years beginning on or after January 1, 2022. That means that Georgia generally conforms to the provisions of the IRC as enacted on or before January 1, 2023. Please note, however, that there are numerous exceptions to this as set forth in Georgia Code section 48-1-2(14).
  • One of those exceptions enacted under Senate Bill 56 is that Georgia does not conform to the changes made to IRC section 174 by the Tax Cuts and Jobs Act (TCJA) of 2017. Those changes eliminated a taxpayer’s ability to fully deduct expenditures in the year incurred for costs meeting the section 174 definition of research and experimentation. Instead, for tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize these expenditures over five years for domestic expenditures and 15 years for foreign expenditures. By decoupling from this provision, Georgia will continue to allow taxpayers to fully deduct those expenditures in the year incurred for state income tax purposes. If you have already filed your 2022 Georgia income tax return and did not incorporate this change, you should discuss filing an amended tax return with your tax advisor.
  • For tax years beginning on or after January 1, 2024, Georgia has eliminated the personal exemption for taxpayers, but still allows a $3,000 exemption for each dependent. Instead, taxpayers will be entitled to a larger standard deduction of $12,000 for single taxpayers and $24,000 for married couples filing a joint return. In addition, regardless of whether one itemizes or takes the standard deduction on a federal return, taxpayers may now elect to use their federal itemized deductions or take the state’s standard deduction on the Georgia return. Those that itemize may be entitled to a $300 tax credit per taxpayer.
  • Finally, effective January 1, 2024, sales of digital goods that are transferred electronically (which means “obtained, accessed, or available to be accessed by means other than tangible storage media”) will be subject to sales tax.2 A digital good includes items, such as books, artwork, magazines, music and videos, but it does not include prewritten computer software transferred electronically. The tax applies only to those transactions in which the purchaser receives permanent use that is not conditioned on continued payment.  

House Bill 482 – Limits a Non-Profit’s Eligibility for the Quality Jobs Tax Credit

House Bill 482 adds a provision that limits a non-profit’s eligibility for Georgia’s Quality Jobs Tax Credit (QJTC) by providing that such entity qualifies only to the extent that it generates unrelated business income under section 512 of the Internal Revenue Code and such jobs related to that trade or business. This amendment reverses a 2021 Georgia Tax Tribunal decision that permitted a non-profit to claim the QJTC for jobs related to its tax-exempt operations.3

House Bill 162 – One Time Tax Refund

Similar to last year, House Bill 162 provides Georgia taxpayers who filed returns in both 2021 and 2022 a one-time tax refund for the 2021 tax year equal to the lesser of (i) the taxpayer’s Georgia income tax liability for 2021 or (ii) $250 for single taxpayers or for married taxpayers filing separately, $375 for a taxpayer that files as head of household, or $500 for married taxpayers filing a joint return. The credit will be applied once the taxpayer’s 2022 return is filed. Please check with your tax advisor about whether such refund will need to be picked up as income on your federal income tax return.

The bottom line

Aprio’s SALT team can assist you with understanding the implications of these state tax law changes. 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 May 2023 SALT newsletter.

1 To read more about Georgia’s PTET, see this article from our April 2021 SALT Newsletter.

2 In other words, the digital good does not have to be downloaded to a device for it to be taxable.

3 An entity that qualifies for the QJTC may elect to utilize amounts in excess of its income tax liability to offset state payroll withholding taxes. Thus, non-profits could still benefit from the QJTC. For more information about that Tax Tribunal decision, please see this article from our October 2021 SALT Newsletter.

Stay informed with Aprio.
Get industry news and leading insights delivered straight to your inbox.

Recent Articles

About the Author

Jeff Glickman

Jeff Glickman is the partner-in-charge of Aprio, LLP’s State and Local Tax (SALT) practice. He has over 18 years of SALT consulting experience, advising domestic and international companies in all industries on minimizing their multistate liabilities and risks. He puts cash back into his clients’ businesses by identifying their eligibility for and assisting them in claiming various tax credits, including jobs/investment, retraining, and film/entertainment tax credits. Jeff also maintains a multistate administrative tax dispute and negotiations practice, including obtaining private letter rulings, preparing and negotiating voluntary disclosure agreements, pursuing refund claims, and assisting clients during audits.