Compilation of Rules and Regulations of the State of Georgia › Department 560 - RULES OF DEPARTMENT OF REVENUE › Chapter 560-7 - INCOME TAX DIVISION › Subject 560-7-3 - SUBSTANTIVE REGULATIONS › Rule 560-7-3-.11 - Partnership and Pass-Through Entity Audits

Current through Rules and Regulations filed through June 27, 2024
(1)
Purpose.
The purpose of this
				regulation is to provide guidance concerning the administration of federal
				adjustments pursuant to subsection (c) of O.C.G.A. §
									48-7-53 and  partnership and pass-through entity audits conducted by the Department
				pursuant to subsections (d) and (e) of O.C.G.A. §
									48-7-53, respectively.
(2)
Definitions.
As used in this regulation:
(a) "Administrative adjustment request" means
				the same as provided in Section 6227 of the Internal Revenue Code of 1986 and
				the regulations thereunder.
(b)
				"Audited partnership" means a partnership subject to a final federal adjustment
				resulting from a partnership level audit.
(c) "Corporate partner" means a C corporation
				partner that is subject to tax pursuant to O.C.G.A. §
										48-7-21.
(d) "Direct partner" means a person that
				holds an interest directly in an audited partnership, including a person who
				holds such interest through another person who is a disregarded LLC or other
				entity that is disregarded for federal and Georgia income tax
				purposes.
(e) "Exempt partner"
				means a partner that is exempt from taxation pursuant to paragraph (1) of
				subsection (a) of O.C.G.A. §
										48-7-25.
(f) "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 or decreases a net loss as determined
				under Title 48 and is negative to the extent that it decreases Georgia taxable
				net income or increases a net loss as determined under Title 48.
(g) "Federal adjustments report" means an
				amended Georgia income tax return that arises directly or indirectly from a
				partnership level audit and which for the audited partnership and any tiered
				partners, 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; a
				copy of the report received from the Internal Revenue Service shall be
				sufficient if it provides 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 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.
(h) "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.
(i) "Fiduciary partner"
				means a fiduciary that is subject to tax pursuant to O.C.G.A. §§
										48-7-20 and 
				 48-7-22.
(j) "Final determination date" means the
				following:
1. 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
2. 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.
(k) "Final federal adjustment" means a
				federal adjustment after the final determination date for that federal
				adjustment has passed.
(l) "Georgia
				income tax" means the tax imposed by O.C.G.A. §§
										48-7-20,  48-7-21, and
				 48-7-25, and as provided in subsection (c) of O.C.G.A. §
										48-7-53.
(m) "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.
(n) "Individual partner" means a partner who
				is a natural person that is subject to tax pursuant to O.C.G.A. §
										48-7-20.
(o) "Internal Revenue Service" means the
				Internal Revenue Service of the United States Department of the
				Treasury.
(p) "Nonresident partner"
				means a partner that is not a resident as defined in O.C.G.A. §
										48-7-53 and  this regulation.
(q) "Partner"
				means a person that holds an interest, directly or indirectly, in a partnership
				or pass-through entity.
(r)
				"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.
(s) "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.
(t) "Pass-through entity"
				means an entity, other than a partnership, that is not subject to tax under
				O.C.G.A. §
										48-7-21 for C corporations but excluding an exempt partner.
(u) "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 or decrease a net loss for such partners, and a negative
				reallocation adjustment means a reallocation adjustment that would decrease
				Georgia taxable net income or increase a net loss for such partners.
(v) "Resident partner" means for an
				individual or fiduciary partner, the same as provided in O.C.G.A. §
										48-7-1 and 
				for all other partners means a partner whose headquarters or principal place of
				business is located inside this state. Whether a person is a resident partner
				shall be based upon the facts as such existed during the reviewed
				year.
(w) "Reviewed year" means the
				taxable year of a partnership that is subject to a partnership level audit from
				which final federal adjustments arise.
(x) "State partnership audit or pass-through
				entity 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. Included within this definition are adjustments made at the partnership
				or pass-through entity level that may affect a partner's apportionment and/or
				allocation of income or loss.
(y)
				"Tiered partner" means any partner that is a partnership or pass-through
				entity.
(z) "Unrelated business
				income" means the income which is defined in Section 512 of the Internal
				Revenue Code of 1986 and the regulations thereunder.
(aa) "Withholding partner" means a partner in
				a partnership for whom the partnership was required to withhold tax pursuant to
				O.C.G.A. §
										48-7-129 for the reviewed year.