28 August 2025 State and Local Tax Weekly for July 18 and July 25 Ernst & Young's State and Local Tax Weekly newsletter for July 18 and July 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. P.L. 119-21 (the new law), which was enacted July 4, 2025, reinvents the Opportunity Zone regime enacted under the Tax Cuts and Jobs Act (TCJA) as a new, permanent program, effective for investments made after December 31, 2026. The new program largely mirrors the proposal released by the Senate Finance Committee on June 16, 2025, with some key changes to the rules around capital gain deferral and basis step-up. Current law: Opportunity Zones are designed to spur investment in distressed communities throughout the country by granting investors preferential tax treatment. These investments must be made through qualified Opportunity Funds, which are specially created investment vehicles that invest at least 90% of their assets in Opportunity Zone Property. Opportunity Zone Property includes Opportunity Zone Business Property, which is tangible property that is:
Tangible property used in a qualified Opportunity Fund's trade or business is considered substantially improved if investments are made in the property during the 30 months following the property's acquisition, and those investments exceed the property's adjusted basis at the beginning of the 30-month period (i.e., the investments equal at least 100% of the property's basis after 30 months). The preferential tax treatment offered under the Opportunity Zone program is threefold. First, investors can defer tax on capital gains invested into Opportunity Zones until no later than December 31, 2026. Second, investors that hold the Opportunity Fund investment for five or seven years as of December 31, 2026, receive a 10% or 15% reduction, respectively, on their deferred capital gains tax bill by increasing the basis of the original deferred gain. Finally, investors that hold the Opportunity Fund investment for at least 10 years can receive the added benefit of paying no tax on any realized appreciation in the Opportunity Fund investment. Investments in qualified Opportunity Funds may consist of partially of deferred gains and partially of basis or ordinary income, but the tax benefits under the Opportunity Zone Program accrue only on the eligible capital gains. To date, the IRS has designated Opportunity Zones in all 50 states, the District of Columbia, American Samoa, Guam, Northern Marianas Islands, Puerto Rico and the Virgin Islands. Those designations will expire after December 31, 2028. New law: The new law reinvents the Opportunity Zone regime enacted under the TCJA as a new, permanent program. Opportunity Zone designations: The new law creates rolling, 10-year Opportunity Zone designations, with the first determination period beginning on July 1, 2026, and the new census tracts designations going into effect on January 1, 2027. The criteria for qualifying as a low-income community, and therefore an eligible census tract that can be designated as a qualified Opportunity Zone, is generally narrowed so that areas with a median income of 70% or less of statewide median income (rather than 80% or less under the TCJA OZ program) are eligible for designation. Under the new law, communities that are contiguous to a qualified Opportunity Zone but themselves are not low-income communities are no longer eligible for designation. The new law also creates a new "qualified rural opportunity fund," with certain benefits unique to funds holding at least 90% of their assets in qualified opportunity zone property (directly or via other ownership interest) that is located in a rural area. Opportunity Zone benefits: Investors may defer tax on eligible capital gains from new investments made after December 31, 2026, for up to five years by investing in qualified opportunity funds. Upon reaching the five-year mark, investors investing in qualified opportunity funds receive a 10% step-up in basis on the capital gains deferred. Investors in a qualified rural opportunity fund may similarly defer eligible capital gains for five years and get a 30% step-up in basis on the capital gains deferred upon reaching the five-year mark. To demonstrate substantial improvement of property in a qualified opportunity zone comprised entirely of a rural area, the qualified rural opportunity fund only needs to make new substantial improvements up to 50% of the property's adjusted basis (rather than 100% for non-rural funds). The new law preserves the election allowing investors to elect to step up the basis of investments held for at least 10 years to fair market value on the date that the investment is sold or exchanged. Additionally, the new law allows investors to elect to step up the basis of investments held for 30 years or more to fair market value without disposing of the investment. Effective date: The new law generally applies to investments made after December 31, 2026. The new reporting requirements apply to tax years beginning after July 4, 2025, while the first decennial determination process will begin on July 1, 2026, with new census tracts designations going into effect on January 1, 2027. For more on this development, including a discussion of reporting requirements, see Tax Alert 2025-1418. Final reconciliation legislation (P.L. 119-21, the Act), signed on July 4, 2025, repeals or modifies most of the renewable energy credits created under the Inflation Reduction Act of 2022 (IRA).
Following the legislation's enactment, President Trump issued an Executive Order on July 7, 2025, (the Order) in which he directed the Department of Treasury, within 45 days of the Act's enactment, to "take all action … necessary and appropriate to strictly enforce the termination of the clean electricity production and investment tax credits under [IRC] Sections 45Y and 48E for wind and solar facilities." Specifically, the Order directs the Secretary of the Treasury (Secretary) to issue guidance to assure policies around the "beginning of construction" are not circumvented and to restrict the use of broad safe harbors unless a "substantial portion of a subject facility has been built." The Order further directs the Secretary, within 45 days of enactment, to issue guidance implementing the Act's enhanced foreign-entity-of-concern (FEOC) restrictions. The provision referenced in the Order is a safe harbor whereby a wind or solar project is deemed to have begun construction once it incurs 5% of the ultimate total cost of the facility. Renewable developers and financing institutions have relied on this safe harbor provision for years and will be keenly focused on any new guidance that revises and elevates this critical definition. Since the Act now requires a solar or wind facility to begin construction within one year of the date of enactment (to avoid a rule requiring that the facility be placed in service by the end of 2027), developers will need to react quickly across their construction and supply chains to meet any new or revised definition. It is difficult to anticipate just how differently the Treasury will define whether 'a substantial portion of the facility has been built,' but the Order implies the threshold will likely be significantly higher. For a detailed discussion of these changes, see Tax Alert 2025-1434. San Francisco, CA: The San Francisco Office of Treasurer & Tax Collector in response to feedback from interested parties issued updated proposed sourcing regulation, Tax Collector Regulation 2025-1 (hereafter, proposed regulations). The proposed regulations would provide guidance on allocating gross receipts from services, intangible property and sales of financial instruments to the city for gross receipts tax (GRT) purposes. The proposed regulations would apply to the allocation of gross receipts effective for tax years beginning on or after January 1, 2025. Changes from the initial draft of the proposed regulations: (1) add a summary of the regulation that "is not part of the Regulation and is only intended to provide basic information regarding the Regulation;" (2) make clear that the regulation does not change whether or to the extent gross receipts are allocated or apportioned under the GRT but "only clarifies" how gross receipts are allocated for GRT purposes; (3) modify provisions regarding the presumption of the location of the receipt of the benefit of the service, the applicable sequence for determining where gross receipts are allocated, and examples of such; and (4) change throughout the proposed regulations the word "assigned"/"assignment" to "allocated"/"allocation." Comments on the revised proposed regulations are due by August 29, 2025. Additional information is available here. Georgia: A Senate Special Committee has been formed to study the elimination of Georgia's income tax. In announcing the formation of this committee, Lt. Governor Burt Jones noted that in the prior year nine states cut individual income taxes, while three states cut corporate income taxes. The Lt. Governor further stated that "to remain the number one state for businesses and keep our state competitive, we must expand on the progress made over the past four years to eliminate Georgia's income tax." The committee is tasked with looking at additional ways to "make significant cuts to our income tax rate, while maintaining the fiscal soundness of our state." The committee will stand abolished on December 15, 2025. Illinois: The Illinois Department of Revenue (IL DOR) issued an informational bulletin discussing recent legislative changes that may impact current tax year liabilities for certain taxpayers. These changes include: (1) the modification of the rules for the allocation and apportionment to Illinois of gain or loss from the sale of a passthrough entity interest; (2) the switch from the Joyce to Finnigan methodfor apportioning income of multistate businesses and the application of throwback and throw-out rules; (3) the repeal of certain exceptions for the related-party interest and intangible expense addback requirements; (4) the establishment of an ordering rule for the IRC Section 163(j) interest expense limitation that is allocated to interest expense paid to a foreign related party; and (5) the modification to the tax treatment of global intangible low-taxed income. The IL DOR noted that these changes may affect a taxpayer's estimated payment amounts or require a taxpayer not already making estimated tax payments to begin making such payments. Ill. Dept. of Rev., Informational Bulletin FY 2025-29 "Legislative Income Tax Changes that May Increase Current Tax Year Liabilities" (June 2025). Missouri: New law (HB 594) provides an income tax deduction for capital gains. Effective for all tax years beginning on or after January 1, 2025, an individual subject to individual income tax may subtract 100% of all income reported as a capital gain for federal income tax purposes. For all tax years beginning on or after January first of the tax year following the tax year in which the top income tax rate imposed under Mo. Rev. Stat. Section 143.011 is equal to or less than 4.5%, the law provides a subtraction for 100% of income reported as a capital gain for federal income tax purposes by an entity subject to tax under Mo. Code Section 143.071 (i.e., the corporate income tax). Mo. Laws 2025, HB 594, signed by the governor on July 10, 2025. Missouri: New law (HB 754) modifies the tax credit for income tax paid in another state on income subject to Missouri income tax. With respect to any estate or trust, the credit is allowed to the extent the Missouri adjusted gross income of the estate or trust is excluded from Missouri taxable income (MTI) pursuant to the subtraction under Mo. Rev. Stat. Section 143.341(3). Effective for tax years beginning on or after January 1, 2026, this new provision requires a resident estate or resident trust subtract from its federal taxable income the amount included in MTI that would not be included in MTI if the estate or trust were considered a nonresident estate or trust. This subtraction only applies to the extent it is not a determinant of the estate's/trust's federal distributable net income. HB 754 takes effect on August 28, 2025. Mo. Laws 2025, HB 754, signed by the governor on July 10, 2025. Florida: New law (HB 999), effective July 1, 2026, exempts from sales and use tax any gold or silver coin recognized as legal tender in Florida that is sold, exchanged or traded. The person claiming the exemption bears the burden of determining whether the gold or silver coins meet the definition of legal tender. Fla. Laws 2025, ch. 100 (HB 999), signed by the governor on May 27, 2025. Illinois: The Illinois Department of Revenue (IL DOR) adopted amendments to the Illinois Retailers' Occupation Tax (ROT) rules 86 Ill. Adm. Code 130.225, 130.530, 130.175 and 130.2075, to implement a statutory change (Pub. Act 103-983) that deems a retailer maintaining a place of business in Illinois and making retail sales of tangible personal property to Illinois customers from a location outside Illinois to be engaged in selling at retail in Illinois for ROT purposes. Starting January 1, 2025, such retailers must use Form ST-2 to report these sales, listing the Illinois location where the tangible personal property was shipped or delivered or where the purchaser took possession (i.e., destination sourcing). Pursuant to Rule 130.175, the IL DOR provides registered taxpayers that sell tangible personal property from more than one location a sub-certificate of registration for each additional place of business. The amended rule provides that the sub-certificate of registration provisions do not apply to the out-of-state locations of retailers maintaining a place of business in Illinois who must file using destination sourcing for sales to Illinois customers from outside the state. Amendments to the rule make clear that use tax continues to apply to tangible personal property purchased outside the state by an Illinois or out-of-state construction contractor or builder in such a way that the seller does not incur ROT and such property is used in Illinois for building purposes. The amended rule includes examples of when ROT liability is not incurred, such as when a builder purchases property from a remote retailer and the property was shipped to the builder in Illinois. Lastly, amendments provide that when a purchaser buys tangible personal property from an out-of-state retailer that maintains a place of business in Illinois, the out-of-state retailer should remit applicable state and local ROT unless the purchaser is also a retailer and elects to assume responsibility for such tax. The IL DOR also adopted amendments to the Leveling the Playing Field for Illinois Retail Act rules 86 Ill. Adm. Code 131.105, 131.107, 131.110, 131.150, 131.155 and 131.Illustration A, to implement a statutory revision (Pub. Act 103-983) that changed the tax obligations for retailers maintaining a place of business in Illinois and making sales to Illinois customers from outside the state. The amended rules reflect that on and after January 1, 2025 such retailers with a physical presence in Illinois incur destination-based state and local ROT on sales they make outside Illinois and ship or deliver to Illinois purchasers. Such sellers that maintain a place of business in Illinois with a physical presence in the state incur state and local ROT using origin sourcing for sales for which the selling activities occur in Illinois. If the seller also makes sales over a marketplace, they will be considered a marketplace seller and the marketplace facilitator. If they have met the remittance threshold, they will incur state and local ROT liability based on destination sourcing. Remote retailers that have not met the remittance threshold and do not have a physical presence in Illinois will not incur state or local ROT on sales made outside Illinois that are shipped or delivered to Illinois purchasers. The remote retailer, nevertheless, may register with the IL DOR as a voluntary use tax collector. The amendments add new and update several examples to reflect the statutory changes. The IL DOR adopted amendments to the Use Tax rules 86 Ill. Adm. Code 150.801, 150.802 and 150.1305. The changes reflect that on and after January 1, 2025, retailers maintaining a place of business in Illinois making retail sales to Illinois customers must register under the ROT and incur state and local ROT on all retail sales to Illinois customers, including retail sales from locations outside the state. Amendments provide that every retailer maintaining a place of business in Illinois continues to act as a Use Tax collector for the state and include examples of when a retailer is required to collect and remit Use Tax while also incurring state and local ROT liability on a transaction. Lastly, the IL DOR adopted amendments to the Home Rule Municipal Retailers' Occupation Tax rules 86 Ill. Adm. Code 270.115 to implement statutory changes to the tax obligation for retailers that maintain a place of business in Illinois and that make sales to Illinois customers from outside the state. The retailer is engaged in the business of selling at the Illinois location where the property is shipped or delivered or where the purchaser takes possession. Amendments also modify sourcing rules for leasing tangible personal property in the state. Beginning on and after January 1, 2025, the Home Rule Municipal Retailers' Occupation Tax applies to leases of tangible personal property in effect, entered into or renewed on or after that date and the business of selling includes leasing tangible personal property. Amendments provide sourcing guidance for (1) leases that require recurring periodic payments and for which the property is delivered to the lessee by the lessor, and (2) all other leases. For leases requiring periodic payments, the payment will be sourced to the primary location for each period covered by the payment. For all other leases, the payment is sourced as otherwise provided by applying the Composite of Selling Activities Test and the other Presumptions Applying to Certain Selling Operations under 270.115(c) and (d), respectively. The amended rules took effect on June 13, 2025. Ill. Dept. of Rev., Adopted Rules 86 Ill. Adm. Code 130, 86 Ill. Adm. Code 131, 86 Ill. Adm. Code 150, and 86 Ill. Adm. Code 270 (Ill. Register, Vol 49, Issue 26, June 27, 2025). Kentucky: In response to an increase in questions regarding tariffs, the Kentucky Department of Revenue (KY DOR) said that charges for tariffs that are passed on to customers as part of the retail sale are subject to sales and use tax. The KY DOR explained that the only taxes excluded under the definition of gross receipts in KRS 139.010(17) are those impose directly on the purchaser. Thus, tariffs imposed on manufacturers or importers that are passed on to the retail customer as part of the sale are subject to sales and use tax. Further, the exemption for taxes imposed by the United States under KRS 139.010(18) specifically excludes any importer's import duty (tariff) from exempt treatment. Lastly, the KY DOR noted that tariff charges included on a retail receipt are taxable, whether itemized or not. Ky. Dept. of Rev., "Kentucky sales Tax Facts" (June 2025). Louisiana: New law (HB 610) requires an online platform in regard to short-terms rentals located in the city of New Orleans rented through its platform, to provide the renting party with a line-by-line itemization of all assessments, fees and taxes owed by the party. This information must be provided on the online platform's website as well as on the final bill issued to the renting party. This requirement takes effect on January 1, 2026. La. Laws 2025, Act 387 (HB 610), signed by the governor on June 20, 2025. Louisiana: New law (HB 578) makes several changes to the state's sales and use tax provisions. Select changes do the following: (1) add references to "digital products" to various definitions, including "cost price," "dealer," "sales price," "use" and the "imposition of tax" provision under R.S. 47:321.1; (2) modify sale for resale provisions related to "retail sale" or "sale at retail"; (3) revise the description of "providing of information services"; (4) source purchases of multiple listing services by real estate licensees and brokers to the location of the licensee's or broker's Louisiana regional real estate association office; (5) modify the imposition of various sales and use taxes under R.S. 47:321 to remove the exclusion for prepaid calling service and prepaid wireless calling service; (6) cap the sales and use tax levied on boats registered in the state to $20,000 if the tax is paid within 90 days of purchase; and (7) reinstate certain state and local tax exemptions that were repealed by Act 11 (Laws 2024 Third Extraordinary Session) and create new exemptions. For instance, an exemption applies to computer software or prewritten computer software access services or information services that are used by licensed healthcare facilities and providers for storing or transmitting healthcare information for the diagnosis or treatment of medical conditions (this exemption already applies to digital products used for such.) An exemption is created for the lease or rental of motor vehicles by licensed motor vehicle dealers or vehicle manufacturers for their use in furnishing such vehicles to their customers in certain situations. These changes have various effective dates. La. Laws 2025, Act 384 (HB 578), signed by the governor on June 20, 2025. Louisiana: New law (SB 162) revises the definition of dealer for sales and use tax purposes, provides for vendor compensation, and modifies the definition of a marketplace facilitator. A dealer included any person who sells for delivery in Louisiana tangible personal property, products transferred electronically or services. Effective July 1, 2025, SB 162 changes "products transferred electronically" to "digital products." A similar change was made to the definition of "remote seller." For use tax purposes, the law further defines a "dealer" to mean "any person who is engaged in business in Louisiana through participation in the retail sales market within the state through any means whatsoever or who otherwise avails himself of the substantial privilege or carrying on business within the state, including through virtual or economic contacts." SB 162 provides for vendor compensation in the form of a deduction against tax due on a return timely filed by the 20th day of the month following the month of collection, provided that all tax due on the return is timely remitted. The Louisiana Sales and Use Tax Commission on Remote Sellers will apply each taxing jurisdiction's specific rate of vendor's compensation as a deduction against tax due. Lastly, SB 162 modifies the definition of a "marketplace facilitator" by repealing language that specifically excluded from the definition of "marketplace facilitator" any person that offered or facilitated the furnishing of sleeping rooms, cottages or cabins by hotels or facilitated the furnishing of rental cars by rental car companies. SB 162 took effect on July 1, 2025. La. Laws 2025, Act 433 (SB 162), signed by the governor on June 20, 2025. Missouri: New law (HB 594), effective August 28, 2025, exempts from state and local sales and use tax all retail sales of diapers, incontinence products, and feminine hygiene products. (HB 594 defines these terms.) HB 594 also creates for all tax years beginning on or after January 1, 2026, a state and local sales and use tax exemption for all sales, purchases or use of "machinery and equipment used to provide broadband communications services" by a broadband communications service provider. To qualify for the exemption, the broadband communications service provider must give the seller a written certificate indicating that the broadband exemption applies to such machinery and equipment so purchased or used. A broadband communications service provider may enter into a direct pay agreement with the Missouri Department of Revenue, under which the provider may directly pay any applicable sales and use tax on such equipment directly to the Department. Mo. Laws 2025, HB 594, signed by the governor on July 10, 2025. See also, Mo. Dept. of Rev., "Diapers, Feminine Hygiene, & Incontinence Products Exemption FAQs" webpage. California: New law (AB 1138), for purposes of the motion picture tax credit 3.0 and 4.0 as well as the certified studio tax credit, expands the definition of "qualified taxpayer" to include a single member limited liability company (SMLLC) that is a disregarded entity for tax purposes. In addition, a qualified taxpayer that is a disregarded SMLLC may elect to assign any portion of a motion picture tax credit to one or more affiliated corporations. AB 1138 also enhances the state's motion picture tax credit 4.0 and the certified studio tax credit, which may be claimed against the state's personal and corporate income taxes. Effective for tax years beginning on or after January 1, 2025, for purposes of the motion picture tax credit 4.0, AB 1138 expands the definition of qualified motion picture to include new live action and animated series with episodes that average 20 minutes, animated films, and large-scale competition shows. (Each episode or film must have a minimum production budget of $1 million.) For purposes of qualifying as a "qualified motion picture" the following applies: (1) a production that was not previously allocated a credit and that completed principal photography on its prior season more than 48 months before applying for the credit allocation will be deemed not to have commenced principal photography before the date the credit application is approved by the California Film Commission (Commission); and (2) for a television (TV) series that did not commence principal photography before July 1, 2025 and applied for, but did not receive a credit allocation for its first season filming in California and have applied for a credit allocation for filming its second season, will be deemed not to have commenced principal photography before the date the application is approved by the Commission. AB 1138 also does the following: (1) requires diversity workplans include veteran status and indicate ZIP code data for certain members of the workforce whose wages are or are not qualified expenditures; (2) modifies the limit on the amount of credits available to a recurring TV series; (3) increases the applicable credit percentage for the certified studio construction project credit and the motion picture credit 4.0; (4) adds a definition of "recurring television allocation amount;" and (5) modifies requirements for the Career Pathways Program and increases the amount of credit available to qualified productions that employ trainees from the program. AB 1138 took effect immediately, with various applicable dates. Cal. Laws 2025, ch. 27 (AB 1138), signed by the governor on July 3, 2025. Louisiana: New law (HB 665) extends the Angel Investor Tax Credit Program through June 30, 2026. HB 665 modifies eligibility requirements for the credit by requiring a business demonstrate that it is in a "high-growth" and "wealth-creating" business and that it is primarily engaged in one of the following business sectors: energy and process industries, logistics, aerospace and defense, agribusiness, professional services, life sciences and technology. In addition, HB 665 does the following: (1) eliminates a requirement that the credit be divided in equal portions for two years; (2) expands the qualifying investment to include investments in Louisiana Entrepreneurial Businesses located in parishes with a population of less than 50,000; and (3) requires each Louisiana Entrepreneurial Business participating in the program to submit a report containing certain information. HB 665 has various effective/applicable dates. La. Laws 2025, Act 515 (HB 665), became law without the governor's signature on July 1, 2025. Louisiana: New law (HB 533) establishes a tax credit against the Louisiana income tax for employment of eligible apprentices, interns and youth workers (collectively, "eligible worker"). The amount of credit available to an eligible employer for each eligible worker employed for at least 100 hours during the tax period equals the lesser of $2.50 per hour of employment or $2,500. For 2026, the aggregate amount of credit that may be awarded is capped at $1 million. In 2027 and thereafter the cap will not be adjusted if less than 80% of the authorized credit cap amount was granted. The cap, however, will be increased by $1 million, if at least 80% of the authorized credit cap amount for the prior year was granted. The credit cap for a calendar year cannot exceed $7.5 million. Credit will be awarded on a first-come, first-served based determined by the received date and time of a completed application. The amount of credit that exceeds a taxpayer's tax liability may be carried forward for up to five years. No credit will be earned for the employment of eligible workers before January 1, 2026 or after December 31, 2031. HB 533 takes effect on January 1, 2026. La. Laws 2025, Act 376 (HB 533), signed by the governor on June 20, 2025. Missouri: New law (HB 754) modifies the neighborhood assistance program tax credit by allowing any amount of the $10 million in Housing Credit that has not be authorized for the fiscal year be authorized for Contribution Credits, provided that the combined amount of credits that may be authorized in the fiscal year is capped at $11 million. The Housing Credit is available to business firms that engage in providing affordable housing assistance activities or market rate housing in distressed communities. The amount of Housing Credit is capped at $10 million during the fiscal year. The Contribution Credit is available to business firms that contribute to a neighborhood organization that provides affordable assistance activities or market rate housing in distressed communities. The Contribution Credit generally is capped at $1 million during the fiscal year. In any fiscal year in which the amount of authorized Housing Credit is less than $10 million, HB 754 allows the remaining amount of such credit to be authorized for the Contribution Credit. HB 754 takes effect on August 28, 2025. Mo. Laws 2025, HB 754, signed by the governor on July 10, 2025. New Jersey: New law (A. 5170) requires the state to purchase unused tax credits awarded under the New Jersey Aspire Program and the Cultural Arts Incentive Program. The state must purchase unused credits under these programs at 85% of the credit amount, provided that the tax credit certificate or tax credit transfer certificate was issued to the developer or holder at least one year before the date of application to the Director of the Divisions of Taxation. N.J. Laws 2025, c. 113 (A. 5170), signed by the governor on July 22, 2025. Washington: New law (SB 5682) extends the customized employment training program tax credit through June 2031 (from June 2026). A credit is not allowed for repayment of training allowances received from the Washington customized employment training program on or after July 1, 2031 (from July 1, 2026). SB 5682 took effect on July 27, 2025. Wash. Laws 2025, ch. 289 (SB 5682), signed by the governor on May 15, 2025. Florida: Approved joint resolution (HJR 1215) proposes a constitutional amendment, which if approved by voters, would exempt certain agriculture-related tangible personal property from ad valorem tax. Specifically, the ad valorem tax exemption would apply to tangible personal property that meets all of the following conditions: the property is (1) habitually located or typically present on land classified as agricultural; (2) used in the production of agricultural products or agritourism activities; and (3) owned by the landowner or leaseholder of the agricultural land. If approved, this exemption would first apply to assessments for tax years beginning January 1, 2027. This constitutional amendment will be submitted for voter consideration at the next general election or at an earlier authorized special election. Fla. Laws 2025, HRC 1215, filed with the Secretary of State on June 18, 2025. Louisiana: New law (HB 365), subject to voter approval of the constitutional amendment in HB 366 (discussed below), would establish a local option to exempt business inventory from ad valorem taxes and would authorize the reduction of the fair market value (FMV) percentage of business inventory under certain circumstances. If the provisions of HB 365 take effect, the exemption election must be "evidenced in writing" and must indicate whether a parish will exempt 100% of business inventory immediately or over a period of time, or if business inventory will be partially exempt via a reduction in the percentage of FMV applicable to such property. The parish sheriff, school board and governing authority would have to elect to exempt business inventory from ad valorem tax or to provide a reduction in the percentage of FMV applicable to business inventory. Parishes that elect to provide a full exemption before July 1, 2027 would receive a payment from the state to mitigate the loss of local revenue. A parish's election to reduce the percentage of FMV applicable to business inventory would be irrevocable and once the percentage for FMV has been reduced in a parish it could not be increased. A parish would only be allowed to make such reduction once an assessment period. These provisions would apply to property tax years beginning on or after 2026. HB 365 will take effect and become operative if the proposed constitutional amendment in HB 366 is adopted at a statewide election. La. Laws 2025, Act 357 (HB 365), signed by the governor on June 20, 2025. HB 366 (Act 221), a proposed constitutional amendment, which if approved by voters would authorize parishes to irrevocably exempt business inventory from ad valorem taxation or provide a reduced FMV percentage applicable to business inventory property. The term "business inventory" would be defined as "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 sales, or are to physically become a part of the production of such goods." HB 366 also would expand classifications of property subject to ad valorem tax by adding: (1) public service property, excluding land, owned by a railroad company, and (2) business inventory. Both new property classifications would have an FMV percentage of 15%. This proposed constitutional amendment is to be submitted for voter approval during the statewide election to be held on April 18, 2026. HB 366 was sent to the Secretary of State on June 13, 2025. Ohio: Governor Mike DeWine announced the formation of the Property Tax Reform Working Group. The governor noted that increases in property values over the years, have resulted in property tax increases. The governor has formed the work group "to issue concrete recommendations for meaningful property tax reforms that address the needs of property owners, are affordable to our state budget, and protect local schools and other services." Ohio Gov., Press Release "Governor DeWine Announces Co-Chairmen of Property Tax Reform Working Group" (July 10, 2025). Missouri: New law (SB 221) modifies the standard of judicial review for agency interpretations of statutes, regulations, rules and subregulatory documents. Under the revised law, a court or administrative hearing officer in reviewing these items shall not defer to a state agency's interpretation of the statute, regulations, rule or other documents; rather, they must "interpret the meaning and effect [of these statute, regulations, rule or other documents] de novo." The law further provides that in an action brought against a state agency, after a court or administrative officer has applied "all customary tools of interpretation" it will "decide any remaining doubt in favor of a reasonable interpretation … ." SB 221 takes effect on August 28, 2025. Mo. Laws 2025, SB 221, signed by the governor on July 11, 2025. New Hampshire: New law (HB 2) establishes a tax amnesty program that will run December 1, 2025 through February 15, 2026. The tax amnesty program applies to taxes administered and collected by the New Hampshire Department of Revenue Administration that were due but unpaid on or before June 30, 2025. Eligible taxpayers that report and pay such taxes in full during the amnesty period will have all penalties and 50% of applicable interest waived. The tax commissioner may consider a taxpayer's failure to pay such taxes during the amnesty period a factor in deciding whether to abate any penalties or interest for good cause or other reasons. N.H. Laws 2025, ch. 141 (HB 2), signed by the governor on June 27, 2025. Federal: In Revenue Procedure 2025-25, the IRS announced the new Affordable Care Act (ACA) affordability percentage of 9.96% for 2026 employer health care plans. This percentage increase gives employers more flexibility in setting employee premiums without making their coverage unaffordable under the safe harbor. For additional information on this development, see Tax Alert 2025-1542. Alaska: New law (HB 123) modifies the rate of the vehicle rental tax. Effective July 1, 2025, the rate of the passenger vehicle rental tax is reduced to 9% (from 10%) of the total fees and costs charged for the lease or rental of a passenger vehicle not arranged through a vehicle rental platform. The rate is further reduced to 7% if the lease or rental is made through a vehicle rental platform. Effective July 1, 2028, the reduced rate for rentals made through a rental platform is deleted, and the 9% rate applies to "the lease or rental of that passenger vehicle." HB 123 also modifies collection and remittance provisions, requiring a vehicle rental platform to collect and remit tax on leases that are arranged or executed through its platform (otherwise, such tax is collected and remitted by the person who provides the leased or rented vehicle). Alaska Laws 2025, ch. 18 (HB 123), became law without the governor's signature on July 10, 2025. Connecticut: On July 22, 2025, Comptroller Sean Scanlon released the "Special Examination on H.B. 1, the One Big Beautiful Bill Act (OBBBA)." Provisions of OBBBA examined in the report include the following: (1) extension of 2017 Tax Cuts and Jobs Act; (2) the state and local tax deduction limitation; (3) the 20% qualified business income deduction for small businesses under IRC Section 199A; (4) bonus depreciation and research and development expensing; (5) clean energy credits; (6) affordable housing funding; (7) new deductions for tips, overtime, and auto loan interest; (8) estate and gift tax; and (9) endowment tax. The report also discusses changes to Medicaid, SNAP and ACA health insurance. Office of the Conn. Comptroller, "Special Examination on H.B. 1, the One Big Beautiful Bill Act (OBBBA)" (July 22, 2025). Minnesota: New law (HF 14), a transportation finance and policy bill, makes changes to the retail delivery fee and establishes a new electronic vehicle (EV) charging tax. HF 14 exempts from the retail delivery fee certain liquefied fuel products that are subject to the state general sales tax when sold and road construction materials. This change applies to retail deliveries made after June 30, 2025. Starting July 1, 2027, a new tax is imposed on all public charging station operators for electricity sold as vehicle fuel at a public charging station. The tax is imposed at a rate of five cents per kilowatt hour of electricity sold. Legacy chargers1 are exempt from the tax for electricity sold as vehicle fuel through December 31, 2031. Starting in 2032, a legacy charger must be capable of imposing the cost of electricity sold as vehicle fuel on a per-kilowatt-hour basis. Tax also does not apply to EVs charged at a private residence that uses electric power paid for by the owner or occupant of the residence, public charging stations with a charging capacity of less than 50 kilowatts, or public charging stations that do not require payment for the delivery of electricity as vehicle fuel. HF 14 defines "electricity as vehicle fuel," "public charging station" and "public charging station operator." Effective for EV registrations on or after January 1, 2026, the calculation of the EV surcharge is modified so that it is the greater of the minimum amount or 0.5% of the manufacturer's suggested retail price multiplied by a percentage specified by the law. The minimum flat amount is $150 for EVs registered on or after January 1, 2026 and on or before June 30, 2027; and reduced to $100 for registrations on or after July 1, 2027. HF 14 imposes a new surcharge on plug-in hybrid EVs, effective for registrations on or after January 1, 2026. The plug-in hybrid EV surcharge is the greater of the minimum amount or 0.25% of the manufacturer's suggested retail price multiplied by a percentage specified by the law. The minimum flat amount is $75 for plug-in hybrid EVs registered on or after January 1, 2026 and on or before June 30, 2027; and reduced to $50 for registrations on or after July 1, 2027. Minn. Laws 2025 (1st Special Sess.), ch. 8 (HF 14), singed by the governor on June 14, 2025. International — Chile: On July 10, 2025, the Chilean Tax Authority issued Exempt Resolution No. 84, establishing the procedure for nonresident entities to register under the simplified value-added tax (VAT) regime. This development follows changes introduced by Law No. 21,713, published on October 24, 2024 and aimed at expanding the VAT regime for the digital economy — which previously applied only to digital service providers — to include digital platforms and marketplaces for imported goods remotely acquired in international sales of low-value tangible goods made by Chilean-tax-resident individuals. Goods acquired through digital platforms and marketplaces with a value of less than US$500 will be subject to the 19% VAT under the simplified regime and exempt them from further import VAT and customs duties. It should be noted that, in connection with this measure, Law No. 21,713 also eliminated the de minimis exemption for the import of low-value goods acquired abroad (valued at less than approximately US$41). For additional information on this development, see Tax Alert 2025-1592. International — Egypt: On July 17, 2025, the Egyptian Parliament issued Law No. 157 of 2025 (Amendment Law), which introduces significant amendments to the original Value-Added Tax (VAT) Law (Law No. 67 of 2016). These changes primarily aim to increase state revenue and enhance financial stability by adjusting taxes on cigarettes and alcohol, while also broadening the application of VAT to include commercial trademarks, crude oil and certain news/advertising services. The Amendment Law is effective from July 18, 2025. For additional information on this development, see Tax Alert 2025-1554. 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: 2025-1766 | ||
