16 July 2024 State and Local Tax Weekly for June 21 and June 28 Ernst & Young's State and Local Tax Weekly newsletter for June 21 and June 28 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. California suspends NOLs and limits credits, overturns apportionment representation of deductible income; companion bill provides for refundability of limited credits California's Governor signed into law at the end of June 2024 the state budget bill (AB 107) along with tax bills SB 167 (enacted June 27, 2024) and SB 175 (enacted June 29, 2024). SB 167 suspends most taxpayers' net operating losses (NOLs) and limits the use of tax credits to $5 million for tax years 2024 through 2026, and modifies corporate income tax apportionment provisions, among other changes.1 SB 175 provides for a potential early end to the suspension of NOLs and, notably, provides for the refundability of limited credits after the limitation ends. NOL suspension and limit on business tax credits:The ability of California taxpayers with net business income, or modified adjusted gross income, of $1 million or more to utilize their California NOLs will be suspended for tax years beginning on or after January 1, 2024 and before January 1, 2027. The suspension affects business entities as well as individuals with business income such as through ownership in pass-through entities (PTEs) or rental activity. Similar to NOL suspensions California has previously enacted, SB 167 includes an extended carryover period for the suspended NOLs with an additional year carryforward for each year of suspension. In previous suspension periods, under Legal Ruling 2011-04, the Franchise Tax Board (FTB) has interpreted this provision to disallow an additional extension period if the affected taxpayer would have otherwise been in a loss position and would not have been able to utilize the NOL during the suspension year. The suspension applies only to the use of California NOLs for tax years 2024, 2025 and 2026. Accordingly, for tax year 2023, corporate taxpayers will still be able to fully utilize NOL carryforwards on their California returns. For tax years 2024, 2025 and 2026, the total of all business credits cannot reduce the net tax by more than $5 million. Significantly, the $5 million limitation applies on a combined group basis such that the business tax credits cannot reduce the aggregate tax of all members of the combined reporting group by more than $5 million. SB 167 also provides that if a taxpayer is unable to utilize a credit due to the limitation, then the carryforward period for the credit will be extended with an additional carryforward year for each year the credit is impacted by the limitation. The credit limitation provisions impact both corporate and personal income taxpayers. The corporate tax credits affected include, but are not limited to, the following: the research and development credit, the jobs tax credit, the California competes credit and the motion picture production credits. On the corporate tax credit portion of the provision, there is an exclusion from the limitation for the low-income housing tax credit. The personal income tax portion provides for the exclusion of 12 specified credits from the limitation including, notably, the California PTE elective tax credit as well as the earned income tax credit and renter's tax credit, among others. SB 175 provides some potential relief for taxpayers affected by the NOL suspension and credit limitation. First, SB 175 allows the Director of Finance and the Legislature to evaluate whether there is a continued need for the NOL suspension or credit limitation provisions of SB 167 after each of the first two suspension years. If the Director of Finance determines "that the General Fund money over the multiyear forecast is sufficient without the revenue impact" of the NOL suspension and credit limitation, then the suspension may be lifted. During the prior NOL suspension and credit limitation, the Legislature agreed to end the suspension and limitation that was originally imposed for tax years 2020, 2021 and 2022 early by one year by removing the suspension and limitation for the 2022 tax year. SB 175 also includes a refundability of limited credit provision that accomplishes the Legislature's intent statement to provide such relief to affected taxpayers. Affected taxpayers can make an irrevocable election on an original timely-filed return for tax years beginning on or after January 1, 2024 and before January 1, 2027, to receive an annual refundable credit amount of qualified credits. The refundable credit amount will be available for the five consecutive tax years beginning the third tax year after the election is made. For each of these five years, the refundable credit amount is equal to 20% of the qualified credits that would have otherwise been available but for the $5 million limitation in SB 167. Apportionment:In response to ongoing litigation, SB 167 modifies both retroactively and prospectively certain corporate income tax apportionment provisions. New statutory provision Cal. Rev & Tax Code Section 24831.6 provides that when a corporation receives income that is not included in net income excluded from taxable business income, it must exclude this income from its apportionment factor. For purposes of this provision, "not included in 'net income'" is defined as "income from transaction and activities that is not included in net income subject to apportionment for any reason, including … exclusion, deduction, exemption, elimination, or nonrecognition." In creating Cal. Rev & Tax Code Section 24831.6, the Legislature's stated that its intent is that (1) FTB Legal Ruling 2006-1 on the treatment of apportionment factors attributable to income exempt from California's corporate income tax "apply with respect to apportionment factors attributable to the income of taxpayers subject to tax under the Corporation Tax Law" and (2) new Cal. Rev & Tax Code Section 24831.6 "apply to any apportionment formula currently and formerly allowed … " This section of SB 167 applies to tax years beginning before, on or after the effective date of SB 167, and takes effect immediately. Oil and gas tax subsidies: Effective January 1, 2024, SB 167 eliminates the following oil and gas direct tax subsidies:
Conservation easements: Starting in 2024, SB 167 conforms to the federal changes in the Consolidated Appropriations Act (CAA) of 2023 that limit the deduction for charitable conservation easements. Specifically, the CAA modified the charitable conservation easement by limiting the deduction for PTE owners to two and a half times the value of the taxpayer's investment and disallowed the deduction for participants who previously engaged in fraud. New advanced strategic aircraft credit: SB 167 extends the new advanced strategic aircraft credit through January 1, 2031 (from January 1, 2026). Administrative: SB 167 exempts California Department of Tax and Fee Administration legal rulings of counsel from the Administrative Procedure Act. Such exemption already applies to legal rulings of counsel issued by the FTB and the State Board of Equalization. This change takes effect immediately. SB 167 also repeals the expiration date for electronic notifications to taxpayers from the FTB. Without the repeal, these provisions would have sunset on January 1, 2025. In addition, SB 167 empowers the Director of Finance, instead of the currently empowered FTB, to determine whether a taxpayer is affected by a state of emergency when determining whether the postponement of certain tax-related deadlines applies to a taxpayer. For purposes of the declared disaster provisions, the law adds definitions of "impacted taxpayer" and "supporting documentation." This change applies to any federally declared disasters or Governor-proclaimed state of emergencies announced on or after June 27, 2024 (i.e., the effective date of SB 167). For more on this development, see Tax Alert 2024-1299. New Jersey enacts corporate transit fee, phases out sales and use tax exemption for zero emission vehicles, repeals annual sales tax holiday On June 28, 2024, New Jersey Governor Phil Murphy signed various tax bills as part of the annual budget process, including the imposition of a 2.5% corporate transit fee, the phase-out of the sales and use tax exemption for zero emission vehicles and the repeal of the annual sales and use tax holiday. 2.5% Corporate Transit Fee: SB 3513/AB 4704 imposes a 2.5% surtax, referred to as the Corporate Transit Fee (the "Fee"), on certain Corporation Business Tax (CBT) payers that have allocated New Jersey taxable net income in excess of $10 million for privilege periods beginning on and after January 1, 2024 through December 31, 2028 (e.g., five privilege periods). Like the surtax that New Jersey imposed from privilege periods beginning on or after January 1, 2018 through December 31, 2023, the Fee functions as a 2.5% rate of tax in addition to the 9% CBT rate imposed on each taxpayer that has allocated New Jersey taxable net income in excess of $10 million.
Unlike prior CBT legislation with retroactive effect, the Fee legislation does not provide for underpayment penalty or interest abatement. Sales and use tax law changes: On the same day, Governor Murphy signed into law SB 3514/AB 4702, which includes the following revenue-raising provisions:
For more on this development, including tax-related measures that were approved by the General Assembly and have been sent to the governor for his consideration, see Tax Alert 2024-1298. Federal: In Moore et ux. v. United States, the Supreme Court, affirming the Court of Appeals for the Ninth Circuit, has held the mandatory repatriation tax (MRT), enacted under IRC Section 965 as part of the Tax Cuts and Jobs Act, is constitutional because Congress has the power to attribute an entity's realized and undistributed income to its shareholders and partners. The majority opinion did not answer the question of whether the 16th Amendment includes an income-realization requirement, which leaves open the question of whether a wealth tax could be constitutional. For more on this development, see Tax Alert 2024-1260. Multistate: Tax Alert 2024-1283 summarizes significant legislative, administrative and judicial actions that affected US state and local income/franchise and other business taxes for the second quarter of 2024. These developments are compiled from the EY Indirect/State Tax Weekly and Indirect/State Tax Alerts issued during that period. Highlights include: (1) a summary of legislative developments in Alabama, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Iowa, Kansas, Kentucky, Maine, Minnesota, Nebraska, New Jersey, New York, North Carolina, Oregon, Rhode Island, South Carolina, Tennessee, Vermont and Virginia; (2) a summary of judicial developments in Wisconsin; (3) a summary of administrative developments in Massachusetts; and (4) a discussion of federal tax items and state tax items to watch in the District of Columbia, New York, New York City, Oregon and Pennsylvania. Arkansas: New law (SB 1) reduces the highest corporate income tax rate, which is imposed on corporations with net income exceeding $11,000, from 4.8% to 4.3%, effective for tax years beginning on or after January 1, 2024. SB 1 took effect immediately. The law also modifies the individual income tax brackets and reduces the highest rate from 4.4% to 3.9%, effective for tax years beginning on or after January 1, 2024. Ark. Laws 2024 (2nd Extraordinary Session), Act 1 (SB 1), signed by the governor on June 19, 2024. For more on the individual income tax rate change, see Tax Alert 2024-1256. Hawaii: New law (HB 2484) updates the state's date of conformity to the IRC to December 31, 2023. This change applies to tax years beginning after December 31, 2023. Haw. Laws 2024, Act 75 (HB 2484), signed by the governor on June 21, 2024. Hawaii: New law (SB 2725) modifies the state's elective pass-through entity tax (PTET). Effective for tax years beginning after December 31, 2023, the PTET tax rate is amended to be the sum of all qualified member's distributive shares and guaranteed payment of Hawaii taxable income multiplied by 9% (changed from the highest rate of tax imposed on individuals, and the exclusion from the sum the distributive shares and guaranteed payments of members who are corporations). The law allows certain qualified members entitled to a tax credit to carryforward the credit that exceeds a member's income tax liability until fully used. The law adds a definition of "qualified member" (i.e., a member of an electing PTE that is an individual, trust or estate) and repeals definitions for "direct member" and "indirect member". Haw. Laws 2024, Act 50 (SB 2725), signed by the governor on June 19, 2024. Kansas: New law (SB 1, 1st Special Session) makes various tax changes. The law reduces from 2.25% to 1.94% the rate of the normal privilege tax imposed on national banking associations and state banks, as well as on trust companies and savings and loan associations, located in or doing business in the state, effective for tax year 2024 and thereafter. The tax is measured by such entity's net income for the next preceding tax year and it consists of a normal tax and a surtax. The rate of the surtax remains unchanged at 2.125% of a banking association's/state bank's net income in excess of $25,000, and at 2.25% of a trust company's/savings and loan associations' net income in excess of $25,000. Effective for tax year 2024 and thereafter the law reduces the highest individual income tax rate and the number of income tax brackets from three to two. The lowest 3.1% rate bracket has been eliminated, with a new lowest rate of 5.2% (from 5.25%) and new highest rate of 5.58% (from 5.7%). Also beginning in tax year 2024, the law slightly increases the standard deduction, significantly increases the Kansas personal exemption, and exempts all social security benefits from Kansas income tax. Kan. Laws 2024 (2024 Special Session), SB 1, signed by the governor on June 20, 2024. Oregon: Initiative Petition 2024-17 (IP-17), currently being circulated in Oregon for consideration on the November 5, 2024, ballot, would impose a new 3% minimum tax on corporations with gross sales exceeding $25 million starting in 2025 if approved by voters. The new corporate minimum tax would be in addition to the current minimum tax regime imposed under ORS 317.090 and stipulated in OAR 150-317-0170. Like the current minimum tax regime, Oregon sales would have the same meaning as the sales factor numerator under the state's corporate income tax apportionment provisions, including applicable special industry apportionment. No credits or deductions could be taken against this new minimum tax. The potential ballot measure would also amend treatment of S corporations under the minimum tax regime, removing the current $150 minimum tax limitation for S corporations with Oregon sales exceeding $25 million. For additional information on this development, see Tax Alert 2024-1250. Rhode Island: New law (HB 7225) effective for tax years beginning on or after January 1, 2025, extends the net operating loss carry forward period from five years to 20 years. Also effective for tax years beginning on or after January 1, 2025, the law modifies the elective pass-through entity tax (PTET) provisions by reducing the credit for owners to 90% (from 100%) of the amount of tax paid by the PTE that pass-through to the owner on a pro rata basis. R.I. Laws 2024, ch. 117 (HB 7225), signed by the governor on June 17, 2024. Rhode Island: New law (SB 3152/HB 7927) starting in 2025, allows banking institutions operating in multiple states to elect to apportion their Rhode Island net income using a single receipts factor. The election will be made by filing a form prescribed the tax administrator, and it will be effective in the tax year made and is binding for subsequent years. After five years, if there has been a material change in fact or law, the taxpayer may apply to revoke the election. Further, if the applicable allocation and apportionment provisions, including the electable single receipts factor, do not reasonably approximate the bank's net income from business carried on in Rhode Island, the banking institution may apply to use, or the tax administrator may require the use of, an alternative apportionment method. For tax years beginning on or after January 1, 2025, the law requires a taxpayer that (1) elects to use single receipts factor apportionment and (2) would be included in the unitary group but for an exemption from the definition of corporation (e.g., specified banking, investment, and insurance companies) to add the business expense transactions between the taxpayer and the unitary group to net income. This adjustment will not be required when it results in duplicate taxation in violation of the law. The adjustment will result in the add back of otherwise deductible business expenses paid, accrued or incurred to a related member; however, the deduction, will be allowed when a taxpayer either shows by clear and convincing evidence that the disallowance is unreasonable or enters into an agreement with the tax administrator to apply an alternative apportionment method. Lastly, the law creates a financial institution combined reporting study, under which banking institutions as part of their tax return for tax years beginning after December 31, 2023, but before January 1, 2026, are required to file reports as though they were included in a combined group. Penalties may be imposed for failure to timely file such report. R.I. Laws 2024, ch. 159 (SB 3152) and ch. 158 (HB 7927), both signed by the governor on June 24, 2024. Colorado: New law (SB 24-184) starting January 1, 2025, imposes a new congestion impact fee on all short-term vehicles rentals at a maximum rate to be determined by the Transportation Enterprise Board, but not more than $3 per day for any vehicle. Subsequent renewals of a short-term vehicle rental is exempt from the fee to the extent it extends the total rental period beyond 30 days. Car-sharing programs must collect the fee on short-term rentals of 24 hours or longer. The fee must be collected and submitted to the Colorado Department of Revenue. Vehicles rented under a vehicle sharing arrangement that is exempt from the daily vehicle rental fee will also be exempt from the congestion impact fee. SB 24-184 took effect immediately. Colo. Laws 2024, ch. 186 (SB 24-184), signed by the governor on May 17, 2024. Georgia: In response to a ruling request, the Georgia Department of Revenue (GA DOR) determined a bus carrier that for a flat fee provides shuttle bus services for its clients and the clients' employees, customers and tenants, is not a for-hire ground transport service provider (e.g., a limousine carrier, ride share network service, taxi service or transportation service provider) and, therefore, not subject to the transportation services tax (TST). Because the transportation services the bus carrier provides is not subject to the TST, these services are not automatically exempt from sales and use tax. Accordingly, the transportation services provided by the bus carrier will be subject to Georgia's sales and use tax unless otherwise exempted by the Georgia Code. Ga. Dept. of Rev., LR SUT-2024-01 (May 10, 2024). Louisiana: New law (SB 500) prohibits local governing authority from imposing local fees and taxes on nongaming incentives or inducements awarded by gaming licenses to patrons on a complimentary basis or through the redemption of loyalty program rewards (e.g., room stays), unless otherwise expressly provided or agreed to by the authority and licensee. If the incentive or inducement is provided by the licensee on a discounted basis or partially through the redemption of rewards, the tax or fee imposed is limited to the actual cash portion paid by the patron; no tax or fee applies to the extent of the discount or reward. "Local governing authority" includes local political subdivisions and local school boards. This prohibition does not apply to: (1) sales and use tax on a licensee's purchase of tangible personal property, including meals and beverages, used as a complimentary incentive or inducement; and (2) sales or use tax on parking, admissions or entertainment provided on a complimentary or discounted basis if the tax is otherwise due. SB 500 took effect upon the governor's signature. La. Laws 2024, Act 592 (SB 500), signed by the governor on June 11, 2024. Minnesota: Reminder -the new retail delivery fee takes effect July 1, 2024. Starting on that date, a 50-cent fee applies to each transaction where charges for taxable tangible personal property and clothing equal or exceed $100. The Minnesota Department of Revenue (MN DOR) explained on its "Retail Delivery Fee" webpage that in calculating whether a transaction meets the threshold, the transaction includes all charges that are part of the sale, excluding the retail delivery fee. Retailers not liable for the Retail Delivery Fee include those whose prior calendar year Minnesota retail sales were less than $1 million, and marketplaces that facilitate sales for a retailer whose prior calendar year Minnesota retail sales were less than $100,000. Both taxable and nontaxable retail sales are included in the calculation of the retail sales threshold for the retailer exclusion. Charges for certain items, such as drugs, medical devices, food, select baby products, items delivered electronically, utilities delivered through wires and pipes, and items purchased for resale are not included in calculating whether the threshold has been met. The retail deliver fee does not apply to certain deliveries, including curbside pickup and deliveries made to a purchaser who is exempt from sales tax or made by a food and beverage service establishment. Retailers will need to register for the fee, and they will need to report the fee on the "Retail Delivery Fee" tax line on the Sales and Use tax return. The MN DOR also said that the retail delivery fee applies even when there is free shipping, and that taxpayers should follow the sales price definition in determining how to handle discounts and coupons when calculating the $100 threshold. Vermont: New law (HB 887) repeals the state's sales and use tax exemption for remotely accessed prewritten computer software, effective July 1, 2024. Accordingly, sales of such software, including Software as a Service (SaaS), are now subject to Vermont sales and use tax. The new law provides that "tangible personal property" includes prewritten software "regardless of the method in which the prewritten computer software is paid for, delivered, or accessed." Prewritten computer software that is not accessed remotely was never part of the exemption enacted in 2015 and remains subject to Vermont sales and use tax. Vt. Laws 2024, HB 887, enacted over the governor's veto on June 17, 2024. Federal: In Notice 2024-49, the IRS describes the requirements for obtaining a letter of registration for the IRC Section 45Z clean fuel production credit, which is necessary for the production of sustainable aviation fuels (SAF) and non-SAF low-emission fuels, starting on or after January 1, 2025. Taxpayers can apply for the letter of registration on Form 637, Application for Registration (for Certain Excise Tax Activities). The Notice also includes an appendix identifying the primary feedstocks used to make transportation fuels that may be eligible for the IRC Section 45Z credit for purposes of applying for registration. The IRS intends to issue additional IRC Section 45Z credit guidance in the future. For more on this development, see Tax Alert 2024-1193. Federal: The IRS and Treasury Department released final regulations (TD 9998) on the increased credits or deductions available for taxpayers satisfying the prevailing wage and apprenticeship (PW&A) requirements established by the Inflation Reduction Act (IRA). The final regulations adopt the proposed regulations for the most part, with some modifications and clarifications. The final regulations are effective August 24, 2024. The IRS indicated that, in the months ahead, it will "dedicate significant resources to promoting and enforcing compliance with the final clean energy rules." Nevertheless, the IRS does not currently anticipate providing additional guidance in the form of Private Letter Rulings on compliance with the PW&A rules. For more on this development, see Tax Alert 2024-1269. Illinois: New law (HB 5005) enhances, expands and extends certain tax credits and creates new credits. HB 5005 extends the Illinois research and development income tax credit to any tax year ending before January 1, 2032 (from tax year ending before January 1, 2027). HB 5005 expands the Reimagining Electric Vehicle (REV) incentives to include green steel manufacturers, manufacturers of electric vertical takeoff and landing aircraft, and manufacturers of electric vehicle powertrain technology. It creates new exemptions and credits for tenants in a designated quantum computing campus. HB 5005 also enhance various credits, including the Economic Development for a Growing Economy (EDGE) credit, the Illinois job relocation credit, the High Impact Business Construction Job credits, the film production services credit, and the Manufacturing Illinois Chips for Real Opportunity Act. Ill. Laws 2024, Pub. Act 103-0595 (HB 5005), signed by the governor on June 26, 2024. Rhode Island: New law (HB 7225) extends the sunset date of various tax credits. The sunset dates of the following credits/incentives have been extended through December 31, 2025 (from December 31, 2024): the Rhode Island New Qualified Jobs Incentives Act 2015, the Rebuild Rhode Island Tax credit, the I-195 Redevelopment Project Fund, the Small Business Assistance Program, the Innovation Initiative, among other programs. The sunset date of the Air Service Development Fund has been extended to December 31, 2027 (from December 31, 2024). No fund application will be granted, and no credits will be authorized, for the Rhode Island Small Business Development Fund after June 30, 2024. The sunset date of the historic preservation tax credit has been extended to June 30, 2026 (from June 30, 2024). In addition, the sunset provisions for the Rhode Island Tax Increment Financing and the Tax Stabilization Incentive are amended to prohibit the commerce corporation from entering into an agreement after December 31, 2025 (from December 31, 2024). Further, financing will not be authorized to be reserved after December 31, 2025 (from December 31, 2024) for the First Wave Closing Fund. Lastly, the sunset dates for the Motion Picture Production Tax Credit and the Musical and Theatrical Production Tax Credits are extended through July 1, 2029 (from July 1, 2027). R.I. Laws 2024, HB 7225, signed by the governor on June 17, 2024. South Carolina: New law (SB 1021) extends the South Carolina Abandoned Building Revitalization Act to 2035 (from 2025) and increases the maximum amount of abandoned building tax credit that can be claimed by a taxpayer in a tax year to $700,000 (from $500,000). Applicable to income tax years beginning after December 31, 2023, the law provides an income tax credit equal to 50% of an eligible taxpayer's qualified railroad reconstruction or replacement expenditures (i.e., "gross expenditures for maintenance, reconstruction, or replacement of railroad infrastructure, including track, railroad, bridges, industrial leads and sidings, and track-related structures owned or leased by a Class II or Class III railroad located in this State"). The amount of credit is the lesser of (1) $5,000 multiplied by the number of miles of railroad track owned or leased within South Carolina by an eligible taxpayer at the close of the tax year, or (2) $1.5 million in any tax year. Once the railroad reconstruction or replacement expenditures is completed, an eligible taxpayer must submit a verification form and documentation to the Department of Commerce. After receiving and approving the documentation, the Department will issue a tax credit certificate to the eligible taxpayer. This credit is repealed at the end of 2028, however, credits earned before the repeal continue to apply until they are fully claimed. S.C. Laws 2024, Act 169 (SB 1021), signed by the governor on May 20, 2024. District of Columbia: The District of Columbia Office of Tax and Revenue (OTR) issued guidance that summarizes the City's recordation and transfer tax treatment of lease assignments under governing statutes and case law. The OTR explained that a recent appellate court opinion held that "the assignment of a lease is taxable in the same manner as a newly created lease" and that "a lease assignment may also transfer other real property interest, such as buildings or other leasehold improvements, and that such other interest are separately taxable from the lease assignment, even if the conveyance of all of these interests is accomplished by a single deed." Under City law, both transfer and recordation taxes are imposed on the transfer of a lease or ground rent with a term of 30 years or more, including renewals; each transfer of such a lease is subject to tax. In determining the taxable value associated with a lease, OTR looks at the rent due under the lease and any other considerations paid. The OTR's guidance explains how to calculate taxes on a lease transfer, including when the average annual rent under the lease is ascertainable and not ascertainable, and on a lease assignment, including when no other real property interests are transferred and when other real property interest are transferred with the assignment. The guidance includes illustrative examples. D.C. OTR, Tax Notice 2024-02 (May 17, 2024). Kansas: New law (SB 1, 1st Special Session) prohibits the sales price or value at which property sells or transfers ownership in an IRC Section 1031 exchange transactions from being considered an indicator of fair market value for property tax purposes. Such transactions cannot be used as comparable sales for purposes of the sales ratio study, which is used to measure the accuracy of a tax appraisal. In addition, for tax year 2024 and tax years thereafter, the amount of residential property exempt from the statewide school levy is increased to $75,000 of appraised value (from $40,000 of appraised value). SB 1 takes effect and is in force from and after its publication in the Kansas register. Kan. Laws 2024 (2024 Special Session), SB 1, signed by the governor on June 20, 2024. Maine: New law (LD 1153), effective for property tax years beginning on or after April 1, 2025, changes eligibility requirements for the property tax exemption for solar and wind energy equipment that generates heat or electricity. As of that date, such solar energy equipment will qualify for the exemption if: (1) all of the energy is used on the site where the property is located; (2) the equipment is collected with a net energy billing customer that are subscribed to at least 50% of the facility's output; or (3) all of the energy is transmitted through the facility of a transmission and distribution utility and customers of the utility receive a credit for the energy generated by the equipment and the electricity generator entered into an interconnection agreement with such utility before June 1, 2024. By April 1 of the first property tax year in which the taxpayer claims the exemption, the taxpayer must file a report with the assessor that identifies the property for which the exemption is being claimed. Maine Laws 2024, ch. 682 (LD 1153), became law without the governor's signature on May 1, 2024. Rhode Island: New law (HB 7225) allows the state tax administrator, on a quarterly basis, to prepare a list of delinquent individual and business taxpayers (from a limit of 100 delinquent taxpayers) who owe at least $50,000 (from the largest amount) of state tax that have been unpaid for more than 90 days following the date the taxes were due. The tax administrator cannot list any delinquent taxpayers until they provide them 30 days' notice of intent to publish the delinquency. This change took effect upon passage. R.I. Laws 2024, ch. 117 (HB 7225), signed by the governor on June 17, 2024. Rhode Island: New law (SB 3056/HB 8055) authorizes the Rhode Island Division of Taxation to share tax information with the Secretary of State when that office requests information on an entity's tax status as compliant or noncompliant. If the Secretary receives information that the entity has failed to pay any taxes or fees due to the state, it shall issue a notice and begin revocation proceedings under R.I. Stat. Sections 7-1.2-1310 (Revocation of articles of incorporation) or 7-1.2-1414 (Jurisdiction of court to liquidate assets and business of corporation). Similar provisions were adopted for limited partnerships, limited liability partnerships and limited liability companies. The new law takes effect on January 1, 2025. R.I. Laws 2024, ch. 150 (SB 3056) and ch. 148 (HB 8055), both signed by the governor on June 17, 2024). Arkansas: On June 19, 2024, Arkansas Governor Sarah Huckabee Sanders signed into law SB 1 which, retroactive to January 1, 2024, lowers the state's personal income tax rate from 4.4% to 3.9%. The Arkansas Department of Finance and Administration projects that individual taxpayers will save $384 million in 2025 and $256 million in 2026. Effective retroactive to January 1, 2024, the supplemental rate of withholding on bonuses and other irregular wage payments is reduced from 4.4% to 3.9%. For additional information on this development, see Tax Alert 2024-1256. Georgia: The Georgia Department of Revenue (DOR) has revised its Employer's Withholding Tax Guide (Guide) to reflect changes under HB 1015 and HB 1021, which, retroactive to January 1, 2024, lower the personal income tax rate from 5.49% to 5.39% and make other changes affecting Georgia taxpayers' state income tax liabilities. Employers are required to immediately implement the changes in the Georgia income tax withholding calculation. For additional information on this development, see Tax Alert 2024-1213. New York: Contained in New York's final budget for fiscal year 2025 (AO8805, Part M) is a new requirement that New York employers provide their employees with up to 20 hours of paid prenatal personal leave during any 52-week calendar period. The prenatal paid leave benefit is in addition to paid sick leave already required under New York state law. The law is effective January 1, 2025. Additionally, the final budget establishes an end date of July 31, 2025, for the COVID-19 paid sick leave law that has been in effect since March 2020. For additional information on this development, see Tax Alert 2024-1224. Maryland: New law (SB 362), effective July 1, 2024, imposes a new statewide transportation network company impact fee on passenger trips that originate in Maryland. The fee is $0.75 for each passenger trip. The fee is reduced to $0.50 for each passenger trip if the trip is provided using an electric vehicle or if it is a shared passenger trip. Starting July 1, 2028 and each July 1 thereafter, the fee will be increased by an amount to be determined by the comptroller. A transportation network company can collect the fee from passengers, or it can pay the fee on behalf of passengers. This fee is in addition to any other tax or fee. A transportation network company must show the fee as a separate line item on the passenger's receipt, invoice or other bill of sale, distinct from the transaction price and any other tax or fee imposed. Transportation network companies may retain the lesser of 0.9% of the amount of fee it remits or $250, for the expense of reporting the fee. Md. Laws 2024, ch. 717 (SB 362), signed by the governor on May 16, 2024. See also, Md. Comp., Tax Alert — Transportation Network Company Impact Fee (May 30, 2024). Vermont: New law (HB 887) effective August 1, 2024, imposes a 3% short-term rental impact surcharge. The surcharge is to be collected by the operator on each occupancy of a short-term rental, i.e., the rental of a furnished house, condominium or other dwelling room or self-contained dwelling unit rented for less than 30 consecutive days and more than 14 days per calendar year. For purposes of the surcharge, short-term rental does not include a lodging establishment licensed under 18 V.S.A. ch. 85. The surcharge is in addition to any assessed rooms tax, and will be collected, remitted and enforced in the same manner as the rooms tax. Vt. Laws 2024, HB 887, enacted over the governor's veto on June 17, 2024. International: The latest edition of TradeFlash (June 2024) is now available. TradeFlash is a roundup of the latest developments in global trade and includes articles/insights, alerts, podcasts and webcasts. In this issue, we provide links to EY articles and webcasts covering key trade topics, many of them focused on the impact of sustainability and data challenges on international trade. International — European Union: On June 21, 2024, the Economic and Financial Affairs Council of the European Union (EU) met under the Belgian Presidency to discuss changes to the EU Value Added Tax (VAT) rules as part of the VAT in the digital age (ViDA) initiative. However, once again, the Ministers 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. For more on this development, see Tax Alert 2024-1231. 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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