GA: Policy bulletin addresses exclusion for foreign dividends

The Georgia Department of Revenue recently issued a policy bulletin (Policy Bulletin IT 2018-01) providing guidance on the statutory exclusion for dividends received from sources outside the United States. The guidance addresses tax years beginning before January 1, 2018. The bulletin confirms that the dividend exclusion, which applies to amounts included in income under IRC section 965, is allowed only for federal C Corporations. S-Corporations, individuals, partnerships, and fiduciaries are not allowed an exclusion for foreign dividends. The guidance also clarifies that Georgia does not allow any tax required to be paid on section 965 income to be deferred and does not follow the federal election under IRC section 962 whereby individuals can elect to pay tax on section 965 income as if it was received by a C Corporation. An attachment to the guidance document confirms that normally the net amount of section 965 income after the section 965(c) deduction would be subtracted on the Georgia return, but that it is not necessary because 965 income is presented for federal purposes on the IRC 965 Transition Tax Statement. However, an addition must be made on the Georgia return for expenses that are directly attributable to the net amount after the section 965(c) deduction. Please stay tuned to TWIST for future state guidance on federal tax reform.