16 August 2024 State and Local Tax Weekly for August 9 and August 16 Ernst & Young's State and Local Tax Weekly newsletter for August 9 and August 16 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. Illinois governor signs bills exempting food from state sales and use tax, modifying direct pay permit holder and remote sales sourcing provisions, among other changes In recent weeks, Governor J.B. Pritzker signed several tax related bills into law. The bills modify the state's sales and use tax1 and property tax laws as well as various tax credits and incentives. Exemption for food: HB 3144 (enacted August 5, 2024), starting in 2026, exempts from state sales tax food sold for off-premise human consumption. The law allows local jurisdictions to impose a 1% tax for such sales. Alcoholic beverages, soft drinks, candy, food prepared for immediate consumption and food infused with adult-use cannabis do not qualify for this exemption. Direct permit holders: For Retailers' Occupation Tax (ROT) purposes, SB 3282 (enacted August 9, 2024) requires Direct Pay Permit holders to review all purchase activity for the prior year to verify that purchases were properly sourced and the correct tax rate was applied. A $6,000 penalty applies for failure to properly verify purchase activity and correct sourcing and tax rate errors. The penalty will not apply if at least 95% of the permit holder's transactions for the applicable 12-month review period are correctly sourced and the correct taxes have been remitted, or the permit holder acted with ordinary business care and prudence. Sourcing remote sales: SB 3362 (enacted August 9, 2024), starting in 2025, deems a retailer that maintains a place of business in Illinois and makes retail sales of tangible personal property from a location outside Illinois to be engaged in selling at retail in Illinois for ROT purposes. Such sales will be sourced to the Illinois location where the tangible personal property is shipped or where the purchaser takes possession (i.e., destination sourcing), similar to the sourcing of sales by remote retailers. Prepaid wireless 911 surcharge: HB 3144 (enacted August 5, 2024) eliminates the statewide 3% prepaid wireless 911 surcharge in a home rule municipality with a population exceeding 500,000 (i.e., Chicago). The bill extends through July 1, 2029, Chicago's authority to impose a 9% prepaid wireless 911 surcharge. The Illinois Department of Revenue issued Informational Bulletin FY 2025-02 "Prepaid Wireless E911 Surcharge Rate Change, Effective August 5, 2024" (Aug. 2024), to provide guidance on this development. Materials, parts, equipment, components and furnishings for aircraft exemption: SB 3426 (enacted August 9, 2024) modifies the service use tax, service occupation tax, and retailers occupation tax exemption for materials, parts, equipment, components and furnishings (collectively "materials") incorporated into or upon an aircraft as part of its modification, refurbishment, completion, replacement, repair or maintenance (collectively, "repair") to clarify that the exemption only applies to sales/use of qualifying tangible personal property transferred incident to: (A) the repair of an aircraft by persons who meet certain qualifications; and (B) to the repair of aircraft engines or power plants without regard to whether the person meets the qualifications required under (A). This exemption is available through December 31, 2029. Motor fuel tax: SB 3426 (enacted August 9, 2024) describes how to calculate the percentage increase in the Consumer Price Index for purposes of the annual adjustment in the motor fuel tax rate. Angel Investment Tax Credit: SB 3155 (enacted August 9, 2024) modifies the angel investment tax credit's recapture provisions. Generally, if a qualified new business venture fails to maintain a minimum employment threshold in Illinois through the date which is three years from the date the last credit certificate was issued, the claimant of the credit must pay back the aggregate amount of disqualified credits the claimant received related to investments in that business. SB 3155 provides this three-year reporting period does not include March 13, 2020 to January 1, 2024. Rather, for angel investment tax credits involving a three-year reporting period that includes these dates, the Illinois Department of Revenue has the discretion to determine the repayment of any issued tax credit. SB 3155 took effect upon becoming law. REV and MICRO credits: HB 5412 (enacted July 19, 2024) amends the Reimagining Energy and Vehicles in Illinois (REV) Act and Manufacturing Illinois Chips for Real Opportunity (MICRO) Act. The REV Illinois and MICRO Acts are amended to provide that if an applicant issued a certificate for a tax credit or tax exemption under the respective Acts fails to annually report the total project tax benefits received, such failure may result in the applicant's ineligibility to receive incentives/exemptions. The Illinois Department of Revenue (IL DOR) may adopt rules governing ineligibility to receive credits/exemptions, including the length of ineligibility. Factors that will consider in determining whether a business is ineligible include: (1) prior compliance with reporting requirements, (2) cooperation in discontinuing and correcting violations, (3) the extent of the violation, and (4) whether the violation was willful or inadvertent. The law amends the ROT regarding the building materials exemption for REV Illinois and MICRO projects to require the retailer obtain from the purchaser, in addition to the purchaser's exemption certificate number issued by the IL DOR, a certification that contains specific information, including a description of the building materials being purchased and the purchaser's signature and date of purchase. HB 5412 took effect immediately. Property tax study: SB 3455 (enacted August 9, 2024) requires the IL DOR, in consultation with the Department of Commerce and Economic Opportunity, to study the state's property tax system and recommend improvements, with the final report due to the Governor and General Assembly by July 1, 2026. The study must include the following: (1) comprehensive reviews of Cook County's classification system used for assessing real property compared with the rest of Illinois, State laws for appealing assessments and for collecting property taxes, statewide assessment processes, and current property tax homestead exemptions; (2) analysis of preferential assessments or incentives; and (3) review of the State's reliance on property taxes and the historical growth in property tax levies.
See Tax Alert 2024-1178 for a discussion of legislation enacted in June that modifies the state's income and franchise tax and extends, enhances and creates various credits and incentives. Minnesota Supreme Court affirms taxpayer's activities were not ancillary to solicitation of orders and unprotected by PL 86-272 In Uline, Inc. v. Comm'r. of Rev., A23-1561 (Minn. 2024), the Minnesota Supreme Court (Court), affirming the Minnesota Tax Court's decision, held that certain activities conducted by a multistate business were not ancillary to solicitation simply because they were assigned to sales representatives and, therefore, those activities were not protected by PL 86-272. The taxpayer, an S corporation headquartered in Wisconsin, sold industrial and packaging products, which were shipped via common carrier from distribution centers located in the United States. The taxpayer had no offices or other facilities in Minnesota but employed sales representatives who called on Minnesota customers. The taxpayer did not file Minnesota income tax returns, primarily relying on PL 86-272. Upon a review of the taxpayer's activities within the state, the Minnesota Department of Revenue (Department) concluded that certain activities performed by non-sales personnel and sales personnel were nexus-creating and not protected by PL 86-272. The Minnesota Tax Court agreed, ruling that the taxpayer's activities were unprotected by PL 86-272 (see Tax Alert 2023-1267). The taxpayer appealed to the Court. The Court's review focused on the preparation of "Market News Notes" (Notes) by sales representatives, which documented information about customers, such as complaints about products or services, the need for certain products, special delivery needs, bulk pricing requests and what products customers were buying from competitors. The reports also documented information about competitors, such as product pricing, lead times, payment terms, and rebates and discounts. To denote the nature of the information, the reports were organized by the following topics: competitor, operational, and marketing, and those reports were actively directed to other departments via a shared database. The company mandated a goal that a sales representative prepare at least two Notes each week, and training manuals stressed the importance of the preparation of these reports. The Court then went on to analyze the taxpayer's facts in light of William Wrigley, Jr. Co. v. Wis. Dept. of Rev., 465 N.W.2d 800 (Wis. 1991), noting that PL 86-272 protects solicitation and activities entirely ancillary to solicitation, i.e., those activities that serve no independent business function apart from their connection to a request for purchases. The Court first rejected the taxpayer's argument that the preparation of the reports was a component of solicitation, finding that an activity is not converted into solicitation merely by assigning it to sales representatives. The Court concluded that the record showed the reports went beyond "effectuating more effective requests for purchases" as other departments benefitted from them and, accordingly, were not ancillary to solicitation. The Court also rejected the argument that the activities were de minimis because the company had a policy regarding the preparation of the reports and 1,600 reports were prepared during the two-year period at issue, giving rise to a nontrivial connection with Minnesota. For more on this development, see Tax Alert 2024-1549. Idaho: The Idaho legislature approved amendments to Idaho Income Tax Admin. Rules 35.01.01.700 regarding the credit for income taxes paid to another state or territory (hereafter, "credit"). The amended rule provides that when tax is paid to another state by an affected business entity (i.e., a pass-through entity (PTE) that elects to be taxed at the entity level at the corporate rate), the credit is a pro rata share of the of the actual tax paid to the other state. In calculating the credit, the share of any member that is an exempt entity is excluded. Idaho residents who are shareholders, partners or members of a PTE that has not elected to be treated as an Idaho affected business entity but pays entity level taxes in other states, are allowed the Idaho credit for taxes paid to another state to the extent the tax is attributable to the individual because of their share of the entity's taxable income in another state. The Legislature reviewed and approved these amendments during the 2024 legislative session. The amended rule took effect July 1, 2024. (Idaho Admin. Bulletin, Vol. 24-8, Aug. 7, 2024) (for text of the amendments, see Idaho Admin. Bulletin, Vol. 23-8, Aug. 2, 2023). Kansas: The Kansas Department of Revenue (KS DOR) issued guidance on recent legislative changes related to the business interest deduction under IRC Section 163(j) that are effective for tax years beginning after 2020. (Kan. Laws 2024, SB 410; see Tax Alert 2024-0943.) The law change allows affected taxpayers to amend their 2021 Kansas income tax returns to adjust the amount of the interest deduction and to claim the deduction for tax years 2018, 2019 and 2020. The KS DOR said taxpayers should include with their 2021 amended return a copy of their federal Form 8990 for each of the 2018, 2019, 2020 and 2021 tax years, as well as the worksheet showing how the taxpayer computed the amount of interest expense being claimed for each of those years. Kan. Dept. of Rev., Notice 24-16 "Interest Expense Under IRC Section 163(j)" (Aug. 7, 2024). Missouri: The Missouri Department of Revenue (MO DOR) adopted amendments to 12 CSR 10-2.165 "Net Operating Losses on Corporate Income Tax Returns." The MO DOR said it updated the rule to account for law changes since the prior amendment and to accommodate Administrative Hearing Commission rulings regarding net operating losses. The amendments delete examples in the rule, while adding a new example. Further, the amended rule provides that "[n]otwithstanding any provision of this rule to the contrary, nothing in this rule shall be interpreted or construed as incorporating by reference any rule, regulation, standard, or guideline of a federal agency." The amended rule takes effect 30 days after publication in the Code of State Regulations. No changes were made to the proposed text, which appeared in Mo. Reg., Vol. 49, No. 5, March 1, 2024. Mo. Dept. of Rev., Amended 12 CSR 10-2.165 (Mo. Reg., Vol. 49, No. 15, Aug. 1, 2024). Oklahoma: The Oklahoma Tax Commission (OTC) adopted amendments to Okla. Admin. Rules Sections 710:50-17-51, 710:50-19-5 and 710:50-21-1 and adopted new rule Section 710:50-21-5, regarding the add-back of federal depreciation for Oklahoma income tax purposes. Under Oklahoma law, taxpayers may make an irrevocable election to immediately and fully deduct the cost of qualified property and qualified improvement property. This deduction, the OTC explained, is eligible for 100% bonus depreciation that can be claimed as an expense in the tax year in which the property was placed in service. The OTC noted that this deduction is available in subsequent years "regardless of changes to federal law related to cost recovery amortization beginning January 1, 2023." The OTC further explained that depreciation claimed under this provision by a taxpayer who elects immediate and full expensing of qualified property and qualified improvement property cannot duplicate the depreciation or bonus depreciation they claimed on their federal income tax return. For tax returns filed on or after January 1, 2023, the OTC said taxpayer must increase their federal taxable income by the amount of depreciation received under the IRC for the property for which the Oklahoma immediate and full expensing election was made on the Oklahoma income tax return. The amended rules and new rule took effect on August 11, 2024. Okla. Tax Comm., Adopted amended Okla. Admin. Rules Sections 710:50-17-51, 710:50-19-5 and 710:50-21-1 and adopted new rule Section 710:50-21-5 (Okla. Register, Vol. 41, Issue 22, final adoption on June 21, 2024). Wisconsin: The Wisconsin Department of Revenue (WI DOR) extended through October 13, 2024 emergency administrative rule (EmR2404, Wis. Admin. Code 3.10), which clarifies what income from certain commercial and agricultural loans qualifies for a tax exemption enacted in 2023. For tax years beginning after December 31, 2022, Wis. Stat. 71.26(l)(i), 71.05(l)(i) permits financial institutions to exclude from their income interest, fees, and penalties from a commercial loan of $5 million or less that they provide to a Wisconsin resident primarily for business or agricultural purposes. The emergency rule further defines statutory terms, outlines the WI DOR's interpretation of the $5 million limitation, and prescribes record-keeping requirements. The emergency rule is described in Tax Alert 2024-0728. Without the extension, the emergency rule would have expired on August 14, 2024. Wis. Dept. of Rev., EmR2404 (Wis. Register No. 824A2, Aug. 12, 2024). Colorado: In response to a ruling request, the Colorado of Department of Revenue (CO DOR) determined that an online company's sale of ancestral and health reports and saliva kits are not subject to Colorado's sales tax, but its use of saliva kits to collect a customer's DNA is subject to Colorado's use tax. The CO DOR explained that while the DNA analysis for ancestral and health reports is not among the list of services explicitly subject to tax, the saliva kits are tangible personal property used in the DNA analysis and, as such, are "inseparable from the service." Since the service and kits are inseparable, the CO DOR looked to the true object of the transaction and conclude that the "true object" of the customer is the DNA analysis (i.e., the service) that results in the report, and not the saliva kit. Thus, neither the service nor the kits are subject to Colorado's sales tax. The kits, however, are subject to Colorado's use tax, which as the user of the property, the company pays. Colo. Dept. of Rev., PLR 24-007 (July 2, 2024). Colorado: In response to a ruling request, the Colorado of Department of Revenue (CO DOR) explained the applicability of the state's sales and use tax to sales of non-alcoholic beer, kombucha, bottled coffee with sweetener and insulin sold without a prescription. The CO DOR said that because non-alcoholic beer and kombucha contain trace amounts of alcohol, they are excluded from the federal definition of "food." For purposes of Colorado's sales and use tax exemption for food, the state references the federal definition of "food" used for the federal food stamp program. Since non-alcoholic beer and kombucha are excluded from the federal definition of "food," they are likewise excluded from the Colorado sales and use tax exemption and, therefore, subject to sales and use tax. Coffee-based sweetened beverages that meet the definition of soft drinks (i.e., contain sweeteners, but not milk or milk products, soy, rice or similar milk substitutes) are subject to Colorado sales and use tax. Lastly, the CO DOR explained that "insulin does not necessarily require a prescription to qualify for the exemption because it only needs to be dispensed pursuant to the direction of a practitioner" (i.e., a person authorized to prescribe drugs or devices). Accordingly, when there is not a prescription, the seller must obtain and retain sufficient information and documentation from the purchaser to verify that the insulin is being "dispensed pursuant to the direction of a practitioner." Otherwise, the seller will have to collect sales tax at the time of sale. (The CO DOR noted that '[w]hile the statute sets forth that prescription drugs are exempt if dispensed in accordance with a prescription by a practitioner, it does not use such explicit language with the insulin exemption." (citations omitted)) Colo. Dept. of Rev., GIL 24-003 (June 24, 2024). Kansas: The Kansas Department of Revenue (KS DOR) issued guidance on the sales and use tax exemption for providing communication services, which as enacted earlier this year as part of HB 2098. From July 1, 2024 through July 1, 2029, the law exempts purchases of: (1) equipment, machinery, software, ancillary components, appurtenances, accessories or other infrastructure for use in the provision of communications services (i.e., internet access services, telecommunications services, and/or video services); and (2) services purchased by providers in the provision of communications services used in the repair, maintenance or installation in such communication services.2 Purchasers claiming the exemption should complete "ST-63, Communications Service Provider Exemption Certificate" and provide it to their vendor. Kan. Dept. of Rev., Notice 24-13 "Sales Tax Exemption for Providing Communication Services" (July 1, 2024). Massachusetts: In response to a ruling request from an online company that provides DNA testing and analysis, the Massachusetts Department of Revenue (MA DOR) said the company's charges for processing and analysis of saliva specimens that are collected by Massachusetts customers and sent to the company's out-of-state laboratory are not taxable services. The MA DOR explained that the company is providing customers with a service (in this case DNA testing and analysis) and the transfer of tangible personal property to customers (in this case the saliva testing kit) for which no separate charge is made is an inconsequential element of the service transaction. Thus, the transaction is not subject to sales tax. The company, however, must pay sales tax on test kits purchased in Massachusetts. If the test kits are purchased or manufactured outside the state, the company must pay use tax on test kits that are transferred to its Massachusetts customers. Ma. Dept. of Rev., Letter Ruling 24-1: Taxability of Genetic Testing and Analysis Services (June 12, 2024). Mississippi: The Mississippi Department of Revenue adopted amendments to Miss. Admin. Code Section 35.IV.6.01 "Electric Power, Light, Gas and Other Fuel Distributors" to provide that the regular retail rate of sales tax applies to receipts for the use of electric charging stations, including fees for electricity, charging time, idle time and any other fees. These fees are included in gross income related to the purchase of electricity under Miss. Code Ann. Section 27-65-19(1)(a)(i). The revised rule took effect August 1, 2024. Oklahoma: In response to a ruling request from a company that provides DNA testing and analysis, the Oklahoma Tax Commission (OTC) determined that DNA testing and provision of personalized ancestral and health history reports is not an enumerated taxable service. Thus, this service is not subject to Oklahoma sales or use tax. The OTC further stated that based on the true object of the transaction (in this case, the DNA testing service and subsequent results), it finds the sale of tangible personal property (in this case, the saliva collection kits) is essential to the use of the service. Thus, the OTC does not consider the non-taxable service to be taxable as part of a bundled transaction with the tangible personal property. Further, the OTC said that the company is required to remit use tax on the saliva collection kits "because they are tangible personal property brought into the state for use in providing the service;" the rate of tax will depend on whether the company has already paid sales or use tax on the kits to another state and the rate of that state's tax. The company also may take a credit against any municipal or county use tax paid for out-of-state municipal or county sales or use tax it has already paid. Okla. Tax Comm., LR 23-006 (July 5, 2024). Federal: On August 8, 2024, the IRS announced (IR-2024-203) that it is continuing its enforcement work on high-risk employee retention credit (ERC) claims while also beginning payment of valid ERC claims. Businesses may receive payments for some periods while the IRS continues to review other periods for eligibility. For more on this development, see Tax Alert 2024-1539. Massachusetts: The Massachusetts Department of Revenue announced that starting September 1, 2024, all Brownfields and Film Credit applications must be submitted on MassTaxConnect. Mass. Dept. of Rev., DOR News "Brownfields Credit and Film Credit Applications Must Now Be Submitted Online" (July 2024). New Jersey: New law (SB 3275 / AB 4448) revises various provisions of the film and digital media content production tax credit program. The law expands the definition of qualified film production expenses and qualified digital media content production expenses to include wages and salaries paid to nonresident employees who are not subject to New Jersey gross income tax because of the state's reciprocity agreement with another state, among other changes to these definitions. Such qualified expenses include payments made by the taxpayer to a loan out company for services performed in New Jersey by such employees. In addition, the law modifies various definitions, including "digital media content," "film," "full-time or full-time equivalent employee," "highly compensated individual," "loan out company," "New Jersey film-lease production company" and adds a definition of "independent post-production company." The law modifies eligibility requirements for reality shows, providing that at least 60% of the total film production expenses (exclusive of post-production costs) of the taxpayer are incurred for services performed and goods purchased in New Jersey, and the taxpayer's qualified film production expenses for goods and services purchased and performed in New Jersey exceed $1 million per production. For credit application submitted after the effective date of the law, the bill modifies how digital media content production expenses are calculated by providing that qualified wage and salary payments made to full-time employees working on digital media are not "deemed" expenses incurred for services performed. The law also allows a tax credit for qualified digital media content production expenses of the taxpayers for post-production services, including visual effects services. Lastly, the law expands who unused tax credits from the Aspire and Emerge tax credit programs may be made available to include "taxpayers, other than New Jersey studio partners and New Jersey film-lease production companies" (this is in addition to New Jersey studio partners and New Jersey film-lease production companies). SB 3275 /AB 4448 took effect immediately. N.J. Laws 2024, SB 3275/ AB 4448, signed by the governor on July 10, 2024. South Carolina: New law (HB 4087) modifies various credit and incentive provisions. The credit for headquarter facilities is modified by (1) replacing "corporation" with "taxpayer or a business unit of a taxpayer" and changing references to "corporate headquarters" to "headquarter facility"; (2) specifying that to qualify for the credit the taxpayer must create 40 new "full-time" jobs (formerly, "40 new jobs") that are performing headquarters-related functions and requiring that the new jobs have gross wages that are at least twice the per capita income of South Carolina and are provided a benefits package that includes health care; (3) removing research and development services as a type of qualifying job or type of facility that may qualify for the credit; (4) changing how the amount of credit is computed; and (5) amending various definitions, including "headquarters" and "regional headquarters," and defining "remote employee;" among other changes. The law amends the qualified recycling facility credit by decreasing the minimum investment for such facility from $300 million to $150 million incurred by the end of the fifth year in which the taxpayer begins construction or operation of the facility. For purposes of the credit, the list of examples of "postconsumer waste materials" is expanded to include batteries, solar panels, turbines and related structures. The job development credit is amended by redefining "employee" to require the employe work full time in South Carolina for the benefit of the project, including remote employees. A "remote employee" is defined as "a full-time employee who is a resident of this State, North Carolina, or Georgia who is subject to [South Carolina] withholding … who is hired to fill a job for the project and who works either completely or partially from a home office or other residence within or without this State." The law also provides that in determining the amount of job development credit that may be claimed for a job filed by a remote employee, the physical location of the project, not the location where the remote employee provides services, must be used. In addition, the law amends provisions related to revitalization agreements a city council may enter in to with a qualifying business with respect to the project, modifies job and per capita income thresholds, and adds requirements for when the council approves an operating lease as an eligible expenditure for certain qualifying businesses. Eligibility for the retraining credit is expanded to include businesses engaged in warehousing and distribution, and the types of retraining programs eligible for the credit is expanded to including retraining of current employees for the purpose of upskilling, management development or recertification in production-related competencies. Other changes to the retraining credit include revising when a qualifying business that is eligible to claim the job development credit may not claim the retraining credit. S.C. Laws 2024, Act No. 22 (HB 4087), signed by the governor on July 2, 2024. Delaware: New law (SB 25) exempts from the 2% realty transfer tax imposed on documents described in 30 Del. Code Section 5401(9)3 the portion of any contract, agreement or undertaking for the construction of affordable housing units when such construction is financed using federal, State, or local funds that were provided for the purpose of constructing affordable housing units. SB 25 took effect upon the governor's approval. Del. Laws 2024, SB 25, signed by the governor on August 9, 2024. Missouri: The Missouri Department of Revenue (MO DOR) adopted amendments to 12 CSR 10-2.190 "Partnerships and S Corporation Annual Return Filing Requirements, Composite Returns, and Nonresident Partner/Shareholder Income Tax Withholding." Amendments to the rule add definitions of partnership (e.g., general partnership, limited partnership, limited liability partnership, and limited liability company treated as a partnership for federal income tax purposes, but not a publicly traded partnership treated as a corporation for federal income tax purposes) and S corporation; revise and expand the explanation of partnership and S corporation return filing requirements and deadlines; update the partnership and S corporation withholding provisions to make them more consistent with statutory provisions; and clarify when a composite return for nonresident partners and nonresident S corporation shareholders may be filed as well as the withholding requirements for nonresident partners and shareholders related to the withholding exemption. Further, the amended rule provides that "[n]otwithstanding any provision of this rule to the contrary, nothing in this rule shall be interpreted or construed as incorporating by reference any rule, regulation, standard, or guideline of a federal agency." No changes were made to the proposed text, which appeared in Mo. Reg., Vol. 49, No. 5, March 1, 2024. Mo. Dept. of Rev., Amended 12 CSR 10-2.165 (Mo. Reg., Vol. 49, No. 15, Aug. 1, 2024). New Jersey: In response to taxpayer and practitioner questions on how to report Federal and State differences from federal K-1s and NJK-1's received from lower-tier partnerships on the 2023 NJ-1065, the New Jersey Division of Taxation explained that when the net NJK-1 income amounts from the lower-tier partnerships are greater than the lower-tier partnership's federal K-1s, the corresponding difference between the lower-tier partnership's federal K-1 and NJK-1 is reported on line 13b of the 2023 NJ-1065. If such amounts are less than the lower-tier's partnership's federal K-1, then this difference is reported on line 15e of the 2023 NJ-1065. N.J. Div. of Taxn., Webpage "How to Report Federal and State Differences on 2023 NJ-1065 from K-1s Received from Lower-Tier Partnerships" (last updated Aug. 7, 2024). Multistate: The July 2024 issue of Payroll Month in Review is now available. This monthly summarizes the latest developments in US federal, state and local payroll and human resources matters. Idaho: Governor Brad Little signed into law HB 428 which, retroactive to January 1, 2024, staves off a large increase in state unemployment insurance (SUI) rates by lowering the multiplier from 1.3 to 1.2 in determining the size of the unemployment insurance (UI) trust fund. The reduction in the multiplier to 1.2 lowered the 2024 SUI tax increase by 20%, resulting in net savings to employers of $44 million. It is anticipated that employer tax savings will be $117 million by the end of five years. For more on this development, see Tax Alert 2024-1541. Kansas: Governor Laura Kelly signed into law SB 1, which retroactive to January 1, 2024, reduces the personal income tax brackets from three to two with the highest tax rate lowered from 5.7% to 5.58%. The law also increases the personal exemption and standard deductions. The Kansas Department of Revenue has issued an updated withholding formula that employers should apply immediately when computing Kansas state income tax withholding on wages. For more on this development, see Tax Alert 2024-1459. Maryland: The Maryland Department of Labor (Department) announced that it recomputed the state unemployment insurance (SUI) tax rates for 2024, resulting in a lower rate for some employers. Updated SUI rate notices were issued to all contributory employers in April 2024. The original 2024 SUI rate notices were issued on January 16, 2024. The Department notes that this 2024 recalculation will not cause an increase in the SUI tax rate of any employer; all employers' rates are either unchanged or lowered from the rate notice originally issued in January 2024. For more on this development, see Tax Alert 2024-1548. California: New law (AB 160) increases the Medi-Cal per enrollee tax for Medi-Cal taxing tier II for calendar years 2024, 2025 and 2026 from $205 to $274. AB 160 took effect immediately. Cal. Laws 2024, ch. 39 (AB 160), signed by the governor on June 29, 2024. Pennsylvania: On July 11, 2024, Pennsylvania Governor Josh Shapiro signed into law SB 654. Key tax changes in SB 654 gradually increases the net operating loss deduction and amends the related-party interest/intangible expenses and cost-addback requirements. It also (1) clarifies the goodwill deduction under the Bank and Trust Company Shares Tax; (2) limits the application of the sales and use tax exemption for data centers; and (3) amends, enhances and creates various tax credits. For additional information on this development, see Tax Alert 2024-1520. Federal — International: This edition of Trade Talking Points provides updates on the: new UK government plus the UK King's Speech announcements; new Agreement on Climate Change, Trade and Sustainability; European Parliament elections; G7 Trade Ministers' Meeting; and World Trade Organization General Council meeting. For additional information on this development, see Tax Alert 2024-1445. Federal — International: This edition of Trade Talking Points provides updates on the: the United States (US) delay to its China tariff implementation; US-Japan Partnership on Trade meeting; World Trade Organization's (WTO) Electronic Commerce agreement; the latest WTO trade statistics; and the upcoming 2024 WTO public forum. For additional information on this development, see Tax Alert 2024-1542. International — Brazil: A complementary bill (the Bill) on value-added tax (VAT) reform, which was approved by the Brazil Chamber of Deputies on July 19, 2024, has been finalized and forwarded to the Federal Senate for scrutiny. With an expedited process requested, it is anticipated that the Senators will pass the proposed text within next months. The Bill reflects a major simplification of how indirect taxes are calculated but could also pose some challenges for taxpayers. Moreover, on August 1, 2024, the first technical notes were released aimed at adapting the layout of current invoices so they can be ready on January 1, 2026, when the transition period begins. For additional information on this development, see Tax Alert 2024-1490. International — Peru: On August 4, 2024, the Executive enacted Legislative Decree 1623, establishing a new set of rules for levying an 18% VAT on the use of digital services via online platforms and the import of intangibles via the internet by individuals. The legislative decree also implemented a mechanism through which nonresident digital services providers, or nonresident sellers of intangibles, must withhold the VAT and pay it to the Peruvian Tax Authority. For additional information on this development, see Tax Alert 2024-1509. September 17, 2024. Domestic tax quarterly webcast series: a focus on state tax matters (1:00-2:30 p.m. ET New York). For our third quarterly webcast in 2024, we will discuss state tax considerations of the U.S. Supreme Court's recent ruling in Loper Bright. The decision overturned Chevron, which had instructed courts to defer to the decisions of federal agencies when a statute is ambiguous. While in recent years states have been moving away from Chevron deference, we will discuss the impact this decision could have on state taxes. In part three of our four-part series on the use of artificial intelligence (AI) in the world of state and local tax, we will dive deeper into how organizations can evaluate their readiness to begin their GenAI journey and explore more practical examples of GenAI use cases for tax. We will round out the webcast with a state and local policy update, highlighting recently enacted changes and what they mean for taxpayers from a compliance perspective. 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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