Georgia Response to Bonus Depreciation

CCH, 4/5/02
Georgia--Corporate, Personal Income Taxes: Nonconformity with Job Creation and Worker Assistance Act Explained

Georgia nonconformity with the federal Job Creation and Worker Assistance Act of 2002 (P.L.  107-147) is explained for Georgia corporate and personal income tax purposes. Georgia H.B. 1026 (as passed and adopted by the legislature on March 7, 2002) would update Georgia's income tax code to the Internal Revenue Code as enacted on or before January 1, 2002. Since the federal Act was enacted on  March 9, 2002, which is after January 1, 2002, Georgia will not be adopting the provisions of the Act.  Therefore, adjustments to federal net operating losses (NOLs) and depreciation must be made for NOLs  and depreciation claimed on 2001 Georgia tax returns.

NOLs
The Act increases the federal carryback period for NOLs to five years (previously, two years) for federal tax years ending in 2001 or 2002. Georgia, however, would continue to use the two-year carryback period, as provided by the federal law as it existed on January 1, 2002.

 "Bonus" Depreciation
The Act allows a 30% "bonus" depreciation in the first year for certain types of property. Accordingly,  the federal tax basis of such property may be reduced by 30% before computing the normal depreciation.  However, Georgia taxpayers claiming the federal "bonus" depreciation must add back any depreciation computed on new federal Form 4562 to Georgia income, and then subtract any depreciation computed on old federal Form 4562. Both the new and the old forms must be attached to the Georgia income tax return, and the old federal Form 4562 must be labeled at the top "Georgia Form 4562."
                                      
Georgia taxpayers must also add back any depreciation computed on the new federal Form 2106 to  Georgia income, and then subtract any depreciation computed on the old federal Form 2106. Both of  these forms must also be attached to the Georgia income tax return, and the old federal Form 2106 must  be labeled at the top "Georgia Form 2106."

Georgia taxpayers claiming NOLs or depreciation that have already filed Georgia income tax returns may need to file amended returns with the appropriate adjustments. (Press Release, Georgia Department of Revenue, April 2002.)

For more information and for changes in tax forms due to the Job Creation and Worker Assistance Act, taxpayers may go to www2.state.ga.us/departments/dor/inctax/fedact2002/index.html