Ga. Comp. R. & Regs. r. 560-7-4-.01 — Net Taxable Income (Individual). Amended

(1) The Georgia taxable net income of an individual shall be computed pursuant to O.C.G.A. § 48-7-27 . (2) There shall be added to "net income" the amount of deductions reflected therein which resulted from transactions occurring in years in which the individual was not subject to Georgia income tax. Such deductions shall include but not be limited to, contribution carryovers, capital loss carryovers, and net operating loss carryovers. (3) Net Operating Losses (a) An appropriate adjustment shall be made to such "net income" for a net operating loss carryover. (b) For any taxable year in which the taxpayer claims a net operating loss deduction on the Federal income tax return, the amount of such deduction shall be added back to "net income". There shall be allowed as a separate deduction from "net income" an amount equal to the aggregate of the Georgia net operating loss carryovers to such year, plus the Georgia net operating loss carrybacks to such year if such carrybacks are allowed by the Internal Revenue Code of 1986. 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; provided, however, that such limitations, including, but not limited to, the 80 percent limitation, shall be applied to Georgia taxable net income. (c) For any taxable year in which the taxpayer has a Federal net operating loss, the Georgia net operating loss for such taxable year shall be computed by making the same adjustments to the Federal net operating loss that are made to Federal adjusted gross income to determine Georgia taxable net income. In the case of nonresident individuals, trusts, and estates doing business both within and without Georgia, the loss attributable to operations within Georgia shall be computed as provided in O.C.G.A. § 48-7-30 . The term "Georgia net operating loss" shall mean the loss computed as provided in this subparagraph. In the event the net Georgia adjustments completely offset the federal net operating loss, there shall be no Georgia net operating loss for the taxable year, and any excess of net Georgia adjustments over the Federal net operating loss shall constitute Georgia taxable net income. (d) The procedural sequence of taxable years to which a Georgia net operating loss may be carried back or carried over, and the number of years for which a net operating loss may be carried back or carried over, shall be the same as provided in the Internal Revenue Code as adopted for Georgia purposes. The extent to which Georgia adopts the Internal Revenue Code is set forth in the definition of "Internal Revenue Code" in O.C.G.A. § 48-1-2 . The terms "Georgia net operating loss carryback" and "Georgia net operating loss carryover" shall mean the Georgia net operating loss carried back or carried over in the manner and for the number of years as provided in this subparagraph. (e) In the event the net operating loss is allowed to be carried back and the taxpayer elects to forgo the carryback period for the federal net operating loss as allowed under the Internal Revenue Code, the taxpayer shall also forgo the carryback period for Georgia purposes. If the taxpayer does not have a federal net operating loss, the taxpayer may make an irrevocable election to forgo the carryback period for the Georgia net operating loss, provided the loss is allowed to be carried back and an affirmative statement is attached to the Georgia return for the year of the loss. Such election (the affirmative statement) must be made on or before the due date for filing the income tax return for the taxable year wherein the loss was incurred, including any extensions which have been granted. Form 500-NOL must also be separately filed when the taxpayer forgoes the carryback so that the net operating loss can be established on the Department's system for future years. Such filing must occur on or before the due date for filing the income tax return for the taxable year wherein the loss was incurred, including any extensions which have been granted. Form 500-NOL cannot be filed as an attachment to Form 500. If the net operating loss is allowed to be carried back and if the taxpayer does not elect to forgo the carryback period for the federal net operating loss, the election to forgo the net operating loss period shall not be allowed for Georgia purposes. (f) Claim for Refund. 1. In the event the taxpayer is entitled to a refund of income taxes by reason of a net operating loss carryback, a net operating loss carryback adjustment claim for refund will be filed on Form 500-NOL and in accordance with O.C.G.A. § 48-7-21(b) (10.1).The taxpayer must file such claim for refund within three years after the due date for filing the income tax return for the taxable year wherein the loss was incurred (including any extensions which have been granted) as prescribed in O.G.C.A. § 48-7-21(b) (10.1).Such claim for refund shall constitute a claim for credit or refund for purposes of O.C.G.A. § 48-2-35 . Within a period of ninety (90) days from the last day of the month in which such claim for refund is filed, the Commissioner shall make, to the extent he or she deems practicable in such period, an examination of the claim for refund to determine the amount of tax decrease attributable to such carryback adjustment upon the basis of the claim for refund and the examination. The decrease so determined shall be applied against any unpaid amount of the tax and the remainder shall, within such ninety (90) day period, be either credited against any income tax then due from the taxpayer, or refunded to the taxpayer. Any such credit or refund made within such ninety (90) day period shall be without interest as provided in O.C.G.A. § 48-7-21(b) (10.1) and shall be subject to further examination as provided in subparagraph (3)(f)3. 2. If such claim for refund contains errors of computation which the Commissioner deems cannot be corrected within such ninety (90) day period or which contains material omissions, the Commissioner may disallow without further action any such claim for refund. Alternatively, the Commissioner may request that the taxpayer correct such errors or omissions. In either case, the date upon which the taxpayer later corrects such errors or omissions shall be considered the filing date for the claim for refund for purposes of the aforementioned (90) day no interest period. 3. The Commissioner may further examine, subject to the applicable statute of limitations, such claim for refund at a later time and assess as necessary. (g) The provisions of Sections 108 , 381 , 382 , and 384 of the Internal Revenue Code of 1986, as amended, as they relate to net operating losses also apply for Georgia purposes. These shall be applied as provided in O.C.G.A. § 48-7-21(b) (10.1)(D) and the regulations thereunder. (4) The subtraction provided by subsection (d) of O.C.G.A. § 48-7-27 shall be allowed for the Texas Franchise Tax and for other states which have a tax on the entity which is on or measured by income. Such subtraction shall not be available for a tax on the entity which is on or measured by gross receipts and other taxes which are not on or measured by income. Such subtraction shall be computed as provided in this paragraph. First, determine the Georgia taxable net income before apportionment of the entity. For purposes of this paragraph, Georgia taxable net income shall include income, gains, losses, and deductions from the entity which are separately reported and included on the partners', shareholders', or members' returns. For purposes of this paragraph, Georgia taxable net income shall not include wages paid to the partner, shareholder, or member. However, if such wages are taxed by another state, the partner, shareholder, or member may be eligible for the credit provided by O.C.G.A. § 48-7-28 . Second, multiply such Georgia taxable net income by the entity's apportionment ratio in Texas or such other state. Third, multiply such result by the partner's, member's, or shareholder's direct or indirect distributive share percentage used for Federal income tax purposes. Provided, however, if any separately reported item (such as guaranteed payments) is allocated directly to a partner, shareholder, or member, such item shall be excluded from the above computation and allocated to such partner, member, or shareholder and multiplied by the entity's apportionment ratio in Texas or such other state and then combined with the result above. (a) For example, an individual has a 50% distributive share percentage of partnership A which paid the Texas Franchise Tax. Partnership A's apportionment ratio in Texas was 80%. Partnership A's Georgia taxable net income before directly allocated items and before apportionment was $10,000. $2,000 of guaranteed payments were deducted to arrive at the $10,000 and were paid to the individual. 50% of partnership A's income of $10,000 was included on the individual's federal income tax return. Partnership B also has a 50% distributive share percentage of Partnership A. As such, 50% of partnership A's income of $10,000 was reported on Partnership B's return. The individual who has a distributive share percentage of Partnership A also has a 40% distributive share percentage of Partnership B. 40% of partnership B's income was included on the individual's federal income tax return. The percentage the individual would be allowed is 70% (50% for Partnership A plus 40% of 50% for Partnership B). As such, $5,600 (70% x $10,000 x 80%) of the Georgia taxable net income before directly allocated items could be subtracted by the individual. The individual would also include $1,600 of the guaranteed payment ($2,000 x 80%). As such, a total of $7,200 could be subtracted by the individual. Cite as Ga. Comp. R. & Regs. R. 560-7-4-.01 Authority: O.C.G.A. §§ 48-2-12 , 48-7-27 . History. Original Rule entitled "Gross Income Defined" adopted. F. and eff. June 30, 1965. Repealed: New Rule entitled "Net Taxable Income (Individual)" adopted. F. Feb. 16, 1972; eff. Mar. 7, 1972. Repealed: New Rule of same title adopted. F. Dec. 2, 2005; eff. Dec. 22, 2005. Amended: F. Dec. 7, 2006; eff. Dec. 27, 2006. Repealed: New Rule of same title adopted. F. Nov. 5, 2009; eff. Nov. 25, 2009. Amended: F. Oct. 9, 2015; eff. Oct. 29, 2015. Amended: F. Oct. 20, 2017; eff. Nov. 9, 2017. Amended: F. Nov. 29, 2018; eff. Dec. 19, 2018.