Governmental Leasehold Intangible Personal Property Tax

Every lessee of governmental property used for a residential or commercial purpose, or that is undeveloped, is subject to the intangible tax on the value of the leasehold estate on January 1 of each tax year, if rental payments are due in consideration for the leasehold estate.

The tax rate is 50 cents per $1,000 (1/2 mill) of value of the leasehold estate. If the tax due amount is $60 or more, the lessee must file a return and pay the tax. If the Department mailed you a Governmental Leasehold Intangible Personal Property Tax Return (Form DR-601G) and the tax due before discount is less than $60, you must still file a zero return to indicate no tax is owed.

Note: Taxpayers with more than one lease must file a separate return for each location.

Tips on Preparing the Return

Enter the annual rental payment and multiply it by the valuation factor for the number of years remaining on the lease to determine the taxable amount. The taxable amount is multiplied by the tax rate of .0005 to calculate the tax due for that one year.

The annual rental payment and years remaining reported on pages one and two of the return must match. The years remaining on the lease should decrease by one from year to year unless the lease is amended.

Example - A Taxpayer enters into a five-year lease on July 1, 2015, with a government entity to lease a warehouse. On the first return (2016), the term of the lease and the years remaining on January 1, 2016, are the same (five years). On the 2017 return, the term of the lease in years entered on page two will remain the same (five years). However, the lease years remaining entered on page one (coupon) and page two will be reduced by one so that they show four years remaining. On the 2020 tax return, the Taxpayer would only have six months remaining on its lease, which is considered one year for the purpose of determining the number of years remaining on the lease. However, since the lease only has six months remaining, the tax due is prorated for the number of months remaining (6 months / 12 months = 50%).

The just value of a lessee's leasehold estate or possessory interest to be reported on the return is determined by the rent payments for the remaining term of the lease at the Federal Reserve Bank of Atlanta discount rate on the last business day of the previous year, plus 1%.

The Valuation Factor Table is determined annually by the Department based on that discount rate, plus 1% and published in Tax Information Publications. Nominal or token rental payments are not used to value the lessee's interest. In such cases, the fair market rental for the leased property is the amount to be valued. If lease rental payments are based on some factor, such as a percentage of sales or profits, the average annual rent actually paid for a period not to exceed the previous five years should be used, provided the amount is not nominal or significantly less than fair market rental. If the average amount is a nominal or token amount, the lease rental payment to be valued should be the fair market rental for the property. Market rent is the amount that would be paid annually for use of a property in the open market, as indicated by current rentals being paid for comparable property. This should be net rent to the owner or lessor after allowances for taxes, insurance, or other expenses specifically itemized as part of the rental payment.

The period for which the lease payments should be valued is the number of years remaining under the lease on January 1 of the tax year, exclusive of renewal options. The year in which the lease expires should be considered a full year for the purpose of determining the number of years remaining under the lease agreement. If, on January 1 of the tax year, less than one year remains under the lease agreement, the value is determined as if a full year remains and is then prorated for the number of months remaining under the lease agreement.

A request for an extension for filing the tax return to September 30 may be submitted. For each lease, an extension of time must be filed on or before June 30 of the tax year using a Governmental Leasehold Intangible Personal Property Tax Application for Extension of Time to File Return (Form DR-602G ). Blanket requests for extensions of time for filing for more than one lease (return) may not be made. When an extension has been timely requested, the Governmental Leasehold Intangible Personal Property Tax Return (Form DR-601G ), including payment, must be postmarked on or before September 30 to avoid penalty. Interest will be due on any tax not paid by June 30. The extension period will not be extended if September 30 falls on a weekend or holiday.

If a tax was overpaid, the taxpayer must submit an Application for Refund (Form DR-26 ) to obtain a refund. The Application for Refund must be submitted within three (3) years of the date the tax was paid. Filing an amended return does not qualify as a claim for refund.

If intangible property was undervalued on, or omitted from, the tax return, the taxpayer should file an amended return. The amended return must be completed in its entirety, as if it was an original filing. Only the additional tax due should be paid, along with any applicable penalty and interest. If the return is postmarked after June 30, it will be subject to penalty and interest. A separate letter explaining whether the property was undervalued or omitted should be attached to the amended return.

Governmental leasehold tax is reported and paid annually by lessees of governmental property used for a residential or commercial purpose, or that is undeveloped, using the Governmental Leasehold Intangible Personal Property Tax Return (Form DR-601G ).

Returns and payments are due on January 1 and late after June 30 each year. If June 30 falls on a Saturday, Sunday, or state or federal holiday, returns are timely if postmarked or hand-delivered to the Department on the first business day following the 30th. A discount may be claimed for early payment of tax, provided the payment is submitted or postmarked on or before the last day of the month for which the discount is claimed.

Note: Taxpayers with more than one lease must file a separate return for each location.

If tax is not paid by June 30, a delinquency penalty of 10% per month or portion thereof, not to exceed a maximum of 50% of tax due, is charged. If the return is not postmarked or delivered by June 30, a specific late-filing penalty of 10% per month or portion thereof, not to exceed a maximum of 50% of tax due is charged until the return is filed. The combined total of the delinquency and specific late-filing penalty will not exceed 10% per month or portion thereof, or a maximum of 50% of the tax due. A floating rate of interest applies to underpayments and late payments of tax. Interest rates can be found on the Department's Tax and Interest Rates webpage.