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GENERAL INFORMATION:

INCOME TAX

(continued)

minority subcontractors for the Revenue Department and general

ADJUSTMENTS TO FEDERAL INCOME OF SHAREHOLDERS

public. To register as a minority subcontractor or to view the list,

To determine total income for Georgia purposes, certain

visit

additions and subtractions as provided by Georgia law are

included in the Schedule 8 computation. Lines 8 and 10 of

A corporation may subtract federally taxable interest received

Schedule 8 provide for modifications required by Georgia law.

on Georgia municipal bonds designated as “Build America

The total of the additions to Georgia income should be indicated

Bonds” under Section 54AA of the Internal Revenue Code of

on Schedule 8 and listed in Schedule 5. Georgia does not

1986. ‘Recovery Zone Economic Development Bonds” under

allow the Federal deduction for income attributable to domestic

Section 1400U-2 of the Internal Revenue Code or any other

production activities (I.R.C. Section 199). An adjustment to

bond treated as a “Qualified Bond” under Section 6431(f) of the

the Georgia S Corporation return is not required if the S

Internal Revenue Code are considered “Build America Bonds”

Corporation is not allowed the Section 199 deduction directly,

for this purpose.

but instead passes the information needed to compute the

deduction to the shareholders.

See Georgia Code Section 48-7-21 for additional adjustments.

A corporation must add back all intangible expense and

A corporation may subtract federally taxable interest received

related interest expense directly or indirectly paid to a

on Georgia municipal bonds issued by the State of Georgia

related member. All such expense must be listed as an

and certain authorities or agencies of the State of Georgia for

addition to federal income even if the taxpayer qualifies for an

which there is a special exemption under Georgia law from

exception. If the taxpayer qualifies for a full or partial exception,

Georgia tax on such interest.

Form IT-Addback must be completed in order to take a

subtraction on Schedule 6 for all or any portion of the addition

ALLOCATION AND APPORTIONMENT OF INCOME

listed on Schedule 5.

SCHEDULES 7, 8, and 9

If any corporation, domestic or foreign, does business or owns

A corporation must add back all captive REIT expenses directly

property both within and without Georgia, the Georgia ratio as

or indirectly paid to a related member. All such expense must

computed in Schedule 7 should be used to compute Georgia

be listed as an addition to federal income even if the taxpayer

taxable income for nonresidents. Schedule 8 reflects flow-

qualifies for an exception. If a taxpayer qualifies for a full or

through income from the federal return, which is taxable to the

partial exception, Form IT-REIT must be completed.

individual shareholders.

A taxpayer must addback payments of more than $600 in a

A resident shareholder is required to report the full share of

taxable year made to employees who are not authorized

corporate income or loss. A nonresident shareholder, however,

employees and who are not excepted by O.C.G.A.

§ 48-7-21.1

is required to report only the share of allocated and apportioned

An authorized employee is someone legally allowed to work in

income as computed in Schedule 9 (see Federal Tax Changes

the United States.

on page 1 for separately stated shareholder adjustments).

Total subtractions from Federal income should be indicated on

General instructions for computing the apportionment ratio and

Schedule 8 and listed in Schedule 6. The more commonly used

apportioned and allocated income are listed below. If the

items are listed in each of these schedules. Additionally,

business income of the corporation is derived from Georgia

adjustments due to other Federal tax changes should be reported

sources, from property owned or business done within the State,

as stated on Page 1 of the instructions. U.S. obligation income

and derived in part from property owned or business done outside

must be reduced by direct and indirect interest expense. To

the State, the tax is imposed only on that portion of the business

arrive at such reduction, the total interest expense is multiplied

income which is reasonably attributable to Georgia sources

by a fraction, the numerator of which is the taxpayer’s average

and property owned and business done within the State, to be

adjusted basis of the U.S. obligations, and the denominator of

determined as follows:

which is the average adjusted basis of all assets of the taxpayer.

(1) Interest received on bonds held for investment and income

Any other methodology requires preapproval from the Department.

received from other intangible property held for investment are

Also see Georgia Regulation 560-7-3-.10.

not subject to apportionment. Rentals received from real estate

Any deductions subject to further limitations such as a Section

held purely for investment purposes and not used in the operation

179 deduction, charitable contributions, etc., are not deductible

of the business are also not subject to apportionment. All

in the calculation of total income for Georgia purposes. These

expenses connected with the interest and rentals from such

items are deductible, based on percentage of ownership, by

investments are likewise not subject to apportionment but must

the individual shareholder on his or her individual tax return.

be applied against the investment income. The net investment

Taxpayers who are parties to state contracts may subtract from

income from intangible property shall be allocated to Georgia if

Federal taxable income or Federal adjusted gross income 10%

the situs of the corporation is in Georgia or the intangible property

of qualified payments to minority subcontractors or $100,000,

was acquired as income from property held in Georgia, or as a

whichever is less, per taxable year. The Commissioner of the

result of business done in Georgia. The net investment income

Department of Administrative Services maintains a list of certified

from tangible property in Georgia shall be allocated to Georgia.

Page 6

Form It 611s Instructions - S Corporation Income Tax - Georgia Department Of Revenue - 2014 Page 7

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