Written by: Brad Dickson
Delayed legislation for this annual bill adds confusion, inefficiency and even conflict for many taxpayers, practitioners and the DOR. This situation is not unique to Georgia. The IRS has routinely dealt with last minute legislation that incorporates retroactive effective dates after forms and software deadlines had passed. Recent examples include the stimulus payments, Section 179, credit extenders, teacher’s expenses, etc. The DOR, not having the fiscal resources of the IRS, has dealt with such after-print law changes by means of announcements and policy statements issued by the Commissioner after the law has been adopted. The effect of all of this is that “early filers” may file before the law is settled, and “later filers” may file using forms and instructions that have not been updated. For taxpayers that are closer to the legislative process, their annual dilemma is: do they file before conformity is passed and amend if necessary, or wait and see? The most aggressive bill-trackers have even filed returns taking positions on the assumed passage of an item or items. That scenario is explicitly described in the AICPA Statement on Standards of Tax Practice (SSTS) No.1 as frivolous.
In contrast to states like Alabama, Georgia’s code is annually adopted as opposed to constitutionally linked to the federal code. Before adopting conformity, Georgia must analyze a plethora of federal legislative changes from a perspective of social and fiscal policy. For mostly fiscal reasons, Georgia has chosen not to follow a variety of federal provisions, most notably §199 (domestic production deduction) and §168(k) bonus depreciation. In recent years, Georgia has adopted changes to §179 (first-year expensing election) but this has not always been the case. For the 2009 tax season “early filers” faced the dilemma of not knowing how Georgia would vote on the significantly expended §179 limits (from $125,000 to $250,000). For the 2010 Session, the conformity bill (HB 1138) is trudging through the General Assembly even slower than it did in 2009.
The House Ways and Means committee initiates all tax legislation and the majority of vetting takes place there. Legislation will have input, either passive or active, from legislative legal counsel, the DOR, the Governor’s office, Rules, Appropriations and Budget, and eventual input from the Senate Finance committee and the Senate Research Office. Most bills – and particularly the conformity bill – also require an economic impact study before a full vote. For federal legislation enacted late in the year, completing a timely study is problematic, but for legislation enacted earlier in the year (such as the AARA of 2009), shouldn’t this be done before Session begins? Scarce funding has impacted the legislative branch as well.
Setting the “starting point” for Georgians to compute their tax liabilities should make this legislative action a #1 priority. What is an appropriate expectation? January 31? February 28? March 15? April 15? The Tax Section is in conversations with legislators to discuss and volunteer its members’ input. If you have comments on the matter and would like to assist, please contact The Tax Section Chair, John Masters, or Jeff Wells.
2010 HB 1138 passed Ways and Means about 3 weeks later than its 2009 counterpart. That said–don’t be surprised if 2009 conformity is not in the law until after April 15!
As of this writing, HB 1138 includes several significant carve outs. The bill excludes the 5-year NOL carry back provisions of AARA (§172(B)(1)(H) and §810(b)(4)); the income exemption for up to $2,400 in unemployment benefits (§85(c)); the deduction for sales tax on automobile purchases (§164(a)(6)); the 5-year deferral election for cancellation of indebtedness income (§108(i)); the high yield OID provisions (§163(e)(5)(F)). The usual suspects §199 and bonus depreciation remain “de-linked”.
HB 1138 does adopt the retroactive Haitian relief charitable contributions deduction as enacted on January 22, 2010. Lastly, the bill expands the Commissioner’s authority to mandate electronic filing for any return preparer filing a federal return that is required to be electronically filed. Enjoy those extensions!
Bradford C. Dickson, CPA
