April 6, 2022
Recent state law developments for tax-exempt organizations
Recent state tax developments affecting tax-exempt organizations highlight the importance of regularly monitoring these developments.
Alabama introduces electronic application process for governmental exempt entities and contractors
In a notice to governmental exempt entities and their contractors in early 2022, the Alabama Department of Revenue announced the availability of its online application process for obtaining a "Certificate of Exemption for a Government Entity Project." This electronic application process, offered through the "My Alabama Taxes" account, replaces paper applications, should make it easier to submit applications, and will likely improve processing time.
Massachusetts issues final guidance on ARPA implications for individual/corporate taxes
The Massachusetts Department of Revenue issued a Technical Information Release (TIR 22-2) in early 2022 explaining how the state's personal income tax and corporate excise tax were affected by the American Rescue Plan of 2021 (ARPA), Consolidated Appropriations Act of 2021, COVID-Related Tax Relief Act of 2020, and Taxpayer Certainty and Disaster Tax Relief Act of 2020.
Montana announces increased tax credits for educational donations
In its 2021 Legislative Roundup series, the Montana Department of Revenue noted that a new law allows a tax credit for donations up to $200,000 made to qualified educational organizations. Donations made to public schools may receive tax credits under the Innovative Education Program, while donations to private school scholarship organizations may be eligible for a Student Scholarship Organization credit. The allowable credit is capped at $1 million for tax year 2022 and will increase to $2 million for tax year 2023.
Washington State reinstates property tax exemption for weekly use of nonprofits' property for farmers markets
A new law enacted in Washington State (S5505) reinstates property tax exemptions for property owned by nonprofit entities that allow their property to be used for farmers markets up to 53 days per year (e.g., one day per week). Any income the nonprofit receives from a farmers market must be used for capital improvements to the property, its operation or maintenance, or for charitable purposes. The new law is effective June 9, 2022, but also applies retroactively to taxes levied for collection in 2021 and later.
These recent developments demonstrate state efforts to enhance tax technology, update organizations on state adherence to Federal law changes, and remind tax-exempt organizations of state tax benefits available to them. Tax-exempt organizations should continue to monitor state tax law developments through legislation, state court rulings, and regulatory guidance to ascertain and respond to new requirements, legal challenges, and technology updates.
Please contact your Ernst & Young LLP professional for further information.
— For more information about EY's Exempt Organization Tax Services group, visit us here.