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April 13, 2023

State and Local Tax Weekly for March 31 and April 7

Ernst & Young's State and Local Tax Weekly newsletter for March 31 and April 7 is now available. Prepared by Ernst & Young's State and Local Taxation group, this weekly update summarizes important news, cases, and other developments in U.S. state and local taxation.


Proposed Superfund Tax regulations address many issues, but leave others open

On March 27, 2023, the IRS published an advanced copy of proposed regulations (REG-105954-22) on the Superfund Chemical Tax and Superfund Imported Substance Tax (hereafter, Superfund Tax), which are excise taxes that apply to certain chemicals and certain imported substances effective July 1, 2022 (see Tax Alert 2021-2059). The proposed regulations are expected to be published in the Federal Register and open for public comment on March 29, 2023.

The proposed regulations provide a detailed analysis and discussion of IRC § 4661 and various issues associated with taxable chemicals. While the discussion of taxes under IRC § 4671 references back to the proposed regulations that overlap with IRC § 4661, the IRS spent considerably less time and attention clarifying uncertainties around the importation or exportation of taxable substances. Taxpayer comments are expected to focus on these omissions around IRC § 4671.

In addition to defining numerous terms used in the statutes, the proposed regulations address the following topics: (1) Form 637 registrations, (2) chemical mixtures, (3) methane and butane, (4) predominant method of production, (5) foreign manufacturers and foreign drop shipments, (6) tax-free sales / refunds, and (7) conditions to allowance rules. The IRS also has specifically requested additional comments on certain issues or concerns not currently resolved by the proposed regulations.

The IRS also released a new draft notice and revenue procedure addressing penalty relief and the timing of when taxable substances become eligible for refunds. Notice 2023-28 extends Notice 2022-15 penalty relief to deposits made in the second, third, and fourth quarters of 2023, even if the deposits are computed incorrectly, provided (a) the taxpayer makes timely deposits and (b) any underpayment is paid in full by the due date for filing the Form 720 return for that calendar quarter. In addition, the IRS agreed not to withdraw a taxpayer's right to use the deposit safe harbor in the fourth quarter of 2023 and the first and second quarters of 2024.

For purposes of claiming a refund, Revenue Procedure 2023-20 clarifies that a petition received and accepted by the IRS after Dec. 31, 2022, is considered to have been filed on the first day of the calendar quarter during which the petition was received. This additional guidance emphasizes the IRS's view that a refund for exports of taxable substances will only be made if the taxable substance is "listed" as such by the IRS.

For additional information on this development, see Tax Alert 2023-9002.

Unclaimed property holders that want to participate in California's Voluntary Compliance Program can now submit an interest form to receive an application

The California State Controller's Office (SCO) announced on its website that holders of unclaimed property (Holders) may complete an interest form for the voluntary compliance program (VCP) enacted by AB 2280 in Sept. 2022. The VCP allows the 12% statutory interest to be waived for Holders that report past-due unclaimed property and meet the program's requirements.

Holders must complete a "VCP Interest Form" to receive an application form to enroll in the VCP. The "VCP Interest Form" asks for the following information:

Business entity information

  1. Business entity name and state of domicile
  2. Mailing address
  3. Has the business entity submitted an unclaimed property report within the previous 10 years?

Representative information

  1. Have you previously reported unclaimed property on behalf of any business entity?
  2. Have you previously reported unclaimed property on behalf of the business entity you currently represent?
  3. Representative contact information

After reviewing the "VCP Interest Form," the SCO will send Holders an application form that will require certain information, such as staff members who will attend the required training and submit reports, as well as the estimated value of inactive properties and accounts to be filed.

Following review and approval of the application, the SCO will advise Holders on the due dates for deliverables, which will coincide with the state's annual reporting cycles. As of today, the due dates are as follows:

  • July 31, 2023 — Required training completed
  • Sept. 30, 2023 — Due diligence completed
  • Before Nov. 1, 2023 — Notice Report submitted
  • June 1-15, 2024 — Remit Report and remittance submitted

The SCO, however, indicates that the VCP will be an on-going program that Holders can enter on an on-going basis.

Holders will be ineligible to participate in the VCP if they meet one of the specified conditions.

  • Holder is currently subject to an unclaimed property examination.
  • Holder is currently subject to a civil or criminal investigation for unclaimed property compliance.
  • Holder currently has unpaid interest assessments from the past five years or had an assessment waived within the past five years.

Holders, however, may file or refile a request to enroll in the program after resolving (paying) the outstanding interest assessment. If an interest waiver is received from the SCO, AB 2280 also permits a Holder that acquired or merged with another entity within the five-year period preceding the interest waiver to submit a VCP enrollment request to resolve past-due unclaimed property resulting from the acquisition or merger.

For more on this development, see Tax Alert 2023-0607.


Multistate: The recently issued state income tax quarterly provides a summary of the significant legislative, administrative and judicial actions that affected US state and local income/franchise and other business taxes for the first quarter of 2023. These developments are compiled from the EY Indirect/State Tax Weekly and Indirect/State Tax Alerts issued during that period. Highlights include: (1) A summary of legislative developments in Arizona, Idaho, Illinois, Indiana, Kentucky, Minnesota, Mississippi, Montana, New Jersey, South Dakota, Utah, Virginia and West Virginia; (2) a summary of judicial developments in Wisconsin; (3) a summary of administrative developments in Arizona, District of Columbia, Georgia, Illinois, Massachusetts, Montana, New Jersey, New Mexico, Oregon, Tennessee, Texas and Wisconsin; and (4) a discussion of state tax items to watch in Arizona, Georgia, Missouri, New Mexico, New York, Oklahoma and Virginia. The newsletter is available via Tax Alert 2023-0648.

Idaho: New law (HB 172) fixes the effective date of a 2022 law change (2022 Extraordinary Sess., ch. 1) that replaced Idaho's income tax bracket system with a flat income tax. As originally enacted, the law change took effect Jan. 3, 2023. As revised by HB 172 the new 5.8% corporate income tax rate is effective Jan. 1, 2023. HB 172 is retroactively effective to Jan. 1, 2023. Idaho Laws 2023, ch. 44 (HB 172), signed by the governor on March 16, 2023.

Mississippi: New law (HB 1733), for purposes of computing income tax for tax years beginning after Dec. 31, 2022, allows taxpayers to treat specified research or experimental (R&E) expenditures1 as expenses that are not chargeable to the capital account. Such treated expenditures are allowed as an immediate deduction; they also remain allowable as a full and immediate expense deduction in the year in which the expenses are incurred, notwithstanding any changes to the IRC regarding depreciation of such specified R&E expenditures. Alternatively, taxpayers may treat the depreciation of specified R&E expenditures in accordance with the schedule provided in IRC § 174. In addition, under the new law expenditures for business assets that are qualified property or qualified improvement property are eligible for 100% bonus depreciation and may be deducted as a taxpayer incurred expense during the tax year in which the property is placed in service, notwithstanding any federal law changes related to cost recovery as of Jan. 1, 2023 or any other date. Alternatively, the taxpayer may treat the depreciation of such business assets under the schedule provided in IRC § 168. Taxpayers may elect whether to take a full and immediate deduction for specified R&E expenditures/ 100% bonus depreciation and/or to depreciate the expenditures in accordance with IRC § 174/IRC § 168. These elections may be made for any tax year if made by the deadline for filing the return for such tax year, including extensions. The elections, once made, are irrevocable unless a change in method is allowed by the tax commissioner. The law also provides that in any tax year in which IRC § 179 property is placed in service, a taxpayer can elect to treat the cost of such property as an expense not chargeable to a capital account. Such treated costs are allowed as a deduction for that year, with Mississippi's treatment of the deduction conforming to IRC § 179 in effect for that year. The total of any method or combination of methods of depreciation used cannot exceed 100% or the cost of the property. Lastly, the law defines key terms including "qualified improvement property", "qualified property" and "specified research or experimental expenditures". These changes take effect and are in force from and after Jan. 1, 2023. Miss. Laws 2023, HB 1733, signed by the governor on March 27, 2023.

Mississippi: New law (HB 1668) modifies various elective pass-through entity (PTE) tax provisions, including revising the method by which a PTE makes the election to be subject to the PTE tax. As revised, such election can be made at any time during the tax year for which the entity elects to be taxed as an electing PTE or by the due date of the return for that tax year or by the date the return is filed, whichever is latest. In addition, a form to revoke a PTE election can be submitted to the Mississippi Department of Revenue at any time during a subsequent tax year for which entity no longer wants to be taxed at the entity level or by the due date of the return for that tax year or by the date the return is filed, whichever is latest. The election to be taxed at the entity level and the revocation of such election must be accomplished by a vote satisfying the threshold required for taking official action as specified in the entity's governing documents. If, however, the governing documents do not provide such, the election/revocation must be approved by a vote or written consent of the owners, members, partners or shareholders holding greater than 50% of the voting control of the entity, and by the vote or written consent of the members of a governing body if they entity has one. The law also modifies the computation of a partner's or shareholder's pro rata or distributive share of the electing PTE's income and provides that such share will be used in computing the taxpayer's gross income tax liability. In addition, the law provides for the pass through of any additional income tax credits generated by the electing PTE to the owners, members, partners or shareholders on a pro-rata basis that they can claim on their returns. Excess credits can be carried forward as an overpayment or be refunded at the election of the owner, member, partner or shareholder. Carry forward limitations that apply to credits generated by an electing PTE apply at the owner, member, partner or shareholder level. These changes take effect and are in force from and after Jan. 1, 2023, and apply to any income tax returns with an original due date on or after that date. Miss. Laws 2023, HB 1668, signed by the governor on March 27, 2023.

Utah: New law (SB 203) allows corporate taxpayers to carry forward Utah net operating losses (NOLs) arising from a tax year beginning on or after Jan. 1, 2008 until the Utah NOL is exhausted. For Utah NOLs carried forward to a tax year beginning on or after Jan. 1, 2023 (a change from Jan. 1, 2021), the amount of Utah NOL a taxpayer can carry forward to a tax year is capped at 80% of Utah taxable income calculated before deducting any Utah net loss from Utah taxable income. The amount of loss carryforward is capped at 80% of taxable income. SB 203 has retrospective operation for tax years beginning on or after Jan. 1, 2023. Utah Laws 2023 SB 203, signed by the governor on March 23, 2023.

Virginia: New law (HB 1456 and SB 1476) modifies the state's elective PTE tax. The law replaces the qualifying PTE requirement (i.e., the requirement that a PTE be 100% owned by natural person or persons eligible to be shareholders of an S corporation in order to make the PTE tax election) with an eligible owner requirement. The law defines "eligible owner" as a direct owner of a PTE who is a natural person subject to Virginia individual income tax or an estate or trust subject to Virginia fiduciary income tax. The law also provides that only the pro rata or distributive share of income, gain, loss or deduction attributable to an eligible owner is subject to the PTE tax. (Thus, amounts attributable to non-eligible owners such as corporations are not subject to the PTE tax.) These changes are retroactively effect for tax years beginning on and after Jan. 1, 2021. Va. Laws 2023, ch. 686 (HB 1456) and ch. 687 (SB 1476), identical bills signed by the governor on March 27, 2023; see also, Va. Dept. of Taxn., Tax Bulletin 23-3 "Important Information Regarding 2022 Virginia PTET Returns" (March 29, 2023).

Virginia: New law (HB 1405 and SB 796) modifies provisions under which the tax commissioner may grant permission to a group of affiliated corporations to change their filing status from consolidated to separate or from separate or combined to consolidated. HB 1405 removes the requirement that, for the tax year immediately preceding the tax year for which the new election would apply, there would have been no decrease in tax liability computed under the proposed election as compared to the former filing method. This change takes effect July 1, 2023. Va. Laws 2023, ch. 520 (HB 1405) and ch. 521 (SB 796), identical bills signed by the governor on March 26, 2023.

Virginia: New law (HB 1481 and SB 1349) allows Internet root infrastructure providers that meet certain criteria to enter into a memorandum of understanding with the Virginia Economic Development Partnership Authority to use a hybrid sales factor for income tax apportionment purposes. Under this hybrid sales factor, the market-based sourcing method will be used to source sales of services. Va. Laws 2023, ch. 405 (HB 1481) and ch. 406 (SB 1349), identical bills signed by the governor on March 23, 2023.

West Virginia: New law (HB 3286) allows a publicly-traded company a subtraction from its federal taxable income determined before apportionment when the application of the single-sales factor apportionment formula and market-based sourcing provisions, both of which took effect in 2022, increases the taxpayer's net deferred tax liability or results in either an aggregate decrease to the taxpayer's net deferred tax asset or an aggregate change from a net deferred tax asset to a net deferred tax liability. The subtraction will be available for the 10-year period beginning with the taxpayer's tax year that begins on or after Jan. 1, 2033. A taxpayer in computing West Virginia taxable income is allowed to subtract one-tenth of the amount necessary to offset the relevant change in net deferred taxes, as computed in accordance with generally accepted accounting principles that resulted from the application of a single-sales factor apportionment formula and market-based sourcing. Excess subtraction amount can be carried-forward until fully used. Taxpayers intending to claim this subtraction will have to file a statement with the tax commissioner by July 1, 2024, specifying the total amount of subtraction the taxpayer would claim. W.V. Laws 2023, HB 3286, signed by the governor on March 29, 2023.

West Virginia: New law (SB 151) establishes an elective pass-through entity (PTE) tax under which tax will be treated as a tax imposed on the PTE itself. The elective PTE tax "is intended to comply with the provisions of [IRS] Notice 2020-75 in which such tax paid by an electing [PTE] is deductible to the entity for federal income tax purposes." Effective for tax years beginning on and after Jan. 1, 2022, a PTE (i.e., a partnership or other business entity that is not subject to the West Virginia corporate net income tax) that is not a disregarded entity for federal income tax purposes can elect to be subject to West Virginia personal income tax. The election is made on a form prescribed by the Tax Commissioner and it is made on or before the due date for filing the applicable return, including extensions. The election only applies to the tax year for which it was made and is irrevocable for that year. A tax equal to the top marginal individual income tax rate is imposed on the electing PTE's West Virginia taxable income. Tax is calculated without regard to any deductions or credits that can otherwise be claimed by an owner or member of an electing PTE in computing their aggregate tax liability and not utilized by the PTE in determining its taxable income. An electing PTE is eligible for credits, deductions or other adjustments to taxable income provided by West Virginia law, provided that a qualifying PTE's taxable income is adjusted to eliminate any federal deduction for state and local taxes. Only the electing PTE can request a refund of overpaid tax. In regard to tax underpayments, the tax commissioner may collect tax from the electing PTE, but the shareholders, owners and partners are jointly and severally liable for any underpayment not paid by the electing PTE. The law also provides a credit against a taxpayer's aggregate tax liability for a taxpayer who is an owner of an electing PTE. The credit equals the owner's proportionate share of the PTE tax remitted for the tax year. The taxpayer can carry forward excess credit for up to five tax years. The credit for tax paid to another state is modified to apply tax either directly paid by the individual or paid by a PTE in accordance with West Virginia's PTE tax and passed through by the entity to the individual taxpayer. For purposes of this credit, the owner of a PTE is considered liable for tax paid to another state by the PTE under a PTE tax imposed by that state if it is substantially similar to West Virginia's PTE tax, in an amount equal to that portion of the PTE tax representing the owner's share of the PTE's income subject to tax. The owner also is considered to have paid that portion of tax paid by the PTE. (Similar provisions apply on tax paid on behalf of an owner through withholding, a composite return or otherwise). If an owner receives a refund or credit for an overpayment of PTE tax imposed by another state, the amount paid by the owner is reduced by that refund. W.V. Laws 2023, SB 151, signed by the governor on March 28, 2023.


Multistate: The EY Sales and Use Tax Quarterly Update provides a summary of the major legislative, administrative, and judicial sales and use tax developments. Highlights of this edition include a review of the most recent developments involving nexus, tax base and exemptions, technology, and compliance and controversy. A copy of the newsletter is available via Tax Alert 2023-0647.

Colorado: The Colorado Department of Revenue announced that the total rate of the retail delivery fee for July 2023 to June 2024 will be $0.28 (increased from $0.27). The webpage lists the rates for each fee type that makes-up the total fee. The CO DOR's "About the Retail Delivery Fee" webpage includes answers to frequently asked questions. Colo. Dept. of Rev., "About the Retail Delivery Fee" webpage (last reviewed March 31, 2023).

District of Columbia: The District of Columbia Office of Tax and Revenue said that if a business adds a mandatory service charge, fee or other similar item (e.g., fair wage service charge, packaging fee, resort fee) to the total sales price, the City's sales tax is due on the total sales price including the mandatory service charge or fee. D.C. Office of Tax and Rev., Notice 2023-03: Sales Tax on Additional Mandatory Charges as a Result of Initiative 82 (March 27, 2023).

Massachusetts: The Massachusetts Department of Revenue (MA DOR) issued guidance explaining when the Commissioner will consider the in-state use of rolling stock (e.g., trucks/tractors, storage of trailers affixed to trucks) to be de minimis with respect to the use or storage of rolling stock. Generally, the sale of rolling stock is subject to Massachusetts sales tax, while use tax applies to rolling stock purchased in another state when it is stored or used in Massachusetts regardless of whether it was registered with the other state. A credit is allowed against the use tax for tax paid to the other state if that state allows a corresponding credit. In addition, the MA DOR recognizes a de minimis exception when use tax would otherwise apply to rolling stock. When a taxpayer demonstrates that rolling stock it owns or leases for at least 12 months was used in Massachusetts for no more than six days during a 12-month period the Commissioner will consider the in-state use to be de minimis such that the Commissioner will not impose use tax or require the taxpayer to pay use tax on the use or storage of rolling stock in the state for that period. The guidance includes examples. Ma. Dept. of Rev., Directive 23-1: Use Tax Applied to the Sale of Rolling Stock; De Minimis Standard (March 23, 2023).

Rhode Island: In response to a ruling request, the Rhode Island Division of Taxation (RI DOT) discussed the application of sales and use tax to various fees and charges related to a taxpayer's provision of employee recognition incentives. The RI DOT said that to the extent the taxpayer charges Rhode Island customers to access its website and software services, such charges are taxable as (1) infrastructure as a service, platform as a service and software as a service, and (2) as part of the sale/license of the software to the customer. The RI DOT also found that transaction fees charged by the taxpayer to its Rhode Island customers for the issuance of reward certificates are subject to sales and use tax. Sales of merchandise to Rhode Island consumers are subject to the state's sales tax even when points are used to purchase the merchandise. Sales of gift cards to Rhode Island consumers are not subject to tax, however, purchases made with the gift cards are taxable. R.I. Div. of Taxn., Ruling Request No. 2023-01 (March 7, 2023).

Virginia: New law (HB 2334) extends the sunset date of the sales and use tax exemption for raw materials, fuel, power, energy, supplies, machinery or tools or repair/replacement parts used directly in the drilling, extraction or processing of natural gas or oil and the reclamation of a well area through July 1, 2024 (from July 1, 2023). This law takes effect July 1, 2023. Va. Laws 2023, ch. 144 (HB 2334), signed by the governor on March 21, 2023.

Virginia: New law (HB 1677) exempts from Virginia sales and use tax separately charged amounts for labor rendered in connection with diagnostic work for automotive repair and emergency roadside service for motor vehicles, regardless of whether there is a sale of repair or replacement parts or a shop supply charge. This exemption takes effect July 1, 2023. Va. Laws 2023, ch. 35 (HB 1677), signed by the governor on March 17, 2023.


Massachusetts: The Massachusetts Department of Revenue has issued guidance on the wind power incentives jobs credit, the wind power incentives investment credit and the National Guard hire credit. These credits are available for tax years beginning on or after Jan. 1, 2023. Mass. Dept. of Rev., TIR 23-6: Tax Provisions in Certain Massachusetts Legislation Enacted in 2022 (March 28, 2023).

Virginia: New law (HB 2178) renames the "green job creation tax credit" under Va. Code §58.1-439.12:05 to the "Green and alternative energy job creation tax credit". The law also modifies the definition of "green jobs" by expanding the list of "alternative sources" used in the manufacture and operation of products used to generate electricity and other forms of energy to include methane extracted in Planning District 2. These changes apply to tax years beginning on and after Jan. 1, 2023. Va. Laws 2023, ch. 509 (HB 2178), signed by the governor on March 24, 2023.


Georgia: New law (HB 311) provides optional temporary tax relief to eligible tax parcels located in nationally declared federal disaster areas. Eligible tax parcels are "eligible destroyed tax parcels" and "eligible damaged tax parcels". The law defines such parcels as tax parcels that contain a building located wholly or partially in a disaster area, which building has been determined by the appropriate local emergency management director to have incurred a degree of damage as a result of the disaster sufficient to qualify as "major" (i.e., a damaged tax parcel) or destroyed. Following the receipt of a damage report from the local emergency management director, a governing body is authorized (but not required) to adopt a resolution to provide temporary tax relief to eligible damaged or destroyed tax parcels for the tax year in which the disaster occurred. Relief can be either a reduction in the millage tax rate or a flat dollar amount credit (one reduction/amount applied equally or two reductions/amounts with one rate applied equally to damaged tax parcels and one rate applied equally to destroyed tax parcels). Upon adoption of the resolution, eligible damaged and destroyed tax parcels will automatically qualify to receive the temporary relief. HB 311 applies to property tax assessments issued on or after April 1, 2023. Ga. Laws 2023, ch. 3 (HB 311), signed by the governor on March 16, 2023.

South Dakota: New law (SB 120) increases the amount of property value owned by a local industrial development corporation that is exempt from property taxation to $2.5 million (from $750,000). The full and true value of the real property in excess of $2.5 million is taxed as other real property of the same class is taxed. This exemption does not apply to real property that is leased to an entity not otherwise exempt from property tax. This change takes effect July 1, 2023. S.D. Laws 2023, SB 120, signed by the governor on March 23, 2023.


Idaho: The Idaho State Tax Commission announced that it is offering tax relief to those affected by severe weather in Alabama, California, Georgia, Mississippi and New York. Affected taxpayers in Alabama, California and Georgia have until Oct. 16, 2023 to file returns and pay tax due. Affected taxpayers in Mississippi have until July 31, 2023 to file returns and pay tax due, while the extended filing and payment due date for affected New York taxpayers is May 15, 2023. This relief applies to taxpayers in any area the Federal Emergency Management Agency designates as qualifying for individual assistance (the list of eligible areas is available here). Affected taxpayers should write "WEATHER-RELATED DISASTER" at the top of their tax return to qualify for the extension. Those filing electronically, can send an email to the tax commission, with "WEATHER-RELATED DISASTER" in the email subject line and additional information in the body of the email (click here for additional information). Idaho State Tax Comm'n, "Idaho grants tax deadline relief to victims of weather-related disasters" (March 28, 2023).

Mississippi: In response to sever storms and tornadoes that took place March 24 and 25, the Mississippi Department of Revenue is following the federal extension granted to taxpayers that reside or have a business in Carroll, Humphreys, Monroe and Sharkey counties. Affected taxpayers will have until July 31, 2023 to file individual income tax returns, corporate income and franchise tax returns, pass-through entity tax returns and quarterly estimated payments that were originally due during this period. This extension does not automatically apply to other tax types or payments due on prior liabilities. Miss. Dept. of Rev., "Relief for victims of severe storms, straight-line winds, and tornadoes in Mississippi" (March 29, 2023).


Multistate: EY's Employment Tax Advisory Services group has developed a publication summarizing the latest employment tax and other payroll developments in an easy-to-read format. Developments in US federal, state and local payroll and human resources matters are highlighted, as are our insights to improve US employment tax and payroll compliance. The publication is available via Tax Alert 2023-0583.

Alabama: On March 8, 2023, the Alabama Tax Tribunal (court) upheld an Alabama Department of Revenue (AL DOR) assessment of income tax on the wages that a remote worker earned from his Alabama employer while working from his home office in Idaho. The AL DOR reviewed the employee's 2020 Alabama personal income tax return and other information he provided in support of his position and concluded that by retaining the Alabama driver's license, he "did not abandon his Alabama domicile in 2020 and that, even if he did, the income was taxable as Alabama-sourced income." Accordingly, the AL DOR assessed Alabama income tax on the Alabama-sourced wages earned in Idaho in 2020. The court upheld the AL DOR's assessment because the employee continued to transact business in Alabama via his employment, and thus, income from his Alabama employer was a result of conducting business in Alabama and was properly taxable to Alabama. The ruling in this case hinged on the employee's continued connection to his Alabama employer while working remotely from Idaho, disregarding the physical location from where services were performed. Although this interpretation is not expressly set forth in Alabama law or administrative guidance, the result is akin to the "convenience of the employer rule" imposed by several states (e.g., New York) and localities (e.g., Philadelphia). Bollinger v. Ala. Dept. of Rev., Dkt. No. Inc. 22-390-LP (Ala. Tax Trib. March 8, 2023). For more on this development, see Tax Alert 2023-0609.


Washington: On March 24, 2023, the Washington State Supreme Court (WSC) reversed a superior court order and held that the legislatively imposed capital gains tax (CGT or tax) is a valid excise tax, not an unconstitutional income tax. The WSC held that the CGT was an excise tax because it taxes transactions involving capital assets but "not the assets themselves or the income they generate." Accordingly, the CGT is not an income tax, and is not subject to the restrictions imposed by the Washington State Constitution. The CGT applies to individuals at a rate of 7% on long-term capital gains of more than $250,000 in a calendar year. Gains from real estate, retirement accounts and qualified family-owned small businesses, among other things, are excluded from the tax base. The CGT went into effect Jan. 1, 2022, with payments for tax year 2022 due by April 18, 2023. Quinn et al v. Washington State, No. 100796-8 (Wash. S.Ct. March 24, 2023). For additional information on this development, see Tax Alert 2023-0608.


Wednesday, April 19, 2023. What you need to know about the new Superfund Tax Proposed Regulations (2:00-3:00 p.m. ET; 11:00-12:00 p.m. PT). Please join EY's cross-functional panel of professionals for a webcast focused on the recently released proposed regulations pertaining to the environmental taxes imposed by IRC §§ 4661 and 4671. During the webcast, we will focus on the proposed regulation's procedural rules and interpretation of the Superfund Tax statutes. Register.

Because the matters covered herein are complicated, State and Local Tax Weekly should not be regarded as offering a complete explanation and should not be used for making decisions. Any decision concerning matters covered herein should be reviewed with a qualified tax advisor.



1 "Specified research or experimental expenditures" has the same meaning as it has in IRC § 174, as it existed on Jan. 1, 2021.