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February 8, 2024

State and Local Tax Weekly for January 19 and 26

Ernst & Young's State and Local Tax Weekly newsletter for January 19 and 26 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.


The following is a summary of recent governors' budget proposals and state-of-the state addresses.

Colorado: On Jan. 11, 2024, Governor Jared Polis delivered his 2024 State of State Address. The governor is proposing the expansion of the State Affordable Housing Tax Credit; stating that "[t]ax relief is the best mechanism to relieve cost of living pressures and spur economic growth for everyone in our state." The governor challenged members of the legislature to work together to cut the income tax rate. Additionally, he called for the reduction of property taxes without hurting local services.

Georgia:On Jan. 11, 2024, Governor Brian Kemp delivered his 2024 State of the State Address. The governor is looking to speed up implementation of the state individual income tax cuts, stating that he is looking "forward to signing legislation that decreases our state income tax to 5.39 percent starting this year." (On Dec. 4, 2023, the governor proposed accelerating the income tax cut.)

Indiana: On Jan. 9, 2024, Governor Eric Holcomb presented his 2024 State of the State Address. The governor did not mention taxes in his speech.

Iowa: On Jan. 9, 2024, Governor Kim Reynolds delivered her 2024 Condition of the State Address. In her speech, the governor said the state ended the year with $1.83 billion surplus and more than $900 million in reserve funds. In addition, the governor noted that the state's unemployment trust fund is full such that the state can reduce the unemployment insurance payment. The governor also discussed foreign ownership of Iowa farmland and that a bill has been proposed to enhance reporting and enforcement, increase penalties and provide more transparency on what land is currently under foreign ownership. Regarding taxes, the governor said she will propose a bill to reduce the individual income tax rate to a flat 3.65% starting in 2024, with an addition reduction of the rate to 3.5% starting in 2025.

Maryland: On Jan. 17, 2024, Governor Wes Moore presented his FY 2025 Budget Proposal. The governor's budget proposal "shrinks the state's structural deficit by 34[%], keeps the Rainy-Day Fund balance at 9.4[%], and flips the state's projected cash shortfall of $1.1 billion to a positive cash balance of more than $100 million — all without raising taxes for Marylandders."

Massachusetts: On Jan. 24, 2024, Governor Maura Healey and Lt. Governor Kim Driscoll filed their Fiscal Year 2025 budget recommendation as HB 2. The governor's budget proposes to invest $1.3 billion in revenue from the Fair Share Income surtax to "support transformative investments in education and transportation." The governor said the budget "does not raise broad-based taxes" or use funding from the Stabilization Fund, which is over $8 billion and will continue to grow under HB 2. Tax related provisions in the budget, which are found in the "outside sections" of HB 2, would do the following:

  • Provide discretionary authority to the revenue commissioner to conduct a 60-day tax amnesty program with the following parameters:
    • Penalties, with some exceptions, would be waived
    • Amnesty would apply to returns due on or before Dec. 31, 2024
    • Revenue commissioner would have the authority to apply a limited look-back period, unless the commissioner determines that the taxpayer acted with fraudulent intent
    • Amnesty would run in Fiscal Year 25, and it would have to expire no later than June 30, 2025
    • Interest could not be waived
  • Update for personal income tax purposes the state's date of conformity to the IRC to Jan. 1, 2024 (from Jan. 1, 2022)
  • Repeal the deduction of interest from savings in Massachusetts banks (this would take effect for tax years beginning on or after Jan. 1, 2024)
  • Repeal the sales tax exemption for publications of tax-exempt organizations (this change would take effect 60 days after the effective date of HB 2)

On Jan. 18, 2024, the governor and lieutenant governor testified in support of the "Affordable Homes Act" (H.4138), which is a key provision of the governor's housing policy. A provision of the bill would allow towns to enact a real estate transfer fee on sales over $1 million, the revenue from which would help support the development and preservation of affordable housing.

On Jan. 17, 2024, the governor presented her State of the Commonwealth Address. In her speech, she noted the tax cuts package she signed into law in 2023. The governor also said that she will propose "a historic, multi-year capital investment in climatetech to make Massachusetts the climate innovation lab for the world."

On Dec. 6, 2023, the governor and lieutenant governor presented their draft economic development plan — Team Massachusetts: Leading Future Generations. The plan would invest in fundamentals (i.e., housing and transportation) to enable economic growth, retain and attract talent across all backgrounds, and support sectors, especially those in the innovative sectors such as climatetech, life sciences and advanced manufacturing. The plan also calls for the streamlining of state resources for businesses of all sizes and from all sectors, including state incentives.

Michigan: On Jan. 24, 2024, Governor Gretchen Whitmer gave her 2024 State of the State Address. She said that in 2024 the state will "make the largest investment to build housing in Michigan history" via an investment of $1.4 billion to build or rehabilitate nearly 10,000 homes. The governor wants the state to enact an R&D tax credit, which "will unleash innovation while lowering costs for businesses." In addition, the governor's budget would (1) create the HIRE Michigan Fund to lower overall payroll taxes so the state can attract small and second stage businesses; (2) simplify Renaissance Zones into a single, flexible category incentivize growth; and (3) establish an Innovation Fund to invest in high-growth startups. Lastly, the governor is calling for the creation of a new caregiver tax credit.

Mississippi: In his Jan. 9, 2024, Inaugural Speech , Governor Tate Reeves said he wanted to continue to "give Mississippians relief from taxes and eliminate the burdens on their families." Previously, the state enacted individual income tax rate reductions.

Missouri: On Jan. 24, 2024, Governor Mike Parson gave his 2024 State of the State Address. The governor's plan includes $10 million for advance semiconductor research, development and skills training and approximately $7 million for the support of critical mineral development. In addition, the governor's legislative priorities include the establishment of a new childcare tax credit program.

Nebraska: On Jan. 18, 2024, Governor Jim Pillen gave his 2024 State of the State Address. In it, he stressed that the "most important economic issue [facing the state] is out of control property taxes," noting that it must be fixed now. Legislative proposals that would help fix property taxes would (1) put a hard cap on local spending (this would force local governments to curb spending), (2) repurpose existing credits so that all property taxpayers can benefit from this relief, and (3) add an additional $1 billion in new property tax credits that would appear directly on a taxpayer's property tax statement. To pay for this relief, the governor said that bills have been introduced "to close several tax loopholes created for special interests … " In addition, the governor said $247 million would be transferred from agency cash funds. The governor is also working with the legislature to reform the state's current incentives package to make the state's credits more competitive for manufacturers; stating that the incentives need to be retooled to be people focused. An "innovative bill" would be introduced to provide a credit to Nebraska businesses for bringing new residents to the state. Credits would also focus on housing, childcare and early childhood education for residents. Lastly, the governor is seeking to take advantage of federal resources designed to develop a new bioeconomy in Nebraska.

New Mexico: On Jan. 16, 2024, Governor Michelle Lujan Grisham gave her 2024 State of the State Address. Tax related changes would: (1) establish a hospital provider tax; (2) set aside funds to invest in companies that develop advance energy technologies (this investment would be funded by dedicating 2% (around $170 million) of State Severance Tax Permanent Funds); (3) establish an advanced manufacturing tax credit (this would be a companion to the federal Inflation Reduction Act incentives); and (4) establish an infrastructure matching fund so that communities can access federal grants that require a local match.

New York: On Jan. 16, 2024, Governor Kathy Hochul presented her Fiscal Year 2025 Executive Budget, which does not raise taxes, maintains a historic level of reserves to deal with economic downturns and allows for prior year investments to be implemented. The governor's economic development vision laid-out in the budget would provide for $150 million in new capital grants, $75 million in new Excelsior tax credits for projects coordinated and planned by the Regional Economic Development Councils, and $100 million for FAST NY program, which develops shovel-ready sites to maintain New York's continued attractiveness to large employers, among other investments. The governor's budget also includes tax incentives to help increase the supply of new housing in New York City and encourage affordable housing in office-to-residential conversions.

Other tax-related proposals in the budget would:

  • Permanently extend tax shelter provisions
  • Close the amended return "loophole" for personal income and corporate franchise taxes by changing the limitation period on petitions filed by the New York Division of Tax Appeals
    • As explained in the budget book, this change would allow the New York Department of Taxation and Finance to act on amended returns that are filed during or after the appeals process
  • Clarify that the filing of amended sales tax returns is subject to similar limitations as other tax filings
  • Subject vacation rentals to state and local sales taxes and the New York City convention center hotel fee — i.e., the same taxes imposed on hotels
    • Vacation rental marketplaces providers that facilitate occupancy would be responsible for collecting and remitting tax
  • Make technical corrections to the Metropolitan Commuter Transportation Mobility tax by reversing the repeal of the tax for self-employed individuals within suburban Metropolitan Computer Transportation District counties (the repeal was enacted as part of the FY 2024 budget)
  • Address the US Supreme Court ruling on local property tax foreclosures by returning tax foreclosure surplus to the property owner
  • Clarify taxable status of telecommunications property
  • Establish the commercial security tax credit (focused on small businesses)
  • Permanently extend authorization to manage delinquent sales tax vendors
  • Extend for three years certain sales tax exemptions related to the Dodd-Frank Protection Act
  • Extend for one year the sales tax vending machine exemption (otherwise the exemption expires May 31, 2024)
  • Permanently extend the itemized deduction limit on high income filers (i.e., gross income of more than $10 million)
  • Repeal the cannabis potency tax and replace it with wholesale excise tax, while maintaining the state retail excise tax and local excise tax

On Jan. 9, 2024, Governor Hochul gave her 2024 State of the State Address. In it she proposed a tax credit to help business owners cover additional security costs and to restore tax incentives to build affordable housing.

North Dakota: On Jan. 23, 2024, Governor Doug Burgum presented his 2024 State of the State Address. He noted that the state's reserves exceed $1.3 billion and general fund revenues for the next two-year budget cycle are already running more than $154 million ahead of forecast. Given this, the governor is calling on the legislature to make North Dakota the 10th state to eliminate the state's individual income tax. The governor also called for improving housing availability and affordability.

Rhode Island: On Jan. 18, 2024, Rhode Island Governor Dan McKee presented his FY 2025 "Team Rhode Island" Budget. The governor said his budget "makes key investments in education, small businesses, and Rhode Island's health care system without raising any broad-based taxes." The budget also maintains fiscal discipline and uses one-time funding for one-time investments. Tax related measures in the budget include:

  • Extending the net operating loss carryforward period to 20 years (from five-years) starting with tax year 2025 losses
  • Decreasing the corporate minimum tax to $350 (from $400)
  • Reducing to 90% the credit for members of a pass-through entity (PTE) who pay taxes under the elective PTE tax
  • Allowing cannabis businesses to deduct ordinary business expenses when filing taxes
  • Increasing the exemption for taxable retirement income to $50,000 (from $20,000) starting in 2025
  • Eliminating various nuisance fees, such as the $50 fee for estate tax filers, the $25 fee required by entities seeking a sales tax exemption certificate and select fees imposed by the Department of Business Regulation and the Department of Environmental Management
  • Providing $5 million for up to 80% matching grants for public, private and nonprofit entities for brownfield remediation projects
  • Increasing the per-pack tax on cigarettes to $4.50 (from $4.25) effective starting in September 2024 and taxing e-cigarettes like other tobacco products that have an 80% wholesale tax

The governor's budget also would "increase proactive tax collection" by the Rhode Island Division of Taxation through new staff, increased overtime and contracting with vendors to leverage new sources of tax data and analysis.

South Carolina: On Jan. 24, 2024, Governor Henry McMaster gave his 2024 State of the State Address. The governor is recommending that the General Assembly add an additional $54.3 million to the state's rainy-day funds. The governor is also asking the General Assembly to accelerate the income tax cut schedule.

On Jan. 5, 2024, Governor McMaster presented his FY 2024–2025 Executive Budget. The governor's budget provides for tax relief and investments in economic development. The governor said that "my Executive Budget recognizes this year's $99 million scheduled cut to the income tax rate, dropping it to 6.3%." The governor is also proposing a $2,000 income tax credit for first responders.

Vermont: On Jan. 4, 2024, Governor Phil Scott delivered his 2024 State of the State Address. In his address, the governor noted the state's shrinking workforce, which shifts the tax burden onto fewer people. The governor said that the state needs to keep its spending within existing revenue, noting that his budget will take an austerity approach and only increase by approximately 3%. The governor also explained that due to rising cost of education system, and if nothing changes, the state could see an estimated 18.5% increase in statewide property tax bills.

Washington: On Jan. 9, 2024, Governor Jay Inslee gave his 2024 State of the State Address. In it, he did not mention tax changes. The governor focused on the state's committee to the climate, noting how the state is attracting and creating jobs in clean energy and clean technology.

West Virginia: On Jan. 10, 2024, Governor Jim Justice presented his State of the State Address, in which he said "the faster that we can get rid of the taxes on the individuals, the better we'll be." In his address, the governor unveiled a tax cut package that would (1) eliminate the social security tax for all; (2) create a state child and dependent care tax credit equal to 50% of the allowable federal child and dependent care credit; and (3) increase and expand the senior citizen property tax credit. These changes would be effective Jan. 1, 2024.

Wisconsin: On Jan. 23, 2024, Governor Tony Evers gave his 2024 State of the State Address. In his address, the governor focused on generational workforce challenges and looking for long-term solutions to workforce shortages. He also discussed the need for more affordable housing, and said the state must expand paid family leave. The governor's address did not mention any tax changes.


Georgia: The Georgia Department of Revenue (GA DOR) issued proposed amendments to Rule 560-7-3-.13 "Consolidated Returns" (proposed rule). Starting in 2023, a group of affiliated corporations can elect to file a consolidated return; prior to 2023, a group of affiliated corporations had to petition the Commissioner for permission to do so. The proposed amendments explain that an affiliated group would make the consolidated return filing election on an originally filed income tax return. The election, once made, would be irrevocable and binding on the affiliated group and the GA DOR for five years. Affiliated groups that had permission to file a consolidated return before 2023, would be allowed to (1) elect to file a consolidated return under this rule; (2) continue to file a consolidated return under the terms of the prior grant (affiliated groups choosing this option would be governed by Rule 560-7-3-.13 as it existed before Jan. 1, 2023); or (3) cease filing a consolidated return and file separate returns. The proposed rule would provide guidance on terminating a prior grant of permission, making a new consolidated return election, and terminating the filing of a Georgia consolidated return during the five-year binding period when there is a change to the Georgia affiliated group. The proposed rule would require that all credits utilized against the Georgia affiliated group's tax liability be assigned to the consolidated parent, unless the parent generated the credit. Credits would only be assignable in the year generated and the assignment would have to be made by the return's due date, including extensions. Credit carryforwards would not be assignable. The proposed rule would provide a transition rule for carrying forward credits and net operating losses (NOLs). A Georgia affiliated group that had permission to file a consolidated return before 2023, and that elects to file a Georgia consolidated return for tax years beginning on or after Jan. 1, 2023 and the four succeeding tax years, would be eligible to carry forward to the Georgia consolidated return the credits/NOLs shown on the last-filed consolidate return filed under the prior grant of permission. The proposed rule would also provide guidance on estimated tax payments and special issues. The proposed rule, once adopted, would be effective for tax years beginning on or after Jan. 1, 2023. Comments on the proposed amendments are due by, and the GA DOR will hold a hearing on the proposed amendments at, 10:00 a.m. Feb. 20, 2024. Ga. Dept. of Rev., Notice IT-2024-1 "Proposal to amend Rule 560-7-3-.13 Consolidated Returns" (Jan. 16, 2024).

Kansas: Vetoed bill (HB 2284) would have enacted a flat 5.25% individual income tax rate, exempted social security benefits from Kansas income tax and increased the standard deduction and personal exemption, among other tax changes. In her veto message Governor Laura Kelly said the that "this flat tax experiment would overwhelmingly benefit the super wealthy … " HB 2284 was vetoed on Jan. 26, 2024.

Missouri: The Missouri Department of Revenue (MO DOR) has rescinded and amended various income tax rules. Specifically, the MO DOR rescinded 12 CRS 10-2.052 "Optional Single Sales Factor", explaining that it was rescinded because of "its limited potential applicability". In addition, the following industry specific allocation and apportionment rules were rescinded: (1) 12 CRS 10-2.200 "trucking companies"; (2) 12 CRS 10-2.205 "railroads"; and (3) 12 CRS 10-2.210 "airlines". The MO DOR explained that these rules were rescinded as they "may lead to a lack of clarity" for taxpayers in these industries that can no longer use the apportionment provisions found in these rules because of the new apportionment method created by RSMo §143.445. The MO DOR also amended rule 12 CRS 10-2.080 on Domestic International Sales Corporations (DISCs) to update the reference to the IRC for purpose of satisfying the requirements of IRC §992 to the IRC of 1986 (from 1954). The rescissions and amendment take effect 30 days after publication in the Code of State Regulations. Mo. Reg., Vol. 49, No. 2, Jan. 16, 2024. (See Mo. Reg., Vol. 48, No. 16, Aug. 15, 2023 for text of the proposed amendments and rescissions).

South Carolina: On Jan. 3, 2024, the South Carolina Administrative Law Court (ALC) denied the taxpayer's request to reconsider,1 for a second time, its rulings in Tractor Supply Co. Last August, the ALC issued a decision upholding the South Carolina Department of Revenue's use of combined unitary reporting as an alternative apportionment method under South Carolina Code § 12-6-2320(A)(4) to fairly represent the taxpayer's business activity in the state. On Dec. 4, 2023, the Chief Administrative Law Judge (Judge) of the ALC granted the taxpayer's first motion for reconsideration and while it reached the same result, the Judge issued an amended final order to clarify his reasoning that combined unitary reporting is an appropriate method to determine the taxpayer's South Carolina corporate income tax liability. Notably in the amended final order the Judge made clear that the South Carolina Supreme Court's ruling in Media General,2 in which it affirmed the ALC's order without change, "leaves no doubt that when the ALC discussed 'combined entity apportionment,' it was referring to 'combined unitary reporting,' and the two linguistic formulations of this 'method' are interchangeable." Further, the Court in Medial General interpreted the state's alternative apportionment provision as allowing combined unitary reporting. For more information on this development, see Tax Alert 2024-0244.

Vermont: The Vermont Department of Taxes issued for public comment proposed amendments to rules for "allocation and apportionment of Vermont net income by corporations" and "unitary combined reporting" to implement legislative changes enacted in 2022 (see Tax Alert 2022-1006). Starting in 2023, Vermont moved from a three-factor (property, payroll and double weighted-sales) apportionment formula to a single sales factor apportionment. Taxpayers, however, are still required to report the value of real and tangible property, and the value of salary and wages paid, in the state as a percentage of all such items. Proposed amendments to the rule would reflect these changes, as well as the repeal of the throwback rule, and would describe the process for reporting property and payroll. The special rules for the property factor also would be repealed. Amendments to the unitary combined reporting rules would: (1) reflect the repeal of Vermont's so called 80/20 provisions (specifically the "overseas business organization" rules); (2) change the definition of a unitary business; (3) modify the calculation of a group's combined net income; (4) repeal the provisions on net operating loss carryforward and carryback under the rules of attributes of a separate corporation; (5) modify and expand group return rules; and (6) repeal the exclusion from consolidated return provision. Information on how to submit comments on the proposed amendments is available here.


Indiana: A finance company is entitled to a sales tax refund on bad debt calculations that reflected the federal market discount rules to value repossessed property. In so holding, the Indiana Tax Court rejected the Indiana Department of Revenue's assertion that the state's bad debt statute required the taxpayer to reduce its adjusted basis by subtracting the full amount of the repossessed property, not merely a fraction of it. Indiana Finance Financial Corp. v. Ind. Dept. of Rev., Case No. 20T-TA-00017 (Ind. Tax Ct. Jan. 4, 2024).

Iowa: In response to a request for a declaratory order regarding the taxability of charges for the installation of qualified manufacturing equipment, either new or used, that is directly used in the manufacturing process, the Iowa Department of Revenue (IA DOR) said that when a business charges for installation of used industrial machinery and equipment, the sales price of the installation is taxable. Iowa law (Iowa Code §423.3(48)) specifically exempts from sales tax charges for the installation of new industrial machinery or equipment. The IA DOR explained that if the business installs both new and used industrial machinery or equipment, the business must separately itemize the sales price of each installation charge; otherwise, the entire lump-sum invoice billing is subject to tax. If the business bills a single lump-sum that consists only of the sales price of new industrial equipment or machinery and the charge for installation services for such equipment or machinery, sale tax will not be due if it is clear from the invoice that each component of the lump-sum is not taxable. In the Matter of Performance Contracting Inc., Dkt. No. 318637 (Iowa Dept. of Rev. Dec. 8, 2023).

Texas: The Texas Comptroller of Public Accounts (Comptroller) after holding an industry roundtable discussion on flowback and water transfer operations, issued updated guidance on the application of sales and use tax on flowback and water transfer services used at oil and gas well sites to support fracking operations. The Comptroller has determined that flowback and water transfer services, as described in the guidance, are not subject to sales or use tax. In addition, such services are not one of the listed services subject to the 2.42% oil well servicing tax, unless the company providing the flowback services is also providing the fracking services. The Comptroller noted that a provider of nontaxable flowback and water transfer services must pay tax on all equipment and materials used to perform the service. The Comptroller said that Rule 3.324 will be amended to address these issues. The taxability determination in this guidance will apply beginning with the later date of adoption of the rule amendment or March 1, 2024. The Comptroller also provided guidance for open audits and hearing assignments with these issues, closing out a particular assignment, and application of the new guidance to assignments that were settled. Tex. Comp. of Pub. Accts., STAR No. 202312010L (Dec. 13, 2023) (supersedes STAR Nos. 202302014H (2023), 202110021H (2021), 202008019H (2020) and 202009002L (Sept. 31, 2020) as they relate to equipment provided to control flowback after fracking oil and gas wells).


New Jersey: New law (A.5840) extends certain accommodations for businesses participating in the Business Employment Incentives Program (BEIP), the Business Retention and Relocation Assistance Grant (BRAG) Program, the Grow New Jersey Assistance (GROW) Program and the Urban Transit Hub (HUB) Program. During the COVID-19 pandemic, the New Jersey Economic Development Authority (EDA) provided accommodations to businesses that had previously been approved for BEIP, BRAG, GROW and HUB programs. One accommodation waived the requirement that to be eligible for an award under one of these incentive programs full-time employees of such businesses had to spend at least 80% of their time at the qualified business facility. Law enacted in 2020 lowered this full-time employee work location requirement to 60%. Law enacted in 2022 (ch. 134), provided an additional temporary waiver that allowed a business that had entered into incentive agreement for one of these programs to make an election before Dec. 31, 2023, to waive for the period beginning July 1, 2022 through Dec. 31, 2023, the 60% full-time employee work location requirement, if such business satisfied the following criteria: (1) any full time employee employed by the business must spend at least 10% of the employee's time at the qualified business facility through the 2023 tax period, and (2) the business must pay 5% of the amount of tax credit it received for 2022 to the EDA. A.5840 extends the time for making the election, and the waiver period, to March 31, 2024. (Thus, for those making this extended election, the waiver period is July 1, 2022 through March 31, 2024). A.5840 repeals statutory provisions that starting in 2024 allowed a business to elect to waive the requirement that a full time-employee employed by the business spend at least 60% of the employee's time at the qualified business facility. N.J. Laws 2023, ch. 261 (A.5840), signed by the governor on Jan. 12, 2024.

Wisconsin: The Wisconsin Department of Revenue posted FAQs on the refundable portion of the research credit, which increased to 25% (from 15%) for tax years beginning after Dec. 31, 2023. The refundable portion of the research credit may be claimed by a corporation, an individual, a partner of a partnership, a shareholder of an S corporation, or a member of a limited liability company (LLC). The refundable portion of the credit cannot be claimed by partnerships, S corporations and LLCs; rather, such entities will compute the amount of credit that can be claimed by their partners, shareholders and members. The following are eligible to have a portion refunded: (1) research credits for qualified activities, (2) research credits for activities related to internal combustion engines, and (3) research credits for activities related to certain energy efficient products. The FAQs include examples of how to compute the refundable portion of the credit. The portion of research credit that is not refundable may be carried forward for up to 15-years but the nonrefundable portion cannot be used to compute the refundable portion of the credit in future tax years. The refundable portion of the credit cannot be shared with other member of the same combined group. Under Wisconsin law, refundable credits computed by a combined group member must be claimed on the combined return and refunded to the designated agent. A combined group member that elects to share its nonrefundable portion of the research credit must first use the credit/credit carryforward to offset its own current year tax liability before offsetting the tax liability of all other combined group members on a proportionate basis, to the extent such liability is attributable to the unitary business. The FAQs were last updated on Dec. 5, 2023.


Arizona: The Arizona Department of Revenue updated its Appraisal Manual for Centrally Valued Natural Resource Property, including mines, certain non-producing mines, qualifying environmental technology property and oil, gas, and geothermal interest in Arizona. The guidelines are designed to assist property appraisers in the income, cost and market approach methods to value such property in the current tax year. The guidelines are used to establish full cash values for such properties as of January 1 of the valuation year. Ariz. Dept. of Rev., Appraisal Manual for Centrally Valued Natural Resource Property (Jan. 2024).

Maryland: The Maryland Department of Assessments and Taxation (Department) announced that a two-month filing extension is available to taxpayers who need additional time to complete their Annual Report and Personal Property Tax Return. Taxpayers must request the extension on the Department's website by Monday, April 15, 2024. Taxpayers can request extensions for an unlimited number of Department ID numbers. The Department must receive annual reports and returns filed under an extension by Monday, June 17, 2024. Md. Dept. of Assess. and Taxn., "2 Month Extension Request for Filing the Annual Report and Personal Property Tax Return" (Jan. 2024).

Montana: On Jan. 11, 2024, Governor Greg Gianforte issued an executive order creating the property tax advisory council, also referred to as the Property Tax Task Force. The Task Force will provide the Governor with recommendations and strategies for the State and its political subdivisions to reform the property tax system and reduce the taxpayers' tax burden. In developing its recommendations, the Task Force will gather input from Montana citizens, members of the legislature, advisory groups and property tax policy researchers and other appropriate stakeholders. The initial written report is due to the Governor by Aug. 15, 2024. Mont. Gov., Executive Order No. 1-2024 (Jan. 11, 2024).


Montana: Calendar-year taxpayers that want to make a new Montana water's-edge election — or renew an existing election that expired at the end of 2023 — must file Form WE-ELECT by April 1, 20243 (instead of the March 31 deadline normally applicable in non-leap years). While many states require a water's-edge election to be made by the due date, or extended due date, of the return for the year for which it is intended to be effective, Montana is unique in that a water's-edge election must be made within 90 days of the beginning of the tax year in which it is intended to become effective. For more information on this development, see Tax Alert 2024-0213.


Michigan: Governor Gretchen Whitmer via executive order transferred by a Type I transfer the Michigan Tax Tribunal from the Michigan Office of Administrative Hearings and Rules to the Department of Licensing and Regulatory Affairs (Department). As a Type I agency, the tax court will exercise its prescribed authority, powers, duties, functions and responsibilities independently of the director of the Department. The executive order takes effect on March 18, 2024. Mich. Gov., Executive Order 2024-2 (Jan. 17, 2024).


Multistate: State unemployment insurance (SUI) trust funds are largely financed by employer contributions (in Alaska, New Jersey and Pennsylvania employees also make contributions). States are required to maintain a SUI taxable wage base of no less than the limit set under the Federal Unemployment Tax Act (FUTA). The 2024 FUTA wage limit of $7,000 has remained unchanged since 1983, despite increases in the federal minimum wage and annual cost-of-living adjustments over the last 41 years. Some states are conservative in their approach to maintaining adequate SUI trust fund reserves. Consequently, the SUI wage base is flexible in those states, meaning it is indexed to the average wage or varies based on the trust fund balance. According to the US Department of Labor (US DOL), 26 jurisdictions had a flexible wage base in 2023. Tax Alert 2023-2106 provides a list of the 2024 SUI taxable wage bases as of Jan. 16, 2024 (as compared to 2023) and employee SUI withholding rates, if applicable.

MISCELLANEOUS TAX                                                                        

Washington: The U.S. Supreme Court will not review the Washington State Supreme Court's (WSC) ruling in Quinn,4 which held that the legislatively imposed capital gains tax is a valid excise tax, not an unconstitutional income tax. The WSC held that the capital gains tax is an excise tax because it taxes transactions involving capital assets but "not the assets themselves or the income they generate." Accordingly, the capital gains tax is not an income tax, and is not subject to the restrictions imposed by the Washington State Constitution. Quinn, et al v. Washington, et al, No. 100796-8 (Wash. S.Ct. March 24, 2023), petition of cert. denied, Dkt. No. 23-171 (U.S. S.Ct. Jan. 16, 2024).


International — Kenya: The Kenyan High Court held on Nov. 20, 2023 that value added tax is not applicable to interchange fees that an issuing bank earned on credit card transactions. For additional information on this development, see Tax Alert 2024-0237.

International — Netherlands: The Ministry of Finance has updated its policy regarding the value-added tax treatment of the sale and rental of immovable property. Several adjustments have been made. The new version of the Decree applies as of Jan. 1, 2024. Tax Alert 2024-0206 explains some of the most important adjustments for the immovable property sector.

International — Uruguay: Uruguay's Law No. 20,239 (enacted Dec. 28, 2023), establishes that lodging-related services rendered to resident tourists will be subject to a 0% VAT rate (treatment that already applies for nonresidents) from Dec. 15, 2023 until March 31, 2024, if the following conditions are met: (1) the taxpayer is registered on the Ministry of Tourism as a hotel, apart hotel, motel, hostel, rural establishment, or similar establishment; and (2) the taxpayer's annual income, in the last fiscal year closed before the entry into force of this bill, does not exceed 10,000,000 indexed units. For more on this development, see Tax Alert 2024-0212.


Friday, February 16. Tax in a time of transition: Legislative, economic, regulatory and IRS developments (12 pm ET). Companies need to keep pace with a tax and economic environment in transition. This requires understanding tax policy trends and anticipating future developments that could impact their operations. Join us for a fast-paced overview of recent tax and economic developments designed to help you stay on top of changes in today's shifting economic, legislative and regulatory environment. In this regularly occurring webcast series, panelists will provide updates on: the US economy and tax policy, what's happening at the IRS, and breaking developments. 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.

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1 Tractor Supply Co. v. S.C. Dept. of Revenue, Dkt. No. 19-ALJ-17-0416-CC (Dec. 6, 2023), motion for recons. denied (Jan. 3, 2024).

2 Media General Communications, Inc. v. S.C. Dept. of Revenue, 388 S.C. 138, 694 S.E.2d 525 (2010).

3 The election period would normally run on March 30, 2024, in the leap year. However, since March 30 falls on a Saturday in 2024, the deadline is now Monday April 1, 2024.

4 Quinn et al v. Washington State, No. 100796-8 (Wash. S.Ct. March 24, 2023). For additional information on this decision, see Tax Alert 2023-0608.