May 19, 2023
State and Local Tax Weekly for May 5 and May 12
Ernst & Young's State and Local Tax Weekly newsletter for May 5 and May 12 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.
New York governor signs budget legislation that includes various tax changes affecting businesses and individuals
On May 3, 2023, New York's Governor signed into law the budget's revenue bill (A.3009-C/S.4009-C) and transportation bill (A.3008-C/ S.4008-C). Of note, the final revenue bill extends the 7.25% business income base tax and the 0.1875% capital base tax for an additional three years, through tax year 2026.1 This provision took effect immediately.
The revenue bill also allows the New York Department of Taxation and Finance (Department) to appeal certain adverse New York Tax Appeals Tribunal (Tribunal) decisions, including decisions based on federal and state constitutional law. Previously, NY Tax Law § 2016 only gave a taxpayer petitioner the opportunity to appeal the decision of the Tribunal, not the Department. This provision allows the Commissioner to "petition for judicial review of a decision of the [Tribunal] that is premised on interpretation of the state or federal constitution, international law, federal law, the law of other states, or other legal matters that are beyond the purview of the state legislature." In addition, Part V stays the running of interest and penalties on assessments until 15 days after the issuance of a judicial decision from which no further appeals are allowed. This provision took effect immediately and applies to decisions and orders issued by the Tribunal on or after such date.
Among other things, the revenue bill:
The Final Transportation Bill increases the MCTMT rate for employers "in the counties of Bronx, Kings, New York, Queens and Richmond" to a top rate of 0.60% of payroll expense for employers whose payroll expense exceeds $437,500 in any calendar quarter. For individuals in these counties, the Final Transportation Bill increases the top rate to 0.60% of net earnings from self-employment "if such earnings attributable to the Metropolitan Commuter Transportation District exceed [$50,000] for the tax year." Those employers and individuals in the counties of "Nassau, Orange, Putnam, Rockland, Suffolk and Westchester" retain the old 0.34% top MCTMT rate. (See Tax Alert 2023-0840.)
For more on this development, see Tax Alert 2023-0823.
Maryland Supreme Court dismisses taxpayer challenge to state's Digital Advertising Services Tax
On May 9, 2023, the Maryland Supreme Court (Court) vacated a lower court ruling that invalidated the state's Digital Advertising Services Tax as violating the US Constitution and federal law. The Court concluded that the taxpayers failed to exhaust their administrative remedies before filing their action in the Maryland courts and did not reach the merits of the case. In doing so, the Court implicitly agreed with the Maryland Attorney General's argument that Md. Code, Tax-General §13-505 1 extends to actions for declaratory judgments and requires taxpayers to exhaust their administrative remedies through the Maryland Tax Court. The Court rejected the taxpayers' claim that a constitutional exception to that law applied because they were challenging the entirety of the law.2
The Court's order effectively requires the taxpayers to refile their claim in the Maryland Tax Court, a process that could take more than a year before the matter can return to the courts. To date, at least five states — Connecticut, Massachusetts, Montana, New York and Texas — have introduced or considered identical measures and we will be monitoring if this action impacts proposals in those states. Ultimately, Maryland's Digital Advertising Services Tax may prove too flawed to withstand constitutional scrutiny. But, for now, the tax remains law and may be enforced by the Maryland Comptroller.
For additional information on this development, see Tax Alert 2023-0857.
Colorado makes Retail Delivery Fee collection optional for retailers, increases small-seller threshold
On May 4, 2023, Colorado Governor Jared Polis signed into law SB 23-143, which amends the state's Retail Delivery Fee (Fee) provisions by making collection optional for the retailer and raising the small-seller threshold to $500,000. These changes are effective July 1, 2023.
The Fee applies to retail sales orders placed on or after July 1, 2022, for tangible personal property that is delivered by motor vehicle to a Colorado location. Currently, the Fee applies to Colorado purchasers and requires retailers to collect and remit the Fee to the Colorado Department of Revenue (CO DOR) if they are responsible for collecting sales and use tax on the tangible personal property sold and delivered. Retailers must also collect the Fee on deliveries made from out-of-state or by a third party. (See Tax Alert 2022-0902). The Fee is currently $.27 per order, but it is indexed and will be increasing to $.28 on July 1, 2023.
Under the amended provisions, retailers will be given the option of continuing to collect the Fee from customers and remitting it to CO DOR or directly paying the Fee. If the retailer opts to pay the Fee directly, it may not show a separate line item for a "retail delivery fee" on customer receipts or contracts.
Retailers with $500,000 or less of Colorado retail sales in the previous calendar year are exempted from paying the Fee until the first day of the calendar quarter after the retailer's annual retail sales exceed $500,000. In justifying the small-seller exemption, SB 23-143 specifically notes that "there are administrative costs for a retailer when the state imposes a fee on retail deliveries, and the benefits from the fee revenue need to be balanced with the potential economic impacts on the retailers." Accordingly, the bill explains that "fees on retail deliveries should only be imposed on retailers that are large enough to absorb these administrative costs without significant economic harm."
For more on this development, see Tax Alert 2023-0832.
Arizona: New law (SB 1260) moves forward the reduction of the Arizona small business income tax rate to 2.5% (from 2.8%) to tax years beginning from and after Dec. 31, 2022 (from 2024). The rate applies to small business taxpayers that elect to file a small business income tax return with the Arizona Department of Revenue. This change applies retroactively to tax years beginning from and after Dec. 31, 2022. Ariz. Laws 2023, ch. 67 (SB 1260), signed by the governor on April 18, 2023.
Georgia: New law (SB 56) update the state's date of conformity to federal law enacted on or before Jan. 1, 2023 (from Jan. 1, 2022), applicable to tax years beginning on or after Jan. 1, 2022, and decouples Georgia from the Tax Cuts and Jobs Act changes to the treatment of research and experimental expenditures under IRC § 174. Ga. Laws 2023, Act 236 (SB 56), signed by the governor on May 2, 2023.3
Georgia: New law (HB 412) modifies the elective pass-through entity (PTE) tax. The law makes clear that making the election has no impact on the accounting or tax treatment of distributions for an electing PTE. The law also repeals the provision that had limited the types of partnerships allowed to make the PTE tax election to partnerships that were 100% directly owned and controlled by persons eligible to be shareholders of an S corporation. These changes are retroactively effective to Jan. 1, 2023. Ga. Laws 2023, Act 238 (HB 412), signed by the governor on May 2, 2023.
Illinois: Adopted amendments to Rule 100.3380 provide guidance for when receipts from certain sales-inducing payments from vendors to retailers, such as buying allowances and merchandising allowances, should be included or excluded from the sales factor. Under the amended rule, the Illinois Department of Revenue (IL DOR) will exclude rebates and other buying allowances, which generally are considered reductions to cost of goods sold, from the sales factor. Examples of such include a cash discount for prompt payment, a trade discount for a specified volume of purchase, markdown participation allowances to cover shortfalls in the sales price or defective or damaged merchandise, and sales-based allowances for short-term promotions. Merchandising allowances, which are part of the product's selling price, will be included in the sales factor to the extent they promote sales. Types of merchandising allowances described by the IL DOR include cooperative advertising, salary or payroll allowances, up-front cash payments and long-term agreements that compensate the retailer for a commitment to purchase a targeted volume of goods over a period-of-time. The amended rule also addresses payments received under a cost sharing agreement and includes illustrative examples. The amended rule took effect April 12, 2023. Ill. Dept. of Rev., Adopted Rule 100.3380 (Ill. Reg., Vol. 47, Issue 17, April 28, 2023).
Iowa: New law (HF 352) adopts an elective pass-through entity (PTE) tax that applies retroactively to tax years beginning on or after Jan. 1, 2022. The election is only available for tax years in which the federal limitation on the state and local tax deduction applies under IRC §164(b)(6). HF 352 allows a partnership or an S corporation to elect annually to be subject to an entity-level tax. The Iowa Department of Revenue will establish how and when to make the election. Once made, the election is irrevocable and binding on all partners and shareholders of the PTE for that year. If the election is made, the composite return, otherwise required by Iowa Code 422.16B, will not be required. The PTE tax applies to the PTE's taxable income allocated and apportioned to Iowa at the highest individual rate prescribed by Iowa Code 422.5A. The PTE tax is due with the taxpayer's return on or before the last day of the fourth month following the close of the PTE's tax year. HF 352 also creates a refundable credit for each PTE owner based on the owner's pro rata share of the PTE tax paid. The credit applies to the owner's individual income tax, corporate income tax, or franchise tax returns, as applicable. If a PTE is itself a partner or shareholder in another taxpayer making an election, the PTE could claim the credit. A nonresident individual who is a partner or shareholder in an electing PTE is not required to file an Iowa return for the tax year if the PTE income is the only source of Iowa income for that individual, provided the PTE files the entity-level return. Iowa Laws 2023, HF 352, signed by the governor on May 11, 2023. For additional information on this development, see Tax Alert 2023-0809.
North Dakota: New law (HB 1158) reduces the number of individual income tax brackets from five to three and reduces the income tax rate for individuals, estates and trusts, effective for tax years beginning after Dec. 31, 2022. The new highest tax rate for individuals is 2.50% (from 2.90%) as is imposed on North Dakota taxable income of: (1) $225,975 for single filers; (2) $275,100 for married filing joint and surviving spouse; (3) $137,550 for married filing separately; and (4) $250,550 for head of household. The highest rate imposed on estates and trusts also is reduced to $2.50% (from 2.90%) and is imposed on North Dakota taxable income of $10,750. N.D. Laws 2023, HB 1158, signed by the governor April 27, 2023.
Pennsylvania: The Pennsylvania Department of Revenue (PA DOR) issued guidance stating that it will treat sales of electricity as tangible personal property for purposes of apportioning income under the Corporate Net Income Tax (CNIT). Prior to this guidance, the PA DOR had stated that for apportionment purposes the sale of electricity more closely resembled the sale of a saleable commodity (than a service) and that was inappropriate to use provisions for sourcing intangibles. More recently, however, the Pennsylvania Board of Finance and Revenue (Board) has addressed this issue in several published decisions, determining that sales of electricity should be treated as sales of tangible personal property for CNIT apportionment purposes. The PA DOR agrees with the Board, and it will apply the Board's treatment of electricity as tangible personal property to all open CNIT periods. Such sales will be sourced to Pennsylvania under 72 P.S. §7401(3)2.(a)(16). For partnerships with corporate partners, the partnership's receipts from sales of electricity will flow up to its corporate partners. Pa. Dept. of Rev., Corp. Tax Bulletin 2023-01 "Treatment of Electricity for Corporate Net Income Tax Apportionment Purposes" (May 1, 2023).
SALES & USE
Arkansas: New law (SB 441) modifies the sales and use tax exemption for certain machinery and equipment. The law expands the exemption to include machinery and equipment purchased for use or possible use, and placed in inventory for later use, by a taxpayer for one of the following purposes: (1) modify, replace, repair or maintain existing machinery or equipment; (2) service relating to the initial installation, alteration, addition, cleaning, refinishing, replacement or repair of such machinery or equipment; and (3) machinery and equipment purchased to modify, replace, or repair existing molds and dies used directly in producing, manufacturing, fabricating, assembling, finishing or packaging articles of commerce at a manufacturing or processing facility. A withdrawal from inventory (i.e., a withdrawal or use of machinery or equipment for a nonexempt purpose) is not eligible for the exemption. Rather, tax is due on withdrawn inventory at the time it is removed. These changes are effective on the first day of the calendar quarter following the effective date of this Act. The Act takes effect 90 days after the Arkansas Legislature adjourns. Ark. Laws 2023, Act 646 (SB 441), signed by the governor on April 11, 2023.
Arkansas: New law (HB 1654) provides a sales and use tax exemption for data centers, data center equipment, data center costs, electricity used by a data center, and services purchased for the purpose of and in conjunction with developing, acquiring, constructing, expanding, renovating, refurbishing and operating a qualified data center. A qualified data center is owned or operated by a qualified firm that: (1) creates a qualified investment of at least $500 million within five years of the issuance of a certificate of occupancy and (2) pays an aggregate annualized compensation of at least $1 million to employees within Arkansas over the two calendar years following the commencement of operations, and (3) has received a positive cost-benefit analysis from the Arkansas Economic Development Commission. A qualified firm must apply to the Commission for the qualified data center sales and use tax exemption. The Commission will grant or deny, in full or in party, a completed application within 30 days after receiving it; approved applicants will receive an approved financial incentive certificate. Qualified firms must annually certify to the Commission the data center's minimum qualified investment and aggregate annualized compensation at the qualified data center during the preceding calendar year. This exemption is effective on the first day of the calendar quarter following the effective date of this Act. The Act takes effect 90 days after the Arkansas Legislature adjourns. Ark. Laws 2023, Act 819 (HB 1654), signed by the governor on April 13, 2023.
Arkansas: New law (HB 1719) provides a sales and use tax exemption for gross receipts or gross proceeds derived from the sale of a service providing for the electronic transmission of a drug prescription directly to a pharmacy, including services provided directly by an electronic prescription technology company or indirectly through a pharmacy software company or pharmacy management system. This exemption is effective on the first day of the calendar quarter following the effective date of this Act. The Act takes effect 90 days after the Arkansas Legislature adjourns. Ark. Laws 2023, Act 827 (HB 1719), signed by the governor on April 13, 2023.
Georgia: New law (SB 56) imposes sales and use tax on the retail purchase or retail sale of specified digital products, other digital goods, and digital codes to an end user in Georgia, if such end user receives or will receive the right to permanently use such products, goods or codes and that the transaction is not conditioned upon continued payment by the end user. Tax applies regardless of whether possession of such items is maintained by the seller or a third party. Further, such sales will be considered a sale for resale if the item is subsequently sold, licensed, leased, broadcast, transmitted or distributed, in whole or in part, as an integral, inseparable component part of a service or another such product, good or code by the purchaser of the product, good or code to an ultimate consumer. Taxable products include the following: digital audio-visual works, digital audio works, digital books; electronically transferred artwork, photographs, periodicals, newspapers, magazines, video or audio greeting cards, or video games or electronic entertainment. These provisions take effect on, and apply to transactions occurring on or after, Jan. 1, 2024. Ga. Laws 2023, Act 236 (SB 56), signed by the governor on May 2, 2023.
Michigan: New laws (HB 4039 and HB 4253) provide that delivery and installation charges are not included in the definitions of "sales price" and "purchase price" for sales and use tax purposes, if (1) the charges are separately stated on the invoice, bill of sale, or similar document provided to the purchaser, and (2) the seller maintains its books and records to separately show the transactions used to determine the tax. This does not apply to delivery or installation charges that fail to satisfy these conditions or that involve or relate to the sale of electricity, natural gas, or artificial gas by a utility. The Michigan Department of Treasury has 90 days from this Act's effective date to cancel all outstanding balances related to such delivery and installation charges on Notices of Intent to Assess and Final Assessments that were issued before the effective date of these provisions. After the effective date of these provisions, the Department cannot issue any new sales/use tax assessments on such delivery and installation charges for any tax period before the effective date of this Act. This Act took effect April 26, 2023. Mich. Laws 2023, Act 20 (HB 4039) and Act 23 (HB 4253), signed by the governor on April 26, 2023. See also, Mich. Dept. of Treas., "Notice Regarding Changes in the Taxability of Delivery and Installation Charges for Sales and Use Taxes" (April 26, 2023).
New York: New law (A.3009-C/S.4009-C) extends the sales tax exemption for certain food and drink items sold in vending machines through May 31, 2024 (from May 31, 2023). The exemption applies to items sold for $1.50 or less through a vending machine that accepts coin or currency only, or $2.00 or less through a vending machine that accepts any form of payment. N.Y. Laws 2023, ch. 59 (A.3009-C/S.4009-C), signed by the governor on May 3, 2023.
North Dakota: New law (HB 1177) exempts sales of children's diapers from sales and use tax, effective for sales occurring after June 30, 2023. N.D. Laws 2023, HB 1177, signed by the governor on April 18, 2023.
North Dakota: New law (HB 1455) creates a temporary sales and use tax exemption for raw materials, single-use product contact systems and reagents used for discovery, testing, screening and production for biologic manufacturing in North Dakota. To receive the exemption the taxpayer must receive from the Commissioner a certification that the raw materials, single-use product contact systems or reagents qualify for the exemption. The taxpayers receiving the exemption must annually file with the Commissioner, a report showing specific information from the taxpayer's prior year, such as total gross payroll, total sales and use tax liability exempted under this provision, among other information. The exemption applies to taxable events occurring after June 30, 2023 and before July 1, 2029. N.D. Laws 2023, HB 1455, signed by the governor on April 26, 2023.
Alabama: New law (HB 241) extends and modifies the Alabama Jobs Act and the Growing Alabama Act, and establishes the Sweet Home Alabama Tourism Investment Act. The sunset dates of Alabama Jobs Act and the Growing Alabama Act are extended to July 31, 2028 (from July 31, 2023). Starting in 2023, the annual amount of Alabama Jobs Act credit is increased to $375 million (from $350 million in 2022), with annual increases until the credit reaches $475 million in 2027. Modifications to the Alabama Jobs Act (1) expand a "qualifying project" to include renewable energy generation facility that is owned by one or more electric providers for providing electric service at retail in Alabama, (2) remove from a "qualifying project" a commercial enterprise that is open to the public not less than 120 days during the year and is designed to attract out-of-state visitors, (3) sunset the ability to claim utility taxes paid as a jobs credit as of the effective date of this Act, and (4) modify provisions related to the transferability of the investment credit. The law amends the Growing Alabama Act by removing certain activities from the list of activities that an economic development organization can apply for funding to undertake. In addition, the cumulative amount of the Growing Alabama Act credit allowed in a calendar year is increased to $23 million in 2024 (from $20 million), with additional $3 million per year increases, until the amount of cumulative credit is increased to $35 million in 2028. The law also establishes the Sweet Home Alabama Tourism Investment Act, which provides tax rebates to companies with certain tourism destination projects. The rebates, which are available Aug. 1, 2023 through July 31, 2028, equal the company's tax liability for state and local sales and use tax, lodgings tax and other transactional taxes, but are capped at $1 million per year and up to $5 million per company. Unused credits can be carried forward for up to five years. These credits can also be transferred to subsequent owners of the project. HB 241 took effect immediately. Ala. Laws 2023, Act 34 (HB 241), signed by the governor on April 20, 2023.
Alabama: New law (HB 247) establishes the Innovating Alabama Act. Under the Act, an economic development organization can apply for Innovating Alabama tax credits to undertake the following projects: (1) the creation, operation or support of an accelerator4 for technology companies; or (2) the creation, operation or support of programs designed to provide funding, workforce development or other resources for an "innovative company" that meets certain criteria. Innovating Alabama tax credits will be granted to taxpayers that agree to make a cash contribution to an economic development organization. The Innovating Alabama Tax credit can be applied to offset: income taxes or as an estimated tax payment of income, the state portion of the financial institution excise tax, the insurance premium tax, and the state license tax. The credit cannot reduce a taxpayer's tax liability by more than 50%; unused credits can be carried forward for no more than five years. The credit is only available to the donating taxpayer and may not be assigned or transferred. The credit is not available for qualifying applicants whose applications are not approved on or before July 31, 2028. The law took effect immediately. Ala. Laws 2023, Act 33 (HB 247), signed by the governor on April 20, 2023.
Kansas: New law (HB 2292) establishes the Kansas Apprenticeship Act, which provides tax credits and grants to eligible employers, which includes in-state businesses and for-profit eligible healthcare employers. Effective for tax years beginning after Dec. 31, 2022 and ending before Jan. 1, 2026, a credit is allowed against the income tax liability of an eligible employer that employs an apprentice under a registered apprenticeship agreement and in accordance with a registered apprenticeship plan for at least all or a portion of the probationary period. The apprentice must be employed at the end of the probationary period. An eligible employer that continues to employ the apprentice can claim additional credits for up to three successive calendar years succeeding the date on which the probationary period was met. The credit equals $2,500 for each apprentice employed, capped at 20 apprentices employed in each taxable year per eligible employer. The credit cannot be awarded more than four times for employing the same apprentice. In addition, for tax years beginning after Dec. 31, 2025, a credit is available for employment of the apprentice for a continuous period constituting at least 25% of the apprenticeship time period required by the registered apprenticeship program. The amount of the credit is up to $2,750 for each apprentice employed, capped at 20 such credits in a tax year per eligible employer. An additional credit is available to eligible employers for an apprentice who is enrolled in a secondary or postsecondary career and technical education program if certain criteria is met. The law also establishes various grant programs. The above-mentioned credits are not refundable or transferable. Kan. Laws 2023, HB 2292, signed by the governor on April 23, 2023.
New York: New law (A.3009-C/S.4009-C) modifies various tax credits and incentives provisions. The law does the following: (1) makes the investment tax credit for eligible farmers refundable for tax years beginning before Jan. 1, 2028; (2) modifies the empire state film production credit and the empire state film post-production credit by extending the credits through 2034, increasing the amount of the credits and making other enhancements to the credits; (3) establishes the child care creation and expansion tax credit program; (4) extends the 100% historic properties tax credit (increased to 150% for small projects) through 2029, with the credit reducing to 30% in 2030; and (5) extends through 2028 the empire state commercial production tax credit. N.Y. Laws 2023, ch. 59 (A.3009-C/S.4009-C), signed by the governor on May 3, 2023.
North Dakota: New law (HB 1244) expands the income tax credit for employment of individuals with developmental disabilities or severe mental illness (collectively, "eligible employee") and removes the credit's sunset date. The amount of the credit is increased to 25% (from 5%) of up to $6,000 in wages paid annually (changed from the first 12 weeks of employment) by the taxpayer for each eligible employee. Such employee must be deemed by the Department of Health and Human Services' Vocational Rehabilitation Division (Department) to have the most significant disability, be eligible for services, and require customized employment or supported employment to obtain competitive integrated employment. The Department will provide the taxpayer a letter of certification listing the names of qualifying employees. The amount of credit allowed cannot exceed 50% of the taxpayer's income tax liability. If the taxpayer is a pass-through entity, the credit is determined at the entity level. These changes are effective for tax years beginning after Dec. 31, 2022. N.D. Laws 2023, HB 1244, signed by the governor on April 10, 2023.
North Dakota: New law (SB 2391) expands the income and property tax incentives for renaissance zones. For taxpayers that purchase, lease, rehabilitate or make leasehold improvements to residential, public utility infrastructure or commercial property for any business or investment purpose as a zone project, the law extends the income tax exemption on income derived from a business or investment location within a zone to eight years (from five years). The exemption begins with the date of the purchase, lease or completion of rehabilitation. Similarly, the lax extends to eight years (from five years) the amount of time (1) a municipality may grant a partial or full property tax exemption on buildings, structures, fixtures and improvements purchased or rehabilitated as a zone project for any business or investment purpose, and (2) the State Board of Equalization may grant a partial or full property tax exemption on public utility infrastructure rehabilitated as a zone project. N.D. Laws 2032, SB 2391, signed by the governor on April 26, 2023.
North Dakota: New law (HB 1170) temporarily exempts from property tax all property, excluding the land on which it is situated, that is part of a natural gas transmission or distribution pipeline system constructed in North Dakota for a 15 year period following the tax year in which the pipeline becomes operational. The exemption applies to pipeline in the state, if: (1) construction of the pipeline begins after Jan. 1, 2023, and (2) the pipeline provides service to a city or township located within North Dakota in which the majority of households or businesses did not have access to natural gas service as of Jan. 1, 2023. N.D. Laws 2023, HB 1170, signed by the governor on April 20, 2023.
Colorado: New law (SB 23-156) makes permanent the ability of the Colorado Department of Revenue (CO DOR) to issue information letters and private letter rulings. The law also allows the CO DOR to issue an information letter or private letter ruling to a taxpayer that provides general information regarding, or the consequences of a proposed or completed transaction under, any fee administered by the CO DOR (this is in addition to providing such information for any tax). Lastly, the law allows the Executive Director to extend, upon taxpayer approval, the period in which the CO DOR has to respond to a private letter ruling (without an extension, the CO DOR has 90 days to respond). These changes take effect on the day following the expiration of the 90-day period after final adjournment of the Colorado General Assembly. Colo. Laws 2023, ch. 137 (SB 23-156), signed by the governor on May 1, 2023.
PAYROLL & EMPLOYMENT TAX
Multistate: EY's Payroll Month in Review for April 2023 is now available. 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. A copy of the newsletter is available via Tax Alert 2023-0790.
Arkansas: On April 10, 2023, Arkansas Governor Sarah Huckabee Sanders signed into law SB 549, which retroactive to Jan. 1, 2023, lowers the top marginal personal income tax rate from 4.9% to 4.7%. The supplemental rate of withholding is also reduced from 4.9% to 4.7%. The revised withholding tables and formula, once available, will be posted here. For more on this development, see Tax Alert 2023-0779.
Michigan: The Michigan Department of Treasury, which administers the Detroit income tax, has published guidance clarifying remote workers' liability for the city tax, employers' withholding obligations during and after the COVID-19 emergency and how to request a refund if necessary. (Michigan Department of Treasury Update, Feb. 2023.) For more on this development, see Tax Alert 2023-0758.
Michigan: The Michigan Department of Treasury (Department) confirmed in frequently asked questions that revised withholding tables will not be published to reflect the 2023 reduction in the personal income tax rate from 4.25% to 4.05% that was announced earlier this year. As to whether employers can withhold at the lower rate of 4.05% in the absence of updated 2023 withholding tables, the Department stated that employers have the option of continuing to withhold at 4.25% or refigure withholding calculations using the reduced rate of 4.05%. For more on this development, see Tax Alert 2023-0807.
North Dakota: New law (HB 1158) establishes a "Legislative Tax Relief Advisory Committee" that will study tax relief during the 2023-24 interim. The study must include consideration of the following: historical and recent income and property tax relief, options for implementing a flat individual income tax rate, options for adjusting the individual income tax structure, and progress on implementing the primary residence credit. The advisory committee must consider input from local taxing jurisdictions on the administration of the primary residence and homestead credits, and it must report its finding and recommendations during the next legislative session. N.D. Laws 2023, HB 1158, signed by the governor April 27, 2023.
Wednesday, June 7, 2023. Domestic tax quarterly webcast series: a focus on state tax matters (1:00-2:30 p.m. EDT). For our second quarterly webcast in 2023, please join our panel to discuss important state tax policy developments, as well as international tax policy developments that could affect state and local taxes. Topics will include: (1) potential US state and local tax implications of the OECD's Model Rules for new global minimum taxes under Pillar Two of the BEPS 2.0 project; (2) state income tax considerations of credits enacted under the federal Inflation Reduction Act; (3) an update on state fiscal conditions; (4) highlights from the 2023 state legislative sessions; and (5) other state tax policy considerations, including non-legislative developments. To register for this event, go to State tax matters.
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 As part of the FY2021-22 budget process, NYS increased the tax rate on the business income base for Article 9-A taxpayers to 7.25% from 6.5% for tax years beginning on or after Jan. 1, 2021, and before Jan. 1, 2024, for any taxpayer with a business income base of more than $5 million for the tax year. It also extended, at a higher rate, the business capital base tax, which had been set to fully phase out starting in 2021, for an additional three years.
2 Comptroller of Maryland v. Comcast of California, Maryland, Pennsylvania, Virginia, West Virginia, LLC, et al., No. 32 per curiam order (Md. Sup. Ct. May 9, 2023).
3 Act 235 (HB 95), enacted May 2, 2023, also updates the state's date of conformity to federal enacted on or before Jan. 1, 2023.
4 An "accelerator" is company that, for a fixed period, educates and mentors early-stage technology companies recruited to Alabama with the goal of acerating the company's development and growth.