hb1151_LC_18_7365S_hs_4.html
08 LC 18 7365S

The House Committee on Ways and Means offers the following substitute to HB 1151:

A BILL TO BE ENTITLED
AN ACT

To amend Titles 16 and 48 of the Official Code of Georgia Annotated, relating, respectively, to crimes and offenses and revenue and taxation, so as to change provisions regarding raffle operations by nonprofit, tax-exempt organizations; to change certain provisions regarding bingo definitions and licensing procedures; to revise and modernize certain provisions regarding state income tax; to change certain provisions regarding organizations exempt from state income tax; to change certain requirements regarding consent agreements; to change certain substantiation requirements regarding the tax credit for private driver education courses; to provide for certain electronic filing requirements; to define the terms "distribution credited" and "distribution paid" with respect to current income tax payments; to authorize certain elections regarding lump sum distributions with respect to withholding requirements for income tax; to revise and change certain provisions regarding withholding tax on distributions to nonresident members of partnerships, Subchapter "S" corporations, and limited liability companies; to provide an effective date; to provide for applicability; to repeal conflicting laws; and for other purposes.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:

SECTION 1.
Titles 16 of the Official Code of Georgia Annotated, relating to crimes and offenses, is amended by revising subparagraph (d)(2)(E) of Code Section 16-12-22.1, relating to raffle licenses, as follows:
"(E) A determination letter from the Georgia Department of Revenue certifying statement affirming that the applicant is exempt under the income tax laws of this state under Code Section 48-7-25;"

SECTION 2.
Said title is further amended by revising paragraph (3.1) of Code Section 16-12-51, relating to definitions pertaining to bingo, as follows:
"(3.1) 'Nonprofit, tax-exempt organization' means an organization, association, corporation, or other legal entity which has been determined by the federal Internal Revenue Service to be exempt from taxation under federal tax law and has been determined by the Georgia Department of Revenue to be which is exempt from taxation under the income tax laws of this state under Code Section 48-7-25; which is organized or incorporated in this state or authorized to do business in this state; and which uses the proceeds from any bingo games conducted by such organization solely within this state."

SECTION 3.
Said title is further amended by revising paragraph (5) of subsection (b) of Code Section 16-12-53, relating to bingo licensing procedures, as follows:
"(5) A determination letter from the Georgia Department of Revenue certifying statement affirming that the applicant is exempt under the income tax laws of this state under Code Section 48-7-25;"

SECTION 4.
Title 48 of the Official Code of Georgia Annotated, relating to revenue and taxation, is amended by revising subsections (a) and (b) of Code Section 48-7-25, relating to organizations exempt from Georgia income tax, as follows:
"(a) The following organizations shall be exempt from taxation imposed by Code Section 48-7-21 unless the exemption is denied under subsection (b) or (c) of this Code section as indicated:
(1) Those Subject to subsections (b) and (c) of this Code section, those organizations described by which are exempt from federal income taxation pursuant to Section 501(c), 501(d), 501(e), 664, or 401 of the Internal Revenue Code of 1986 shall be deemed to have similar exempt status for purposes of Code Section 48-7-21. Organizations described in this paragraph shall be exempt from taxation for state purposes in the same manner and to the same extent as for federal purposes; and
(2) Insurance companies which pay to the state a tax upon premium income.
(b)(1) An organization requesting exemption under paragraph (1) of subsection (a) of this Code section shall file a written application with the commissioner. The commissioner shall issue a determination letter or ruling to an organization requesting the exemption and shall either grant or disallow the requested exempt status. Until a determination letter granting exempt status is issued by the commissioner, no exempt status shall exist. Those organizations which have an exempt status in effect under Section 501(c), 501(d), 501(e), 664, or 401 of the Internal Revenue Code of 1986 on January 1, 1987, shall retain the exempt status unless revoked as provided by law. The commissioner may issue rules governing the filing of written applications and the issuance of determination letters. An organization´s exempt status under paragraph (1) of subsection (a) of this Code section shall be subject to review and revocation by the commissioner in accordance with the provisions of paragraph (2) of this subsection.
(2)(A) The commissioner may revoke the exempt status of any organization described in paragraph (1) of subsection (a) of this Code section when:
(i) The Internal Revenue Service revokes the exempt status of the organization;
(ii) The organization ceases to be organized or operated in the manner in which it was organized or operated at the time the exempt status was granted;
(iii) The organization engages in any prohibited transaction as set forth in the Internal Revenue Code of 1986; or
(iv) There is any material change in the character or purpose of the organization or in the mode of operation of the organization.
(B) Revocation of an exempt status shall revoke the exempt status retroactively to the time of the occurrence of the disqualifying event or events. All exempt organizations shall immediately notify the commissioner in writing of the occurrence of any of the disqualifying events described in subparagraph (A) of this paragraph or of receipt by the organization of a notice of intent to terminate its exempt status by the Internal Revenue Service. The statute of limitations governing the assessment of any taxes determined to be due this state due to the revocation of exempt status shall be tolled as of the date of the occurrence of the disqualifying event or events described in subparagraph (A) of this paragraph. The commissioner at any time may require an organization which is exempt from taxation to file an information return stating the organization´s gross income, receipts, disbursements, accumulation of income, and other data deemed necessary for the proper administration of this Code section."

SECTION 5.
Said title is further amended in Code Section 48-7-27, relating to computation of taxable net income, by revising paragraph (2) of subsection (d) as follows:
"(2) Nonresident shareholders of a Georgia Subchapter 'S' corporation must shall execute a consent agreement to pay Georgia income tax on their portion of the corporate income in order for the such Subchapter 'S' corporation to be recognized for Georgia purposes. This A consent agreement must for each shareholder shall be filed by the corporation with its corporate tax return in the year in which the Subchapter 'S' corporation is first required to file a Georgia income tax return. For a Subchapter 'S' corporation in existence prior to January 1, 2008, the consent agreement shall be filed for each shareholder in the first Georgia tax return filed for a year beginning on or after January 1, 2008. A consent agreement shall also be filed in any subsequent year for any additional nonresident who first becomes a shareholder of the Subchapter 'S' corporation in that year. Shareholders of a federal Subchapter 'S' corporation which is not recognized for Georgia purposes may make an adjustment to federal adjusted gross income in order to avoid double taxation on this type of income. Adjustments will shall not be allowed unless tax was actually paid by the such corporation."

SECTION 6.
Said title is further amended in Code Section 48-7-29.5, relating to the tax credit for private driver education courses, by revising subsection (d) as follows:
"(d) No credit shall be allowed under this Code section unless the taxpayer submits with the claim for such credit has obtained written proof of the successful completion of the course of driver education by the dependent minor child and the amount expended by the taxpayer for such course."

SECTION 7.
Said title is further amended by revising Code Section 48-7-54, which is reserved, as follows:
"48-7-54.
Reserved The commissioner may require any nonindividual taxpayer to electronically file any return, report, or other document required to be filed by this chapter when the federal counterpart of such return, report, or other document is required to be filed electronically pursuant to the Internal Revenue Code of 1986 or Internal Revenue Service regulations. The commissioner shall be authorized to prescribe forms and promulgate rules and regulations deemed necessary in order to effectuate this Code section."

SECTION 8.
Said title is further amended in Code Section 48-7-100, relating to definitions regarding current income tax payment, by revising paragraph (2.1) and adding a new paragraph to read as follows:
"(2.1) 'Distribution credited' means a recognition or assignment of interest in proceeds or property of a partnership, Subchapter 'S' corporation, or limited liability company, including a net distributive share of income which is passed through to members and which may be subject to Georgia income tax.
(2.2) 'Distribution paid or credited' shall mean means any disbursement of funds or recognition or assignment of interest in proceeds or property of a partnership, Subchapter 'S' corporation, or limited liability company which is passed through to the members and which may be subject to Georgia income tax that is made to a member with respect to that member´s interest in the entity and which may be subject to Georgia income tax."

SECTION 9.
Said title is further amended in Code Section 48-7-101, relating to withholding requirements for income tax, by adding a new subsection to read as follows:
"(j)(1) The payee of any nonperiodic payment may elect to have withholding made on distributions from a pension, annuity, or similar fund. Such an election shall remain in effect until revoked by the payee.
(2) Upon such election by a payee as provided in paragraph (1) of this subsection, the payor of any nonperiodic payment shall withhold from such payment the amount specified by the payee, but in no event shall the amount withheld be less than the amount which would be required to be withheld if such payment were a payment of wages by an employer to an employee for the appropriate payroll period.
(3) The commissioner shall be authorized to prescribe forms and to promulgate rules and regulations setting forth the requirements for withholding from such nonperiodic payments and the requirements for making elections to withhold."

SECTION 10.
Said title is further amended by revising Code Section 48-7-129, relating to withholding tax on distributions to nonresident members of partnerships, Subchapter "S" corporations, and limited liability companies, as follows:
"48-7-129.
(a)(1) Any partnership, Subchapter 'S' corporation, or limited liability company which owns property or does business within this state shall be subject to a withholding tax. Such tax shall be withheld from any distributions paid or any distributions credited but not paid to members who are not residents of Georgia, except as provided in subsection (c) of Code Section 48-7-24.
(2) The amount of tax to be withheld for each nonresident member shall be determined by multiplying the distribution paid or the distribution credited but not paid by a rate of 4 percent. To the extent that the partnership, Subchapter 'S' corporation, or limited liability company remits withholding tax during the course of the tax year which exceeds the Georgia income tax liability of a nonresident member, that member shall be entitled to a refund of the excess withholding at the end of the taxable year.
(3) Any partnership, Subchapter 'S' corporation, or limited liability company which fails to withhold and pay over to the commissioner any amount required to be withheld under this Code section may be liable for a penalty equal to 25 percent of the amount not withheld and paid over. Any penalty imposed under this subsection shall be paid upon notice and demand by the commissioner or the commissioner´s delegate and shall be assessed and collected in the same manner as the withholding taxes imposed by this article.
(4) The partnership, Subchapter 'S' corporation, or limited liability company and its members shall be jointly and severally liable for the withholding tax liability imposed under this subsection and shall be assessed accordingly.
(b)(1) As an alternative to the withholding requirement imposed by subsection (a) of this Code section, the commissioner may allow the filing of composite returns by partnerships, Subchapter 'S' corporations, or limited liability companies on behalf of their nonresident members and may provide for the requirements of filing composite returns by regulation. For purposes of this subsection, the term 'composite return' shall mean means a return filed by a partnership, Subchapter 'S' corporation, or limited liability company on behalf of all of its nonresident members which reports and remits the Georgia income tax of the nonresident members.
(2) Where a partnership, Subchapter 'S' corporation, or limited liability company chooses to file a composite return and meets all the requirements of filing the such composite return, such partnership, Subchapter 'S' corporation, or limited liability company shall be exempt from the withholding requirements imposed under subsection (a) of this Code section.
(3) The liability imposed by this subsection shall be paid upon notice and demand by the commissioner or the commissioner´s delegate and shall be assessed and collected in the same manner as all other withholding taxes imposed by this article.
(c)(1) If a partnership, Subchapter 'S' corporation, or limited liability company fails to remit withholding for a nonresident member and the commissioner determines that such failure is due to a false representation that the member is a resident of Georgia, there shall be imposed in addition to the tax a penalty of the greater of $250.00 or 5 percent of the amount which should have been withheld. The partnership, Subchapter 'S' corporation, or limited liability company and the nonresident member shall be jointly and severally liable for any such penalty imposed.
(2) The penalty imposed by this subsection shall be paid upon notice and demand by the commissioner or the commissioner´s delegate and shall be assessed and collected in the same manner as withholding tax imposed by this article.
(d)(1) Every partnership, Subchapter 'S' corporation, or limited liability company which is required to deduct and withhold the withholding tax imposed by subsection (a) of this Code section shall remit such tax and file the required return on a form approved by the commissioner and remit payment to the department as follows:
(A) Taxes deducted and withheld on distributions paid by a partnership, Subchapter 'S' corporation, or limited liability company to members who are nonresidents shall be due on or before the last day of the calendar month following the calendar month within which the distribution was paid or credited; and
(B) Taxes deducted and withheld on distributions credited but not paid by a partnership, Subchapter 'S' corporation, or limited liability company to members who are nonresidents 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 Code Section 48-7-56 without regard to any extension of time for filing such income tax return.
(2) Every partnership, Subchapter 'S' corporation, or limited liability company required to deduct and withhold tax under this article shall furnish, within 30 days of the close of its taxable year, to each nonresident member for which tax is withheld a written statement in duplicate, showing the name of the partnership, Subchapter 'S' corporation, or limited liability company, the name of the member of the partnership, Subchapter 'S' corporation, or limited liability company, the member´s federal tax identification number, the total amount of distributions paid to the member during the taxable year, and the total amount of tax deducted and withheld with respect to the member during the taxable year. The written statement shall be in a form approved by the commissioner and shall contain such additional information as the commissioner may prescribe. The partnership, Subchapter 'S' corporation, or limited liability company shall file copies of all such written statements with the commissioner a written statement or form approved by the commissioner to each nonresident member. Such statement or form shall include the name and federal tax identification number of the partnership, Subchapter 'S' corporation, or limited liability company, the member´s name and federal tax identification number, the total amount of distributions paid to the member during the taxable year, the total amount of tax deducted and withheld with respect to such member during the year, and such other information as the commissioner shall prescribe. Such statement or form shall 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 Code Section 48-7-56 without regard to any extension of time for filing such income tax return.
(3) Any partnership, Subchapter 'S' corporation, or limited liability company required to furnish a nonresident member with the written statement required by this subsection which furnishes a false or fraudulent statement or which fails to furnish the statement shall be subject to the penalty contained in subsection (d) of Code Section 48-7-126. The penalty imposed by this subsection shall be paid upon notice and demand by the commissioner or the commissioner´s delegate and shall be assessed and collected in the same manner as the withholding tax imposed by this article.
(e)(1) Notwithstanding subsection (a) of this Code section, a partnership, Subchapter 'S' corporation, or limited liability company shall not be required to deduct and withhold tax for a nonresident member if:
(A) A composite return is filed on behalf of nonresident members pursuant to the requirements of filing such composite returns as set by the commissioner;
(B) The aggregate annual distributions made to a member are less than $1,000.00;
(C) A federally chartered Subchapter 'S' corporation fails to meet the requirements of subparagraph (b)(7)(B) of Code Section 48-7-21 and is therefore required to remit corporate income tax;
(D) Compliance will cause undue hardship on the partnership, Subchapter 'S' corporation, or limited liability company, provided that no partnership, Subchapter 'S' corporation, or limited liability company shall be exempt from complying with the withholding requirements imposed under subsection (a) of this Code section unless the commissioner approves in writing a written petition for exemption from the withholding requirements based on undue hardship. The commissioner may prescribe the form and contents of such a petition and specify standards for when a partnership, Subchapter 'S' corporation, or limited liability company will shall not be required to comply with the withholding requirements due to undue hardship;
(E) The partnership is a publicly traded partnership as defined in Section 7704 of the Internal Revenue Code of 1986; or
(F) The member meets one of the exceptions as set forth in the rules and regulations promulgated by the commissioner.
(2) Where distributions paid or distributions credited but not paid, or both, to nonresident members of partnerships, Subchapter 'S' corporations, or limited liability companies are subject to withholding under other provisions of Georgia law or represent a return of such member´s investment or a return of capital, such distributions shall not be subject to withholding under subsection (a) of this Code section.
(f) The commissioner is shall be authorized to prescribe forms and to promulgate rules and regulations which the commissioner deems necessary in order to effectuate this Code section."

SECTION 11.
This Act shall become effective upon its approval by the Governor or upon its becoming law without such approval and shall be applicable to all taxable years beginning on or after January 1, 2008.

SECTION 12.
All laws and parts of laws in conflict with this Act are repealed.