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The State of Georgia passed H.B. 149 early last month, seeking a workaround to the $10,000 SALT* cap, included in the Tax Cuts and Jobs Act of 2017 (TCJA). The Bill, as passed by the Georgia House and Senate, becomes law pending the signature of Georgia Governor Brian Kemp. It will add Georgia to the growing list of states to give pass-through entities (PTEs) the option to be taxed at the entity level.
The objective of this amendment is helping individual residents of the state of Georgia avoid the federal $10,000 SALT cap, which was part of the TCJA. It is important to note that pass-through entities with corporate members are precluded from making this election. Only PTEs that are fully owned, directly by individuals who are eligible to be shareholders of an S Corp under IRC Section 1361, are eligible to make the election.
While other states have adopted SALT cap workarounds, each state’s laws are unique. Georgia’s H.B. 149, does not specify who is required, or who has the authority, to make the election, which is unlike the laws enacted by other states that have an elective PTE tax regime.
The pass-through entity elective tax would be applicable to tax years beginning on or after January 1, 2022. The Georgia Department of Revenue is expected to provide further guidance on this law in upcoming months.
*SALT: state and local tax
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