The Georgia General Assembly has approved legislation to decouple from net operating loss and excess business loss provisions of the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act before adjourning for the year.
The legislature reconvened June 15 to pass a budget and other legislation after the session was suspended in March because of the COVID-19 outbreak. During the resumed session, the legislature also approved a tax break for manufacturers of personal protective equipment (PPE), a measure to require film productions to undergo audits before the production company can claim tax breaks, and a bill to tax vaping products.
H.B. 846, sponsored by Rep. John Corbett (R), addresses CARES Act changes to the federal tax code. Kathleen Quinn, partner at McDermott Will & Emery, told Tax Notes June 29 that "it looks like the bill would decouple from the net operating loss amendments and amendments to the limitation on use of excess business loss rules in the CARES Act."
Under the CARES Act, NOLs incurred in 2018, 2019, or 2020 can be carried back for five years and losses can be carried forward to tax years after December 31, 2020, without being subject to the 80 percent income limitation that was imposed by the federal Tax Cuts and Jobs Act.
Katherine Loughead, senior policy analyst at the Tax Foundation, told Tax Notes June 29 that Georgia is one of the states that conforms to the TCJA's treatment of NOLs.
Loughead said that as policymakers consider how best to aid the economic recovery in their state, they should consider the economic benefits of conforming to the CARES Act’s liquidity-enhancing tax provisions, especially the NOL provisions.
“States that don’t currently offer NOL carrybacks should make every effort to either conform to the federal provision or offer carrybacks of their own,” she said.
"Of all the provisions to conform to, the CARES Act’s NOL provisions are among the most important in terms of helping more firms survive this crisis and have the cash on hand to retain or rehire their employees," Loughead said.
IRC section 163(j) changes in the CARES Act also allow taxpayers to deduct more business interest expense for tax years beginning in 2019 and 2020; the changes also increase from 30 percent to 50 percent the percentage of a taxpayer’s adjusted taxable income used to calculate the deductibility of business interest expense.
However, Quinn said those amendments would have no impact in Georgia because the state decoupled from changes to section 163(j) under the TCJA.
H.B. 846 would also create an additional $1,250 job tax credit for manufacturers making PPE in response to the COVID-19 pandemic. The credit would be available for tax years beginning on and after January 1, 2020, and could not be claimed for jobs created on or after January 1, 2025. It would not apply to retail businesses that sell the equipment.
The Senate on June 25 approved a substitute version of H.B. 846 on a 46–3 vote; the House voted 110 to 58 to approve the Senate's version the next day
Other Tax Bills
H.B. 105, sponsored by Rep. Sam Watson (R), was sent to Gov. Brian Kemp (R) June 25.
The bill would create a sales tax exemption for ride-hailing services, taxis, limousines, and transportation referral services and would impose a new excise tax of 50 cents per ride on for-hire ground transport trips and 25 cents per ride on shared rides, beginning on or after April 1, 2020. Transport service providers would be required to collect and remit the tax on behalf of vehicle drivers.
Under the bill, service providers that “knowingly and willfully” violate the requirements would be subject to civil penalties of up to $10,000 in addition to the amount of tax owed.
The bill passed the Senate June 18 on a 41–3 vote after being amended in both the House and the Senate.
S.B. 375, sponsored in the House by Rep. Bonnie Rich (R), would impose excise taxes on vaping products starting January 1, 2021. The House passed it June 25 on a 123–33 vote, and the Senate agreed to the bill as amended in the House on a 45–8 vote June 26.
During a June 24 Ways and Means Committee meeting, Rich said the excise tax is meant to create parity. “This is a nicotine delivery system. It’s only fair that there be a comparable tax,” she said, adding, “The tax attempted to mirror as closely as possible the cigarette excise tax that we already have.”
H.B. 1037, sponsored in the Senate by Sen. Chuck Hufstetler (R), would require the state Department of Revenue to conduct audits of film productions before the production company can claim film tax credits.
Under the bill, the companies must provide a list of information including “a detailed accounting of all qualified production activities and the attendant production expenditures included in the base investment for the state certified production.”
H.B. 1037 passed the Senate June 25 on a vote of 45 to 1 and the House agreed to the Senate’s amendments the next day on 154–10 vote. The bill would become effective January 1, 2021.