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(a) As used in this Code section, the term:
(1) “Administrative adjustment request” means the same as provided in Code Section 6227 of the Internal Revenue Code of 1986 and the regulations thereunder.
(2) “Audited partnership” means a partnership subject to a final federal adjustment resulting from a partnership level audit.
(3) “Corporate partner” means a C corporation partner that is subject to tax pursuant to Code Section 48-7-21.
(4) “Direct partner” means a person that holds an interest directly in an audited partnership.
(5) “Exempt partner” means a partner that is exempt from taxation pursuant to paragraph (1) of subsection (a) of Code Section 48-7-25.
(6) “Federal adjustment” means a change to an item or amount required to be determined under the Internal Revenue Code of 1986 and the regulations thereunder that is used by a partnership to compute state tax owed for the reviewed year where such change results from a partnership level audit. A federal adjustment is positive to the extent that it increases Georgia taxable net income as determined under this title and is negative to the extent that it decreases Georgia taxable net income as determined under this title.
(7) “Federal adjustments report” means an amended Georgia income tax return that arises directly or indirectly from a partnership level audit and for an audited partnership and tiered partner, identifies all partners that hold an interest directly in such audited partnership or tiered partner, and provides the effect of the final federal adjustments on such partner’s Georgia taxable net income. For the audited partnership, the federal adjustments report shall also contain information reasonably necessary to provide the commissioner with an understanding of all adjustments to the audited partnership’s federal taxable income and the amount of such adjustments allocated to each of its partners. For the audited partnership, a copy of the report received from the Internal Revenue Service shall be sufficient if it provides such information. For all tiered partners, the federal adjustments report shall also contain information reasonably necessary to provide the commissioner with an understanding of all adjustments to a tiered partner’s federal taxable income and the amount of such adjustments allocated to each of its partners.
(8) “Federal partnership representative” means the person the partnership designates for the taxable year as the partnership’s representative, or the person the Internal Revenue Service has appointed to act as the federal partnership representative, pursuant to Section 6223(a) of the Internal Revenue Code of 1986 and the regulations thereunder.
(9) “Fiduciary partner” means a fiduciary that is subject to tax pursuant to Code Sections 48-7-20 and 48-7-22.
(10) “Final determination date” means the following:
(A) If the federal adjustment arises from a partnership level audit, the final determination date is the first day on which no federal adjustments arising from that audit remain to be finally determined, whether by agreement, or, if appealed or contested, by a final decision with respect to which all rights of appeal have been waived or exhausted. For agreements required to be signed by the Internal Revenue Service and the audited partnership, the final determination date is the date on which the last party signed the agreement; or
(B) If the adjustment results from filing an administrative adjustment request, the final determination date means the day on which the administrative adjustment request was filed.
(11) “Final federal adjustment” means a federal adjustment after the final determination date for that federal adjustment has passed.
(12) “Georgia income tax” means the tax imposed by Code Sections 48-7-20, 48-7-21, and 48-7-25, and as provided in subsection (c) of this Code section.
(13) “Indirect partner” means a partner in a partnership or pass-through entity where such partnership or pass-through entity itself holds an interest directly, or through another indirect partner, in a partnership or pass-through entity.
(14) “Individual partner” means a partner who is a natural person that is subject to tax pursuant to Code Section 48-7-20.
(15) “Internal Revenue Service” means the Internal Revenue Service of the United States Department of the Treasury.
(16) “Nonresident partner” means a partner that is not a resident as defined in this subsection.
(17) “Partner” means a person that holds an interest, directly or indirectly, in a partnership or pass-through entity.
(18) “Partnership” means an entity subject to taxation under Subchapter K of the Internal Revenue Code of 1986 and the regulations thereunder and includes, but is not limited to, a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on and which is not, within the meaning of this chapter, a trust, estate, or corporation.
(19) “Partnership level audit” means an examination or other review by the Internal Revenue Service for taxable years beginning on or after January 1, 2018, at the partnership level pursuant to the Internal Revenue Code of 1986 and the regulations thereunder either of which results in final federal adjustments initiated and made by the Internal Revenue Service.
(20) “Pass-through entity” means an entity, other than a partnership, that is not subject to tax under Code Section 48-7-21 for C corporations but excluding an exempt partner.
(21) “Reallocation adjustment” means a final federal adjustment that changes the shares of items of partnership income, gain, loss, expense, or credit allocated to a partner that holds an interest directly in a partnership or pass-through entity. A positive reallocation adjustment means a reallocation adjustment that would increase Georgia taxable net income for such partners, and a negative reallocation adjustment means a reallocation adjustment that would decrease Georgia taxable net income for such partners.
(22) “Resident partner” means for an individual or fiduciary partner, the same as provided in Code Section 48-7-1 and for all other partners means a partner whose headquarters or principal place of business is located inside this state.
(23) “Reviewed year” means the taxable year of a partnership that is subject to a partnership level audit from which final federal adjustments arise.
(24) “State partnership audit” means an examination by the commissioner at the partnership or pass-through entity level which results in adjustments to partnership or pass-through entity related items or reallocations of income, expenses, gains, losses, credits, and other attributes among such partners for the reviewed year.
(25) “Tiered partner” means any partner that is a partnership or pass-through entity.
(26) “Unrelated business income” means the income which is defined in Section 512 of the Internal Revenue Code of 1986 and the regulations thereunder.
(27) “Withholding partner” means a partner in a partnership for whom the partnership was required to withhold tax pursuant to Code Section 48-7-129 for the reviewed year.
(b) Every partnership, including but not limited to a foreign partnership, the individual members of which are subject to taxation under this chapter, shall make a return for each taxable year. The return shall state specifically the items of the partnership’s gross income and the deductions allowed by this chapter, shall include the names and addresses of the individuals who would be entitled to share in the net income of the partnership if the net income were distributed, and shall specify the amount of the distributive share of each individual. The return shall be sworn to by any one of the partners.
(c) Partnerships and their direct partners and indirect partners shall report final federal adjustments, as provided in this subsection, and not as provided in subsection (e) of Code Section 48-7-82.
(1) State Partnership Representative.
(A) With respect to an action required or permitted to be taken by a partnership or pass-through entity under this Code section and a proceeding under Code Section 48-2-59 with respect to final federal adjustments arising from a partnership level audit, the state partnership representative for the reviewed year shall have the sole authority to act on behalf of the partnership or pass-through entity, and its direct partners and indirect partners shall be bound by those actions.
(B) The state partnership representative for the reviewed year for a partnership is a partnership’s federal partnership representative unless the partnership designates in writing another person as its state partnership representative as provided in subparagraph (C) of this paragraph. The state partnership representative for the reviewed year for a pass-through entity is the person designated in subparagraph (C) of this paragraph.
(C) The commissioner may establish reasonable qualifications for a person to be the state partnership representative. If a partnership desires to designate a person other than their federal partnership representative, they shall designate such person by attaching a statement to the return filed pursuant to this chapter. A pass-through entity shall designate a person as their state partnership representative by attaching a statement to the return filed pursuant to this chapter. A partnership or pass-through entity shall be allowed to change such designation by notifying the commissioner at the time the change occurs.
(2) Reporting and payment requirements for audited partnerships subject to final federal adjustments and their partners.
(A) Unless an audited partnership makes the election in paragraph (3) of this subsection, then, for all final federal adjustments, the audited partnership shall no later than 90 days after the final determination date of the audited partnership:
(ii) Notify each of its direct partners of their distributive share of the adjustments; and
(iii) File an amended composite return under Code Section 48-7-129 if one was originally filed and for withholding partners, file an amended withholding report under Code Section 48-7-129, and pay the additional amount due under this title that would have been due had the final federal adjustments been reported properly as required.
(B) Unless an audited partnership paid an amount on behalf of its direct partners pursuant to paragraph (3) of this subsection, all direct partners of the audited partnership shall no later than 180 days after the final determination date of the audited partnership:
(i) File a completed federal adjustments report reporting their distributive share of the adjustments reported to them under subparagraph (A) of this paragraph;
(ii) If the direct partner is a tiered partner, notify all of the partners, that hold an interest directly in such tiered partner, of their distributive share of the adjustments;
(iii) If the direct partner is a tiered partner and subject to Code Section 48-7-129, file an amended composite return under Code Section 48-7-129 if such return was originally filed and if applicable for withholding partners file an amended withholding report under Code Section 48-7-129 if one was originally required to be filed; and
(iv) Pay any additional amount due under this title, including any penalty and interest that would have been due had the final federal adjustments been reported properly as required and with respect to a composite return, less any withholding tax paid or withheld for such withholding partners pursuant to subparagraph (A) of this paragraph.
(C) Unless a partnership or tiered partner paid an amount on behalf of its partners pursuant to paragraph (3) of this subsection, each indirect partner, shall:
(i) Within 90 days after the time for filing and furnishing statements to tiered partners and their partners as established by Section 6226 of the Internal Revenue Code of 1986 and the regulations thereunder, file a completed federal adjustments report;
(ii) If the indirect partner is a tiered partner, within 90 days after the time for filing and furnishing statements to tiered partners and their partners as established by Section 6226 of the Internal Revenue Code of 1986 and the regulations thereunder but within sufficient time for all indirect partners to also complete the requirements of this subsection, notify all of the partners, that hold an interest directly in such tiered partner, of their distributive share of the adjustments;
(iii) Within 90 days after the time for filing and furnishing statements to tiered partners and their partners as established by Section 6226 of the Internal Revenue Code of 1986 and the regulations thereunder, if the indirect partner is a tiered partner and subject to Code Section 48-7-129, file an amended composite return under Code Section 48-7-129 if such return was originally filed and if applicable for withholding partners file an amended withholding report under Code Section 48-7-129 if one was originally required to be filed; and
(iv) Within 90 days after the time for filing and furnishing statements to tiered partners and their partners as established by Section 6226 of the Internal Revenue Code of 1986 and the regulations thereunder, pay any additional amount due under this title, including any penalty and interest that would have been due had the final federal adjustments been reported properly as required and with respect to a composite return, less any withholding tax paid or withheld for such withholding partners pursuant to subparagraph (A) or (B) of this paragraph.
(3) Irrevocable election for partnership or tiered partners to pay. If an audited partnership, or a tiered partner that would receive an amended schedule K-1 under paragraph (2) of this subsection, makes an election under this paragraph, it shall:
(A) File a completed federal adjustments report, notify the commissioner that it is making the election under this paragraph, notify each of its direct partners of their distributive share of the adjustments, and pay an amount as provided in this paragraph, including any penalty and interest, on behalf of its partners within one of the following time periods:
(i) For the audited partnership, no later than 90 days after the final determination date of the audited partnership;
(ii) For a direct tiered partner, no later than 180 days after the final determination date of the audited partnership; or
(iii) For an indirect tiered partner, within 90 days after the time for filing and furnishing statements to tiered partners and their partners as established by Section 6226 of the Internal Revenue Code of 1986 and the regulations thereunder;
(B) Exclude from final federal adjustments and any positive reallocation adjustments the distributive share of such adjustments made to an exempt partner, that holds an interest directly in the audited partnership if the audited partnership is making the election or that holds an interest directly in the tiered partner if the tiered partner is making the election, that is not unrelated business income;
(C) Determine the total distributive share of all final federal adjustments and positive reallocation adjustments as modified by this title and apportion and allocate such adjustments as provided in Code Section 48-7-31 for such electing partnership or such electing tiered partner and determine the total distributive share of such amounts that are allocated to all corporate partners, all tiered partners, all exempt partners and that is unrelated business income, all nonresident individual partners, and all nonresident fiduciary partners. If the commissioner determines that a partnership or tiered partner fraudulently underreported its income on a return, the commissioner shall treat any income attributable to a tiered partner of such partnership or tiered partner as being apportioned and allocated entirely to Georgia to the extent the direct and indirect partners of such tiered partner are resident partners;
(D) Determine the total distributive share of all final federal adjustments and positive reallocation adjustments as modified by this title, but without the allocation and apportionment of such adjustments as provided by Code Section 48-7-31, that are allocated to all other partners, including but not limited to resident individual partners and resident fiduciary partners; and
(E) Total the amount computed pursuant to subparagraphs (C) and (D) of this paragraph and multiply by the rate provided in subsection (a) of Code Section 48-7-21.
(4) Effect of election by partnership or tiered partner and payment of amount due.
(A) The election made pursuant to paragraph (3) of this subsection is irrevocable.
(B) If properly reported and paid by the audited partnership or tiered partner, the amount determined in paragraph (3) of this subsection shall be treated as paid on behalf of such person’s partners on the same final federal adjustments; provided, however, that no partner may take any deduction or credit for these amounts, claim a refund of these amounts, or include such amounts on such partner’s return in any manner.
(C) Nothing in this subsection shall preclude a resident partner who is a natural person or a fiduciary and that holds an interest directly in the audited partnership if the audited partnership is making the election or that holds an interest directly in the tiered partner if the tiered partner is making the election, from claiming a credit against taxes paid to this state pursuant to Code Section 48-7-28 for any amounts paid by the audited partnership or tiered partner on such resident partner’s behalf to another state or local tax jurisdiction provided the requirements of Code Section 48-7-28 are met.
(5) Failure of audited partnership or tiered partner to report or pay. Nothing in this subsection is intended to prevent the commissioner from assessing direct partners and indirect partners for taxes they owe in the event that an audited partnership or tiered partner fails to timely make any report or payment required by this subsection for any reason.
(6) Assessments of additional Georgia income tax, interest, and penalties arising from final federal adjustments. The commissioner will assess additional Georgia income tax, interest, and penalties arising from final federal adjustments as if it is a tax imposed by this chapter unless a different treatment is provided by this subsection. Since partnership adjustments are determined at the audited partnership level, any assessment issued to partners shall not be appealable by the partner. Any penalties or interest imposed on the partnership or its partners shall be as provided and at the rates in this title except that penalties and interest imposed on the audited partnership or tiered partners shall be from the day after the due date of the reviewed year return without extension. Such assessment shall be issued by the following dates:
(A) Timely reported final federal adjustments. If a partnership, tiered partner, or other partner files with the commissioner a federal adjustments report as required within the period specified in this subsection reporting all final federal adjustments, the commissioner may assess any taxes, including on-behalf taxes, interest, and penalties arising from those final federal adjustments if the commissioner issues a notice of assessment to the partnership, tiered partner, or partner, on or before the later of:
(i) The expiration of the limitations period specified in Code Section 48-7-82; or
(ii) The expiration of the one-year period following the date of filing with the commissioner of the federal adjustments report by such person.
(B) Untimely reported final federal adjustments. If the partnership, tiered partner, or other partner fails to file the federal adjustments report within the period specified in this subsection, or the federal adjustments report filed by the partnership, tiered partner, or other partner omits final federal adjustments or understates the correct amount of Georgia income tax owed, the commissioner may assess any taxes, including on-behalf taxes, interest, and penalties arising from the final federal adjustments, if it issues a notice of assessment to the partnership, tiered partner, or other partner on or before the later of:
(i) The expiration of the limitations period specified in Code Section 48-7-82;
(ii) The expiration of the one-year period following the date the federal adjustments report was filed with the commissioner by such person; or
(iii) Absent fraud, the expiration of the five-year period following the date on which the Internal Revenue Service notifies the commissioner of the federal adjustments.
(7) Claims for refund of Georgia income tax arising from final federal adjustments. Notwithstanding the reporting requirement contained in this subsection and except as otherwise prohibited by this title, a partnership, tiered partner, or other partner, as the case may be, may file a claim for refund of Georgia income tax arising directly or indirectly from final federal adjustments on or before the later of:
(A) The expiration of the last day for filing a claim for refund of Georgia income tax pursuant to Code Section 48-2-35 for such person; or
(B) One year from the date the federal adjustments report was required to be filed by this subsection for such person.
(8) Scope of adjustments and extensions of time.
(A) Unless otherwise agreed in writing by the partnership, tiered partner, or other partner and the commissioner, any adjustments by the commissioner after the expiration of the time provided in Code Section 48-7-82 or by the partnership, tiered partners, or other partners made after the expiration of the time provided in Code Section 48-2-35, are limited to changes to the partnership’s, tiered partner’s, or other partner’s Georgia income tax liability arising directly or indirectly from final federal adjustments.
(B) Where, before the expiration of the time prescribed in this subsection for the assessment of Georgia income tax, both the commissioner and the person subject to assessment have consented in writing to its assessment after such time, the tax may be assessed at any time prior to the expiration of the agreed upon period. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the previously agreed upon period and the commissioner is authorized in any such agreement to extend similarly the period within which a claim for refund may be filed; provided, however, that the time periods provided in this subsection may be extended automatically by 60 days for an audited partnership which has 10,000 or more direct partners or a tiered partner which has 10,000 or more partners that hold an interest directly in such tiered partner, provided that such audited partnership or tiered partner attaches a statement to its federal adjustments report specifying that it has elected such automatic extension.
(9) Any income subtracted from federal taxable income for the adjustment year pursuant to Section 6225 of the Internal Revenue Code of 1986 and the regulations thereunder shall be added to the partnership’s, tiered partner’s, or other partner’s Georgia taxable net income for the adjustment year.
(d) For taxable years beginning on or after January 1, 2017, any adjustment to a partnership’s items of income, gain, loss, expense, or credit or an adjustment to such items allocated to a partner that holds an interest in a partnership for the reviewed year by the commissioner as a result of a state partnership audit shall be determined at the partnership level in the same manner as provided by subsection (a) of Section 6221 of the Internal Revenue Code of 1986 and the regulations thereunder unless a different treatment is specifically provided in this title. If the commissioner and the partnership agree, the provisions of this subsection may be applied to taxable years beginning before January 1, 2017. The provisions of Sections 6222, 6223, and 6227 of the Internal Revenue Code of 1986 and the regulations thereunder shall also apply in the same manner as provided in such sections unless a different treatment is specifically provided in this chapter. For purposes of applying such sections, due account shall be made for differences in federal and Georgia terminology such as substitution of “Secretary” with “Commissioner” and other obvious differences. The adjustment provided by subsection (a) of Section 6221 of the Internal Revenue Code of 1986 shall be determined as provided in such section but shall be based on the Georgia taxable net income or other tax attributes of the partnership as determined pursuant to this chapter for the reviewed year. The commissioner shall issue a notice of adjustment to the partnership. Such notice shall be treated as an assessment for purposes of Code Sections 48-2-59 and 48-7-82, and, as such, the notice shall be appealable pursuant to Code Section 48-2-59 and shall be issued within the time period provided by Code Section 48-7-82. Once the adjustments to partnership-related items or reallocations of income, expenses, gains, losses, credits, and other attributes among such partners for the reviewed year are finally determined, the partnership and any direct partners or indirect partners shall then be subject to the provisions of subsection (c) of this Code section in the same manner as if the state partnership audit were a partnership level audit.
(e) For purposes of this chapter, any adjustment to a pass-through entity’s items of income, gain, loss, expense, or credit or an adjustment to such items allocated to a partner that holds an interest in a pass-through entity for the reviewed year by the commissioner shall be determined in the same manner as provided in subsection (d) of this Code section.
(f) An administrative adjustment request filed by the partnership with the Internal Revenue Service or the commissioner shall be treated in the reviewed year in the same manner as provided by subsection (c) of this Code section, except that:
(1) The period of limitations on claiming refunds for the partnership and partners shall be as provided by this title, notwithstanding subsection (c) of this Code section; and
(2) The period of limitations on making adjustments and assessments for the partnership and partners shall be on or before the later of:
(A) The expiration of the limitations period specified in Code Section 48-7-82; or
(B) The expiration of the one-year period following the date of the filing of the administrative adjustment request by the partnership or the amended Georgia income tax return by the partners, as the case may be.
(g) The commissioner shall be authorized to promulgate any rules and regulations necessary to implement and administer the provisions of this Code section. History. Ga. L. 1931, Ex. Sess., p. 24, § 27; Code 1933, § 92-3204; Ga. L. 1935, p. 121, § 7; Code 1933, § 91A-3703, enacted by Ga. L. 1978, p. 309, § 2; Ga. L. 2018, p. 319, § 3/HB 849; Ga. L. 2019, p. 817, § 2/HB 419; Ga. L. 2019, p. 1056, § 48/SB 52. The 2019 amendments. — The first 2019 amendment, effective May 7, 2019, substituted “Irrevocable election” for “Election” at the beginning of paragraph (c)(3); inserted “notify each of its direct partners of their distributive share of the adjustments,” in the middle of subparagraph (c)(3)(A); added the second sentence in subparagraph (c)(3)(C); and substituted “the rate provided in subsection (a) of Code Section 48-7-21” for “6 percent” in subparagraph (c)(3)(E). The second 2019 amendment, effective May 12, 2019, part of an Act to revise, modernize, and correct the Code, revised punctuation in paragraph (a)(7), and substituted “filed with the commissioner” for “filed with commissioner” in division (c)(6)(B)(ii). Cross references. Partnerships generally, T. 14, C. 8. Law reviews. For article, “Aggregate-Plus Theory of Partnership Taxation,” see 43 Ga. L. Rev. 717 (2009). RESEARCH REFERENCES Am. Jur. 2d. 71 Am. Jur. 2d, State and Local Taxation, § 463. C.J.S. 85 C.J.S., Taxation, §§ 1977, 1989 et seq., 2042 et seq.