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Ernst & Young's State and Local Tax Weekly newsletter for May 10 and May 17 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

Tennessee's modernize franchise tax calculation and provides for a time-limited refund opportunity

On May 10, 2024, Tennessee Governor Bill Lee signed into law SB 2103/HB 1893, which significantly changes the Tennessee franchise tax calculation. The law does the following:

Prospective repeal of the alternative minimum property measure.Effective for tax periods ending on or after Jan. 1, 2024, SB 2103/HB1893 repeals the franchise tax's alternative minimum property measure and requires the tax to be calculated based solely on a taxpayer's apportioned net worth. Because the repeal is effective for tax periods ending on or after Jan. 1, 2024, absent guidance from the Tennessee Department of Revenue (Department), taxpayers should compute their 2023 franchise tax liability utilizing the alternative minimum property measure and, if applicable, seek refunds of tax paid as outlined next.

Refunds of previously paid franchise tax.Pursuant to the newly created Tenn. Code Ann. Section 67-4-2122, refunds of previously paid franchise tax calculated under the alternative minimum property measure are authorized for tax reported to the state on a return filed on or after Jan. 1, 2021 and covering a tax period ended on or after March 31, 2020. Tax eligible for refund is the difference between the franchise tax paid based on the alternative minimum property measure and the tax that would have been owed based on the net worth measure for the applicable tax year(s). To the extent credits were claimed to reduce franchise tax calculated on the alternative minimum property measure, refund claims will operate to reinstate these credits.

Refunds authorized under Tenn. Code Ann. Section 67-4-2122 are not per se automatic. Rather, a taxpayer must file a refund claim for applicable periods between May 15, 2024 and Nov. 30, 2024. Refund claims must be filed on a form(s) prescribed by the Commissioner of Revenue (Commissioner) for this specific franchise tax refund and include information necessary to determine the amount of the refund. The refund form also must include a statement whereby the taxpayer, in exchange for accepting a refund, waives any claim or right to file a suit alleging the franchise tax — both the alternative minimum property measure and apportioned net worth measure — is unconstitutional by failing the internal consistency test.

A refund claim on any other basis (e.g., something other than the franchise tax alternative minimum property measure refund) is filed under the traditional refund process.

The Commissioner is authorized to approve a timely filed refund claim filed before Jan. 1, 2024, if the claim alleges that the franchise tax, as it previously existed, is unconstitutional for failing the internal consistency test.

Franchise tax refunds claimed under Tenn. Code Ann. Section 67-4-2122 will first be used to offset any outstanding tax liabilities (for all tax types) and are subject to the report of debts requirement (the report of debts form would have to be submitted with the refund claim form(s)).

Interest will be added to the refund beginning 90 days from the date the Commissioner receives the refund claim and proper proof that the refund or credit is due and payable.

The Commissioner has the authority to audit, adjust, or deny refunds as appropriate. To the extent a refund claim filed under Tenn. Code Ann. Section 67-4-2122 is denied or deemed denied¹ by the Commissioner, a taxpayer may seek judicial review in the Sumner County, Tennessee Chancery Court.

Finally, SB 2103/HB 1893 includes a public disclosure requirement whereby, between May 31, 2025 and June 30, 2025, the Department is required to publish on its website the taxpayer's name and the applicable range corresponding to the total refund amount. Applicable ranges disclosed include refunds of: (1) $750 or less, (2) $751 but $10,000 or less, or (3) more than $10,000. To the extent a taxpayer's refund claim has not been issued by May 31, 2025, the taxpayer's name along with a designation of "pending" will be published.

Department guidance on refund procedures. In Franchise and Excise Tax Notice #24-05, Franchise Tax Property Measure Repeal (May 2024), the Department provides guidance on the specific refund procedures. In addition to submitting the refund claim form(s), amended returns are required to be prepared and filed whereby tax is calculated solely based on the net worth measure (i.e., Sch. G is omitted). Taxpayers also can, but are not required to, submit additional information (e.g., schedule of assets/liabilities, a copy of the federal return or pro forma) to substantiate net worth reflected on the amended returns. The Department may request additional information to support the net worth amount, if necessary to complete the refund claim. Finally, the Department strongly encourages taxpayers to file the refund claim form(s) and amended returns via the online TNTAP system. If filed via TNTAP, amended returns must be submitted in chronological order by tax year; refund claim form(s) should then be submitted once the amended returns are processed, typically within 1-2 business days.

The Department has created a "Franchise Tax Property Measure (Schedule G) Refunds" webpage upon which it will post guidance, including important notices, filing instructions, the refund claim form, FAQs, among other things.

Annual election to continue computing franchise tax under alternative minimum property measure. Taxpayers may annually elect to continue computing and paying franchise tax under the alternative minimum property measure if doing so will result in a higher franchise tax liability (e.g., to utilize tax credits). Taxpayers making this election must waive any claim that the alternative minimum property measure is unconstitutional by failing the internal consistency test.

Suit challenging Tennessee's franchise tax as unconstitutional. Taxpayers have until Nov. 30, 2024 to file suit if they want to challenge Tennessee's franchise tax, including the alternative minimum property measure, as unconstitutional by failing the internal consistency test, rather than seeking authorized refunds under Tenn. Code Ann. Section 67-4-2122.

For more on this development, see Tax Alert 2024-0927.

Colorado replaces unique "three of six" combined reporting test with MTC standard starting in 2026

Colorado will adopt the Multistate Tax Commission's standard for combined reporting for tax years beginning on or after Jan. 1, 2026 under HB 24-1134, which was signed by Governor Jared Polis on May 14, 2024.²

HB 24-1134 moves away from Colorado's unique "three of six" test and creates new section Colo. Rev. Stat. Section 39-22-303(11.5), requiring the members of an affiliated group of C corporations that are members of a unitary group to file a combined report.

A unitary business is defined under the new statute as "a single economic enterprise of an affiliated group of C corporations that, through their activities, are sufficiently interdependent, integrated, and interrelated to provide a sharing, exchange, or significant flow of value to the separate parts." A unitary business includes any business that is conducted by a member of the group through an interest in a partnership, whether held directly or indirectly through a series of partnerships or pass-through entities. Colorado's existing water's edge method is retained by HB 24-1134.

Net income of each combined group member will be computed the same as it currently is under existing law but with intercompany transactions eliminated. HB 24-1134 expressly applies federal consolidated return rules for determining intercompany eliminations as if the combined group were a consolidated filing group. Dividends between members of the combined group will continue to be eliminated as under existing law.

HB 24-1134 adopts the Finnigan rule for determining the combined group's apportionment factor — i.e., all Colorado-sourced receipts of combined group members are includable in the receipts factor numerator, regardless of whether the member has Colorado nexus. Intercompany transactions, including intercompany transactions between a corporate partner and a partnership with which the corporate partners have a unitary relationship, will be excluded from the numerator and denominator. The exclusion is as follows: (1) in the case of sales by the corporate partner to the partnership to the extent of the corporate partner's interest in the partnership; and (2) in the case of sales by the partnership to the corporate partner not to exceed the corporate partner's interest in all partnership sales. The Colorado Department of Revenue is authorized to promulgate rules in this area.

If a member of the combined group holds a partnership interest, the share of the partnership's apportionment factor to be included in the combined group's apportionment factor is determined by multiplying the partnership's apportionment factor by the ratio of the corporate partner's share of the partnership's apportionable income over the partnership's total apportionable income.

The law requires the combined report to be filed by the parent corporation of the combined group. If no parent corporation exists, or if the parent corporation is not a member of the combined group, the members of the group are to designate the filing member. Members of the combined group will be jointly and severally liable for the tax liability of the combined group. An affiliated group of C corporations may continue to elect to file a consolidated return as otherwise provided under Colorado law.

For additional information on this development, see Tax Alert 2024-0986.

INCOME/FRANCHISE

Florida: New law (HB 7073) updates the state's date of conformity to the IRC to Jan. 1, 2024 (from Jan. 1, 2023). This change operates retroactively to Jan. 1, 2024. Fla. Laws 2024, ch. 158 (HB 7073), signed by the governor on May 7, 2024.

Nebraska: New law (LB 1023), for tax years beginning on or after Jan. 1, 2025, provides a corporate and individual income tax deduction for: (1) depreciable business assets that are qualified property or qualified improvement property under IRC Section 168, and (2) research and experimental (R&E) expenditures, as defined in Treas. Reg. 1.174-2, that the taxpayer elects to treat as expenses. The deduction is limited to (1) 60% of the full cost depreciable property placed into service after Dec. 31, 2024, and (2) the R&E expenditures incurred during the tax year. The 60% deduction is allowed only to the extent the expenditures are not deducted for federal income tax purposes. Taxpayer may make an irrevocable election to amortize the expenditures over five years in lieu of taking an immediate deduction. Partners, S corporation shareholders, limited liability company members, and estate or trust beneficiaries may claim the deduction to the extent of their shares of income or loss in the pass-through entity, estate, or trust. Neb. Laws 2024, LB 1023, signed by the governor on April 23, 2024. For additional information on this development, see Tax Alert 2024-1021.

North Carolina: New law (SB 508) clarifies that the tax rate on the franchise tax base is $1.50 per $1,000 of the corporation's tax base, with a maximum of $500 on the first $1 million of a corporation's tax base. This change is effective for tax years beginning on or after Jan. 1, 2025 and applies to the calculation of the franchise tax reported on the corporate income tax return for 2024 and later. N.C. Laws 2024, SL 2024-1 (SB 508), signed by the governor on May 15, 2024.

North Carolina: New law (SB 508) extends the date for making the pass-through entity tax (PTET) election for the 2022 taxable year to July 1, 2024 (from Oct. 15, 2023). Following this change, the North Carolina Department of Revenue issued updated guidance on the elective PTET. The guidance addresses the following topics: (1) entities eligible to make the PTET election, with an extended discussion on newly qualifying trust partners and newly qualifying corporate partners; (2) extension of time to make the PTET election for tax year 2022; and (3) important reminders. N.C. Laws 2024, SL 2024-1 (SB 508), signed by the governor on May 15, 2024; N.C. Dept. of Rev., Directive TA-23-1 "Changes That Allow Certain Trusts and Corporations to be Eligible Partners in a Taxed Partnership" (May 16, 2024).

SALES & USE

Alabama: New law (SB 73) effective Oct. 1, 2024 through Sept. 30, 2029, exempts from state sales and use tax up to $25,000 of gross proceeds from the sale of agricultural fencing materials. Such fencing materials include t-posts, wood posts, barbed wire, net wire, smooth wire, standard metal gates, and other like materials used for fencing livestock. This exemption does not apply to county or municipal taxes unless approved by resolution or ordinance by the local governing body. To qualify for the exemption, a retail purchaser must provide a seller an affidavit confirming that the purchased materials are strictly for use with agricultural livestock. Ala. Laws 2024, Act 169 (SB 73), signed by the governor on May 3, 2024.

Alabama: New law (HB 131), starting Sept. 1, 2024, requires any health care provider claiming a sales and use tax emption for durable medical equipment and medical supplies to obtain and maintain an exemption certificate from the Alabama Department of Revenue before purchasing such equipment and supplies. The health care provider must provide the exemption certificate to the seller at the time of purchase. HB 131 took effect immediately. Ala. Laws 2024, Act 391 (HB 131), signed by the governor on May 15, 2024.

Alabama: New law (HB 51), beginning Oct. 1, 2024 through Sept. 30, 2029, exempts sales of hearing instruments, including hearing aids, from sales and use tax. The exemption does not apply to county or municipal sales taxes unless approved by resolution or ordinance adopted by the local governing body. Ala. Laws 2024, Act 400 (HB 51), signed by the governor on May 15, 2024.

Florida: New law (HB 7073) extends sales tax holidays for "back-to-school" (July 29, 2024 through Aug. 11, 2024); disaster preparedness (June 1, 2024 through June 14, 2024, and Aug. 24, 2024 through Sept. 6, 2024); Freedom Month, which is for specified recreation items and activities (July 1, 2024 through July 31, 2024); and skilled worker "tool time" (Sept. 1, 2024 — Sept. 7, 2024). The Florida Department of Revenue has posted guidance on the sales tax holidays on its webpage. The law also provides that the sale of a boat and corresponding boat trailer is deemed to occur in the county where the purchaser resides, as identified on the registration or title documents for the boat and trailer. Fla. Laws 2024, ch. 158 (HB 7073), signed by the governor on May 7, 2024.

Georgia: New law (HB 1181) sunsets various sales and use tax exemptions as of Dec. 31, 2029, including the exemption for (1) machinery and equipment used to remanufacture aircraft engines, engine parts or components at an in-state remanufacturing facility; (2) machinery and equipment and any repair, replacement or component parts for such machinery and equipment used primarily for reducing or eliminating air or water pollution; (3) machinery and equipment incorporated into a telecommunications manufacturing facility that is primarily used to improve air quality in advanced technology clean rooms; and (4) mobility enhancing equipment prescribed by physicians; among other exemptions. Ga. Laws 2024, Act 598 (HB 1181), signed by the governor on May 6, 2024. For additional information on this development, see Tax Alert 2024-0908.

Georgia: Vetoed bill (HB 1192) would have suspended the issuance of any new exemption certificates for high-technology data centers. In his veto message, the governor said that "[t]he bill's language would prevent the issuance of exemption certificates after an abrupt July 1, 2024 deadline for many customers of projects that are already in development — undermining the investments made by high-technology data center operators, customers, and other stakeholders in reliance on the recent extension, and inhibiting important infrastructure and job development." HB 1192 was vetoed on May 7, 2024.

Georgia: New law (SB 340) expands the exemption for agricultural operations to exempt "diesel exhaust fluid for agricultural uses only" from sales and use tax. SB 340 takes effect July 1, 2024. Ga. Laws. 2024, Act 497 (SB 340), signed by the governor on April 30, 2024.

Mississippi: New law (HB 1764) imposes a 4.5% sales and use tax on sales of equipment and materials used, and income from services performed, "in connection with geophysical surveying, exploring, developing, drilling, redrilling, completing, working over, producing, distributing, or testing of oil, gas and other mineral resources", including overhead services. Sales tax will not be charged when an operator that rebills sales of equipment and materials to nonoperating working interest owners on behalf of the joint account has paid or accrued the sales tax. HB 1764 takes effect July 1, 2024. Miss. Laws 2024, HB 1764, signed by the governor on May 8, 2024.

Oklahoma: New law (HB 3346) allows the Oklahoma Tax Commission (OTC) to revoke or suspend a sales tax permit when the sales tax reports indicate that there is no business activity at a place of business for a period of 12 months. The OTC must give the permit holder 20 days-written notice to show cause as to why the sales tax permit for the location at issue should not be revoked. HB 3346 takes effect on July 1, 2024. Okla. Laws 2024, (HB 3346), signed by the governor on April 29, 2024.

Oklahoma: New law (SB 1283) adds definitions of "bottled water" and "food sold with eating utensils provided by the seller" for purposes of the state sales tax exemption on groceries and food items. The definition of "prepared food" is modified to (1) clarify that food sold with eating utensils provided by the seller does not include a container or packaging used to transport the food, and (2) exclude food sold by a food manufacturer, unheated food sold by weight or volume as a single item, and food that ordinarily requires additional cooking by the consumer before it can be consumed. The term "food sold with eating utensils provided by the seller" means food sold by a seller that meets either of the following requirements: (i) for sellers with a prepared food sales percentage of greater than 75%, the seller makes eating utensils available to purchasers or, for bottled water, candy or soft drinks, the seller gives/hands the utensils to the purchaser or makes available plates, bowls, glasses or cups necessary for the purchaser to receive the food (note: if a food item that has four or more servings is packaged as one food item and sold at a single price, the seller must give/hand the eating utensil to the purchaser); or (ii) for sellers with a prepared food sales percentage of 75% or less, the seller's business practice is to give/hand eating utensils to the purchaser (note: the seller need only make available to purchasers eating utensils necessary for purchasers to receive the food, e.g., cups and bowls). Food is not sold with eating utensils provided by the seller if a person other than the seller places the eating utensils in a package with the food items and that person's NAICS classification is a manufacturer. If, however, the person has any other NAICS classification, the seller is considered to have provided the eating utensil. Lastly, SB 1283 deletes the temporary moratorium on increases to local sales tax on food and food ingredients that otherwise would have sunset on June 30, 2025. Okla. Laws 2024, (SB 1283), signed by the governor on May 8, 2024.

BUSINESS INCENTIVES

Federal: In Notice 2024-36 (Notice), the IRS and Treasury Department released guidance on Round 2 of the IRC Section 48C(e) program to allocate the remaining $6 billion in investments in eligible qualifying advanced energy projects, with $2.5 billion going to projects located in energy communities census tracts. The IRS said at the close of Round 2 it will determine whether any credits are unallocated and whether another allocation round is needed. For additional information on this development, see Tax Alert 2024-0909.

Florida: New law (HB 7073) creates a tax credit program for individuals with unique abilities. For tax years beginning on or after Jan. 1, 2024, a qualified taxpayer is eligible for a credit of up to $1,000 for each qualified employee employed by the taxpayer during the year. A qualified employee is an individual who has a disability and has been employed for at least six months by a qualified taxpayer. The Florida Department of Revenue (FL DOR) must approve the credit before the taxpayer can claim it on a tax return. The FL DOR will approve credits on a first-come, first-served basis, and it will notify a taxpayer if their application is incomplete. Taxpayers will have 30 days after receiving the notification to correct any deficiency. Unused credit can be carried forward for up to five years. The amount of credit is capped at $10,000 per year per taxpayer and $5 million in the aggregate. The law also establishes a tax credit for taxpayers who operate an eligible child-care facility for its employees. The credit is 50% of the startup costs of facility against any tax due for the tax year the facility begins operation as an eligible child-care facility. The amount of the credit depends on the number of employees employed by the taxpayer during the year. Taxpayers may carryforward unused credit for up to five years. Taxpayers may apply for the credit starting Oct. 1, 2024; the application must be approved before the taxpayer can claim the credit on a return. Fla. Laws 2024, ch. 158 (HB 7073), signed by the governor on May 7, 2024.

Georgia: New law (HB 1181) limits and reduces the carry-forward period for certain income tax credits, and establishes a sunset date for certain credits. Specifically, HB 1181 establishes new three-year credit carryforward limits for tax credits for (1) clean energy property, (2) business enterprises for leased motor vehicles, daily ridership and implementation, and (3) Class III railroads and reporting. It also reduces from 15 years to 10 years the carryforward period for unused credits for investments in expanding existing manufacturing facilities and enhancements for high-impact aerospace defense projects.

The 10-year credit carryforward period is reduced to five years for income tax credits for: (1) qualified research expenses; (2) qualified investments in a research fund; (3) jobs created by manufacturers of medical equipment, medical supplies, pharmaceuticals or medicine; (4) existing manufacturing and telecommunications facilities in tiers 1, 2, 3 or 4 counties; (5) employers providing approved retraining programs; and (6) qualified donations of real property. The five-year carryforward period (reduced from 10-years) also applies to jobs tax credits for certain business enterprises in counties designated as less developed, increases in port traffic, and revitalization zone tax credits.

HB 1181 reduces from five years to three years the credit carryforward period for income tax credits for: (1) film, gaming, video or digital production and postproduction expenditures; (2) alternative fuel, low-emission and zero-emission vehicles and electric vehicle chargers; (3) businesses engaged in manufacturing cigarettes for export; (4) depository financial institutions that elected subchapter "S" status; (5) certain qualified equipment that reduces business or domestic energy or water usage; and (6) certain qualified investments for limited periods of time. These revised limits apply to unused tax credits generated during tax years beginning on or after Jan. 1, 2025.

Provisions of HB 1181 also sunset certain tax credits on Dec. 31, 2029, including those for (1) qualified investments in a research fund; (2) alternative fuel, low-emission and zero-emission vehicles and electric vehicle chargers; and (3) business enterprises for leased motor vehicles, daily ridership and implementation. Ga. Laws 2024, Act 598 (HB 1181), signed by the governor on May 6, 2024. For additional information on this development, see Tax Alert 2024-0908.

Nebraska: New law (LB 1023) for tax years beginning on or after Jan. 1, 2025, allows employers a refundable income tax³ credit for new employees who move to Nebraska and earn at least $70,000 but not more than $250,000⁴ annually. The refundable credit is limited to 50% of the relocation expenses paid by the employer, up to $5,000 per qualifying employee. Employers must apply for the credit through the Nebraska Department of Revenue (Department), which will approve qualifying applications on a first-come, first-serve basis until the budget limit of $5 million is reached. Employers must attach the credit certification to the appropriate income tax return. The credit is subject to recapture if the employee moves out of Nebraska within two years after claiming the credit. LB 1023 also provides relocation incentives to employees who move to Nebraska and earn at least $70,000 but not more than $250,000 annually. Qualifying employees may make a one-time election to exclude all Nebraska-sourced wage income included in federal adjusted gross income. Employees must make the election within two calendar years of becoming a Nebraska resident and must not have been a Nebraska resident in the year before claiming residency for purposes of the exclusion. Recapture provisions apply for employees who fail to maintain Nebraska residency for two full calendar years following the year in which the exclusion is taken. Neb. Laws 2024, LB 1023, signed by the governor on April 23, 2024. For additional information on this development, see Tax Alerts 2024-0967 and 2024-1021.

PROPERTY TAX

Georgia: New law (HB 808) sends to voters a ballot measure that, if approved, would increase the property tax exemption for tangible personal property (TPP) from $7.5 million to $20 million. If approved by voters, all TPP (except motor vehicles, trailers and mobile homes), would be exempt from all ad valorem taxation if the actual fair market value of the total amount of TPP owned by the taxpayer within a county does not exceed $20 million. The increased exemption would take effect on Jan. 1, 2025. This ballot measure is set to be considered during the Nov. 5, 2024 general election. Ga. Laws 2024, Act 581 (HB 808), signed by the governor on May 6, 2024.

Florida: New law (HB 7073), for purposes of tangible personal property constructed or installed by an electric utility, deems construction work in progress to be substantially completed upon the earlier of (1) the date all permits or approvals required for commercial operation have been received or approved, or (2) one year after the construction work in progress has been connected with a preexisting, taxable operational system or facility. This change applies retroactively beginning with the 2024 property tax roll. The law also amends assessment provisions for renewable energy source devices by expanding the definition of such devices to include equipment that collects, transmits, stores or uses energy derived from biogas. This change first applies to the 2025 property tax roll. Fla. Laws 2024, ch. 158 (HB 7073), signed by the governor on May 7, 2024.

COMPLIANCE & REPORTING

Florida: New law (HB 7073) requires the Florida Department of Revenue to grant the following extensions: (1) an automatic 10-day extension from the due date for filing a sales tax return and remitting tax due to taxpayers within counties affected by a declaration of a state of emergency by the governor, among other conditions⁵; and (2) an automatic 15-day extension for the Florida corporate income tax return beyond the due date of the federal corporate income tax return that has been extended by the IRS due to a federally declared disaster. Fla. Laws 2024, ch. 158 (HB 7073), signed by the governor on May 7, 2024.

CONTROVERSY

Florida: New law (SB 7020), in regard to delivery of notices, expands the definition of "registered mail" to include "any delivery service by the United States Postal Service or a private delivery service that is regularly engaged in the delivery of documents which provides proof of mailing or shipping and proof of delivery." SB 7020 took effect upon becoming law. Fla. Laws 2024, ch. 158 (HB 7073), signed by the governor on May 7, 2024.

PAYROLL & EMPLOYMENT TAX

Multistate: Now that most employees have filed their 2023 personal income tax returns, employers can expect an increase in withholding tax questions and a rise in adjustments to federal and state withholding allowance certificates (e.g., federal Form W-4). This special report, which provides information employers need to know about federal and state Form W-4 compliance, is available via Tax Alert 2024-0924.

Multistate: The Payroll Month in Review for April 2024 is now available. The Payroll Month in Review summarizes the latest developments in US federal, state and local payroll and human resources matters. The full newsletter is available via Tax Alert 2024-0974.

Nebraska: New law (LB 1023) provides some relief from nonresident income tax, along with corresponding employer withholding obligations, for nonresident employees working for a Nebraska employer. Effective for tax years beginning on or after Jan. 1, 2025, LB 1023 amends the state's convenience-of-the-employer rule under 316 Neb. Admin. Code Section 22-003.01C to impose Nebraska income tax and withholding on a nonresident's wages from a Nebraska employer if all of the following apply: (1) the nonresident's services are provided outside of the state for the employee's own convenience; (2) the nonresident's services could be performed within the state; and (3) the employee is present in the state for more than seven days during the tax year in which the compensation was earned. The law provides de minimis safe harbors for attending conferences, meetings and trainings in Nebraska for seven days or fewer in a tax year (with a $5,000 wage cap) and for compensation paid to nonresidents for serving on a board of directors. LB 1023 provides penalty relief for employers that fail to withhold Nebraska income tax if they maintain and rely on a time-and-attendance system for allocating wages among all taxing jurisdictions in which employees perform services. Employers that do not maintain a time-and-attendance system may still receive penalty relief if they rely on other documentation such as travel records, expense reimbursement records, or employee representations. Neb. Laws 2024, LB 1023, signed by the governor on April 23, 2024. For additional information on this development, see Tax Alerts 2024-0967 and 2024-1021.

MISCELLANEOUS TAX

Alabama: New law (SB 150) requires accommodations intermediaries to collect and remit the transient occupancy tax for the facilitation of taxable lodgings transactions, applicable to transactions occurring on or after Jan. 1, 2025. Tax is imposed on the room charge, which is the full retail price paid for by the guest for the accommodation, including the accommodations fee and any other fees or charges. When an accommodations intermediary facilitates the transaction for an accommodations provider, the collected tax may be remitted to the accommodations provider if there is a written agreement or contract specifying the party responsible for remitting the tax. Such an accommodations intermediary will not be liable for taxes not remitted by the accommodations provider to the Alabama Department of Revenue. Accommodations intermediary facilitators must separately state the amount of the tax on the bill, invoice or similar documentation and add the tax to the room charge. Professional property management companies that either collect and remit the transient occupancy tax or manage properties leased for a month or more as the tenant's principal residence, hotels that collect and remit the transient occupancy tax, destination marketing organizations whose primary purpose is the promotion of tourism, and providers of accommodations that collect and remit the transient occupancy tax are not subject to the tax requirement imposed on accommodations intermediaries. The law defines an "accommodations intermediary" as "[a]ny person, firm, or corporation, other than an accommodations provider, that facilitates renting, furnishing, lodging, or accommodation transactions subject to the [transient occupancy tax] and charges a room fee or an accommodations fee to the customer, which it retains as compensation for such facilitation." SB 150 takes effect on Oct. 1, 2024. Ala. Laws 2024, Act 334 (SB 150), signed by the governor on May 9, 2024.

Florida: New law (HB 7073), effective for the period of Jan. 1, 2026 until Dec. 31, 2026, reduces certain fuel taxes as follows: (1) the excise tax on motor fuel equivalent gallon of natural gas fuel to 2 cents per gallon (from 4 cents per gallon); (2) for such fuel designated as the "ninth-cent fuel tax" the additional tax imposed is 0.5 cents per gallon; and (3) for such fuel designated as the " "local option fuel tax" the additional tax imposed is 0.5 cents per gallon. Effective Jan. 1, 2027, the rate of the excise tax on motor fuel equivalent gallon of natural gas is increased to 4 cents per gallon and the additional taxes are each increased to 1 cent per gallon. For 2026, the additional tax rate on natural gas fuel, which is designated as the "State Comprehensive Transportation System Tax" is reduced to 2.9 cents per gallon and reverts to 5.8 cents per gallon in 2027 and thereafter. For 2026, the additional tax rate on each motor fuel equivalent gallon of natural gas fuel for the privilege of selling natural gas fuel is reduced to 4.6 cents per gallon and reverts to 9.2 cents per gallon in 2027 and thereafter. Fla. Laws 2024, ch. 158 (HB 7073), signed by the governor on May 7, 2024.

North Carolina: New law (SB 508) exempts from the for-hire ground transport excise tax for-hire ground transport service provided as public transportation on behalf of a State agency, a governmental entity or a local board of education. This provision takes effect July 1, 2025 and applies to for-hire ground transport services occurring on or after that date. N.C. Laws 2024, SL 2024-1 (SB 508), signed by the governor on May 15, 2024.

VALUE ADDED TAX

International — European Union: On May 14, 2024, the Economic and Financial Affairs Council (ECOFIN) of the European Union (EU) met to discuss changes to the EU Value Added Tax (VAT) rules as part of the VAT in the digital age (ViDA) initiative, based on a revised proposal for a Council Directive issued on May 8, 2024. The Ministers, however, did not reach an agreement on the changes and discussions will continue with a view to reaching a compromise that all 27 Member States can approve. Nonetheless, an agreement could still be achieved under Belgian presidency (which ends on June 30, 2024). It is expected that there could be a compromise proposal in the short term, as only one Member State was opposed to parts of the package related to the Platform Economy. For more on this development, see Tax Alert 2024-0971.

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.