Practice and Procedure: Georgia’s New Partnership Audit Regime

On May 3, Georgia Gov. Nathan Deal (R) signed H.B. 849 into law, creating a new partnership audit regime in Georgia that largely conforms to the federal partnership audit regime passed by Congress in 2015, Pub. L. 114-74, that went into effect Jan. 1, 2018. H.B. 849 was effective immediately upon being signed by the governor. Some of the highlights of the new Georgia law related to conformity with federal law involve the requirement of a partnership representative, adjustments at the partnership level, and guidelines for adjustments requested by a partnership.

As is required under I.R.C. § 6223, Georgia will now require partnerships to designate a representative who will have the sole authority to act on behalf of the partnership, binding its direct and indirect partners. The representative will be the same person designated as the federal partnership representative unless the partnership identifies a different person in writing.

For tax years beginning on or after Jan. 1, 2017, partnership adjustments that result from a state partnership audit will be determined at the partnership level in the same manner as set forth in I.R.C. § 6221(a) and the associated regulations and will not flow to individual partners. Thus, any tax attributed to such adjustments will be assessed and collected at the partnership level. Also, if the commissioner and the partnership agree, this conformity to federal law may also be applied to tax years beginning before Jan. 1, 2017.

Georgia law further stipulates that I.R.C. §§ 6222 and 6227 will apply in Georgia unless a different treatment is specifically required by law. In accordance with I.R.C. § 6222, partners, on their individual Georgia returns, must treat partnership-related items in a manner consistent with the item’s treatment on the partnership return. In accordance with I.R.C. § 6227, a partnership may request an administrative adjustment from Georgia of one or more partnership-related items for any partnership year but must file any such request within three years of the later of the filing date and the due date of the partnership return for the year at issue.

Also included in the new partnership law are detailed guidelines for reporting final federal adjustments to Georgia. Such adjustments must generally be reported within 90 days of the final determination date.

Georgia is not the only state with partnership audit changes on its legislative agenda. As Bloomberg Tax’s Chris Marr notes, there are similar proposals in the Minnesota and California legislatures.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Will Georgia’s new partnership audit law make life easier for partnerships in the state, or more difficult? How?

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