Withholding Tax on Distributions to Nonresident Members of Partnerships, Subchapter "S" Corporations, and Limited Liability Companies

  1. Law
  2. Georgia Code
  3. Revenue and Taxation
  4. Income Taxes
  5. Current Income Tax Payment
  6. Withholding Tax on Distributions to Nonresident Members of Partnerships, Subchapter "S" Corporations, and Limited Liability Companies

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    1. Any partnership, Subchapter "S" corporation, or limited liability company which owns property or does business within this state shall be subject to a withholding tax. Such tax shall be withheld from a nonresident member's share of taxable income sourced to this state, whether distributed or not, except as provided in subsection (c) of Code Section 48-7-24. For purposes of this Code section, the term "taxable income sourced to this state" means the entity's income allocated or apportioned to Georgia pursuant to Code Section 48-7-31 or as otherwise provided by law.
    2. The amount of tax to be withheld for each nonresident member shall be determined by multiplying the nonresident member's share of the taxable income sourced to this state by a rate of 4 percent. To the extent that the partnership, Subchapter "S" corporation, or limited liability company remits withholding tax during the course of the tax year which exceeds the Georgia income tax liability of a nonresident member, that member shall be entitled to a refund of the excess withholding at the end of the taxable year.
    3. Any partnership, Subchapter "S" corporation, or limited liability company which fails to withhold and pay over to the commissioner any amount required to be withheld under this Code section may be liable for a penalty equal to 25 percent of the amount not withheld and paid over. Any penalty imposed under this subsection shall be paid upon notice and demand by the commissioner or the commissioner's delegate and shall be assessed and collected in the same manner as the withholding taxes imposed by this article.
    4. The partnership, Subchapter "S" corporation, or limited liability company and its members shall be jointly and severally liable for the withholding tax liability imposed under this subsection and shall be assessed accordingly.
    1. As an alternative to the withholding requirement imposed by subsection (a) of this Code section, the commissioner may allow the filing of composite returns by partnerships, Subchapter "S" corporations, or limited liability companies on behalf of their nonresident members and may provide for the requirements of filing composite returns by regulation. For purposes of this subsection, the term "composite return" means a return filed by a partnership, Subchapter "S" corporation, or limited liability company on behalf of all of its nonresident members which reports and remits the Georgia income tax of the nonresident members.
    2. Where a partnership, Subchapter "S" corporation, or limited liability company chooses to file a composite return and meets all the requirements of filing such composite return, such partnership, Subchapter "S" corporation, or limited liability company shall be exempt from the withholding requirements imposed under subsection (a) of this Code section.
    3. The liability imposed by this subsection shall be paid upon notice and demand by the commissioner or the commissioner's delegate and shall be assessed and collected in the same manner as all other withholding taxes imposed by this article.
    1. If a partnership, Subchapter "S" corporation, or limited liability company fails to remit withholding for a nonresident member and the commissioner determines that such failure is due to a false representation that the member is a resident of Georgia, there shall be imposed in addition to the tax a penalty of the greater of $250.00 or 5 percent of the amount which should have been withheld. The partnership, Subchapter "S" corporation, or limited liability company and the nonresident member shall be jointly and severally liable for any such penalty imposed.
    2. The penalty imposed by this subsection shall be paid upon notice and demand by the commissioner or the commissioner's delegate and shall be assessed and collected in the same manner as withholding tax imposed by this article.
    1. Every partnership, Subchapter "S" corporation, or limited liability company which is required to deduct and withhold the withholding tax imposed by subsection (a) of this Code section shall remit such tax and file the required return on a form approved by the commissioner. Taxes withheld on a nonresident member's share of the taxable income sourced to this state shall be due on or before the due date for filing the income tax return for the partnership, Subchapter "S" corporation, or limited liability company as prescribed in subsection (a) of Code Section 48-7-56 without regard to any extension of time for filing such income tax return.
    2. Every partnership, Subchapter "S" corporation, or limited liability company required to deduct and withhold tax under this article shall furnish a written statement or form approved by the commissioner to each nonresident member. Such statement or form shall include the name and federal tax identification number of the partnership, Subchapter "S" corporation, or limited liability company, the member's name and federal tax identification number, the total amount of the nonresident member's share of the taxable income sourced to this state during the taxable year, the total amount of tax deducted and withheld with respect to such member during the year, and such other information as the commissioner shall prescribe. Such statement or form shall be furnished to the nonresident member and filed in duplicate with the commissioner on or before the earlier of the date the income tax return is filed or the due date for filing the income tax return of such partnership, Subchapter "S" corporation, or limited liability company as prescribed in subsection (a) of Code Section 48-7-56 without regard to any extension of time for filing such income tax return.
    3. Any partnership, Subchapter "S" corporation, or limited liability company required to furnish a nonresident member with the written statement required by this subsection which furnishes a false or fraudulent statement or which fails to furnish the statement shall be subject to the penalty contained in subsection (d) of Code Section 48-7-126. The penalty imposed by this subsection shall be paid upon notice and demand by the commissioner or the commissioner's delegate and shall be assessed and collected in the same manner as the withholding tax imposed by this article.
    1. Notwithstanding subsection (a) of this Code section, a partnership, Subchapter "S" corporation, or limited liability company shall not be required to deduct and withhold tax for a nonresident member if:
      1. A composite return is filed on behalf of nonresident members pursuant to the requirements of filing such composite returns as set by the commissioner;
      2. The aggregate amount of a nonresident member's share of the taxable income sourced to this state is less than $1,000.00;
      3. A federally chartered Subchapter "S" corporation fails to meet the requirements of subparagraph (b)(7)(B) of Code Section 48-7-21 and is therefore required to remit corporate income tax;
      4. Compliance will cause undue hardship on the partnership, Subchapter "S" corporation, or limited liability company, provided that no partnership, Subchapter "S" corporation, or limited liability company shall be exempt from complying with the withholding requirements imposed under subsection (a) of this Code section unless the commissioner approves in writing a written petition for exemption from the withholding requirements based on undue hardship. The commissioner may prescribe the form and contents of such a petition and specify standards for when a partnership, Subchapter "S" corporation, or limited liability company shall not be required to comply with the withholding requirements due to undue hardship;
      5. The partnership is a publicly traded partnership as defined in Section 7704 of the Internal Revenue Code of 1986; or
      6. The member meets one of the exceptions as set forth in the rules and regulations promulgated by the commissioner.
    2. Where a nonresident member's share of the taxable income sourced to this state is subject to withholding under other provisions of Georgia law, such amount shall not be subject to withholding under subsection (a) of this Code section.
  6. The commissioner shall be authorized to prescribe forms and to promulgate rules and regulations which the commissioner deems necessary in order to effectuate this Code section.

(Code 1981, §48-7-129, enacted by Ga. L. 1993, p. 597, § 3; Ga. L. 1997, p. 450, § 3; Ga. L. 2008, p. 898, § 12/HB 1151; Ga. L. 2012, p. 796, § 2/HB 965.)

Code Commission notes.

- Pursuant to Code Section 28-9-5, in 1993, the Code Section 48-7-128 enacted by Ga. L. 1993, p. 597, § 3, was redesignated as Code Section 48-7-129, since Ga. L. 1993, p. 768, § 2, also enacted a Code Section 48-7-128.

Editor's notes.

- Ga. L. 1993, p. 597, § 4, not codified by the General Assembly, makes this Code section applicable with respect to any distribution paid or credited after January 1, 1994.

Ga. L. 1997, p. 450, § 4, not codified by the General Assembly, makes the 1997 amendment to this Code section applicable to all taxable years beginning on or after January 1, 1997.

Ga. L. 2008, p. 898, § 13/HB 1151, not codified by the General Assembly, provides, in part, that the amendment to this Code section shall be applicable to all taxable years beginning on or after January 1, 2008.

Ga. L. 2012, p. 796, § 3/HB 965, not codified by the General Assembly, provides that the 2012 amendment shall be applicable to all taxable years beginning on or after January 1, 2012.

Law reviews.

- For article commenting on the 1997 amendment of this Code section, see 14 Georgia St. U.L. Rev. 271 (1997). For article, "Post-Creation Checklist for Georgia Business Entities," see 9 Ga. St. B. J. 24 (2004). For note on the 1993 enactment of this Code section, see 10 Georgia St. U.L. Rev. 218 (1993).

RESEARCH REFERENCES

ALR.

- State income tax treatment of S corporations and their shareholders, 118 A.L.R.5th 597.

ARTICLE 6 LOCAL INCOME TAXES

Editor's notes.

- Ga. L. 2010, p. 156, § 1/HB 984, effective May 20, 2010, repealed the Code sections formerly codified at this article and enacted the current article. The former article consisted of Code Sections 48-7-140 through 48-7-149, relating to local income taxes, and was based on Code 1933, §§ 91A-4001 - 91A-4010, enacted by Ga. L. 1978, p. 309, § 2; Ga. L. 1974, p. 506, §§ 1-5, 7-9, 11; Ga. L. 1995, p. 714, § 3.

Ga. L. 2010, p. 156, § 3(b)/HB 984, not codified by the General Assembly, provides that: "Tax, penalty, and interest liabilities and refund eligibility for prior taxable years shall not be affected by the passage of this Act and shall continue to be governed by the provisions of general law as it existed immediately prior to the effective date of this Act." This Act became effective May 20, 2010.

Ga. L. 2010, p. 156, § 3(c)/HB 984, not codified by the General Assembly, provides that: "This Act shall not abate any prosecution, punishment, penalty, administrative proceedings or remedies, or civil action related to any violation of law committed prior to the effective date of this Act." This Act became effective May 20, 2010.


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