Ernst & Young's State and Local Tax Weekly newsletter for April 18 and April 25 is now available. Prepared by Ernst & Young's State and Local Taxation group, this weekly update summarizes important news, cases, and other developments in U.S. state and local taxation.

TOP STORIES

Arkansas enacts economic nexus and market-based sourcing provisions, among other corporate income tax changes

On April 16, 2025, Arkansas Governor Sarah Huckabee Sanders signed into law SB 567 (Act 719), which updates Arkansas statutes to align with the most recent provisions of Article IV of the Multistate Tax Compact (MTC), most notably adopting market-based sourcing for receipts other than from the sale of tangible personal property. SB 567 also adopts a new bright-line economic nexus provision, incorporates the MTC "apportionable" and "nonapportionable" income definitions, adopts a throwout rule. These, and other changes, take effect for tax years beginning on and after January 1, 2026.

Economic nexus: SB 567 adopts a bright-line economic nexus provision under which a nonresident corporation or partnership lacking physical presence in Arkansas will be subject to tax if its Arkansas receipts exceed $250,000 for the current or the immediately preceding tax year. Taxpayers that meet the bright-line nexus threshold will be subject to tax starting no earlier than the tax year beginning on or after January 1, 2026, even if such receipts threshold is met for the immediately preceding tax year, occurring during 2025.

Market-based sourcing: SB 567 repeals the state's modified cost of performance method for sourcing receipts other than from the sale of tangible personal property and enacts a market-based sourcing method. Under this new method, receipts from sales other than from the sale of tangible personal property are sourced to Arkansas if the taxpayer's market for the sales is in Arkansas. The amendment includes the following examples to illustrate when the taxpayer's market is in Arkansas:

• Real property: Receipts from the sale, rent, lease or license of real property should be sourced to Arkansas if and to the extent the property is located in Arkansas.
• Tangible personal property: Receipts from the rents, leases or licenses of tangible personal property should be sourced to Arkansas if and to the extent the property is located in Arkansas.
• Services: Receipts from services should be sourced to Arkansas if and to the extent the service is delivered to a location within Arkansas.
• Intangible property: Receipts from intangible property that is rented, leased or licensed should be sourced to Arkansas if and to the extent the property is used within Arkansas.
• Intangible property utilized in marketing a good or service to a consumer is used in Arkansas if the related good or service is purchased by a consumer within Arkansas.
• Intangible property: Receipts from the sale of intangible property that is sold should be sourced to Arkansas if and to the extent the property is used within Arkansas.
• A contract right, government license, or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area is used in Arkansas if the geographic area includes all or part of Arkansas.
• Receipts from intangible property sales that are contingent on the productivity, use, or disposition of the intangible property should be treated as receipts from the rental, lease or licensing of such intangible property.
• All other receipts from a sale of intangible property should be excluded from both the numerator and denominator of the Arkansas receipts factor.

Concerning receipts from sales other than the sales of tangible personal property, Arkansas will allow for the state or states of assignment to be reasonably approximated when such location(s) cannot otherwise be determined under the previously mentioned methodologies.

Throwback and throwout rules: SB 567 does not amend Arkansas' current throwback rule, applicable to the sale of tangible personal property, when the property is shipped from a location within Arkansas and the taxpayer is not taxable in the state of the purchaser. The throwback rule will continue to phase out, where no sales of tangible personal property would be thrown back to the Arkansas numerator beginning on or after January 1, 2030.

SB 567 introduces the following four scenarios in which certain receipts should be excluded from the Arkansas numerator and denominator of the receipts factor:

• Receipts from hedging transactions and from the maturity, redemption, sale, exchange, loan or other disposition of cash or securities
• Receipts from the sales of intangible property not explicitly mentioned as being included in Ark. Code Ann. Section 26-5-101, Article IV, (17)(a)(4)(B) or Ark. Code Ann. Section 26-51-717(a)(4)(B)
• Receipts otherwise assignable under Ark. Code Ann. Section 26-5-101, Article IV, (17)(a) or (b) or Ark. Code Ann. Section 26-51-717(a) or (b) where a state assignment cannot be determined or reasonably approximated
• Receipts otherwise assignable under Ark. Code Ann. Section 26-5-101, Article IV, (17)(a) or (b) or Ark. Code Ann. Section 26-51-717(a) or (b) where the taxpayer is not taxable in the state to which the receipt is assigned

Industry specific methodologies: For tax years beginning on or after January 1, 2026 but before December 31, 2035, taxpayers principally engaged in the sale of telecommunications services, mobile telecommunications services, internet access services, cable television services, community antenna television services, or direct-to-home satellite television programming services, or a combination of such services, may elect to source sales, other than the sale of tangible personal property, using the cost of performance method. The election should be made on the taxpayer's return for the first year in which the taxpayer is eligible for the election. Once made, the election cannot be changed without written approval from the Secretary of the Arkansas Department of Finance and Administration.

"Apportionable" and "nonapportionable" income: SB 567 replaces definitions of "business" and "nonbusiness" income with the MTC's definitions of "apportionable" and "nonapportionable" income. Apportionable income includes income from: (1) transactions and activity in the regular course of the taxpayer's trade or business; and (2) tangible or intangible property if the acquisition, management, employment, development or disposition of the property is related to the operation of the taxpayer's trade or business. Apportionable income also includes income that would be allocable to Arkansas under US Constitutional law but is instead apportioned to Arkansas under Arkansas law.

"Nonapportionable" income is all income other than "apportionable" income.

Arkansas' previous definition of business income required income from tangible or intangible property to be considered apportionable business income only when the acquisition, management, and disposition of the property constituted integral parts of the taxpayer's regular trade of business operations.¹ The amended law includes two additional factors (the employment or development of the property), replaces the "and" conjugation with "or" and removes the reference to the taxpayer's "regular trade or business" and now uses a more expansive reference to "the operation of the taxpayer's trade of business." Such seemingly minor wording changes have the effect of greatly expanding the application of the business income (now "apportionable income") definition.

Other: SB 567 also modifies alternative apportionment provisions, excludes certain hedging and cash or securities transactions from the definition of receipts, and modifies the definition of "taxable in another state" for allocation and apportionment purposes.

For additional information on this development, see Tax Alert 2025-1011.

Kansas enacts single sales factor apportionment, market-based sourcing, and contingent corporate income tax rate reductions

On April 24, 2025, Kansas Governor Laura Kelly signed into law HB 2231, which adopts single sales factor apportionment and market-based sourcing for sales of services and intangible property. The law also provides for future corporate income tax rate reductions that are contingent on revenue thresholds being met.

Single sales factor apportionment and the deferred tax impact deduction: Effective for tax years beginning on or after January 1, 2027, Kansas adopts a single sales factor apportionment formula for corporate income tax purposes, while financial institutions will use a single receipts factor. Qualified taxpayers that previously elected to use a property and sales factor apportionment formula under K.S.A. 79-3279(b)(2) may use the single sales factor apportionment formula.

The mileage-based apportionment formula used by railroads and interstate motor carriers is repealed for tax years beginning after 2026.

Manufacturers of alcoholic liquor who sell to distributors will continue to use an equally weighted three-factor (property, payroll and sales) apportionment formula.

Additionally, the law creates a deferred tax impact deduction² that may be claimed by publicly traded companies on their relevant Kansas tax return³ if the imposition of the single sales factor apportionment requirements⁴ results in (1) an aggregate increase in the taxpayer's net deferred tax liability⁵ (DTL), (2) an aggregate decrease in its net deferred tax assets⁶ (DTA), or (3) causes its net DTA to become a net DTL. If the taxpayer is a unitary group required to file a combined report, the deferred tax impact deduction is calculated using unitary net DTAs or DTLs.

Taxpayers that plan to take the deferred tax impact deduction must file a statement with the Secretary of Revenue on or before July 1, 2027, specifying the total amount of the deferred tax impact deduction that they plan to claim. The deferred tax impact deduction is equal to the amount necessary to offset the increase, decrease or aggregate change to net DTAs or DTLs. The computation of the increase in net DTLs, decrease in net DTAs or the aggregate change from a net DTA to a net DTL is "based on the change that would result from the imposition of the single sales factor requirements pursuant to this section … as of the end of the tax year prior to tax year 2025." No adjustment to the deferred tax impact deduction will be permitted for events occurring after the deferred tax impact deduction is calculated. The deferred tax impact deduction is calculated without regard to any tax liabilities under the Internal Revenue Code nor does it alter the tax basis of any assets.

Eligible taxpayers may claim the deferred tax impact deduction in annual installments over a 10-year period, starting in 2035. The amount of the deferred tax impact deduction exceeding the taxpayer's liability will be carried forward until fully used.

Market-based sourcing: Effective for tax years beginning on or after January 1, 2027, Kansas replaces the cost of performance method for sourcing sales of non-tangible personal property, e.g., services and intangible, with the market-based sourcing method for purposes of the Kansas corporation income tax. (See K.S.A. 79-3287.) Although financial institutions will adopt a receipts method as previously discussed, the sourcing rules for financial institutions in K.S.A. 79-1130 were not amended by the law. Thus, financial institutions generally will source receipts from services using the cost of performance method; however, under K.S.A. 79-1130(n) "other receipts" of a financial institution, which references K.S.A. 79-3287, adopt the new market-based sourcing rules for corporations.

Under the new corporation income tax sourcing rules, the taxpayer's market for sales is in Kansas as follows:

• Services: to the extent the service is delivered to a Kansas location
• Intangible property that is rented, leased or licensed: to the extent the property is used in Kansas
• Intangible property used in marketing a good or service to a consumer: if the good or service is purchased by an in-state consumer
• Intangible property that is sold: to the extent it is used in the state, with specific provisions for certain transactions
• Interest from a loan: to the extent the real property securing the loan is located in Kansas or, if not secured by real property, to the extent the borrower is located in Kansas
• Dividends: to the extent the payor's commercial domicile is located in Kansas

Communications service providers may assign sales of non-tangible property to Kansas using the cost of performance method.

Corporate income tax rate: The law allows for future corporate rate reductions in the event that revenue thresholds are met. The rate reduction could first take effect for tax years beginning after December 31, 2028.

For additional information on this development, see Tax Alert 2025-0994.

INCOME/FRANCHISE

Georgia: New law (HB 111) reduces the individual and corporate income tax rates to 5.19% (from 5.39%), effective for tax years beginning on or after January 1, 2025. HB 111 retains provisions that provide for a 0.10% rate reduction annually, beginning in 2026 (from 2025), until the rate reaches 4.99%. The additional rate reduction is contingent on revenue thresholds being met. HB 111 takes effect on July 1, 2025 and applies to tax years beginning on or after January 1, 2025. Ga. Laws 2025, Act 7 (HB 111), signed by the governor on April 15, 2025.

Indiana: New law (SB 451) for tax years 2030 through 2042, lowers the personal income tax rate by 0.05% every other year if revenue goals are met. HB 1001, enacted in 2023, lowered the tax rate starting in 2024 with additional tax cuts each year until the rate reached 2.95% in 2026 and 2.90% in 2027. SB 451 extends the 2.90% rate through 2030. If revenue thresholds are met the rate could be reduced to 2.85% for tax year 2030 and 2031, and to 2.8% for 2032 and 2033. The tax rate in effect for tax years beginning after December 31, 2042 remains in effect for tax years beginning after December 31, 2043 and thereafter. SB 451 takes effect on July 1, 2025. Ind. Laws 2025, SB 451, signed by the governor on April 16, 2025.

SALES & USE

Arkansas: New law (HB 1685) exempts gross receipts or gross proceeds from the sale of food and food ingredients from state sales and use taxes but allows such items to continue to be subject to taxes levied by municipalities and counties. "Food and food ingredients" do not include prepared food. The term "prepared food" does not include the following: (1) food that is only cut, repackaged or pasteurized by the seller; or (2) eggs, fish, meat, and poultry, as well as foods containing these raw animal products that require cooking by the consumer to prevent food-borne illnesses as recommended by the FDA. These changes take effect on and after January 1, 2026. Ark. Laws 2025, Act 1008 (HB 1685), signed by the governor on April 22, 2025.

Arkansas: New law (HB 1444) amends the sales and use tax exemption for qualified data centers and expands the exemption to include qualified large data centers. The definition of "qualified data center" is amended to: (1) include any addition to or expansion of a data center facility; (2) reduce the amount of qualified investment created to at least $100 million (from $500 million) no later than five years after construction of the facility begins; (3) allow the aggregate annualized compensation be paid directly or indirectly to individuals performing services (changed from employees), including compensation paid by contractors of qualified firms; and (4) add a new requirement that the qualified data center is owned or operated by a qualified firm that is not primarily engaged in adding transactions involving virtual currency to a distributed ledger at the facility.

The law adds a new definition for "qualified large data center." A qualified large data center is a facility, including any addition to or expansion of, that "is developed, acquired, constructed, expanded, rehabilitated, renovated, repaired, or operated to house a group of networked computer servers in two … or more nonadjacent physical locations that are connected to each other by fiber and associated equipment … " A qualified large data center must be owned or operated by a qualified firm that (1) creates a $2 billion qualified investment at the facility no later than 10 years after the construction of the facility begins, (2) makes an aggregate annualized compensation of at least $3 million, and (3) is not primarily engaged in adding transactions involving virtual currency to a distributed ledger at the facility. A qualified large data center also must receive a positive cost-benefit analysis from the commission. Various definitions and provisions that mention "qualified data center" now refer to "qualified data center or qualified large data center."

The definition of "data center equipment" is expanded to mean "computer equipment, software, and related equipment and services purchased or leased either for immediate use or stored for future use in this state for the processing, storage, retrieval, or communication of data … ." If a qualified data center or qualified large data center fails to meet the aggregate annualized compensation the approved financial incentive certificate for the qualified firm that owns or operates the data center will be revoked. Likewise, the approved financial incentive certificate for the qualified firm will be revoked when the qualified large data center it owns or operates fails to meet its investment requirement; however, eligibility for the exemption will continue if each facility within the qualified large data center independently meets the requirements of a qualified data center. This change is effective on the first day of the calendar quarter following the Act's effective date, with the Act taking effect 90 days after the legislature adjourn sine die. Ark. Laws 2025, Act 548 (HB 14440), signed by the governor on April 10, 2025.

Arkansas: New law (SB 200) expands the gross receipts tax exemption for textbooks and other instructional materials to include instructional materials that are leased for use in interscholastic extracurricular activities or administration or maintenance of a school. A gross receipts tax exemption also is provided for textbooks, library books and other instructional materials that are leased by an Arkansas public school district or an Arkansas public school that receives state funding or for free distribution to an Arkansas public school district or an Arkansas public school. (Exemptions already apply to such items that are purchased). SB 200 takes effect 90 days after the legislature adjourn sine die. Ark. Laws 2025, Act 329 (SB 200), signed by the governor on March 18, 2025.

Arkansas: New law (HB 1851) updates the sales and use tax exemption for the sale of food in public, common and high schools, and college cafeterias and dining facilities (changed from lunch rooms). The law provides that for purposes of this exemption such entity will not be considered as operating for profit if it contracts for services or management from a third party operating for profit. This change is effective on the first day of the calendar quarter following the Act's effective date, with the Act taking effect 90 days after the legislature adjourn sine die. Ark. Laws 2025, Act 714 (SB 200), signed by the governor on April 16, 2025.

Illinois: In response to a ruling request related to tariffs, the Illinois Department of Revenue (IL DOR) said that in computing the Retailers' Occupation Tax (ROT) liability, federal importation taxes (e.g., tariffs) may not be deducted from gross receipts or selling price of the person making the retail sale. The IL DOR explained that "if the seller is the consignee (importer) and passes the amount of the tariff on to the customer, it is part of the selling price, and the amount of the tariff must be included in the gross receipts." The IL DOR noted that in this instance, the tariff is a cost of business to the importer and are not deductible in computing the ROT liability on a subsequent retail sale, even if separately stated on bill to the customer. The tariff is not part of the selling price for purposes of computing the customer's Use Tax liability when the customer as the end-user is the consignee. Ill. Dept. of Rev., ST 25-0022-GIL (April 7, 2025).

Utah: New law (HB 79) creates a sales and use tax exemption for purchases of adaptive driving equipment for motor vehicles. "Adaptive driving equipment" is defined as "mobility enhancing equipment: (1) to be installed in a motor vehicle; and (ii) regardless of who provides the equipment or parts." Such equipment includes wheelchairs or scooter lifts, swivel seats, equipment used to secure wheelchairs, hand or foot controls, and steering aids. A vehicle dealer collects sales tax on the purchase price of the vehicle after subtracting the amount of the purchase price attributed to the adaptive driving equipment. The dealer must state the purchase price attributed to the adaptive driving equipment on the contract of sale. HB 79 takes effect on October 1, 2025. Utah Laws 2025, HB 79, signed by the governor on March 25, 2025.

Virginia: New law (HB 2383) clarifies that an accommodations provider is not required to transmit a return to the tax-assessing officer of a county, city or town if: (1) all retail sales of accommodations owned by the accommodations provider are facilitated by an accommodations intermediary, and (2) the accommodations provider attests that all such sales were facilitated by the accommodations intermediary. The attestation is effective for 12 months and will be due annually on the date required by the locality. Accommodations providers, however, must transmit returns for retail sales of any accommodation not facilitated by an accommodations intermediary. HB 2383 takes effect on July 1, 2025. Va. Laws 2025, ch. 458 (HB 2383), signed by the governor on March 24, 2025.

Virginia: New law (HB 1698) extends the sunset date of the sales and use tax exemption for prescription medicine and drugs purchased by veterinarians and administered or dispensed to patients within a veterinarian-client-patient relationship through July 1, 2028 (from July 1, 2022). HB 1698 takes effect on July 1, 2025. Va. Laws 2025, ch. 188 (HB 1698), signed by the governor on March 21, 2025.

BUSINESS INCENTIVES

Arkansas: New law (HB 1303) creates a sustainable aviation fuel tax credit that may be claimed against income tax. The credit is equal to 30% of the cost of sustainable aviation fuel production and processing equipment purchased for use in Arkansas by a qualified manufacturer of sustainable aviation fuel that satisfies certain conditions. Such conditions include, but are not limited to, obtaining a certification from the Director of the Arkansas Economic Development Commission (Commission) that the qualified manufacturer of sustainable aviation fuel: (1) operates a qualified sustainable aviation fuel project (hereafter, "fuel project") or has such fuel project in production; (2) has invested more than $2 billion after this Act's effective date in a project for (a) property purchased for use in the construction of, or addition or improvement to, a building(s) that will be used for producing sustainable aviation fuel, (b) machinery and equipment located in or used in connection with a fuel project, excluding certain motor vehicles, or (c) project planning costs or construction labor costs such as on-site director labor, architectural/engineering fees, site preparation, land, buildings, drainage systems, rolling stock, among other listed examples. The amount of credit claimed by the taxpayer cannot exceed the taxpayer's income tax liability; unused credit is carried forward indefinitely. Issuance of these credits is subject to an incentive agreement between the taxpayer and the Commission. The law describes what must be in the agreement. The new law also defines the following terms: "new full-time permanent employee," "qualified manufacturer of sustainable aviation fuel," "qualified sustainable aviation fuel project," "sustainable aviation fuel," and "sustainable aviation fuel production and processing equipment." These changes are effective for tax years beginning on or after January 1, 2025. Ark. Laws 2025, Act 546 (HB 1303), signed by the governor on April 10, 2025.

Indiana: New law (SB 306) modifies the film and media production tax credit by allowing taxpayers to assign any part of the credit they may claim. Taxpayers may make only one assignment of the credit, and the assignee of the credit is prohibited from assigning all or part of the credit to another taxpayer. The taxpayer must notify the Indiana Economic Development Corporation of the assignment before making it. Both the taxpayer and the assignee must report the assignment on their Indiana tax returns for the year in which the assignment is made. The value the taxpayer receives in connection with the assignment may not exceed the value of the part of the credit assigned. This change applies to tax years beginning after December 31, 2025. Effective July 1, 2025, the law caps the amount of any single credit to $250,000 and the aggregate amount of credit to $2 million per year, and it extends the sunset date of the credit to July 1, 2031 (from July 1, 2027). Ind. Laws 2025, P.L. 78 (SB 306), signed by the governor on April 16, 2025.

New Mexico: New law (HB 368) amends the high-wage jobs tax credit by modifying the definition of "threshold job." As modified, a "threshold job" is a job that is occupied for at least 44 weeks of the first 52 weeks of employment (changed from "a calendar year"), provided that the 52-week period begins on the date the eligible employee occupies the job. This change takes effect 90 days after the Legislature adjourns. N.M. Laws 2025, ch. 107 (HB 368), signed by the governor on April 8, 2025.

Utah: New law (HB 264) limits eligibility for claiming an energy system tax credit against the corporate and individual income taxes to energy systems that are completed and placed in service before January 1, 2028. The law also repeals the following: the nonrefundable alternative energy development tax credit, the nonrefundable tax credit for qualifying solar projects, and the nonrefundable alternative energy development tax credit. HB 264 takes effect on May 7, 2025 and has retroactive operation for a tax year beginning on or after January 1, 2025. Utah Laws 2025, HB 264, signed by the governor on March 25, 2025.

PROPERTY TAX

Colorado: New law (HB 25-1040) adds nuclear energy, including nuclear energy projects awarded funding through the US Department of Energy's Advanced Nuclear Reactor Programs, to the definitions of "clean energy" and "clean energy resource." However, in making a valuation of a public utility for property tax purposes, nuclear energy is specifically excluded from the definition of "clean energy resource." (See Colo. Rev. Stat. Section 39-4-101(2.4)). HB 25-1040 takes effect on August 6, 2025. Colo. Laws 2025, ch. 45 (HB 25-1040), signed by the governor on March 31, 2025.

Idaho: New law (HB 130) modifies the property tax exemption available to certain hospitals. As revised, a "hospital" includes nonprofit medical clinics and facilities designated by the Centers for Medicare and Medicaid services of the Department of Health and Human Services (HHS) as a critical access hospital or a rural emergency hospital.⁷ The exemption applies to the following property: (1) real property owned by a nonprofit hospital, a county hospital, a critical access hospital, a rural emergency hospital or a hospital district operated as a hospital; and (2) personal property, including medical equipment, owned or leased by a nonprofit hospital, a county hospital, or a hospital district located and used in a hospital district. In order to receive a property tax exemption, the law requires nonprofit hospitals and hospitals that are not facilities federally designated as critical access hospitals to submit certain documentation and/or take certain actions (e.g., limit the amount charged for emergency or other medically necessary care). Throughout the statutory provisions, the term "hospital corporation" is changed to "nonprofit hospital." The law also modifies the information required to be included in a community benefits report that must be prepared by a nonprofit hospital that has been issued a property tax exemption and operates 150 or more patient beds. HB 130 takes effect January 1, 2026. Idaho Laws 2025,ch. 323 (HB 130), signed by the governor on April 14, 2025.

Montana: New law (HB 90) provides for the reappraisal of noncentrally assessed real property every two-years (along with all property within class three under MCA Section 15-6-133, class four under MCA Section 15-6-134 and class 10 under MCA Section 15-6-143). Further, all centrally assessed property and all real property valued with centrally assessed property are revalued as provided in MCA Section 15-23-101(2). HB 90 took effect on approval and applies retroactively to property tax years beginning after December 31, 2024. Mont. Laws 2025, ch. 42 (HB 90), signed by the governor on April 3, 2025.

CONTROVERSY

San Francisco, CA: The San Francisco Office of the Treasurer & Tax Collector (Treasurer) announced a voluntary disclosure and compliance program to allow businesses and other persons to come forward and pay unpaid taxes, other charges and interest for the prior six years. In exchange for participating in the program, the Treasurer will waive penalties for the six-year lookback period as well as taxes, other charges, penalties and interest for periods prior to lookback. The program will run for a three-year period, ending on December 31, 2027. The program is open to taxpayers that do not have a business registration certificate, have not filed the required returns and have not been previously contacted by the Treasurer regarding unreported taxes and other charges or for failing to register. Taxes covered by the program include, but are not limited to, business registration fees, gross receipts tax, commercial rents tax, commercial vacancy tax, homelessness gross receipts tax, overpaid executive tax, administrative office tax, sugary drinks tax, and parking tax. Additional information on this program is available here.

San Francisco, CA: The San Francisco Office of the Treasurer & Tax Collector (Treasurer) announced the advance written determination (AWD) program, which "is intended to provide clarity and predictability on issues related to tax apportionment and business activity classification for businesses in San Francisco." The Treasurer said that it will accept applications for 2025 through October 31, 2025. The program will run for a three-year period, through 2027. The Treasurer explained that an AWD will be issued to a taxpayer or prospective taxpayer regarding areas that may lack clarity, usually before that taxpayer takes a filing position. A taxpayer that does not follow the AWD in a subsequent tax return may be subject to additional tax, penalties and interest; taking a different position than the AWD is not eligible for penalty waiver. The Treasurer noted that redacted AWDs will be published. Additional information on the program, such as eligibility requirements, subject matter covered by the program, and frequently asked questions, as well as information regarding the application and decision process is available here.

New Jersey: The New Jersey Division of Taxation (NJ DOT) announced a new mediation pilot program that will provide taxpayers with a new option to resolve certain types of corporation business tax (CBT) and sales and use tax (SUT) controversies. Associated penalties will also be mediated as part of the program. The pilot program will run from October 1, 2025 through September 30, 2027. Thereafter, the NJ DOT will evaluate the effectiveness of the program and decide whether it should be made permanent. The NJ DOT's guidance describes case eligibility and explains the application and mediation processes. N.J. Div. of Taxn., TB-115 "Mediation Pilot Program" (April 15, 2025).

Texas: New law (SB 14) provides that courts are "not required to give deference to a state agency's legal determination regarding the construction, validity, or applicability of the law or a rule adopted by the state agency responsible for the rule's administration, implementation, or other enforcement." Instead, a court must review all questions of law de novo, including the interpretation of constitutional or statutory provisions or rules adopted by a state agency. The law does not prohibit a court from considering a state agency's legal determination that is reasonable and does not conflict with the statute's plain language. SB 14 takes effect, and applies to a petition for judicial review, action for declaratory judgment, contested case, or other proceeding initiated, on or after September 1, 2025. Tex. Laws 2025, SB 14, signed by the governor on April 23, 2025.

PAYROLL & EMPLOYMENT TAX

Georgia: On April 15, 2025, Georgia Governor Brian Kemp signed into law HB 111, which retroactive to January 1, 2025, lowers the state's income tax rate from 5.29% to 5.19%, accelerating the income tax rate cut. Consistent with existing law, and provided revenue goals are met, HB 111 calls for a further reduction in the tax rate of 0.10% annually starting in 2026 until the tax rate reaches 4.99%. The updated withholding formula, once available, will be posted here. For additional information on this development, see Tax Alert 2025-0930.

Utah: The Utah State Tax Commission has updated Publication 14, Withholding Tax Guide, which contains the revised withholding formula and tables resulting from the decrease in the personal income tax rate effective retroactive to January 1, 2025. The updated withholding formula/tables apply to payroll periods beginning on and after June 1, 2025. For more on this development, see Tax Alert 2025-0958.

MISCELLANEOUS TAX

Maine: New law (LD 609) modifies "hospitals" subject to the state's hospital tax under 36 MRSA Section 2892. Beginning January 1, 2025, a 3.25% tax is imposed on the net operating revenue of acute care hospitals (changed from hospital) and rehabilitation hospitals (changed from specialty hospitals). The hospital's net operating revenue is that which is identified in the hospital's audited financial statement for the hospital's taxable year. The law also adds definitions of "acute care hospital," "critical access hospital," "hospital," "net operating revenue," "psychiatric hospital," and "rehabilitation hospital." Maine Laws 2025, ch. 2 (LD 609), signed by the governor on March 21, 2025.

Utah: New law (HB 378) starting January 1, 2026, imposes a tax on a renewable energy project entity in Utah for each year following the calendar year in which a wind or solar electric generation facility owned by such project becomes commercially operational. A renewable energy project entity will not owe tax for a wind or solar electric generation facility project that before December 31, 2025, was operating, under construction, or subject to a power purchase agreement or other binding agreement to purchase output of the wind or solar electric generation facility. The tax equals the megawatts (or portion thereof) of operational generating alternating current nameplate capacity of a wind or solar electric generation facility owned by the renewable energy project entity multiplied by $1,050. Tax does not apply to a wind or solar electric generation facility owned or operated by the US, the state or a political subdivision thereof, an Indian or Indian tribe, or a distribution or a wholesale electric cooperative. Also starting January 1, 2026, each renewable energy parent entity with an eligible facility that is commercially operational in Utah must pay an annual energy project assessment by March 1 of each year. The amount of the assessment ranges from $25,000 up to $200,000, based on the amount of megawatts of operational generating alternating current nameplate capacity. Additionally, the renewable energy project entity and the renewable energy parent entity are required to electronically file by March 1 of each year, a statement containing certain information such as the name of the entity, description and location of the wind or solar electric generation facility owned by the entity in the state. HB 378 takes effect on January 1, 2026. Utah Laws 2025, HB 378, signed by the governor on March 25, 2025.

Utah: New law (HB 216) requires the State Tax Commission, the Office of the Legislative Fiscal Analyst, and the Governor's Office of Planning and Budget to annually determine whether federal tax law changes will likely result in a material increase in state income tax revenue for the next fiscal year and the first taxable year in which the federal changes take effect. If a consensus of the group determines that such changes will likely result in a material increase of tax revenue, the Commission is required to submit by October 1 a report to the Revenue and Taxation Interim Committee. The report must describe each federal law change expected to result in a material increase in state income tax revenue for the next fiscal year as well as an estimate of the material increase in revenue the state is expected to receive. The revenue committee may recommend legislative action for the next general session to negate the material increase in state income tax revenue. HB 216 takes effect on July 1, 2025. Utah Laws 2025, HB 216, signed by the governor on March 25, 2025.

Utah: New law (SB 216) imposes a new radioactive waste disposal, processing and recycling facility tax. The tax is equal to 16.67% of the gross receipts of a radioactive waste facility from the disposal of radioactive waste received from a generator that ships to the facility for the first time between June 30, 2025 and June 30, 2028. The law creates a new radioactive waste facility expansion tax, which will be imposed on a radioactive waste facility that submits a new radioactive waste facility application to the Division of Waste Management and Radiation Control by December 31, 2025. The tax is equal to $3.45 per cubic yard of new licensed waste disposal volume, not to exceed 8,700,000 cubic yards of new licensed waste disposal volume for a radioactive waste facility. The radioactive waste facility expansion tax is repealed on July 1, 2026. These changes take effect on July 1, 2025. Utah Laws 2025, SB 216, signed by the governor on March 24, 2025.

Washington: New law (HB 1060) requires a business claiming the business and occupation (B&O) tax exemption for printing or publishing a newspaper and publishing eligible digital content to file a complete annual tax performance report with the Washington Department of Revenue (Department). If the business claiming the exemption fails to file a completed report, the business will have to repay the tax in an amount equal to the gross income of the business activities multiplied by a 0.484% rate. Further, if the Department determines that a person is not eligible for the exemption, the amount of taxes for which the exemption has been granted will be immediately due. The amount of tax due equals the gross income of the business activities multiplied by a 0.484% rate plus interest calculated retroactive to the date the exemption was taken; penalties will not be imposed. This emption expires on January 1, 2034. HB 1060 takes effect on July 27, 2025. Wash. Laws 2025, ch. 15 (HB 1060), signed by the governor on April 7, 2025.

GLOBAL TRADE

International — Brazil: On April 14, 2025, the Brazilian government officially enacted bill No. 2.088/23 as Law No. 15.122/25, empowering the government to implement countermeasures against countries imposing retaliatory measures on Brazilian products. This law enables the adjustment of the Contribution on the Intervention in the Economic Domain (CIDE) and the Contribution for the Development of the National Cinema Industry (CONDECINE) rates applicable to payments to specific countries. In April, both the Brazilian Senate and Chamber of Deputies approved the bill in response to recent tariff measures by the United States Administration. The new Brazil law sets forth a framework for adopting economic and environmental retaliatory measures aimed at safeguarding the competitiveness of Brazil's domestic production and upholding commercial agreements. For additional information on this development, see Tax Alert 2025-0901.

International — Canada: On April 15, 2025, the Minister of Finance announced a series of relief measures for Canadian businesses affected by the recent tariffs imposed by the United States (US). Certain importers of motor vehicles from the US have been granted remission of the 25% surtax imposed by Canada in response to US tariffs on automobiles and automobile parts. The parameters for obtaining remission are contained in the United States Surtax Remission Order (Motor Vehicles 2025) (Motor Vehicle Remission Order), released on April 15, 2025. Further guidance can also be found in Customs Notice 25-17: United States Surtax Remission Order (Motor Vehicles 2025), published by the Canada Border Services Agency (CBSA) on April 15, 2025 and updated on April 17. For additional information on this development, see Tax Alert 2025-0928.

International — European Union: The European Union (EU) on April 14, 2025, published countermeasures against recently imposed United States (US) tariffs on steel and aluminum products. However, concurrently, the EU also suspended its countermeasures for 90 days (until July 14, 2025) to allow the US authorities and the European Commission to continue negotiations. For more information on this development, see Tax Alert 2025-0906.

VALUE ADDED TAX

International — Italy: On April 14, 2025, the Director of Italian Revenue issued an implementation measure (Prot. No. 178713/2025) adding a new guarantee requirement for certain nonresident entities that are registered for value-added tax (VAT) in Italy through an Italian VAT representative. The guarantee is necessary to enable the nonresident entity to include its Italian VAT number on the VAT Information Exchange System (VIES) and therefore be allowed to carry out intra-European Union (EU) transactions. Entities that are already included in the VIES database will be required to provide the guarantee within 60 days from the publication of the new measure (i.e. by June 14, 2025). For additional information on this development, see Tax Alert 2025-0939.

International — Saudi Arabia: On April 18, 2025, the Zakat, Tax and Customs Authority (ZATCA) Board Resolution No. 01-06-24 (Resolution), dated November 19, 2024, was published in the Official Gazette. The Resolution approves the previously proposed amendments to the Value-Added Tax (VAT) Implementing Regulations. Subsequently, the ZATCA published the amended Implementing Regulations of the VAT Law (Amended VAT IRs) and released a Guideline for Clarifying Amendments to the Executive Regulation of Value Added Tax Issued by the Decision of the Board of Directors of the Authority No. (01-06-24), dated November 19, 2024. The Amended VAT IRs establish stricter criteria for VAT group formation and refine the rules for cessation of economic activities, nominal supplies and transfers of going concern. Additionally, the Amended VAT IRs clarify the VAT treatment for special zones, services to non-GCC residents, government grants, financing contracts and online platforms, while redefining restricted input tax deductions and setting timelines for issuing credit and debit notes. For additional information on this development, see Tax Alert 2025-0932.