May 3, 2024 State and Local Tax Weekly for April 26 and May 3 Ernst & Young's State and Local Tax Weekly newsletter for April 26 and May 3 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. TOP STORIES New York budget bills includes various tax changes Revenue bill A.8809B/S.8309B (ch. 59), signed into law by the governor on April 20, 2024, includes various business and individual tax changes. These changes, among other things, do the following:
Proposed tax changes that were not included in the final bill include: (1) corporate franchise tax rate increases, (2) income tax rate increases for individuals with income over $5 million, (3) a new work opportunity tax credit (WOTC) program, (4) decoupling from the treatment of capital gains from qualified opportunity zone under IRC Section 1400Z-2, and (5) changes to the elective pass-through entity tax. Another budget bill, A. 8806C/ S. 8306C (ch. 56), signed by the governor on April 20, 2024, establishes a tax credit for hiring and retaining newspaper and broadcast media jobs and establishes property tax incentives. The law exempts from local real property taxation (other than assessments for local improvements) new eligible multiple dwellings (except hotels) in cities that have a population of one million or more and that comply with the requirements of this provision. The amount, and length, of the exemption depends on the location of the development and whether the development is in the construction period or the restriction period. The benefit period for an eligible multiple dwelling is: (1) 35 years for a commencement date on or before June 30, 2026; (2) 30 years for a commencement date on or before June 30, 2028; and (3) 25 years for a commencement date on or before June 30, 2031. Further, the owner of an eligible multiple dwelling receiving affordable housing from commercial conversions tax incentive benefits (AHCC program benefits) must pay all assessments for local improvements in each year the AHCC program benefits apply. AHCC benefits may be limited where the non-residential space exceeds 12% of the aggregate floor area in an eligible multiple dwelling or where such dwelling contains multiple tax lots. In addition, a city, town or village may provide a local tax exemption for certain affordable multi-family housing and for rental multiple dwellings (other than a hotel) newly constructed or converted in a benefit area designation. This exemption is not available in a city with a population of one million or more. These provisions took immediate effect. A. 8806C/ S. 8306C also establishes a newspaper and broadcast media jobs tax credit for eligible newspaper and broadcast media businesses, with a tax credit equal to $5,000 per net new full-time job created, and a tax credit to support the costs related to retaining an existing job equal to 50% of annual wages of an eligible employee (the calculation of the credit will only be applied to up to $50,000 in wages paid annually per employee). The aggregate amount of the credit available is $30 million per year, with $4 million allocated to the new job creation credit and $26 million allocated to the job retention credit; and the cap on an eligible business is $300,000. This credit is available for tax years beginning on or after Jan. 1, 2025 and ending before Jan. 1, 2028. Kansas enacts corporate and individual income tax and pass-through entity tax changes Senate Bill 410 (SB 410), signed into law by Governor Laura Kelly on April 24, 2024, makes various changes to the Kansas corporate and individual income tax laws.1 These changes do the following: IRC Section 163(j):The law clarifies the modifications related to the business interest deduction limitation under IRC Section 163(j). For tax years beginning after Dec. 31, 2020, corporate taxpayers must add to federal taxable income (FTI) "the amount of any interest expense paid or accrued in a previous taxable year but allowed as a deduction [under IRC Section 163] in the current taxable year by reason of the carryforward of disallowed business interest" under IRC Section 163(j). Taxpayers must subtract "any interest expense paid or accrued in the current taxable year and disallowed as a deduction" under IRC Section 163(j). (Italics indicates new text.) For tax year 2021, taxpayers under newly enacted K.S.A. 79-32,117(c)(xxvi)(3) are allowed to subtract "an amount equal to the sum of any interest expenses paid or accrued in tax years 2018, 2019, and 2020 less the sum of amounts allowed as a deduction [under IRC Section 163] in tax years 2018, 2019, and 2020." For purposes of these provisions, interest is considered paid or accrued only in the first tax year the deduction would have been allowed under IRC Section 163, as if the IRC Section 163(j) limitation did not exist. IRC Section 280C:For tax years beginning after Dec. 31, 2021, taxpayers must subtract from FTI any federal credit disallowed under IRC Section 280C(a). The subtraction was previously limited to only disallowed expenses related to the federal tentative jobs tax credit. Employee Retention Credit (ERC): For tax years beginning after Dec. 31, 2019 and ending before Jan. 1, 2022, taxpayers may subtract from FTI, 50% of any disallowed federal ERC. Taxpayers must prove for the applicable years that they filed a Kansas income return and paid Kansas income tax on the disallowed amount. Refund claims and amended returns related to this change must be filed by April 15, 2025. Net operating losses (NOLs): For tax years beginning after Dec. 31, 2017, individuals who carried back federal NOLs arising in a tax year beginning after Dec. 31, 2017 and before Jan. 1, 2021, under IRC Section 172(b)(1) as modified by the federal CARES Act, must subtract the federal NOL carryback for each applicable year. Federal NOL carrybacks that exceed Kansas taxable income may be carried forward up to 20 tax years. The law gives taxpayers until April 15, 2025, to claim a refund or file an amended return related to this change for tax years 2018, 2019 or 2020. Pass-through entity tax (PTET): The law makes various changes to the PTET imposed on a pass-through entity (PTE) that elects to be taxed at the entity-level (electing PTEs). The PTET rate, which was a static statutory 5.7%, now corresponds to the highest rate imposed on resident individuals under K.S.A. 79-32,110(a), which currently is also 5.7%. Such change allows the PTET rate to be synced with individual rates if those rates change in the future. Further, the law changes the PTET calculation to the tax rate for the applicable income tax year, multiplied by the sum of (1) each nonresident electing PTE owner's pro rata or distributive share of an electing PTE's income attributable to Kansas; and (2) each resident electing PTE owner's pro rata or distributive share of either (a) all the electing PTE's income or (b) the portion of its income attributable to Kansas. (All resident owners must use the same method of calculation.) Further, credits attributable to the electing PTE will now be passed through to and claimed by the PTE owners. Previously, these credits could not be passed through to, or claimed by, the owner. Modification to FTI under K.S.A. Sections 79-32,117 or 79-32,138 and any expensing deductions allowed under K.S.A. Section 79-32,143a that are attributable to an electing PTE's activities must be claimed on the electing PTE's return and each electing PTE owner's individual income tax return. These changes apply to tax years beginning on or after Jan. 1, 2022. For more on these developments, see Tax Alert 2024-0943. Governors' Proposals North Carolina: Governor Roy Cooper on April 24, 2024, presented his FY 2024–2025 budget "Securing North Carolina's Future". The governor's proposal includes providing a $49 million unemployment insurance tax cut for businesses with 500 or fewer employees, reinstating the Conservation Tax Credit, maintaining the corporate income and top individual income tax rates at the 2024 levels, implementing a two-tiered individual income tax bracket, and providing a refundable child and dependent care tax credit for eligible families. INCOME/FRANCHISE Federal: Proposed bill (HR 8021) would amend P.L. 86-272 to expand the definition of "solicitation of orders" to mean "any business activity that facilitates the solicitation of orders even if that activity may also serve some independently valuable business function apart from solicitation." HR 8021 was introduced on April 16, 2024 and has been referred to the House Committee on the Judiciary. Alabama: New law (HB 187) modifies elective pass-through entity tax (PTET) provisions by extending the due date to make the PTET election. For tax years beginning on or after Jan. 1, 2024, an electing PTE must submit the appropriate form to the Alabama Department of Revenue by the due date for filing the applicable income tax return (including extensions) following the close of the that tax year for which the entity makes the PTET election. Prior to this change, the PTET election had to be made by the 15th day of the third month following the close of the tax year for which the entity makes the PTET election. For tax years beginning on or after Jan. 1, 2025, the election or revocation of an election must be made on a timely filed return, including extensions. HB 187 took immediate effect. Ala. Laws 2024, Act 113 (HB 187), signed by the governor on April 25, 2024. In "the spirit" of this legislation, the Alabama Department of Revenue (AL DOR) announced that is extending the due date for certain PTEs to file the PTET election for tax year 2023. The extension is available to taxpayers who showed an intent to make the election but erroneously failed to do so. The AL DOR said it will recognize the PTET election filed using the MY Alabama Taxes by the due date of the 2023 electing PTE return, with extensions, for PTEs that (1) timely filed the required entity tax return as if the PTET election had been properly made for the year; (2) timely made an electing PTE extension payment; or (3) made an entity-level tax payment before the return's due date. Ala. Dept. of Rev., "ALDOR Gives PTEs More Time to File Election to be Taxed at the Entity Level" (May 1, 2024). Georgia: New law (HB 1162) updates the state's date of conformity to the IRC to Jan. 1, 2024 (from Jan. 1, 2023). This change applies to tax years beginning on or after Jan. 1, 2023. Ga. Laws 2024, Act 408 (HB 1162), signed by the governor on April 22, 2024. Other Georgia legislation is discussed in Tax Alert 2024-0908. Iowa: New law (SF 2442) accelerates Iowa's move to a flat individual income tax rate structure. In 2022, Iowa passed HF 2317 (see Tax Alert 2022-0351) which began a four-year phase-down of individual income tax rates that would culminate with a flat rate of 3.9% by 2026. SF 2442 implements a flat 3.8% individual income tax rate beginning in 2025. Further, effective for tax years beginning on or after Jan. 1, 2025, SF 2442 allows financial institutions with an investment subsidiary to elect to include that subsidiary's income and expenses on their Iowa bank franchise tax return. Once made, the election remains in place so long as the investment subsidiary remains a subsidiary of the financial institution, unless the Iowa Department of Revenue grants leave to file separate returns. For purposes of apportionment, the commercial domicile of the investment subsidiary will be the commercial domicile of the financial institution. Iowa Laws 2024, SF 2442, signed by the governor on May 1, 2024. For more on this development and other Iowa enacted legislation, see Tax Alert 2024-0941. Iowa: The Iowa legislature approved joint resolution, HJR 2006, a constitutional amendment that would require Iowa to have a flat individual income tax rate; all new individual or corporate taxes or rate increases would need two-thirds majority support from both legislative chambers to pass. These amendments must be passed by the legislature during the 2025 legislative session to be placed on the ballot for voters to approve in a general election. HJR 2006 was approved by the legislature on April 10, 2024. For more on this development and other Iowa enacted legislation, see Tax Alert 2024-0941. New York City: The New York City (NYC) Department of Finance (DOF) has released a list of "several notable differences" taxpayers should expect between business corporate tax (BCT) regulations currently being drafted and final corporate tax regulations adopted by the New York State (NYS) Department of Taxation and Finance in December 2023 (See Tax Alert 2024-0140). DOF recently announced it is currently drafting BCT regulations to implement changes enacted in 2015. While NYC's new regulations "will be substantially similar to the state's," the DOF stated, it expects "several notable differences" as highlighted in a recent release. The differences in the release address: (1) allocation of partnership flow-through income, (2) clear and convincing evidence, (3) allocation of income from passive investment customers, (4) billing address safe harbor, and (5) real estate mortgage investment conduits. For more on this development, see Tax Alert 2024-0907. Oklahoma: New law (HB 3559) expands the way a pass-through entity can elect to be subject to the pass-through entity tax (PTET). In addition to being made on the form provided by the Oklahoma Tax Commission, partnerships and S corporation can now make the election by filing an income tax return by the applicable due date, including extensions. HB 3559 takes effect 90-days after the legislature adjourns sine die. Okla. Laws 2024, HB 3559, signed by the governor on April 29, 2024. SALES & USE Colorado: New law (SB 24-023) establishes hold harmless provisions for vendors that rely on erroneous data in the electronic sales and use tax simplification system (SUTS), inclusive of the GIS database, to determine the local taxing jurisdiction to which tax is owed. Thus, during an audit, the state or any local taxing jurisdiction (e.g., county, city and county, or a home rule city) must hold such vendor harmless for any tax, charge or fee liability to any local taxing jurisdiction that would be due solely because of an error or omission in the data of the SUTS or GIS database. To be held harmless a vendor must "collect, retain, and produce … documentation reasonable sufficient to demonstrate the vendor's proper use of and reliance on the GIS database data to determine the tax rate and local taxing jurisdiction to which tax was owed." A vendor that uses an incomplete or erroneous address in the GIS database will not be held harmless for the failure to pay any tax, charge or fee liability to a local taxing jurisdiction. The law requires the Colorado Department of Revenue (CO DOR), or its third-party contractor, to update the data in the GIS database, including jurisdictional boundaries and tax rates, within 30 days of receipt of an update or correction from a local taxing jurisdiction. In addition, the CO DOR must maintain the GIS database in "an accurate condition" and provide a reasonably convenient way for local jurisdictions to inform the CO DOR of any errors. The law also requires the CO DOR to ensure that the GIS database, including jurisdictional boundaries and tax rates, is at least 95% accurate. These provisions apply to audits commenced by local taxing jurisdictions on or after the effective date of this bill; SB 24-023 took effect upon becoming law. Colo. Laws 2024, SB 24-024, signed by the governor on April 19, 2024. Colorado: New law (SB 24-024) establishes a standard for reporting local lodging tax so that they align with the reporting requirements for remitting other local taxes. For purposes of local tax administration of remote sales, the law prohibits local jurisdictions (e.g., any home rule city, town or city and county) that impose a local lodging tax from applying additional reporting requirements or standards on an accommodation's intermediary that are not similarly applied to all marketplace facilitators obligated to collect and remit locally administered taxes. The law does not prohibit a local jurisdiction from (1) requesting information maintained by the accommodation's intermediary in connection with an audit of the local lodging tax, (2) requesting additional information or data from a marketplace facilitator or an accommodation's intermediary that would be provided on a voluntary basis, or (3) from passing an ordinance regulating a marketplace facilitator or an accommodation's intermediary. Local taxing jurisdictions that have passed marketplace facilitator laws can only audit marketplace facilitators for sales they facilitate when the marketplace facilitator is filing tax returns with the local taxing jurisdiction. Local taxing jurisdiction are prohibited from auditing or otherwise assessing tax against marketplace sellers, multichannel sellers or lodging suppliers for sales facilitated by a marketplace facilitator that has confirmed it is responsible for remitting tax. The law defines key terms, including "accommodations intermediary", "local taxing jurisdiction" and "lodging supplier". HB 24-024 takes effect Jan. 1, 2025; however, if a referendum petition is filed against this law within 90 days after the final adjournment of the legislature, then it will not take effect unless approved by the voters during the Nov. 5, 2024 general election. Colo. Laws 2024, SB 24-024, signed by the governor on April 19, 2024. Idaho: New law (HB 751) clarifies that the sales and use tax exemption applies to grain bin structures, augers, dryers, fans, sweep augers and other equipment that is used directly and primarily in the production of agriculture. The exemption also applies to equipment and supplies used to perform a quality control function in the preparation of crops for storage in a grain bin structure that is directly and primarily used in the production of agriculture. These exemptions apply regardless of whether such equipment becomes part of the real property or is installed by the farmer, contractor or subcontractor. The provisions of HB 752 are retroactively effective to Jan. 1, 2024. Idaho Laws 2024, ch. 297 (HB 751), signed by the governor on April 8, 2024. Maine: New law (LD 2214) eliminates the requirement that sales tax be paid up front by a business owner when purchasing property that would be rented to consumers, such as equipment. Specifically, the law expands the definition of "retailer" to include a lessor and amends the definition of "retail sale" to provide that it does not include the sale or lease or rental to a lessor that has been issued a resale certificate of tangible personal property for lease or rental. The law adds a definition of "lease or rental". The definition of "sale" is amended to include, in addition to leases, "rentals, conditional sale contracts and any contract under which possession of the property is given to the purchaser but title is retained by the seller as security for the payment of the purchasing price, and leases and contracts that are determined by the assessor to be in lieu of purchase." In addition, the list of things that the "sales price" does not include is expanded to include, regarding lease or rental payments, separately stated charges for sales of optional insurance coverage for protection of the lessee or the lessee's personal property (e.g., liability insurance, personal accident insurance, personal effects protection). The definition of "taxable service" is amended to delete from the list rentals or leases of automobiles, camper trailers or motor homes and the rental or lease of trucks or vans with a gross vehicle weight of less than 26,000 pounds from those in the business of renting such trucks or vans. The law provides specific sourcing rules for "leases or rentals of tangible personal property," "motor vehicles, trailers, semitrailers, truck campers or aircraft," and "transportation equipment." These changes apply to sales, leases and rentals of tangible personal property and sales of taxable services on or after Jan. 1, 2025. The law considers each time-period for which a lease or rental payment is charged to be a separate sale. The law also provides for a refund of sales and use tax paid by a qualified lessor on the purchases of qualifying lease or rental property on or after Jan. 1, 2023 and before Jan. 1, 2025. The amount of the refund is limited to Maine sales and use tax collected and remitted to the state by the qualified lessor on a qualifying lese or rental property on or after Jan. 1, 2025 and before Jan. 1, 2027. Further, starting Jan. 1, 2025, the law exempts from Maine sales tax sales to nonprofits exempt from federal income tax under IRC Section 501(c)(3), if the tangible personal property or taxable services sold are primarily used for the purposes for which the nonprofit was organized. Maine Laws 2024, P.L. 643 (LD 2214), signed by the governor on April 22, 2024. Washington: The Washington Department of Revenue issued a tax advisory on the sales and use tax exemption for server equipment and power infrastructure in eligible data centers. The advisory addresses the following questions: (1) "How are tenants treated with respect to the limitation of six annual exemption certificates for refurbishments of rural data centers, and for the construction and refurbishments of urban data centers?" (2) "How does the exemption apply to a computer data center comprised of multi-buildings?" and (3) "How long does the exemption last for a data center comprised of multiple buildings constructed over a number of years?" The advisory also provides an overview of the data center exemption. Wash. Dept. of Rev., ETA 3221.2024 "Data Center Exemption: Qualifying Tenants & Data Centers Consisting of Multiple Buildings (April 23, 2024). BUSINESS INCENTIVES Federal: Treasury and the IRS have released final regulations (TD 9993) on the transfer of certain energy credits under IRC Section 6418, added by the Inflation Reduction Act, which adopt the proposed regulations with some modifications. The final regulations describe special rules related to excessive credit transfers and recapture events, including which taxpayer is responsible in such events. The final regulations also clarify the mandatory pre-filing registration process, which must be completed prior to making a transfer election, and provide specific rules for partnerships and S corporations. (See Tax Alert 2024-0858.) Iowa: New law (SF 2442) extends the Iowa Economic Development Authority's (IEDA) authority to enter withholding agreements for targeted jobs until June 30, 2027 (from June 30, 2024) and increases the investment threshold for qualifying for the credit from $500,000 to $1 million. The credit, created in 2006, provides a withholding tax credit equal to 3.0% of the gross wages paid by an employer to each employee covered. The agreements, which are executed between employers and border pilot project cities meeting defined criteria, must be approved by the IEDA. Employers claim the credit on quarterly withholding tax returns and then remit the withholding to the pilot project city, rather than the Iowa General Fund, to finance projects related to the employer under the agreement. Iowa Laws 2024, SF 2442, signed by the governor on May 1, 2024. For more on this development and other legislation enacted in Iowa, see Tax Alert 2024-0941. Iowa: New law (SF 574) creates the Major Economic Growth Attraction (MEGA) Program to be administered by the Iowa Economic Development Authority's (IEDA). The program provides a tax credit to certain foreign businesses that acquire agricultural land in Iowa if certain requirements are met. Requirements to qualify for the credit include investing over $1 billion in the proposed project, creating jobs in Iowa because of the investment, and primarily engaging in advance manufacturing, biosciences or research and development (data centers and retail businesses do not qualify). Incentives available under the MEGA Program include: (1) a qualifying investment tax credit of up to 5% of the business's qualifying investment, (2) a sales tax refund for certain purchases that are made by a business and used for the construction or equipping of an eligible business's qualifying project investment, and (3) a withholding tax credit of up to 3% of gross wages paid to each employee in a project job that meets certain wage thresholds. Sales tax refunds will be paid to the business equally over five tax years. Applications for the MEGA Program can be submitted beginning July 1, 2024. Iowa Laws 2024, SF 574, signed by the governor on May 1, 2024. For more on this development and other legislation enacted in Iowa, see Tax Alert 2024-0941. PROPERTY TAX Kansas: New law (SB 410) makes various changes to Kansas's property tax provisions. Applicable to tax years beginning after Dec. 31, 2024, a new statutory provisions exempts the following from all property or ad valorem taxes: (1) new electric generation facilities,2 (2) new addition3 to a new or existing electric generation facility, and (3) new pollution control device constructed or installed on or after Jan. 1, 2025, at a new or existing electric generation facility.4 The exemption applies when construction or installation of such property is commenced and the 10 tax years immediately following the year in which the construction or installation of the property is completed. The law also limits the application of the property or ad valorem tax exemption for electric generation facilities and additions to such facilities under K.S.A. Sections 79-257 and 79-258 to property for which an exemption application was filed by Dec. 31, 2024. The law codifies provisions in the Property Valuation Division's administrative guidance on adjustments reducing the taxable value of agricultural land based on adverse influences (e.g., canopy cover, salinity and alkalinity, water table fluctuation, newly constructed drainage and flood control areas) not sufficiently accounted for in the agricultural use valuation formula. The law also allows a hearing of any valuation appeal or tax protest or any appeal from a final determination of the Secretary of Revenue to be conducted by teleconference or video conference. The law reduces the rate of the late filing penalty imposed on (1) persons required to file a statement listing property for assessment and (2) persons, corporations or associations owning oil and gas leases or engaged in operating for oil that fails to timely make and file a state of assessment. The penalties are reduced from 5% to 2% with an additional 2% (from 5%) for each additional month which the failure continues, not to exceed 10% (from 25%) in the aggregate. The penalties for filing a statement after one year from the due date, failure to file, property that has escaped taxation, and property listed but underreported are each reduced from 50% to 12.5%. Kan. Laws 2024, SB 410, signed by the governor on April 24, 2024. CONTROVERSY Georgia: New law (HB 1023), for tax years beginning on or after Jan. 1, 2025, grants corporate taxpayers an additional 30 days after the federal extension deadline to file their state corporate income tax return. Ga. Laws 2024, Act 376 (HB 1023), signed by the governor on April 18, 2024. For a discussion of other changes enacted in Georgia, see Tax Alert 2024-0908. Iowa: New law (SF 2054) removes the requirement that an outstanding tax liability be paid by a dissolved business entity — in this case, limited liability companies, business corporations, closed cooperatives and nonprofit cooperatives — as a condition of reinstatement. Iowa Laws 2024, SF 2054, signed by the governor on April 19, 2024. New Jersey: The New Jersey Division of Taxation (NJ DOT) posted information on the state's adoption of the federal partnership tax audit regime, which applies to adjustments to federal taxable income on or after Jan. 1, 2020. Under New Jersey's law, partnerships, except those that make an election to pay, have 90 days from a final federal adjustment and determination of a change or correction to do the following: (1) submit the federal adjustment report to the NJ DOT, (2) file their amended New Jersey returns (NJ-1065s, NJ-1080-Cs and NJK-1s) for the reviewed year, and (3) notify each direct partner of their distributive share of the final federal adjustment. If the partnership does not make an election to pay, the adjustment will pass through to partners of the reviewed year, who within 180 days of the final determination must (1) file an amended Gross Income Tax or Corporation Business Tax returns, including documentation received regarding their distributive share of the final federal adjustments, and (2) pay additional tax, penalty and interest due. If the partnership elects to pay, it has 90 days from the final determination date to (1) notify the NJ DOT's Gross Income Tax Audit Branch that it is making the election, (2) submit the federal adjustment report to the audit branch, and (3) submit their amended New Jersey returns (NJ-1065s and NJK-1s) to the audit division. The partnership has 180 days from the final determination to remit payment of additional tax, penalties and interest due. The NJ DOT noted that partnerships can only use the partnership pay election method if they participated in the federal centralized partnership audit regime and were audited by the IRS. The NJ DOT also explained that the state partnership representative should be the same person who represents the partnership for federal purposes. A partnership can make a written request to designate a different person as the state partnership representative. N.J. Div. of Taxn., "New Jersey Adoption of the federal Partnership Tax Audit Regime" (last updated April 5, 2024). PAYROLL & EMPLOYMENT TAX Georgia: On April 18, 2024, Georgia Governor Brain Kemp approved HB 1015 and HB 1021, which, retroactive to Jan. 1, 2024, reduce the personal income tax rate and raise the dependent exemption. Under HB 1015, the personal income tax rate is reduced from 5.49% to 5.39% retroactive to Jan. 1, 2024. If revenue targets are met, additional annual reductions of 0.10% will apply starting Jan. 1, 2025, until the tax rate reaches 4.99%. HB 1015 is an acceleration of the tax cuts previously set to begin Jan. 1, 2025. HB 1021 increases the personal income tax dependent exemption from $3,000 to $4,000 starting Jan. 1, 2024. For more on this development, see Tax Alert 2024-0841. Oregon: The Multnomah County Board of Commissioners adopted amendments under Ordinance 1321 which, effective Jan. 18, 2024, modify some of the rules governing its "Preschool for All" personal income tax. The amendments make the following changes: (1) Form W-2 penalties: In addition to other filing and payment penalties, Multnomah County is authorized to assesses a penalty of $50 for each missing or incomplete Form W-2; the penalty can be waived for reasonable cause; (2) Electronic filing of returns: Multnomah County can require that returns prepared by paid tax preparers be filed electronically, via magnetic media or internet-based applications, if the paid preparer is required to file federal returns electronically; Multnomah County may establish exceptions to this rule; (3) Pass-through income: The Ordinance clarifies the rules governing the deduction of pass-through income for tax filers. For more on this development, see Tax Alert 2024-0803. Vermont: Governor Phill Scott announced that the state's voluntary Family and Medical Leave Insurance (FMLI) program was opened to employers with two or more employees on Feb. 15, 2024. Benefits will be available to participating employees starting July 1, 2024. This program is provided exclusively through The Hartford. For more on this development, see Tax Alert 2024-0882. MISCELLANEOUS TAX Maine: New law (LD 2214) increases the rate of the hospital tax to 3.25% (from 2.23%) of the hospital's net operating revenue as identified in the hospital's audited financial statement for the hospital's fiscal year (FY) that ended during calendar year 2022. Also starting in 2025, the tax does not apply to critical access hospitals. For the state FY beginning on July 1, 2025 the hospital's taxable year is the hospital's FY that ended during calendar year 2022. For the state FY beginning July 1 2024, taxpayers subject to the hospital tax must submit a return and pay the amount equal to 2.23% of the hospital's net operating revenue identified in the hospital's audited financial statement for the FY that ended during calendar year 2020 multiplied by one-half by Nov. 15, 2024. Specialty hospitals must pay an amount equal to 3.25% of the hospital's net operating revenue identified in the hospital's audited financial statement for the FY that ended during calendar year 2022 multiplied by one-half by May 15, 2025. Licensed psychiatric hospitals must pay an amount equal to 2.23% of the hospital's net operating revenue identified in the hospital's audited financial statement for the FY that ended during calendar year 2022 multiplied by one-half by May 15, 2025. Maine Laws 2024, P.L. 643 (LD 2214), signed by the governor on April 22, 2024. GLOBAL TRADE Federal and International: This edition of Trade Talking Points includes updates on the United Kingdom's (UK's) consultation for a carbon border adjustment mechanism (CBAM), the European Union's (EU's) Free Trade Agreements, United States (US) trade remedies, the latest World Trade Organization (WTO) meetings, a new Chinese dispute with the US over electric vehicles subsidies, updates on the WTO's global trade forecast and meeting on services trade, the UK's Border Target Operating Model's April deadlines, the sixth meeting of the US-EU Trade and Technology Council, EU trade defense and the finalization of the EU's Ukraine autonomous measures. For more on this development, see Tax Alert 2024-0847. Federal and International: The latest issue of TradeWatch is now available. In this issue, we set out Top seven trade trends that, in our view, will have a significant impact on international trade over the course of 2024. We assess the outcomes from the recent World Trade Organization's 13th Ministerial Conference, and we explore some key themes impacting global trade, including hot topics that we have dealt with in previous issues of this publication. A copy of TradeWatch is available via Tax Alert 2024-0853. VALUE ADDED TAX International — Algeria: Tax authorities in Algeria recently published a tax administration doctrine regarding the tax audit approach to input value-added tax (VAT) and VAT credits audits, as well as VAT compliance requirements in relation with a VAT exempted turnover. For additional information on this development, see Tax Alert 2024-0859. UPCOMING WEBCASTS Wednesday, June 12, 2024. Domestic tax quarterly webcast series: a focus on state tax matters (1:00-2:30 p.m. ET New York). For our second quarterly webcast in 2024, we welcome Marilyn Wethekam, Of Counsel to the Council on State Taxation, who will join us to discuss the states' renewed interest in worldwide combined reporting. Panelists will discuss recent proposals, constitutional issues related to worldwide combined reporting and the taxation of foreign income. They will also identify compliance challenges involved in obtaining the information needed to file a worldwide combined return, among other issues. In this webcast, we also will hold the second of a four-part series on the use of artificial intelligence (AI) in state and local taxation. In this part, we discuss the impact of generative AI on the tax profession and explore use cases in a "day in the life" of a tax practitioner. We will round out the webcast with a state and local legislative update, highlighting recently enacted changes to state corporate and individual income taxes, sales and use taxes, property taxes, credits and incentives, and administrative provisions. Panelists will also discuss policy activity to watch for the remainder of 2024. 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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