07 January 2025 State and Local Tax Weekly for December 6 and December 13 Ernst & Young's State and Local Tax Weekly newsletter for December 6 and December 13 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. Louisiana Governor Jeff Landry on December 4, 2024 signed into law a package of tax reform bills, which make several changes that will impact all Louisiana business and individual taxpayers. Franchise tax: HB 3 repeals the Louisiana franchise tax effective for franchise tax periods beginning on or after January 1, 2026. The law amends several tax incentives to remove references to the franchise tax. Corporate income tax: HB 2 makes several changes to the corporate income tax. These changes, unless otherwise specified, take effect for tax years beginning on or after January 1, 2025. Rates: Currently, Louisiana's has a graduated corporate income tax rate of 3.5% (first $50,000), 5.5% (next $100,000) and 7.5% (excess over $150,000). In 2025, the rates collapse and a flat 5.5% corporate income tax rate applies. Corporate taxpayers may also claim a newly created $20,000 standard business deduction. Full expensing: The law adopts permanent full expensing under IRC Section 168(k) and (e)(6) and IRC Section 174. Starting in 2025, taxpayers (corporate, pass-through entity (PTE) and individual) may elect to deduct the full cost of qualified property, qualified improvement property (collectively, "qualified property") and research and experimental (R&E) expenditures. Taxpayers will make the election on an original or amended Louisiana corporate income tax return. Expenditures for qualified property placed in service, or R&E expenditures paid or incurred, on or after January 1, 2025, are eligible for bonus depreciation or bonus amortization, respectively. If the election is made, such expenditures must be deducted as expenses incurred by the taxpayer during the tax year in which the expenditure was incurred. Foreign trade zones (FTZs): Preferential apportionment treatment for companies with sales and inventory in FTZs is eliminated. Prior to the change made HB 2, taxpayers can exclude from the numerator of the corporate income tax apportionment factor property and sales attributable to property located in an FTZ. Inventory tax credit (ITC) repeal: The ITC for C corporations is repealed for tax periods beginning on July 1, 2026. The refundability of the ITC, however, is repealed for C corporations for tax periods beginning on or after January 1, 2025. Unused ITCs may be carried forward for an additional five years. The ITC remains intact for individuals and PTEs. Tax credits: HB 2 accelerates the sunset of, or immediately eliminates, many corporate income tax credits. Credit certifications to enter into new, or renew already existing contracts requested after June 30, 2025, will not be granted for the following credits: (1) angel investor tax credit, (2) enterprise zone program credits, (3) Louisiana quality jobs program credits, (4) sound recording investor tax credit, and (5) retention and Modernization Act investment credit. Tax credits that are repealed for tax periods beginning on and after January 1, 2025, and for franchise tax periods beginning on or after January 1, 2026, include, among others, the following: (1) new markets tax credit; (2) low income housing tax credit; (3) Louisiana Community Development Financial Institution Act credits; (4) jobs tax credits under R.S. 47:34; 47:287.748; 47:287.749; 47:287.752 (e.g., work opportunity tax credits-type credits); (5) brownfields investor tax credit; and (6) solar energy tax credit.
R&D tax credit claims are "allowed on a first-come, first-served basis." Taxpayers whose R&D credit claim are disallowed due to the cap may use the credits on an original return filed in the next fiscal year. Sales tax rate: Effective January 1, 2025 the combined state sales and use tax rate will be increased to 5% from 4.45%.1 On January 1, 2030, the combined state sales and use tax rate will decrease to 4.75%. In 2016, Louisiana enacted an additional, temporary 1% sales tax (i.e., clean penny) on certain purchases of tangible personal property or services within the state. In 2018, the clean penny was extended through June 30, 2025 (from June 30, 2018), but at a lower 0.45% rate. HB 10 extends the sunset date of the current 0.45% rate to June 30, 2029 and imposes an additional 0.55% rate from January 1, 2025 through December 31, 2029. Beginning January 1, 2030, both the 0.45% and 0.55% are replaced with a 0.75% rate. HB 10 also increases the 0.97% rate to 1% and it removes the 0.03% imposition under R.S. 51:1286 in favor of a revenue allocation. Vendor compensation: HB 10 reduces the aggregate maximum vendor compensation from $1,500 to $750 per month, for tax periods beginning on or after January 1, 2025. Exclusions, exemptions, rebates, and credits: For tax periods beginning on or after January 1, 2025, HB 10 eliminates 70 current sales tax exclusions, exemptions, rebates, and credits that businesses or individuals may claim. Eliminated exclusions, exemptions, rebates, and credits include, but are not limited to, the following:
HB 10 retains over 70 exclusions, exemptions, rebates, and credits. Select tax exclusions, however, are converted into exemptions, then consolidated and modified — including those related to (1) manufacturing machinery and equipment; (2) medical devices, equipment and drugs; (3) agricultural inputs and other agricultural tangible personal property; and (4) governmental and intergovernmental transactions. Additionally, HB 10 recodifies and amends definitions of various services currently subject to sales tax under R.S 47:301. "[E]lectronic data retrieval or research; and collecting, compiling, analyzing, or furnishing of information of any kind, including … general or specialized news, other current information or financial information, by printed, mimeographed, electronic, or electrical transmission, or by utilizing wires, cable, radio waves, microwaves, satellites, fiber optics, or any other method now in existence or which may be devised." Such information may be delivered or accessed via a database or subscription. Examples include furnishing newsletters; tax guides; research publications; financial, investment, circulation, credit, stock market, or bond rating reports; mailing lists; news clipping; broadcast rating services; global positioning system services; and database subscriptions. Information services do not include payment processing, financial-for-account-balance information, information gathered or compiled on behalf of a particular client, among other exceptions. Digital products and services: For tax periods beginning on or after January 1, 2025, HB 8 imposes the state's sales and use tax on digital products. A "digital product" is defined as "digital audiovisual works, digital audio works, digital books, digital codes, digital applications and games, digital periodicals and discussion forums, and any other otherwise taxable tangible personal property transferred electronically, whether digitally delivered, streamed, or accessed and whether purchased singly, by subscription, or in any other manner, including maintenance, updates, and support."
A business-to-business exemption applies for purchases of qualifying digital products, computer software or prewritten software access services, and information services used by a business directly in the production of goods or services for sale to its customers. Sourcing: HB 10 establishes general sourcing rules for sales of tangible personal property and digital products and services, as well as leases or rentals of tangible personal property, excluding motor vehicles. Specific sourcing rules apply for sales and leases of vehicles, sales of telecommunications services, and repairs to tangible personal property. Additional exceptions to the general sourcing rule are also established for purposes of sales and use taxes imposed by political subdivisions. Bundled transactions: HB 10 also establishes rules for taxing bundled transactions. The law provides exceptions to transactions that otherwise meet the definition of a "bundled transaction," including the true object exception, the de minimis exception, and the exception for food, drugs and medical items. (The true object exception applies only to transactions that include a service component and does not apply if the transaction only includes sales of tangible personal property or digital products.) The law includes specific rules for bundled transactions that include digital products that provide purchasers with the right to obtain multiple digital products. Individual income tax: HB 10 makes several changes to the state's individual income tax. Like the corporate income tax rate, Louisiana's current individual income tax rate applies on a graduated schedule of 1.85% on the first $12,500, 3.5% on the next $37,500, and 4.25% on amounts over $50,000. (Similar tax rates apply to income of trusts and estates, but with slightly different brackets.) Beginning in 2025, the graduated income tax rates for individuals, trusts and estates collapse and a flat 3% rate applies to net income; the rate of the elective PTE tax shifts from a graduated rate to the 3% rate for individuals. Previously enacted contingent, automatic individual income tax rate reductions scheduled through 2034 are repealed. In 2025, the standard deduction increases to $12,500 (from $4,500) for single taxpayers and those who are married but filing separately. For taxpayers who are married filing jointly or filing as a qualified surviving spouse, the standard deduction is 200% of the deduction for single filers (i.e., $25,000 for the 2025 tax year). Annual inflation adjustments for the standard deduction will begin in 2026. For nonresidents computing taxable income, HB 10 repeals deductions for (1) expenses disallowed by IRC Section 280C, and (2) net capital gains. HB 10, like HB 2, adopts full expensing under IRC Section 168(k) and (e)(6) and IRC Section 174 for individual income tax purposes, repeals many business tax credits, and retains other specified credits. A similar deduction is allowed for trusts and estates. For more on this development, see Tax Alert 2024-2266. Maine: The Maine Revenue Services (MRS) has proposed amendments to Rule 801 "Apportionment" to modify provisions regarding sales other than sales of tangible personal property. Receipts from the performance of services generally are sourced to the state where the services are received. A proposed amendment would provide that a service may be received by a person that did not pay, or contract, for them. The determination of where services are received would be based on all available facts including the books and records of the taxpayer and related parties. Another proposed amendment would make clear that there is a distinction between determining where the service is received and determining the amount of gross receipts from the performance of services in Maine. Proposed amendments also would add several examples of sourcing receipts from the performance of services under the general rule, including for: (1) in-person services; (2) services concerning real property; (3) services concerning tangible personal property; (4) services concerning teaching and training; (5) advertising and related services; (6) cable TV services; and (7) pharmacy benefit management services. Comments on the proposed changes are due to the MRS by January 17, 2025. Massachusetts: Governor Maura Healey signed supplemental budget legislation (H. 5077, ch. 248) on December 4, 2024, which includes a fix to the commonwealth's single sales factor apportionment provisions. Under a law enacted in 2023, Massachusetts will require the use of a single sales factor apportionment formula for corporate excise tax purposes by all industries effective for tax years beginning on or after January 1, 2025. Previously, only manufacturing companies, qualifying defense contractors and qualifying mutual fund service corporations were required to use single sales factor apportionment. The 2023 law also modified statutory provisions on factor drop out (e.g., when there is no denominator). As originally enacted, a missing sales factor (i.e., both the numerator and the denominator are zero) meant that a corporation's net income would be fully taxable in the state. As amended, and effective for tax years beginning on or after January 1, 2025, a corporation's taxable net income will be apportioned to Massachusetts based on the corporation's property and payroll in the state if the sales factor does not apply. The law specifies that the sales factor does not apply if: (1) both the numerator and the denominator are zero, (2) the denominator is less than 10% of one-third of a corporation's taxable net income, or (3) the commissioner determines that the sales factor is insignificant in producing income. The sales factor, however, may apply when only the sales factor numerator is zero. For more on this development, see Tax Alert 2024-2331. Michigan: The Michigan Department of Treasury (MI DOT) issued a Revenue Administrative Bulletin (RAB) to corporations reporting business income under Part 2 of the Michigan Income Tax Act (MITA) on computing federal taxable income (FTI), net operating losses (NOLs) and business losses for purposes of calculating its corporate income tax (CIT) liability under the MITA. In computing FTI, Michigan decouples from IRC Section 168(k) (bonus depreciation) and Section 199 (domestic production activities deduction). Taxpayers will have to adjust for these amounts in computing FTI. The MI DOT noted that taxpayers need to track and keep records on the differences between federal taxes and CIT resulting from decoupling for future CIT liability computations. After computing FTI, the adjustments under MCL 206.623(2)(c) are applied, including the add back of NOLs deducted in computing FTI. The MI DOT explained that a CIT business loss is not the same as a federal NOL or a Michigan Business Tax (MBT) business loss. Under the CIT, only business losses incurred after December 31, 2011 may be deducted. Business losses incurred under the former MBT may not be claimed on a CIT return. Taxpayers have 10 years to use a business loss. The MI DOT noted that taxpayers need to keep sufficient records to support when a business loss was realized, the amounts used and the amount available to carryforward. As for an entity that joins a unitary business group, that entity may bring its business loss carryforward to the group. If such entity was part of a prior unitary business group, it will bring its share of the prior group's business loss carryforward. The RAB includes several illustrative examples. This RAB does not apply to insurance companies and financial institutions, which are subject to different taxes under ch. 12 of the MITA. Mich. Dept. of Treas., RAB 2024-23: "Federal Taxable Income, Net Operating Loss and Business Loss Under Part 2 of the Michigan Income Tax Act" (Dec. 4, 2024). Tennessee: In response to a ruling request, the Tennessee Department of Revenue (TN DOR) addressed a taxpayer's use of Tennessee net operating losses (NOLs) and tax credits against future Tennessee franchise and excise tax liabilities following an IRC Section 368(a)(1)(F) reorganization. The operating company, a wholly owned subsidiary of a US parent, performed manufacturing and distribution activities throughout the US, including Tennessee. Prior to the reorganization, the operating company had generated Tennessee NOLs and Tennessee tax credits. The taxpayer is a newly formed company that will take the place of operating company. Under the reorganization, the taxpayer will contribute 100% of its equity interest in operating company to a newly formed holding company that ultimately will be sold to a third-party buyer. Through the reorganization, parent will divest itself of legacy liabilities and insurance policies that originally arose in the operating company. The TN DOR determined that the taxpayer may use the Tennessee NOLs and tax credits to future Tennessee franchise and excise tax liabilities. The TN DOR explained that in the case of a merger, consolidation or like transaction, the successor taxpayer generally may not use the qualified NOLs and tax credits generated by the predecessor taxpayer; however, an exception to this general rule applies in certain circumstances — the Tennessee Carryover Exception. Under this exception the predecessor's qualified Tennessee NOLs and Tennessee tax credit may be carried over and used on the successor taxpayer's franchise and excise tax return when the "predecessor taxpayer merges out of existence and into a successor taxpayer that has no income, expenses, assets, liabilities, equity, or net worth." In this case, the predecessor merged into a "shell company," which "accounts for the restructuring while also preventing the NOLs and tax credit from merging into an already existing company." Based on the facts presented regarding the reorganization, the TN DOR found that the Tennessee Carryover Exception applies and, as such, the taxpayer may use the Tennessee NOLs and tax credits generated by the operating company. Tenn. Dept. of Rev., Letter Ruling # 24-09 (Nov. 5, 2024). Florida: The Florida Department of Revenue released several tax information publications (TIP) on local surtax rates approved by voters during the November 5, 2024 general election. In Seminole County, voters approved an extension of the county's 1% Local Government Infrastructure Surtax through December 31, 2034 (from December 31, 2024). The combined state and local tax rate for Seminole County will continue to be 7%. In Marion County, voters approved ballot measures extending the sunset date of the county's 1% local government infrastructure surtax through December 31, 2044 (from December 31, 2024) and adding a new 0.5% school capital outlay surtax. The surtax applies beginning January 1, 2025, at which time the combined state and local sales and use tax rate for Marion County will be 7.5%. In Martin County, voters approved a new 0.5% local government infrastructure surtax that will be imposed starting January 1, 2025. As of that date, the combined state and local tax sales and use tax rate for Martin County will be 7%. In Hamilton County, voters approved a new 1.0% emergency fire rescue services and facilities surtax. This surtax will be imposed starting January 1, 2025, and it brings the combined state and local tax sales and use tax rate for Hamilton County to 8%. Fla. Dept. of Rev., TIP Nos. 24A01-17, 24A01-18, 24A01-19, 24A01-20 (all released on Nov. 25, 2024). Illinois: The Illinois Department of Revenue (IL DOR) issued a compliance alert regarding its direct pay permit program (DPP). The IL DOR said that "many participants in the [DPP] are not in compliance with the record-keeping, filing, and payment requirements for purchases made under DPP." To promote compliance with the DPP, law enacted in 2024 (Pub. Act 103-0966) imposes new reporting requirements as well as a penalty. Starting January 1, 2025, DPP participants must complete an annual review of all transactions for the prior calendar year and by March 31 of the following calendar year the participant must submit confirmation of the annual review. By April 20 of the following calendar year, DPP participants must file Form ST-1-X, Amended Sales and Use Tax and 911 Surcharge return for filing periods for which a transaction was not taxed at the correctly sourced tax rate and pay any additional tax due. Failure to comply with these requirements may result in the imposition of a $6,000 penalty for the transaction review reporting period. The penalty may be waived "if the participant can show that any errors were made while exercising ordinary business care and prudence … " Ill. Dept. of Rev., Compliance Alert "CA-2025-01, Changes to Increase Participant Compliance in the Illinois Department of Revenue's Direct Pay Permit Program" (Dec. 10, 2024). Illinois: The Illinois Department of Revenue (IL DOR) issued an informational bulletin on the application of the state's sales and use tax on leased or rented tangible personal property. The IL DOR explained that starting January 1, 2025, businesses that lease2 or rent tangible personal property in the ordinary course of their business are considered a retailer. As a retailer, such businesses are subject the Illinois sales and use tax laws and they must register with the IL DOR and pay tax on their lease or rental receipts. The IL DOR noted that the law change enacted by Pub. Act 103-592 does not impact leases or rentals that must be titled or registered with a state agency such as leases of motor vehicles, watercraft, aircraft and semitrailers. To make a tax-exempt purchase of tangible personal property that will be leased or rented, the IL DOR said that a taxpayer may use Form CRT-61 "Certificate for Resale" to claim an exemption for eligible leases and rentals. The informational bulletin also addresses the following topics: (1) taxable receipts from lease or rental transactions; (2) taxability of leases and rentals of computer software; (3) tax considerations for lease and rental agreements entered into before January 1, 2025; and (4) how to determine the proper tax rate on leases and rentals; among other topics. Ill. Dept. of Rev., Information Bulletin "FY 2025-15, Illinois Sales and Use Tax Applies to Leased or Rented Tangible Personal Property" (Dec. 12, 2024). Massachusetts: New law (H. 5100) creates a sales and use tax exemption for qualified data centers. The exemption applies to sales of the following: (1) eligible data center equipment and computer software for use in a qualified data center; (2) electricity for use or consumption in the operation of a qualified data center; or (3) construction costs incurred for the construction, renovation or refurbishment of a qualified data center. The exemption is available for a 20-year qualification period, which begins on the effective date of the certification of the qualified data center. If a qualified data center is sold to a new owner, the exemption will continue through the end of qualification period. The law defines several terms relevant to the data center exemption, including "colocation tenant," "computer software," "construction costs," "eligible data center equipment," "qualification period," "qualified data center," "qualified data center costs," "secretary," and "substantially refurbished." The law also describes the information that the owner or operator of a data center must include in the application for the sales and use tax data center exemption, such as location and anticipated size of, investment in, and jobs created by the qualified data center. The Secretary of Economic Development will issue a written certification to qualified data centers that meet the requirements for the sales and use tax exemption. Certification may be revoked if the data center is in material noncompliance with the exemption requirements. This exemption is effective for costs incurred after the effective date of H. 5100. Mass. Laws 2024, ch. 238 (H. 5100), signed by the governor on November 20, 2024. Michigan: The Michigan Department of Treasury issued an updated revenue administrative bulletin (RAB) on Michigan's sales and use tax exemptions for "prescription drugs" and "over-the-counter [OTC] drugs that are legally dispensed by prescription."3 The RAB describes the differences in eligibility and scope of each exemption. For prescription drugs, the RAB identifies (1) a "drug for human use" including satisfying the definitional and functional components of a drug, and (2) a drug that can only be legally dispensed by prescription. Regarding the OTC drug exemption, the RAB (1) identifies OTC drugs for human use, and (2) how to establish that the OTC drug is "legally dispensed by prescription," including identifying transactions in which OTC drugs are legally dispensed and when OTC drugs are dispensed by prescription. The RAB also discusses the application of the exemption to single transactions involving both prescription and OTC drugs. The RAB includes several illustrative examples. Mich. Dept. of Treas., RAB 2024-21 "Sales and Use Tax: The Prescription Drug and Over-the-Counter Drug Exemptions" (Nov. 26, 2024) (replaces RAB 1993-3). Texas: The Texas Comptroller of Public Accounts (Comptroller) issued a memo to provide guidance to auditors on local tax sourcing for mobile telecommunications services. The Comptroller explained that audit requested help from Tax Policy in reviewing audits regarding local tax sourcing for mobile telecommunications services, noting that "[p]roviders had been incorrectly sourcing local tax on sales of mobile telecommunications, data plans, and tangible personal property." Providers in turn assert that they should be "held harmless" under the Mobile Telecommunications Sourcing Act. Under Texas law, a taxpayer may be held harmless for incorrect tax collection when (1) the tax collected is based on enhanced zip codes for each taxing jurisdiction, and (2) the taxpayer exercised due diligence to ensure the proper local tax was collected. The Comptroller said that for audit periods through December 31, 2024, providers will be held harmless for incorrect sourcing of local tax on sales of mobile telecommunications, data plans, and tangible personal property. Beginning January 1, 2025, providers will be deemed to have exercised due diligence when they use the Comptroller's Sales Tax Rate Locator and Publication 96-339 "Local Sales Tax on Telecommunications." Thus, to "be held harmless" for sales of taxable items, a provider must use the Locator and Publication 96-339 to source the local tax. The Comptroller noted that the standard sourcing provisions in Tex. Tax Code ch. 321 should be used to source tangible personal property. Tex. Comp. of Pub. Accts., STAR No. 202410001M (Oct. 2, 2024). Texas: In response to a ruling request from a software, marketing and event planning company that works with restaurants to provide food at client locations via popup, delivery and catering and requires the restaurants to use its point-of-sale platform and mobile application, the Texas Comptroller of Public Accounts (Comptroller) said that for purposes of the popup, delivery and catering, the company is a marketplace provided. The Comptroller reasoned that both the popup event and catering constitute marketplaces as they provide a physical medium through which the restaurants can sell their food and that the mobile app for delivery is a marketplace as it is an electronic medium through which the restaurants can sell food. In addition to operating a marketplace, the company also processes payments through its point-of-sale platform or mobile app. Through these activities, the company satisfies the definition of a marketplace provider and as a marketplace provider, the company is required to collect and remit sales and use tax on transactions occurring through its platform and mobile app. The Comptroller also found the company's charges for the following are taxable as the sale of data processing: popup fee, order total fee, and delivery fee. (Both the popup fee and the order total fee cover charges for providing the functionality offered by the point-of-state platform.) The following fees also are taxable as part of the sales price of taxable data processing services: scheduling fees, payment processing fees, and catering fees. Lastly, the Comptroller found the company's site management fee, which is a charge for providing plates, containers, napkins, condiments and utensils, is taxable as the sale of tangible personal property. Tex. Comp. of Pub. Accts., STAR No. 202410007L (Oct. 10, 2024). Federal: The Treasury Department and IRS have finalized the regulations (TD 10015, the Final Regulations) on the types of energy properties eligible for the IRC Section 48 investment tax credit (ITC). The Final Regulations adopt most of the Proposed Regulations (see Tax Alert 2023-1936) while making some changes in response to the 350 comments the IRS received. The changes most helpful to taxpayers include modifying the definitions of qualified biogas property and how to determine when multiple units of energy property are considered a single project for purposes of complying with prevailing wage and apprenticeship (PWA) requirements. For additional information on this development, see Tax Alert 2024-2290. Massachusetts: New law (H. 5100) establishes the climatetech tax incentive program. "The purpose of the program shall be to develop and expand climatetech related employment opportunities … and to promote climatetech related economic development in the commonwealth by supporting and stimulating research, development, innovation, manufacturing and deployment in the climatetech sector." The law lists criteria owners and tenants of a certified climatetech company must demonstrate to be eligible for the credit. An owner or tenant of a certified climatetech company, to the extent authorized, may claim a refundable credit against its corporate excise/personal income tax in an amount not exceeding 50% of the owner's total capital investment in a climatetech facility. The credit will be distributed in equal parts over the five tax years that correspond with the owner or tenants certification period. Certification may be revoked by the Massachusetts Clean Energy Technology Center if the Center determines that the climatetech company is in material noncompliance with its certification proposal. The amount of credit available to a tenant may not exceed the tenant's total lease payments for occupancy of the climatetech facility for the tax year. The aggregate amount of climatetech credits available is capped at $30 million per year. The climatetech tax incentive program also provides for: (1) a refundable jobs credit that can be taken against the corporate excise and personal income taxes, and (2) credits for certain qualified research expenses and basic research payments that can be taken against the corporate excise tax. Excess research credit is not refundable but may be carried over for up to 15 years. The law also creates a sales and use tax exemption for purchases of tangible personal property by a certified climatetech company "for use in connection with the construction, alteration, remodeling, repair or remediation of research, development or manufacturing or other commercial facilities used for the provisions of goods or services in the climatetech sector and utility support systems." The law creates a refundable internship tax credit. The credit is equal to the lesser of $5,000 or 50% of the wages paid to each net-new qualified intern employed in the tax year. The law list requirements an employer must met to be eligible for the internship tax credit. The amount of credit an employer can claim per year is capped at $100,000 and the total aggregate amount of credit available per year is limited to $10 million. The internship tax credit is not transferable. The law increases the annual cap on the life sciences tax incentive program to $40 million (from $30 million). The law also makes modifications the Economic Development Incentive Program and the offshore wind tax incentive program. These changes have various effective dates. Mass. Laws 2024, ch. 238 (H. 5100), signed by the governor on November 20, 2024. Massachusetts: New law (S.2967) modifies the refundable income tax credit for capital investment in an offshore wind facility by reducing the number of new full-time employees the facility must employ from "not less than 200" to "not less than 50." This change takes effect February 18, 2025. Mass. Laws 2024, ch. 239 (S.2967), signed by the governor on Nov. 20, 2024. Louisiana: HB 7, which became law on November 25, 2024, proposes various amendments to the Louisiana Constitution. In conjunction with statutory companion HB 11,4 the tax-related amendments, if approved by voters, would do the following: (1) transition various property tax provisions, including the Industrial Tax Exemption Program (or ITEP), from the Constitution to statute; (2) require a two-thirds vote of the legislature to enact an exemption, exclusion, deduction, credit, or rebate, or an increase in a deduction, credit, or rebate; (3) authorize payments to parishes that elect to provide an ad valorem tax exemption for business inventory; and (4) authorize parishes to apply a reduced assessed value percentage to business inventory. Louisiana will vote on these proposed Constitutional amendments during a statewide election on March 29, 2025. Multistate: The November 2024 issues of Payroll Month in Review newsletter, which summarizes employment tax and other payroll developments in US federal, state and local payroll and human resources matters is now available. For the full newsletter, is available via Tax Alert 2024-2247. Missouri: Governor Michael L. Parson has announced that effective January 1, 2025, the top personal income tax rate will be lowered from 4.8% to 4.7%. This decrease is the result of legislation enacted in 2022 under SB 3 and SB 5, which allow for a potential decrease of 0.1% for each year that revenue goals are met until the top tax rate reaches 4.5%. For additional information on this development, see Tax Alert 2024-2158. West Virginia: Governor Jim Justice signed into law SB 2033 which, effective January 1, 2025, lowers the graduated income tax rates from a range of 2.36% to 5.12% to a range of 2.2% to 4.82%. The legislation allows for future tax rate cuts if revenue goals are met. For more on this development, see Tax Alert 2024-2154. Louisiana: New law (HB 25) amends the state's severance tax, defining key terms regarding orphan well qualification, including "payout of well cost," "qualified accountant," and "well cost statement." The final version of the bill does not include rate changes that were originally proposed. HB 25 took effect upon the governor's signature. La. Laws 2024 (Third Extraordinary Session), Act 18 (HB 25), signed by the governor on December 4, 2024. Washington: The Washington Department of Revenue (WA DOR) issued an Excise Tax Advisory (ETA) on non-fungible tokens (NFTs). The ETA defines key terms, includes various examples, and provides general guidance regarding the imposition of business and occupation (B&O) and retail sales tax and use tax on transactions involving NFTs. The WA DOR explained that in determining the proper tax treatment of an NFT, taxpayers should consider the following: (1) the underlying product (e.g., a good or a service or other item of value) that represents the NFT; (2) the number of products the transaction represents; (3) the B&O and sales and use tax treatment of each underlying product; and (4) the parties to the transaction (e.g., a purchaser, consumer or reseller). The WA DOR said if there is only one product representing the NFT, then the B&O and sales and use tax treatment is determined by the nature of the underlying product. Thus, if the underlying product is taxable tangible personal property, the sale of the NFT is taxed as the sale of tangible personal property. And if the purchaser is a consumer and the sale is in Washington, the sale would generally be subject to the B&O tax under the retailing classification. In this situation, the seller collects retail sales tax. If the NFT represents two or more distinct and identifiable products at a single price, the sale or exchange of the NFT is treated as a bundled transaction and the purchaser of the NFT is the consumer of the products. The ETA addresses the following topics: (1) selling price; (2) sourcing retail sales of NFTs; (3) bundled transactions; (4) marketplace facilitators and marketplace sellers; (5) apportionment of non-retail activities; (6) royalties from use of NFTs; (7) burning and minting NFTs; (8) use tax; and (9) reselling activities. The ETA does not address topics on advanced computing surcharge, exemptions, exclusions, deductions, credits or other incentives that may apply, or capital gains tax. This ETA replaces the WA DOR's July 1, 2022 interim statement on the taxability of NFT (and any prior conflicting rulings or written reporting instructions provided to taxpayers). The ETA took effect December 5, 2024. Wash. Dept. of Rev., ETA 3241.2024 "Non-Fungible Tokens (NFTs)" (Dec. 5, 2024). Federal — International: On December 11, 2024, the United States Trade Representative (USTR) announced modifications to actions taken in the Section 301 of Trade Act of 1974 (Section 301) investigation of the People's Republic of China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation to increase tariff rates on five subheadings of the Harmonized Tariff Schedule of the United States. The subheadings cover certain tungsten products, wafers and polysilicon. The changes are set to take effect on January 1, 2025. The decision to increase tariffs follows a review and public comment period. The USTR concluded that increasing tariffs on these specific products would support domestic industries, reduce reliance on Chinese imports and address national security concerns. For additional information on this development, see Tax Alert 2024-2293. Federal — International: The latest issue TradeWatch is now available. In this final issue of the year, we look at some key trends and themes that are impacting trade now, including trade protection measures, trade technology and trade controversy. We also focus on the life sciences sector and briefly look ahead to identify themes that are likely to continue to dominate the trade agenda in 2025. For more on this development, see Tax Alert 2024-2271. Federal — International: The November 2024 edition of Trade Talking Points provides updates on: (1) the election of Donald Trump as US President and latest US tariff announcements; (2) China's launching World Trade Organization dispute proceedings against the European Union's (EU's) measures on electric vehicles and ongoing EU-China trade tensions; (3) United Arab Emirates' free trade agreements; (4) UK-EU Competition Cooperation Agreement; (5) EU's adoption of the Forced Labor regulation; (6) extended use of Pan-Euro-Mediterranean origin certificates; and (8) conclusion of the Agreement on Climate Change, Trade and Sustainability. For more on this development, see Tax Alert 2024-2205. International — Egypt: On November 17, 2024, the Egyptian Tax Authority (ETA) issued Instruction No. (78), revoking Circular Nos. (5) and (6) of September 2019 (Circulars). These Circulars had required value-added tax (VAT) to be applied to specific exported services, including marketing, promotion, warranty services and agency services. The Instruction is effective from its date of issuance. Although the new instruction cancels the previous VAT requirement, companies that have already collected VAT under the Circulars must remit these amounts to the ETA. For more on this development, see Tax Alert 2024-2207. January 16, 2025. Observations and trends in unclaimed property: What your organization needs to know in today's environment (1:00-2:00 pm ET). Please join members of Ernst & Young LLP's Unclaimed Property and Escheat Services practice as they discuss recent trends and legislation in unclaimed property that could have an impact on your organization, including: (1) recent trends in enforcement from Delaware, such as verified report requests and compliance reviews; (2) observations related to organizations selected by states for examinations, self-reviews and self-audits and steps to take if your organization receives a notice; (3) challenges to accepted norms in the healthcare, transportation and financial services industries; (4) California's recently operational Voluntary Compliance Program; (5) proactive unclaimed property considerations during transactions, such as initial public offerings (IPOs) or mergers and acquisitions; and (6) opportunities to help prepare your organization for an audit-ready and efficient annual compliance program. 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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