25 July 2025 State and Local Tax Weekly for June 20 and June 27 Ernst & Young's State and Local Tax Weekly newsletter for June 20 and June 27 is now available. Prepared by Ernst & Young's State and Local Taxation group, this weekly update summarizes important news, cases, and other developments in U.S. state and local taxation. Illinois governor signs tax bill that impacts income and sales and use taxes, sports betting and tax incentives On June 16, 2025, Illinois Governor JB Pritzker signed Public Act 104-0006 (HB 2755, the Bill), which modifies Illinois's income, franchise, and sales and use tax laws, as well as certain tax credit and incentive provisions, as part of the state's FY26 budget. Key changes in the Bill include:
The Bill also establishes three separate tax amnesty programs — a general tax amnesty program, a franchise tax amnesty program, and a remote retailer amnesty program. Both the general tax amnesty program and the franchise tax amnesty program will run October 1, 2025 through November 15, 2025. The general tax amnesty, which applies to taxes administered by the Illinois Department of Revenue (Department), waives penalties and interest for taxes due for any period after June 30, 2018, and before July 1, 2024, provided all taxes are paid. The franchise tax amnesty program, which will be administered by the Secretary of State, applies to all taxpayers owing a franchise tax or license fee for any tax period ending after June 30, 2019, and on or before June 30, 2025. In exchange for participating in the franchise tax amnesty program, the Secretary will waive applicable penalties and interest and will not pursue civil or criminal prosecution for the time period that amnesty has been granted. The remote retailer amnesty program will run August 1, 2026 through October 31, 2026. During this amnesty program, the Department will accept returns and payment of state and local retailers' occupation taxes (ROTs) at the simplified ROT rate1 for eligible transactions occurring during the eligibility period — i.e., the period from January 1, 2021 through June 30, 2026. For remote retailers that satisfy their state and local ROT during the amnesty program, the Department will abate and not seek to collect interest or penalties on eligible transactions and it will not seek civil or criminal prosecution of the remote retailer for the period for which amnesty has been granted. On June 27, 2025, Governor Gavin Newsom signed into law SB 132, which enacts tax changes proposed by the governor as part of his 2025 budget. Key tax changes do the following:
In regard to the PTET provisions, the law creates new statutory provision, Cal. Rev. & Tax Code (CRTC) Section 19910, which extends the PTET for tax years beginning on or after January 1, 2026 and before January 1, 2031. New statutory provision CRTC Section 19912 defines qualified entity and new CRTC Section 19914 describes PTET payment and submission requirements. CRTC Section 17052.10 provides a credit against income tax to a qualified taxpayer that is a partner, shareholder or member (collectively, "member") of a qualified entity that makes a PTET election. (The credit is equal to a percentage of the member's pro rata share or distributive share of income subject to the PTET.) The law amends this provision to allow a member of a qualified entity that makes the PTET election for the tax year beginning on or after January 1, 2025 and before January 1, 2026 and files its return on a fiscal year basis, to claim the credit on the qualified taxpayer's tax year beginning on or after January 1, 2026 and before January 1, 2027. The sunset date of the credit provided by CRTC Section 17052.10 has been extended to tax years beginning before January 1, 2027 (from January 1, 2026). New provision CRTC Section 17052.11 allows a similar credit against net tax, effective for tax years beginning on or after January 1, 2026 and before January 1, 2031. Cal. Laws 2025, ch. 17 (SB 132), signed by the governor on June 27, 2025. Texas enacts law to replace research and development franchise tax credit, repeal sales and use tax exemption On June 17, 2025, Texas Governor Greg Abbott signed a bill (SB 2206), replacing the research and development (R&D) franchise tax credit for certain R&D expenses with a new franchise tax credit for R&D expenses2 and repealing the sales and use tax exemption for depreciable tangible personal property directly used in R&D activities. These changes take effect on January 1, 2026. New R&D credit: Taxpayers with qualified research expenses (QREs) are allowed to claim the new R&D tax credit against their franchise tax reports originally due on or after January 1, 2026. The following highlights some of the most significant changes to the Texas R&D Credit:
For additional information on this development, see Tax Alert 2025-1301. Louisiana: New law (HB 567) repeals provisions that subjected S corporation to the corporate income tax and required them to file as a corporation and allowed qualified Subchapter S subsidiaries (QSSS) be treated as a separate corporate entities. Instead, an S corporation will be treated as a pass-through entity (PTE) and be required to file an annual informational corporation return. S corporation shareholders are liable for income tax only in their separate or individual capacities. An S corporation's items of income, loss, deduction and credit taken into an account by a shareholder are characterized as received or incurred by the S corporation and not by the shareholders. For tax years beginning on or after January 1, 2026, credits previously earned by an S corporation flow-through to the shareholders. HB 567 prescribes the computation of the initial basis of resident and nonresident shareholders in the stock of the S corporation and any indebtedness of the corporation owned to the shareholder. Carryforward and carrybacks to and from an S corporation are restricted in the same manner as prescribed by IRC Section 1371(b); the amount of losses and deductions claimed by a shareholder may not exceed the shareholder's adjusted basis in the stock of the corporation. HB 567 discusses the taxability of distributions of an S corporation to its shareholders. Starting in 2026, S corporations may file composite returns and make composite payments of tax on behalf of any or all of its nonresident shareholders. These changes apply to income tax periods beginning on or after January 1, 2026. La. Laws 2025, Act 382 (HB 567), signed by the governor on June 20, 2025. Maine: The Maine Revenue Services (MRS) adopted 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.3 The amended rule provides that a service "may be received by a person other than the person who contracted for or paid for the service." The determination of where services are received will be based on all available facts and not be limited to the books and records of the taxpayer and related parties. The amended rule clarifies that a taxpayer may petition for, or the assessor may require, the use of an alternative apportionment method. The amended rule includes 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. The amended rule was adopted on June 25, 2025. Minnesota: New law (HF 9) modifies individual income tax provisions under Minn. Stat. 290.0132 to add subtraction adjustments for the following: (1) the amount of discharge of indebtedness income relating to coerced debt as defined in Minn. Stat. 332.74, subd. 3; (2) consumer enforcement public compensation received as a distribution to an eligible consumer under Minn. Stat. 8.37, subd. 5; (3) compensation received from a pension or other retirement pay from the federal government for service in the foreign service and established under 22 USC Sections 4041 to 4069 and 4071; and (4) student loan educational assistance payments received from a critical access dental clinic, effective for tax years beginning after December 31, 2025. Unless otherwise provided, these new subtraction adjustments are effective for tax years beginning after December 31, 2024. Minn. Laws 2025, ch. 13 (HF 9), signed by the governor on June 14, 2025. For a discussion of other tax changes included in HF 9, see Tax Alert 2025-1349. Nebraska: New law (LD 647) amends selective pass-through entity tax (PTET) provisions. As modified, the election may be made on the applicable income tax return and shall be made on or before the due date for filing the applicable return, including extensions. LD 647 also provides that for tax returns filed for tax years beginning or deemed to begin on or after January 1, 2022, the refundable credit available to the partners and shareholders of an elective pass-through entity, which is an amount equal to their pro rata or distributive share of Nebraska income paid by the elective pass-through entity, is allowed for the same tax year for which the election is made, without regard to the year in which the tax is paid to Nebraska or deducted on a federal income tax return. Neb. Laws 2025, LD 647, signed by the governor on June 4, 2025. Philadelphia, PA: New law (Bill No 25019900) gradually reduces the net income portion of the Business Income and Receipts Tax (BIRT) and gradually phases-out the gross receipts portion of the BIRT. In 2025 the net income portion of the BIRT is reduced to 5.71% (from 5.81%) and to 5.65% in 2026, with 0.05% reductions in each year 2027 through 2030, when it reaches a 5.45% rate. In 2031 the rate is reduced to 5.30% with a 0.35% reduction in each year 2032 through 2037, when it reaches a rate of 3.20%. The rate is further reduced to 2.80% in 2038 and thereafter. In 2025 the gross receipts portion of the BIRT is reduced to 1.410 mills (from 1.415 mills) and to 1.395 mills in 2026, with 0.005 mill reductions in each year 2027 through 2029, when it reaches a 1.380 mills rate. In 2030 the rate is reduced to 1.255 mills and to 1.130 mills in 2031. The rate is recued to 0.955 mills in 2032 and by 0.175 mills in each year 2033 through 2037 when it reaches a rate of 0.080 mills. In 2038 and thereafter the rate is 0 mills. Philadelphia Laws 2025, Bill No. 25019900, singed by the Mayor on June 13, 2025. Texas: New law (SB 263) clarifies that franchise tax provisions related to computing the cost of goods sold by an entity whose principal business activity is broadcasting applies to television broadcasting as well as radio broadcasting. For purposes of this provision, "television or radio broadcasting" means television or radio broadcasting under a license issued by the Federal Communications Commission. This change took effect immediately. Tex. Laws 2025, SB 263, signed by the governor on June 20, 2025. Texas: In response to a ruling request, the Texas Comptroller of Public Accounts said that for franchise tax purposes the sale of bitcoin is the sale of intangible property. Because the sale of bitcoin is a sale of intangible property, the costs for acquiring bitcoin are not eligible for the cost of goods sold deduction and the sale of an intangible asset is sourced to the payor's location. Tex. Comp. of Pub. Accts., Star No. 202506007L (June 3, 2025). Colorado: New law (SB 25-018), subject to confidentiality requirements, allows every sales and use tax license and exemption certificate to be searchable by the name and identification number of the sales and use tax licensee or exemption certificate holder. SB 25-018 takes effect on August 6, 2025. Colo. Laws 2025, ch. 361 (SB 25-018), signed by the governor on June 3, 2025. Colorado: New law (SB 25-320) reinstates and extends the sales and use tax exemption for low-emitting heavy-duty motor vehicles, power sources for these vehicles, and parts used for converting the power source of motor vehicles to a low-emitting power source. The exemption applies on and after August 1, 2025, but before January 1, 2029. SB 25-320 took effect on June 3, 2025. Colo. Laws 2025, ch. 386 (SB 25-320), signed by the governor on June 3, 2025. Louisiana: New law (HB 374) expands the definition of a marketplace facilitator to include an "accommodations intermediary." An "accommodations intermediary" is a person that facilitates the furnishing of an accommodation (e.g., sleeping room, cottage, cabin, room, suite, condominium, townhouse, rental house) to transient guest through a marketplace it owns, operates or controllers. An "accommodations intermediary" is not an owner, operator or manager of such accommodations. A marketplace facilitator does not include a shared hotel brand (i.e., "an identifying trademark that an owner, operator, or manager is expressly licensed to operate a hotel under, in accordance with the terms of a hotel franchise or management agreement"). Starting January 1, 2026, an accommodations intermediary remitting state sales and use tax as a marketplace facilitator also will be required to remit local hotel and motel occupancy tax due upon furnishing sleeping rooms, cottages or cabins by hotels. HB. 374 takes effect on July 1, 2025. La. Laws 2025, Act 82 (HB 374), signed by the governor on June 4, 2025. Louisiana: New law (SB 112) authorizes compensation for certain dealers and remote sellers for collecting and remitting tax levied by the state as well as by a local ordinance. Such compensation will be in the form of a deduction equal to the rate specified in the local ordinance, provided that the amount due was not delinquent at the time of payment. The deduction will be claimed against tax due if the return is timely filed by the 20th day of the month following the month of collection and all tax due as shown on the return is remitted by that date. The amount of tax already paid to a wholesaler is not included in computing the amount of compensation. SB 112 takes effect on, and applies to tax periods beginning on and after, July 1, 2025. La. Laws 2025, Act 327 (SB 112), signed by the governor on June 11, 2025. Louisiana: New law (SB 243) clarifies that the state and local sales and use tax exemption for certain prescription drugs applies to the sale of prescription drugs to individuals enrolled in the Louisiana Children's Health Insurance Program under Title XXI of the Social Security Act (SSA) or enrolled in any Louisiana Medicaid program under Title XIX of the SSA. SB 243 took effect on June 11, 2025. La. Laws 2025, Act 339 (SB 243), signed by the governor on June 11, 2025. Maine: New law (LD 210) expands the list of services subject to Maine's sales and use tax to include the following: (1) cable and satellite television or radio services; (2) fabrication services; (3) telecommunications services; (4) installation, maintenance or repair of telecommunications equipment; (5) ancillary services; and (6) digital audiovisual and digital audio services. LB 210 exempts from sales and use tax 95% of the sale price of fabrication services for the production of fuel for use at a manufacturing facility. Beginning January 1, 2026, the following are also exempt from sales and use tax: (1) sales of durable medical equipment for home use and breast pumps for home use, (2) sales of mobility enhancing equipment for home use or use in a motor vehicle; (3) the production of tangible personal property through fabrication services, if the sale to the consumer of such property would be exempt or otherwise not subject to sales and use tax; and (4) sales of international or interstate telecommunications service to a business for use directly in that business. LB 210 establishes specific provisions for sourcing sales of mobile telecommunications services. Effective for sales on or after January 1, 2026, charges for mobile telecommunications services provided to customers whose place of primary use is in Maine, for which the charges are billed by or for the customer's home service provider, are deemed provided at the customer's place of primary use. A home service provider is responsible for obtaining and maintaining a record of the customer's place of primary use; home service provides that rely on such information provided by a customer in good faith will not be held liable for any additional tax if a different place of primary use is determined. If the assessor determines that the address used by the home service provider does not meet the definition of customer's place of primary use, the assessor will notify the customer, who may demonstrate that the address is its place of primary use. If the customer fails to do so, the assessor will provide the home service provider with the proper address, which the home service provider must begin using within 30 days from the date of receiving the notice. LB 210 also provides that otherwise nontaxable charges that are aggregated with, but not separately stated from, the taxable telecommunications charges will be subject to tax unless the home service provide can reasonably identify such charges from their books and records kept in the regular course of its business. LB 210 adds several definitions, including, but not limited to, "ancillary service," "conference bridging service," "digital audiovisual and digital audio services," "digital audiovisual works," "digital audio works," "durable medical equipment," "mobility-enhancing equipment," "place of primary use," "telecommunications services," "telecommunications equipment," "vertical service," and "voice mail service." Maine Laws 2025, ch. 388 (LD 210) signed by the governor on June 20, 2025. Minnesota: New law (HF 9) requires vendors with sales and use tax liabilities of $250,000 or more in a fiscal year to remit 5.6% of their June liabilities two business days before June 30, beginning in calendar year 2027. The remaining amount not remitted in June must be paid on or before August 20 of the calendar year. A penalty of 10% of the actual required June liability minus the amount actually remitted in June will be assessed on vendors who fail to pay the required estimated liabilities. The penalty does not apply if the amount remitted in June equals the lesser of 5.6% of the preceding May's liability or 5.6% of the average monthly liability for the previous calendar year. These changes are effective for taxes remitted after May 31, 2027. Minn. Laws 2025, ch. 13 (HF 9), signed by the governor on June 14, 2025. For a discussion of other tax changes included in HF 9, see Tax Alert 2025-1349. Minnesota: New law (HF 9) repeals the sales and use tax exemption for electricity used or consumed in the operation of a qualified data center or qualified refurbished data center, effective for sales and purchases made after June 30, 2025. A separate bill (HF 16) makes broad-based changes to data centers requirements and extends the sunset date of the data center sales tax exemption to the later of June 30, 2042, or 35 years after the first qualified purchase. HF 16 also adds new provisions for "qualified large-scale data centers," which must invest $250 million within a five-year period beginning after June 30, 2025, meet prevailing wage and labor requirements for construction or refurbishment, and meet applicable sustainable design/green building standards. HF 16 also establishes a new water use permit process for data centers that propose to use more than 100 million gallons per year and requires the public utility commission (PUC) to establish a new subclass of electric utility service users for "very large" customers. The PUC may approve, modify or reject a proposed tariff or electric service agreement between utilities and very large customer, with some exceptions. Lastly, HF 16 imposes a new qualified large-scale data center fee. The annual fee will be collected from large-scale data centers based on the data center's peak electric service demand forecast, ranging from $2 million for peak demand of 100 to 250 megawatts (MW) up to $5 million for peak demand of 750 MW or more. An exemption from this fee is provided for large-scale data centers for energy conservation optimization plans. Minn. Laws 2025, ch. 13 (HF 9) and ch. 12 (HF 16), both bills signed by the governor on June 14, 2025. For a discussion of other tax changes included in HF 9, see Tax Alert 2025-1349. Washington: In response to the enactment of SB 5814, which subjects several services to Washington's retail sales tax beginning October 1, 2025 (see Tax Alert 2025-1125), the Washington Department of Revenue created a webpage to provide guidance in the form of Special Notices, FAQs, Interim Guidance Statements, Excise Tax Advisories and Rulemaking. Newly taxable services include the following: sales of custom software and customization of prewritten software; custom website development services; information technology services; advertising services; temporary staffing services; live presentations; modification of digital automated services exclusions; investigation, security and armored car services. The Department indicated that it will be publishing additional guidance on its webpage before October 1. Federal: In Notice 2025-31, the IRS modifies earlier guidance on defining "energy communities" for purposes of the increased production tax credits under IRC Sections 45 and 45Y and investment tax credits under IRC Sections 48 and 48E. The guidelines are used to determine if project areas qualify as statistical areas or coal closure census tracts. For additional information on this development, see Tax Alert 2025-1355. Louisiana: New law (HB 567) makes the Louisiana Work Opportunity tax credit permanent by repealing the June 30, 2025 sunset date. La. Laws 2025, Act 382 (HB 567), signed by the governor on June 20, 2025. Louisiana: New law (SB 232) modifies and enhances the state's motion picture production tax credit program. For applications for state-certified productions or Qualified Entertainment Companies (QEC) approved by the Office of Economic Development (office) and the Secretary on or after July 1, 2025, the amount of tax credit that may be authorized is up to 40% of approved projects in accordance with program rules and the program issuance cap, which is currently set at $125 million a year. SB 232 replaces the current credit availability and requirements, with new provisions based on the program's rules. (The law directs the office to promulgate rules for the administration of the credit program.) The office will consider various discretionary factors in determining which applications to approve, such as the estimated economic impact, the disbursement of funding statewide, the availability of funding and the state's best interest. SB 232 also modifies the definitions of "Louisiana promotional graphic" and "office," and it sunsets the individual project issuance caps for project-based production tax credits and company-based QEC payroll tax credits for applications for state-certified productions before July 1, 2025. SB 232 takes effect on July 1, 2025. La. Laws 2025, Act 44 (SB 232), signed by the governor on June 4, 2025. Louisiana: New law (SB 65) modifies the income tax credit for local ad valorem taxes on inventory paid by manufacturers and retailers — the local inventory tax credit. For ad valorem tax payments made on or after July 1, 2026,4 C corporations, estates or trusts subject to corporation income and franchise taxes are prohibited from claiming the local inventory tax credit. A cooperative, however, may the claim if it is allowed a federal income tax deduction for any patronage dividend paid or allocated to its members. For ad valorem tax paid on or after July 1, 2026, an S corporation may earn the credit only for amounts that flow-through to shareholders and in proportion to amounts calculated under R.S. 47:287.732(B). Taxpayers prohibited from earning the credit may carryforward any remaining credits for an additional 10 years (from five years) from the date that the credit would have expired. Credits for taxes paid by a corporation are applied to state corporation income taxes unless an election to flow-through the credit has been made for the tax period. If the election is made, the credit will be claimed by shareholders of the S corporation. SB 65 took effect on June 20, 2025, and applies to income tax periods beginning on or after January 1, 2025. La. Laws 2025, Act 412 (SB 65), signed by the governor on June 20, 2025. Minnesota: New law (HF 9) modifies the state's research and development (R&D) tax credit. Minnesota currently has an R&D tax credit that is equal to 10% of qualifying expenses up to $2 million, and 4% for expenses above that level. Qualifying expenses are defined by reference to IRC Section 41 but must be for research done in Minnesota. HF 9 makes the credit partially refundable starting with tax year 2025. The refundability rate is 19.2% for tax year 2025 and 25% for tax years 2026 and 2027. Beginning in tax year 2028, the refundability rate will be determined by formula. If the Minnesota Department of Revenue (Department) determines that the total amount of refunds paid will exceed $25 million for the immediately succeeding tax year, the refundability rate must be adjusted so that the projected amount of refunds will approximate $25 million or less. The Department is required to determine the refundability rate by December 15, 2027, and annually thereafter and publish the rate on its website. Minn. Laws 2025, ch. 13 (HF 9), signed by the governor on June 14, 2025. For a discussion of other tax changes included in HF 9, see Tax Alert 2025-1349. Oklahoma: New law (HB 2374) modifies the Filmed in Oklahoma Act to require a production company, or its payroll service provider, to withhold Oklahoma income tax at the highest percentage rate in the withholding statutes, on all payments to loan-out companies for services performed in Oklahoma. HB 2374 also adds definitions of "live audience episodic television" and "loan-out corporation," amends the definitions of "eligible television series" and "film," and expands what is included as an "expenditure" or "production cost." HB 2374 takes effect on July 1, 2025. Okla. Laws 2025, HB 2374, override of governor's veto on May 29, 2025. Louisiana: New law (HB 493) modifies the property tax exemption for certain aircraft. As revised, no personal property tax will be imposed on aircraft with an operating empty weight less than 7,000 pounds (changed from 6,000 pounds) that is owned by a private individual or a limited liability company and used in 14 CFR Part 91 operation (changed from not used for commercial or profit-making purposes). (Italics indicates new or changed provisions.) HB 493 takes effect on January 1, 2026. La. Laws 2025, Act 283 (HB 493), signed by the governor on June 11, 2025. Louisiana: The legislature passed HB 366, a proposed Constitutional amendment, which if approved by voters, would allow parishes to exempt business inventory from ad valorem taxes and to reduce the percentage of fair market value (FMV) applicable to business inventory. The proposed Constitutional amendment would add new, separate property classifications for (1) business inventory and (2) public service property, excluding land, owned by a railroad company. The percentage of FMV applicable to each new classification would be 15%. The proposed Constitutional amendment also would allow parishes to exempt business inventory from ad valorem taxes. In addition, the legislature would be prohibited from enacting any law mandating any taxing authority to exempt business inventory from ad valorem tax. For purposes of this provision, "business inventory" would mean "the aggregate of those items of tangible personal property that are held for sale in the ordinary course of business, are currently in the process of production for subsequent sale, or are to physically become a part of the production of such goods." If approved by voters, the proposed Constitutional amendment would apply to tax years beginning on or after January 1, 2026. The proposed Constitutional amendment will be submitted to voters during the April 18, 2026 statewide election. HB 366 was sent to the Secretary of State on June 13, 2025. If approved by voters, HB 366 would be Act 221. Louisiana: New law (SB 82), in regard to the assessment of bank stock, increases the percentage of assessed value of certain property deducted for assessment purposes. The amount that can be deducted when calculating the ad valorem tax on bank stock is increased to 100% (from 50%) of the assessed value of real estate, improvements, buildings, furniture and fixtures owned by the bank. This change takes effect on January 1, 2026. La. Laws 2025, Act 104 (SB 82), signed by the governor on June 8, 2025. Maine: New law (LD 210) imposes an additional real estate transfer tax on property with a value exceeding $1 million. The real estate transfer tax is imposed at a rate of $2.20 for each $500 (or fractional part thereof) of the property transferred. LD 210 imposes an additional real estate transfer tax at a rate of $3.80 for each $500 (or fractional part thereof) of the value of transferred property that exceeds $1 million. The same rates apply to transferred property that is owned by an entity and located in Maine. This part of the bill takes effect November 1, 2025. Maine Laws 2025, ch. 388 (LD 210) signed by the governor on June 20, 2025. Nevada: New law (SB 196) allows a heavy equipment rental company that is primarily engaged in the business of renting heavy equipment from a Nevada location to charge a recovery fee to offset the property taxes levied on such equipment. The amount of the fee charged may not exceed 2% of the heavy equipment rental charge. The rental charge is the total amount of consideration (e.g., cash, credit, property, services) charge by the rental company, without a deduction for (1) the cost of the rental transaction, (2) any charges for services necessary to complete the rental such as delivery and installation charges, and (3) the cost of materials used, labor or service cost, interest paid, losses, transportation cost, taxes imposed on the rental company or any other expense of the rental company. In addition to being used to offset property tax, the fee must be separately stated on the invoice provided to the renter, and it must be held in a separate account. The recovery fee may not be charged to a governmental entity. SB 196 takes effect on July 1, 2025. Nev. Laws 2025, ch. 180 (SB 196), signed by the governor on May 31, 2025. Philadelphia, PA: New law (Bill No. 25021100) increases the realty transfer tax rate from 3.278%, which is in place through June 30, 2025, to 3.578% for the period beginning July 1, 2025 and thereafter. The law repeals a rate reduction that was set to take effect in 2037. The law is effective for all transactions occurring on or after July 1, 2025. Philadelphia Laws 2025, Bill No. 25021100, singed by the Mayor on June 13, 2025. Maine: New law (LD 221) provides that when the Commissioner of Administrative and Financial Services determines that the legislature did not have a chance before the bureau begins processing returns for the most recently completed tax year to conform or adjust Maine laws in response to changes to federal income tax law affecting the tax year, to submit to the governor and certain legislative leaders a report describing the federal changes and their potential effect on Maine income tax laws and the state budget. After receiving this report, the governor may direct the tax assessor to temporarily adjust the administration of the tax year based on some or all of the federal income tax law changes, contingent on future enactment of state legislation addressing the federal income tax changes. In making this determination, the governor, to the extent practicable, shall consider the budgetary implications and the extent the determination reduces the complexity of tax compliance. The governor will notify the appropriate legislative leaders of the determination. The assessor will act in accordance with the governor's direction, including processing returns and notices, accepting tax payments and issuing refunds. LD 221 lists the information that must be included in the tax return filing instructions and other public information. Maine Laws 2025, ch. 336 (LD 221) signed by the governor on June 17, 2025. Hawaii: New law (SB 1469) suspends the statute of limitations on collections during the period an appeal of an assessment is pending before the Taxation Board of Review or the Tax Appeal Court. The suspension begins on the date the notice of appeal is filed and ends on the date a final decision is issued or the case is withdrawn or dismissed. SB 1469 took effect upon its approval and suspends the statute of limitation on collections of assessments that were on appeal before May 29, 2025. Haw. Laws 2025, Act 118 (SB 1469), signed by the governor on May 29, 2025. Nebraska: New law (LD 647) requires the tax commissioner include in a notice of deficiency of income tax a written statement containing the details of the facts, circumstances and reasons the tax commissioner used to determine that the taxpayer did not report the correct amount of tax. This change takes effect on September 2, 2025. Neb. Laws 2025, LD 647, signed by the governor on June 4, 2025. Washington: The Washington Department of Revenue (WA DOR) announced a temporary investment income voluntary disclosure program (VDP), that will run in two-phases. The first phase will run July 1, 2025 through April 30, 2026 and the second phase will run July 1, 2026 through April 30, 2027. This VDP is available for businesses with unreported investment income subject to the business and occupation (B&O) tax. The lookback period for the tax liability is four years plus the current year. The WA DOR noted that interest and up to 39% of potential penalties may be waived. Taxpayers eligible to participate in the VDP include (1) a business that has unreported investment income subject to B&O tax, unless they have been notified of an audit or agency enforcement action as of July 1, 2025, and (2) affiliates of entities under audit that otherwise would not qualify for VDP treatment. This VDP is not open to businesses engaged in banking, lending and security. Additional information on the VDP, including an online application and a formal agreement, among other information, is available here. Georgia: The Georgia Department of Revenue has updated its state income tax withholding formula and tables to reflect a reduction to the state's personal income tax rate retroactive to January 1, 2025. The updated withholding calculations apply to wages paid on and after July 1, 2025. For additional information on this development, see Tax Alert 2025-1288. Maryland: At the request of the Maryland Department of Labor (Department), legislation (HB 102) was enacted that delays the start date for employer contributions to the state's paid family and medical insurance program (PFML) from July 1, 2025, to January 1, 2027, with the first remittance now due April 30, 2027. Under this updated implementation schedule, PFML benefits will become available January 1, 2028. The Department explained that a delay in implementing its PFML program was necessary because "recent sweeping, unprecedented changes at the federal level have given rise to a high degree of instability and uncertainty for Maryland employers and workers." For additional information on this development, see Tax Alert 2025-1335. South Carolina: The South Carolina Department of Revenue announced that in keeping with the 2025–2026 budget enacted under HB 4025, the top marginal personal income tax rate is lowered from 6.2% to 6.0%, retroactive to January 1, 2025. Background: SB 1087, enacted in 2022, lowered the state's top marginal income tax rate from 7.0% to 6.5%, retroactive to January 1, 2022. Beginning with tax year 2023 and each year thereafter, it decreases the rate by 0.1% until it reaches 6.0% if revenue goals are met. In 2023, HB 4300 lowered the top marginal personal income tax rate to 6.4% effective January 1, 2024. In 2024, HB 5100 lowered the top marginal personal income tax rate from 6.4% to 6.2%. The updated withholding formula and tables once available will be published here. S.C. Dept. of Rev., Information Letter #25-11, (June 19, 2025.) For additional information of this information, see Tax Alert 2025-1396. Georgia: In City of Atlanta v. Block, Inc.,5 the Court of Appeals of Georgia (appeals court) affirmed that a multistate company should include its offices nationwide, not just its one office in Georgia, when calculating its occupation tax. Block, Inc. (Block) (owner of CashApp) had multiple offices nationwide, with only one office in Georgia. Block paid business occupation taxes to Atlanta for 2016 through 2018 on its gross receipts from Georgia customers. In 2019, the city assessed an additional occupation tax on those receipts, plus penalties and interest, which Block paid under protest. Block then filed this lawsuit seeking a partial refund, claiming that the city did not properly account for its out-of-state offices in calculating the occupation tax. At issue, is how those receipts should be allocated when a company operates in multiple locations, including outside Georgia. The trial court had granted summary judgment to Block, finding that Block's occupation tax should be calculated based on its Georgia gross receipts divided by the number of Block offices nationwide, rather than divided by Block's sole Georgia office. On appeal, the appeals court affirmed the summary judgment ruling for Block, holding that under the plain language of the statute, Block's Georgia gross receipts should be divided by all its offices (including out-of-state offices) contributing to the Georgia gross receipts. The appeals court added that the statute's plain language does not limit the number of offices contributing to Georgia gross revenue to offices located within Georgia. For additional information on this development, see Tax Alert 2025-1519. Louisiana: New law (HB 639) increases the tax rate imposed on the net gaming proceeds from sports wagering offered to in-state consumers through a website or mobile application to 21.5% (from 15%). HB 639 takes effect on August 1, 2025. La. Laws 2025, Act 298 (HB 639), signed by the governor on June 4, 2025. Vermont: New law (H. 488) moves the start date of collecting a mileage-based user fee from all battery-electric vehicles registered in Vermont to starting on or before January 1, 2027 (from July 1, 2025), subject to sufficient funding being available for implementation. Vt. Laws 2025, Act 43 (H. 488), signed by the governor on June 2, 2025. International — Canada: On June 19, 2025, the Government of Canada announced several measures to further protect Canada's steel and aluminum sectors, in addition to previously announced counter tariffs on imports of steel products, aluminum products and other goods from the United States (US). These measures are a response to 25% tariffs imposed by the US on imports of steel and aluminum articles effective March 12, 2025 (subsequently increased to 50% effective June 4, 2025). For additional information on this development, see Tax Alert 2025-1366. 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.
Document ID: 2025-1585 | ||
