October 22, 2024 The fate of several state and local tax ballot measures to be decided on November 5 On November 5, 2024, residents across the United States will vote on several state and local ballot measures affecting taxes on businesses and individuals. Oregon Measure 118, for example, would impose a new 3% minimum tax on corporations whose gross sales exceed $25 million starting in 2025 (see, Tax Alert 2024-1250), while San Francisco Measure M would implement substantial revisions to the city's business taxes (see, Tax Alert 2024-1825). Other measures would increase local sales taxes, provide various sales and property tax exemptions or tax revenue from sports betting, among other potential tax changes. The following is a summary of select state and local tax measure that will be considered during the upcoming general election.1 California - Statewide Proposition 5 would lower the threshold for approving certain local bonds used to fund affordable housing, supportive housing, or public infrastructure and related property taxes to a 55% vote, rather than the two-thirds vote required by California's constitution. Proposition 35 would permanently authorize the existing tax on managed healthcare insurance plans. The tax is currently set to sunset in 2027. California - Local2 San Diego: Measure E would allow the City of San Diego to impose a one-cent sales and use tax, which would increase the city's sales and use tax rate to 8.75% (from 7.75%). San Francisco: Measure L would impose a new gross receipts tax ranging from 1% to 4.5% on certain transportation network companies (TNCs) and autonomous vehicle businesses. The tax would apply to TNC companies with passenger-transportation-service gross receipts in San Francisco exceeding $500,000. San Francisco: Proposition M (Prop M), if approved, would drastically change San Francisco's business taxes, including the gross receipts tax, the homelessness gross receipts tax, the overpaid executive gross receipts tax and the administrative office tax. Prop M would also change rates for various taxes, consolidate and reduce the number of business activity classifications for the gross receipts and homelessness gross receipts taxes and modify the calculations of the gross receipts and overpaid executive gross receipts taxes (see Tax Alert 2024-1825). Santa Cruz: Measure Z would create a two-cents-per-fluid-ounce excise tax on the wholesale distribution of sugar-sweetened beverages in the City of Santa Cruz, such as soft drinks, sports drinks, slushies, sweetened ice teas and coffees, and energy drinks. Sugar-sweetened beverages would not include milk, all-natural fruit or vegetable juice, baby formula, beverages for medical use or as a meal-replacement, or alcoholic beverages, among other listed items. The tax would be paid by the distributor and not the consumer. Small businesses with less than $500,000 in gross annual revenue would be exempt from the tax. If approved, tax would be collected starting May 1, 2025. Colorado - State Proposition JJ (HB 24-1436) would allow the State to keep and spend all tax revenue from sports betting by removing the $29 million fiscal-year estimate that was included in the ballot question approved by voters on sports betting in 2019. The excess revenue would fund water conservation projects instead of being refunded to casinos. Colorado - Local Denver: Ballot Issue 2Q would impose an additional 0.35% local sales and use tax on sales of currently taxable tangible personal property, products and services starting January 1, 2025. Revenue generated from the tax would be used to help "maintain and expand Denver Health and Hospital Authority Services." Denver: Ballot Issue 2R would impose an additional temporary 0.50% local sales and use tax beginning January 1, 2025 and ending on December 31, 2064. Revenue generated from the tax would be used to help "expand and preserve affordable housing for low- and middle-income families and individuals … ." Georgia HB 808 (Georgia Laws 2024) sends to voters a ballot measure that, if approved, would increase the property tax exemption for all tangible personal property from $7,500 to $20,000. If approved by voters, all tangible personal property (except motor vehicles, trailers and mobile homes), would be exempt from all ad valorem taxation if the actual fair market value of the total tangible personal property owned by the taxpayer within a county did not exceed $20,000. The increased exemption would take effect on January 1, 2025. HR 598, a proposed constitutional amendment, would create the Georgia Tax Court. The Georgia Tax Court would be an independent court, vested with the judicial power of the State. Approval of HR 598 also would allow HB 1267 (Georgia Laws 2024) to take effect, which would repeal the Georgia Tax Tribunal, which is currently part of the Georgia Office of State Administrative Hearings. In addition, HB 1267 (1) specifies the make-up, role and jurisdiction of the Georgia Tax Court; (2) authorizes the Tax Court to issue orders and opinions; and (3) outlines the process for filing a petition with the tax court. HB 1267 also lists which matters pending before the Georgia Tax Tribunal will and will not be transferred to the Georgia Tax Court. Persons could petition the Georgia Tax Court for relief starting August 1, 2026. HR 1022, a proposed constitutional amendment, would authorize the General Assembly to establish a single, statewide homestead exemption from ad valorem taxes. The statewide exemption would uniformly apply to each county, consolidated government, municipality or local school system (collectively, "political subdivision") beginning January 1, 2025. The General Assembly could (1) limit the application of the homestead exemption to political subdivisions that currently do not have such an exemption; and (2) prescribe methods for opting "out of" or "into" the homestead exemption. Under the current proposal, political subdivisions would have until March 1, 2025, to opt out of the exemption. Political subdivisions that do not opt out would be governed by the statewide homestead exemption. The homestead exemption would remain for as long as homeowners own their homes, and the assessed value would reset to the market value when a home is sold. Illinois A nonbinding statewide advisory question on public policy — required for inclusion on the November 5, 2024 general election ballot by SB 2412 (Pub. Act 103-0586, Ill. Laws 2024) — asks voters: "Should the Illinois Constitution be amended to create an additional 3% tax on income greater than $1,000,000 for the purpose of dedicating funds raised to property tax relief?" Missouri Amendment 2 would amend the state constitution to allow the Missouri Gaming Commission to regulate sports wagering (e.g., online sports betting, excursion gambling boats and professional sports betting districts). The amendment would also allow license fees (retail license fee of up to $250,000 and mobile license fee of up to $500,000) and a 10% wagering tax on adjusted gross revenue from sports wagering. The Amendment would apply to all sports wagering beginning December 1, 2025. Nevada Question 5 would exempt child and adult diapers from the state's sales and use tax, the Local School Support Tax Law and certain analogous taxes on retail sales. The exemption would take effect on January 1, 2025. North Dakota Initiated Measure 4, a constitutional amendment, would prohibit all political subdivisions (in addition to the legislative assembly) from taxing the assessed value of real or personal property, with an exception for certain levies on real property that are dedicated to paying bonded indebtedness. A political subdivision could not issue a general obligation bond secured with a tax levied on property on or after January 1, 2025. The state would replace the political subdivisions' lost revenue from annual property taxes. Oregon Starting in 2025, Measure 118 (formerly Initiative Petition 2024-17), if approved by a majority of voters, would impose a new 3% minimum tax on corporations with gross sales exceeding $25 million. The new corporate minimum tax would be in addition to the current minimum tax regime. 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 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 (see Tax Alert 2024-1250). South Dakota Ballot Measure No. 28 would prohibit the state from collecting sales or use tax on anything sold for human consumption. According to the South Dakota Attorney General's explanation, this measure would not prohibit the state from collecting sales or use tax on alcoholic beverages or prepared foods or prevent municipalities from taxing food sold for human consumption. Ballot Measure 21 would allow SB 201 (SD Laws 2024) to become law. SB 201 allows a county to impose a pipeline surcharge of up to $1 per liner foot of carbon dioxide pipeline installed in the county during any tax year the pipeline company claims a federal tax credit for carbon dioxide sequestration under IRC Section 45Q. The law also prohibits a county, municipality, township or other governmental unit from enacting or increasing any tax, fee or charge that relates to a gas or liquid transmission line or an electric transmission line that requires or holds a permit under S.D. Code Section 49-41B. Washington - State level I-2109 would repeal the state's capital gains tax, which applies to certain long-term capital assets of individuals with over $250,000 in annual capital gains. I-2117 would repeal the state's cap-and-invest program, which was enacted in 2021, and prohibit state agencies from imposing a trading program for carbon tax credits. I-2124 would require employees and self-employed persons to elect to keep coverage under the state's long-term care insurance program. Those electing coverage, however, could opt out of the program at any time. Washington - Local level Ordinance 127053 would, for eight years, allow the City of Seattle to levy regular property taxes exceeding the limitation on levies under RCW ch. 84.55.010. The proposed increase would apply to property taxes levied in 2024 through 2031, which would be collected in 2025 through 2032. The current increase — the Levy to Move Seattle — expires at the end of 2024. Wyoming Amendment A would provide for the separate assessment of residential real property as a separate property class for purposes of taxation. This separate class of property would allow the General Assembly to reduce residential property tax assessments. Implications These ballot measures show the range of issues in state and local tax policy to be decided on November 5. If enacted, several of these measures may implicate 2025 legislative decision-making on tax policy or result in litigation over state and local revenue restrictions. Taxpayers should be aware of these potential changes and consider whether they could impact their tax obligations in the state. We will issue a follow-up alert to provide an update on which measures pass or fail.
| ||||||
|
