Current through Rules and Regulations filed through March 20, 2024
(1)
Definitions. As used in this regulation, the following terms are defined
as follows:
(a)
Taxable income
sourced to this state. The term "taxable income sourced to this state"
means the entity's income allocated or apportioned to Georgia pursuant to Code
Section
48-7-31 or as otherwise provided by law. The entity's income shall include the sum of
the following items:
1. The nonresident
member's share of the Georgia separately stated income, guaranteed payments,
loss, deduction or expense of the entity; and
2. The nonresident member's share of the
Georgia nonseparately stated income, loss, deduction or expense of the
entity;
(b)
Entity. The term "entity" shall mean a Subchapter 'S' corporation,
a partnership, or a limited liability company which is treated as a partnership
or Subchapter 'S' corporation for Federal income tax purposes and which is
required to file a partnership or Subchapter 'S' corporation return. However,
the term "entity" does not include a Subchapter 'S' corporation that is treated
as a 'C' corporation for Georgia purposes.
(c)
Nonresident. The term
"nonresident" shall mean an individual or fiduciary member who resides outside
this state and all other members whose headquarters or principal place of
business is located outside this state. Such nonresident determination shall be
made on the last day of the tax year of the entity.
(d)
Individual. The term
"individual" shall mean a natural person.
(2)
Withholding.
(a)
Withholding Requirements.
Withholding is required at the rate of 4 percent with respect to the
nonresident member's share of taxable income sourced to this state, unless
exempted by this regulation or O.C.G.A. §
48-7-129.
The filing of estimated tax payments by the member does not relieve the entity
from the responsibility of the withholding requirement.
(b)
Certain Retirement Accounts.
A member which is an individual retirement account as defined by Internal
Revenue Code §§ 408(a) and 408(b), a Roth IRA as defined by Internal
Revenue Code § 408A, or a qualified employer plan as defined by Internal
Revenue Code § 409A(d)(2) is not subject to withholding. On a one time
basis, the administrator of such retirement account or plan must certify to the
entity in writing using Form NRW-Exemption, that this exception applies. Such
certification must be attached to the entity's income tax return each
year.
(c)
Annual Income Less
than $1,000.00. An entity is not required to withhold tax for a
nonresident member if the aggregate annual nonresident member's share of
taxable income sourced to this state is less than $1,000.00.
(d)
Withholding Under other Provisions
of Law, Ordering, etc. The nonresident member's share of taxable income
sourced to this state is not subject to withholding under O.C.G.A. §
48-7-129if such income is subject to withholding under other provisions of Georgia law.
The nonresident member's share of taxable income sourced to this state shall
not include payments to a member in a capacity other than as a member (e.g.,
salaries from Subchapter 'S' corporations, rents, or royalties).
(e)
Exempt Organizations. The
nonresident member's share of taxable income sourced to this state of an exempt
organization which results in unrelated business taxable income, as defined by
Internal Revenue Code § 512, will be subject to withholding. The
nonresident member's share of taxable income sourced to this state of an exempt
organization that does not result in unrelated business taxable income is not
subject to withholding. In such latter case, the exempt organization shall
annually certify in writing to the entity using Form NRW-Exemption, that the
nonresident member's share of taxable income sourced to this state does not
result in unrelated business taxable income. Such certification must be
attached to the entity's income tax return each year.
(f)
Insurance Companies. An
insurance company which actually pays a tax to Georgia on its premium income is
not subject to Georgia income tax and the withholding requirements under
O.C.G.A. §
48-7-129.
In this case, the insurance company shall annually certify in writing to the
entity using Form NRW-Exemption, that this applies. Such certification must be
attached to the entity's income tax return each year.
(g)
C-Corporation, Individual, or
Fiduciary Members.
1. Withholding is
not required for the nonresident member's share of taxable income sourced to
this state for a C-Corporation, an individual, or a fiduciary member which
meets the conditions listed below. On a one time basis and on or before the due
date (without extension) for filing the entity's income tax return for the
taxable year for which the withholding is required, such member must certify to
the entity in writing that this exception applies. Such certification must be
attached to the entity's income tax return each year. Such member must:
(i) Agree to be subject to personal
jurisdiction in this State for all income tax purposes, file returns, and pay
all Georgia tax liabilities due, for the current year and future years in which
it is a member and the entity owns property in Georgia, does business in
Georgia, or otherwise derives income from Georgia sources; and
(ii) Will make estimated income tax payments
if required.
2. In the
event such member certifies to such entity and such member fails to satisfy the
requirements of subparagraph (g)1. of this paragraph, then withholding will be
due as originally required as if such certification had not been made for the
year or years of such failure.
3.
Entities except Subchapter 'S' corporations shall provide the certification
required by subparagraph (g)1. of this paragraph on Form NRW-Exemption.
Subchapter 'S' corporations shall use Form 600S-CA. A Subchapter 'S'
corporation that has already obtained the Form 600S-CA for purposes of the
Georgia Subchapter 'S' corporation election shall not be required to obtain the
form a second time.
(h)
Partnerships and Limited Liability Companies. See paragraph (4)
relating to "Tiered Situations" and paragraph (5) relating to "Exception in
Tiered Situations" for additional rules applicable to partnerships and limited
liability companies (treated as partnerships for Federal income tax purposes)
that are members of entities subject to this regulation.
(3)
Composite Returns.
(a)
Alternative to Withholding.
In lieu of withholding, the entity may elect to file a composite income tax
return for one or all of its nonresident members using Form IT-CR. The filing
of the composite return shall constitute the election. Such election shall be
irrevocable and must be made by the due date of the composite return (including
extensions, if approved). Once the due date has expired, the composite return
shall not be amended to include or exclude members. However the return must be
amended to exclude members who, pursuant to subparagraph (d) of this paragraph,
were not eligible to be included on the composite return (i.e. members having
income within Georgia from sources other than the entity). The computation of
tax is done by creating a schedule as described in subparagraph (b) of this
paragraph. Individuals, corporations, partnerships, limited liability
companies, estates, trusts, Qualified Subchapter S Trusts, and Electing Small
Business Trusts may be included on the composite return. However, a corporation
is still required to file a separate net worth tax return to pay the net worth
tax that is due to Georgia. Nonresident members whose aggregate annual share of
taxable income sourced to this state is less than $1,000.00 may also be
included on the composite return.
(b)
Creating a Schedule. The
entity will create its own schedule following the examples on Form IT-CR
showing the name, address, and identification number, and amount of income as
provided in subparagraph (c) of this paragraph for each member included in the
computation. The schedule must also include the name, address, identification
number, and amount of the nonresident member's share of taxable income sourced
to this state of any nonresident member not included in the computation of the
composite return.
(c)
Computing the Tax. Using the schedule created pursuant to
subparagraph (b) of this paragraph, the members shall compute the tax as
indicated in subparagraphs 1. and 2. of this subparagraph. The election of
options may be changed annually; however, such election shall not be changed
after the filing of the return. The member's income from the entity's business
done in Georgia shall be the nonresident member's share of taxable income
sourced to this state adjusted as provided in this subparagraph. Deductions
will not be allowed on the composite return for items of loss, deduction or
expense which are subject to other limitations imposed on computing either
Federal taxable income, Federal adjusted gross income, or Georgia taxable
income, or are otherwise limited by the Internal Revenue Code or the O.C.G.A.,
such as charitable contributions, investment interest expense, I.R.C. §
179 expense, casualty losses, capital losses, etc. Also, deductions based on
self-employment, self-employed health insurance, Keogh or SEP or other
deductions normally allowed in computing Adjusted Gross Income are not allowed
on a composite return.
1. The following three
options shall be available for individual members. Option 1 and Option 2 are
only available for nonresident individual members not having income within
Georgia from sources other than the entity:
(i) Option 1 - Filing Status. The entity may
elect to compute the tax by multiplying the member's income from the entity's
business done in Georgia by the applicable tax rate. The "applicable tax rate"
shall be that rate provided in O.C.G.A. §
48-7-20which applies to each individual member based on the individual member's filing
status.
(ii) Option 2 - Standard
Deduction and Dependents. The entity may elect to compute the tax by reducing
the member's income from the entity's business done in Georgia by the personal
exemption and credit for dependents as provided below and then multiplying such
income by the applicable tax rate. The "applicable tax rate" shall be that rate
provided in O.C.G.A. §
48-7-20which applies to each individual member based on the individual member's filing
status. Under this option, the member is allowed to take a standard deduction
and a personal exemption and credit for dependents; however, the member should
apportion these adjustments so that adjustments are allowed only to the extent
that they apply to Georgia income.
(iii) Option 3 - Highest Marginal Tax Rate.
If the above option 1 and option 2 are not available for use by the entity in
computing the tax due for an individual member who has income within Georgia
from sources other than the entity or if the entity otherwise elects for such
individual, a composite return may be filed using this third option. In such
case the individual member shall be allowed to be included on the composite
return provided the highest marginal tax rate provided in O.C.G.A. §
48-7-20is applied to the member's income from the entity's business done in Georgia to
determine the amount of the tax. Should such individual member be required to
otherwise file a Georgia return, then the income that was included using option
3 shall be excluded from the individual member's return.
(iv) For each individual member for whom the
entity uses either Option 1 or Option 2 in computing the tax liability, the
entity must obtain a signed statement each year from the respective individual
member, using Form CR-AFF, verifying that the member does not have income from
sources within Georgia other than the entity and verifying the individual
member's Georgia filing status.
2. All non-individual members shall apply the
tax rate provided in subsection (a) of O.C.G.A. §
48-7-21 to the member's income from the entity's business done in Georgia to determine
the amount of tax.
(d)
Members Excluded from the Composite Return. Any nonresident member
excluded from the composite return is subject to the withholding provisions and
is required to file a Georgia income tax return, unless otherwise exempted by
this regulation or O.C.G.A. §
48-7-129.
Likewise, any nonresident member included in the computation of a composite
return is not subject to the withholding provisions and is not required to file
a Georgia income tax return to report the entity's income. Except as provided
in subparagraph (c)(1)(iii) of this paragraph, nonresident members having
income within Georgia from sources other than the entity may not be included in
the entity's composite return and shall be subject to the withholding tax
imposed by O.C.G.A. §
48-7-129, unless otherwise exempted by this regulation or O.C.G.A. §
48-7-129.
(e)
Composite Return Due Date.
The due date of the composite return of a calendar year entity is the same as
for a calendar year individual. Extension dates are the same as for
individuals. A fiscal year entity should file its return on a fiscal year basis
and should file its return by the 15th day of the
fourth month after the fiscal year end. Estimated tax payment dates are the
same as for individuals. A fiscal year entity shall adjust its estimated
payment dates and extension dates as if it is an individual filing a fiscal
year return. Form IT-303 (application for extension) should be used if an
extension of time to file is needed. Form IT-303 only extends the time to file.
Accordingly, any tax that is due should be remitted by the original due date of
the composite return on Form IT560C. Tax remitted at the time the IT-CR is due
should be remitted along with the payment voucher (Form CR-PV).
(f)
Amended Composite Returns.
Except as prohibited by subparagraph (a) of this paragraph, amended composite
returns may be filed during the same periods as individual returns, and may be
filed by using the Form IT-CR and checking the amended box.
(g)
Consent Agreements. When
filing a composite return for shareholders, it is not necessary to include
copies of the consent agreements required by O.C.G.A. §
48-7-27(d)(2).
However, consent agreements must be attached to the S Corporation return as
provided in such code section.
(h)
Composite Return Net Operating Losses. The following shall apply
with regard to net operating losses:
1. A net
operating loss computed on a composite return may be carried forward to another
composite return year for each member. A net operating loss computed on a
composite return may not be carried back. For an individual member, the income
for the year or years that the loss is being carried to, must be recomputed
using the option (as specified in subparagraph (3)(c)1.) that was used for the
loss year before the loss is carried to that year.
2. A net operating loss cannot be carried
from a year whereby the member was excluded on the composite return to a year
whereby the member is included on the composite return.
3. A net operating loss must be carried
forward from a year where the member was included on the composite return to a
year the member files the member's own tax return.
4. Any limitations included in the Internal
Revenue Code of 1986 on the amount of net operating loss that can be used in a
taxable year shall be applied for each member; provided, however, that such
limitations, including, but not limited to, the 80 percent limitation, shall be
applied to the income computed pursuant to this paragraph.
(4)
Tiered
Situations. Except as provided in paragraph (5), in situations whereby
the nonresident member is an entity, or where such nonresident member is owned
by subsequent entities, the following shall apply:
(a) Withholding is only required by an entity
that:
1. Does business in Georgia on its own
and not as a result of being a member; or
2. Owns property in Georgia on its own and
not as a result of being a member;
(b) Any withholding that occurs may be passed
through each tier by attaching the G-2-A, of the entity in the tiered situation
that was required to withhold pursuant to subparagraph (4)(a), and providing a
schedule which allocates such withholding tax between the members at each tier
based upon the profit/loss percentage. Failure to include this documentation
will result in the disallowance of the withholding credit. A composite return
may be completed at any level. However, if the composite return is not filed by
the entity meeting either condition 1. or 2. of subparagraph (a) of this
paragraph, withholding is still required by such entity, unless otherwise
exempted by this regulation or O.C.G.A. §
48-7-129.
Tax withheld at one level can be claimed on a composite return at another
level.
(c) A member which is an
entity or a corporation must include its pro rata share of the entity's gross
receipts in its own single factor apportionment formula in determining how much
of its income is Georgia income. In determining its income, the member includes
its share of the entity's income before the entity apportions and allocates its
income.
(d) In determining whether
withholding is required, only the members that directly own an interest in the
entity subject to withholding shall be considered.
For example:
1. An
entity that is subject to the nonresident withholding requirements has several
members. One nonresident member is also a member in several other entities that
are subject to the withholding requirements. Each of the entities must withhold
on that nonresident member whether or not the total income/loss from all the
entities would result in a net loss for that member. A loss from one entity
cannot be used to offset the income in another entity for that
member.
2. Company A is subject to
the nonresident withholding requirements and is in a tiered situation. Company
B is a nonresident member of Company A. Company B has nonresident members, of
which one is an exempt organization called Company C. Company A is required to
withhold on all of Company B's share of taxable income sourced to this
state.
(5)
Exception in Tiered Situations.
(a) Nonresident withholding shall not be
required for a member which is also an entity provided such entity on an annual
basis in writing:
1. Elects to withhold at
the rate of 4 percent with respect to its nonresident members' shares of
taxable income sourced to this state in the same manner and subject to the same
requirements, exceptions (including the exception provided in this paragraph
but excluding the exception provided in subparagraph (2)(c)), etc. as if such
entity itself was subject to O.C.G.A. §
48-7-129 and this regulation;
2. Agrees to
be subject to personal jurisdiction in this State for all income tax purposes
including the withholding required by O.C.G.A. §
48-7-129, together with related interest and penalties; and
3. Provides such election and such agreement
in writing to the entity in which it is a member, using Form NRW-Exemption, on
or before the due date (without extension) for filing the entity's income tax
return for the taxable year for which the withholding is required. Form
NRW-Exemption must be attached to the entity's income tax return each
year.
(b) In the event
such entity makes the election as provided in subparagraph (a)1. of this
paragraph and such entity does not withhold at the rate of 4% if required to do
so, then such exception shall not apply and withholding will be due as
originally required as if such election had not been made.
(c) Each entity in subsequent tiers shall be
entitled to make such election and such agreement provided the entity in which
it is a member makes such election. However, failure by any entity in any tier
to withhold at the rate of 4% if required to do so shall cause withholding to
be due as originally required and as if such elections were not made by any
entity in any tier.
(6)
Withholding Procedures.
(a)
Registration. All entities required to withhold taxes under
O.C.G.A. §
48-7-129must register with the Georgia Department of Revenue by completing Registration
Application CRF-002. Registration for withholding requirements is to be
separate and apart from the registration required for the payment of payroll
taxes.
(b)
Payment of
Taxes.
1. With respect to the
nonresident member's share of taxable income sourced to this state, payment of
taxes withheld shall be due on or before the due date for filing the income tax
return for the partnership, Subchapter 'S' corporation, or limited liability
company as prescribed in subsection (a) of O.C.G.A. §
48-7-56without regard to any extension of time for filing such income tax return.
Payment should be remitted with the required Form G-7-NRW.
(c)
Withholding
Statement. A Form G-2-A (Withholding on Nonresident Members Share of
Taxable Income Sourced to Georgia) showing the amount of the nonresident
member's share of taxable income sourced to this state, the nonresident
member's name, address, tax identification number, the amount of the Georgia
tax withheld, and any other information the Commissioner requires must be
furnished to the nonresident member and filed in duplicate with the
Commissioner on or before the earlier of the date the income tax return is
filed or the due date for filing the income tax return of such partnership,
Subchapter 'S' corporation, or limited liability company as prescribed in
subsection (a) of O.C.G.A. §
48-7-56without regard to any extension of time for filing such income tax return. The
duplicate Form G-2-A must be submitted to the Department of Revenue along with
Form G-1003 (transmittal form) for such taxable year.
(d)
Credit for Withholding; Tax Year
for Which Credit can be Claimed. Nonresident members are required to
submit a copy of Form G-2-A with their Georgia Income Tax Return in order to
receive credit for any Georgia income taxes withheld. Tax withheld from an on
resident member's share of taxable income sourced to this state must be claimed
as a credit for the member's tax year in which the withholding tax year of the
entity ends.
For example:
1.
Calendar Year Taxpayers. A calendar year S Corporation withholds
for the 2012 calendar year. An individual shareholder may claim a credit on the
shareholder's 2012 individual income tax return (generally filed on or before
April 15, 2013) for the 2012 taxes withheld by the S Corporation on the
shareholder's behalf.
2.
Other than Calendar Year Member. A calendar year partnership
remits with holding taxes for 2012 during 2013 and has a corporate partner with
a March 31 year end. The corporate partner may claim a credit in its entirety
on its corporate income tax return for the year ended March 31, 2013 (generally
filed on or before June 15, 2013) for the 2012 taxes withheld by the
partnership on its behalf.
3.
Other than Calendar Year Entity. An S Corporation with a January
31, 2012 year end remits withholding taxes on behalf of its nonresident
shareholders. A calendar year end shareholder may claim a credit on the
shareholder's 2012 individual income tax return (generally filed on or before
April 15, 2013) for the taxes withheld by the S Corporation on the
shareholder's behalf.
(7)
Undue Hardship.
(a)
Establishing Undue Hardship.
To qualify for undue hardship, the entity must be experiencing a significant
hardship. The entity must establish undue hardship and each determination will
be considered on a case-by-case basis. A written petition must be filed with
the Commissioner or his/her delegate requesting an exemption from withholding
for an entity based on undue hardship. The petition shall be made at least
sixty (60) days prior to the day on which the withholding tax is due and shall
be accompanied by a full and complete explanation of the hardship incurred.
This sixty (60) day period may be modified or waived by the Commissioner for
reasonable cause. The Commissioner or his/her delegate will carefully consider
the basis of the hardship and notify the entity in writing whether the petition
is accepted or rejected. An accepted petition is valid for one year only, and
petitions for undue hardship must be requested annually. Failure to receive the
Commissioner's notice shall not relieve the entity from withholding in the
manner prescribed by O.C.G.A. §
48-7-129.
(b)
Circumstances Which do not
Qualify. The following circumstances will not be considered to
constitute undue hardship:
1. Inability to
pay;
2. Additional cost of record
keeping;
3. Paperwork too
cumbersome;
4. Missing K-1 data,
such as social security number, address, etc.;
5. Unfamiliarity of the filing requirements;
or
6. Inadequate records.
(8)
Anti-avoidance Clause. If the Commissioner reasonably determines
that a transaction or payment has been entered into for the purpose of avoiding
the provisions of this regulation and O.C.G.A. §
48-7-129, he or she may characterize any payment, or portion thereof, made by the entity
to its member so as to reflect the true substance of the transaction.
(9)
Effective Date. The
provisions set forth in this regulation will apply to taxable years beginning
on or after January 1, 2012. Taxable years beginning before January 1, 2012
will be governed by the regulations of Chapter 560-7 as they exist before
January 1, 2012 in the same manner as if the amendments thereto set forth in
this regulation had not been promulgated.
O.C.G.A.
§§
48-2-12, 48-7-129.