Ernst & Young's State and Local Tax Weekly newsletter for August 29 and September 5 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

Colorado enacts tax changes impacting businesses and individuals during special legislative session

On August 28, 2025, Colorado Governor Jared Polis signed several bills passed during a special legislative session convened to address a state budget deficit resulting from passage of the "One Big Beautiful Bill Act" (OBBBA)¹ and to enact other tax measures. The enacted changes impact state corporate and individual income taxes and state sales and use taxes, as well as certain tax credits.

House Bill 25B-1001 — qualified business income (QBI) deduction addback: The federal QBI deduction, which was enacted in 2017 as part of the Tax Cuts and Jobs Act, allows eligible self-employed individuals and owners of pass-through entities to deduct up to 20% of their QBI. The OBBBA made the QBI deduction permanent and increased the existing phase-out range.²

In 2020, the Colorado legislature enacted a QBI addback, which initially applied to 2021 and 2022 and was later extended through 2025. HB 25B-1001 makes permanent the state's QBI addback in alignment with the OBBBA changes.

House Bill 25B-1002 — foreign jurisdictions: Colorado law requires corporations incorporated in tax havens to be included in a combined report. The state uses a "listed jurisdiction" approach, which, for tax years beginning on or after January 1, 2026, is expanded to include Hong Kong, Ireland, Liechtenstein, the Netherlands, and Singapore.

Current law provides that a corporation is presumptively incorporated in a foreign jurisdiction for the purpose of tax avoidance if it is incorporated in a listed jurisdiction. A taxpayer may rebut the presumption by proving to the satisfaction of the executive director of the Colorado Department of Revenue that incorporation in a listed jurisdiction was for reasons that meet the IRC Section 7701(o) economic substance doctrine. HB 25B-1002 (HB 25B-1002) adds language allowing the executive director to use discretion in making such a determination.

Additionally, HB 25B-1002 creates an addback to federal taxable income in an amount equal to the federal deduction for foreign-derived deduction eligible income (FDDEI) under IRC Section 250.³ HB 25B-1002 also removes restrictions on which IRC Section 78 dividends from foreign subsidiaries can be subtracted from federal taxable income. This change allows all IRC Section 78 dividends to be deducted regardless of foreign jurisdiction. These changes apply to tax years beginning on or after January 1, 2026.

House Bill 25B-1003 — insurance premiums tax: Under current law, Colorado reduces the insurance premiums tax rate for companies with a home office or regional home office in Colorado. The legislature, referring to findings from the Colorado State Auditor, concluded that the reduced tax rate has not met its intended purpose of creating an incentive to "maintain a substantial workforce presence in the state." Consequently, HB 25B-1003 repeals the reduced 1% rate effective January 1, 2026, at that time, all insurers will be subject to the standard 2% rate.

House Bill 25B-1004 — sales of certain tax credits: Beginning in Colorado's fiscal year 2025-26, HB 25B-1004 authorizes the Colorado Treasurer (Treasurer) to sell insurance premiums tax credits to insurance companies and corporate income tax credits to corporations that do business in Colorado, subject to procedures established by the state Treasury Department.

The Treasurer is authorized to issue tax credit certificates in an amount equal to the lesser of $125 million in total certificate face value or total sales proceeds of up to $100 million, plus any administrative costs associated with the issuance of the credits. The Treasurer may contract with an independent third-party entity to conduct or consult on the bidding process.

The Treasurer must offer qualified insurance companies that have a qualified home office or regional home office in Colorado the first right to purchase the tax credits. Regarding corporate income tax credits, C corporations authorized to do business in Colorado must apply to purchase the credit. Corporations that submit an application "shall make a timely and irrevocable offer, contingent only on the Department's issuance to the C corporation of the tax credit certificates, to make a specified purchase payment amount to the Department on dates specified by the Department … "

The purchase price for the tax credit certificates must be set at the greater of a percentage determined in a manner consistent with market conditions as of the offer date established by the Treasurer or independent third-party, or 80% of the certificate amount.

For tax credit certificates issued in FY 2025-26, the Treasurer, in consultation with the Governor's Office of State Planning and Budget, may determine the calendar years in which the taxpayer may claim the credit.

The tax credits are non-refundable but may be carried forward through calendar year 2033.

House Bill 25B-1005 — elimination of state sales tax vendor fee: Under current law, retailers are allowed to keep 4% of their state sales tax collections, up to $1,000 per retailer per filing period, to cover their expenses of collecting state sales tax on behalf of the state. This allowance is known as the sales tax vendor fee. HB 25B-1005 eliminates the state sales tax vendor fee beginning January 1, 2026. This change only applies to the state sales tax and has no impact on the vendor fee allowances that are permitted for state-collected local jurisdictions (districts, counties and certain municipalities) and home rule self-collected municipalities. Vendor fee allowances vary by jurisdiction.

For more on these developments, see Tax Alert 2025-1788.

Washington Department of Revenue addresses 'existing contracts' for services that will be taxable beginning October 1

On August 29, 2025, the Washington Department of Revenue (WA DOR) published guidance for "existing contracts" for services that will be subject to sales tax beginning October 1, 2025, as a result of the enactment of SB 5814 (see Tax Alert 2025-1125). An "existing contract" for these services means the contract was executed before October 1, 2025. Wash. Dept. of Rev., Interim guidance statement regarding contracts existing prior to October 1, 2025, and changes made by ESSB 5814 (August 29, 2025).

Background: On May 20, 2025, Washington Governor Bob Ferguson signed SB 5814 into law. Effective October 1, 2025, SB 5814 expands the sales tax base to additional services, including:

• Advertising services
• Live presentations
• Information technology services
• Custom website development services
• Investigation, security, and armored car services
• Temporary staffing services, except for qualifying hospitals
• Sales of custom software
• Customization of prewritten software

New guidance: The new guidance permits sellers to choose how to classify the listed services for "existing contracts."

Sellers may treat the transaction sourced to Washington as (1) a retail sale subject to retailing B&O tax and sales tax or (2) maintain the same tax classification of the service before October 1, 2025; typically, such activities will be classified at the service and other activities B&O tax classification.

This election applies to payments for services made after October 1, 2025, but only for transactions occurring through March 31, 2026. Sellers must treat any contracts executed after October 1, 2025, for services listed in SB 5814 as a retail sale and subject to sales tax unless the client provides an exemption certificate.

Existing contracts that are altered (i.e., materially or substantively changed) after October 1, 2025, are subject to retailing B&O and retail sales tax on the date the contract is amended.

For additional information on this development, see Tax Alert 2025-1822.

INCOME/FRANCHISE

District of Columbia: Emergency law (B26-0340), for combined group whose net deferred tax liability was increased as a result of the enactment of the combined reporting provisions, delays when that combined group can deduct a portion of the net increase. The change replaces the phrase "For the [seven]-year period beginning with the 15th year of the combined filing" with the phrase "For the first [seven] tax years beginning after December 31, 2029." For taxpayers that took the deduction into account when making estimated 2025 payments (previously 2020 payments) and an underpayment results due to the delay in the deduction, the estimated tax interest resulting from such underpayment, upon application, will be waived. As an emergency bill, B26-0340 is only effective for a 90-day period and will expire on December 2, 2025. The permanent bill, B26-0265, was approved by the Mayor on September 4, 2025 and on September 10, 2025 it was sent to Congress for a mandatory 30-in-session day review period.

Maryland: The Maryland Comptroller in its "60-Day Report" (issued September 5, 2025) on the impacts the "One Big Beautiful Bill Act" will have on the state, explains that the "State will decouple from tax year 2025 and any applicable prior tax years for amendments to (1) [research and experimental] expenses; (2) the new qualified production property depreciation under [IRC] Section 168(n); and (3) the business interest deduction limitation." Absent legislative action, the state will conform to the federal amendments in tax year 2026 and after.

Nebraska: The Nebraska Department of Revenue issued a report on the changes to the Internal Revenue Code made by the One Big Beautiful Bill Act (OBBBA) and how these changes will impact Nebraska state income tax revenues as well as taxpayers. Neb. Dept. of Rev., "Effects of the One Big Beautiful Bill Act on the State of Nebraska's Tax Revenue" (September 2, 2025).

SALES & USE

District of Columbia: Emergency law (B26-0340) eliminates the previously enacted sales and use tax rate increase from 6.0% to 6.5% that was set to take effect on October 1, 2025 (see Laws 2024, L25-0217). The 6.0% rate will remain through September 30, 2026. B26-0340 does not change the scheduled sales and use tax rate increase to 7.0%, which is set to take effect on October 1, 2026. B26-0340 also extends the sunset date of the temporary increase to the rate of the additional sales and use tax on gross receipts for transient lodgings or accommodations through September 30, 2027 (from March 31, 2027). (Law enacted in 2023 temporarily increase the rate from 0.3% to 1.3%.) As an emergency bill, B26-0340 is only effective for a 90-day period and will expire on December 2, 2025. The permanent bill, B26-0265, was approved by the Mayor on September 4, 2025 and on September 10, 2025 it was sent to Congress for a mandatory 30-in-session day review period.

Florida: The Florida Department of Revenue (FL DOR) issued a tax information publication regarding the application of the state's sales and use tax on parking, docking, tie-down, and storage. The FL DOR said the state's 6% sales tax, along with any applicable discretionary sales surtax, continues to apply to (1) motor vehicle parking or storage spaces in parking lots or garages; (2) boat docks or storage spaces in boat docks or marinas; and (3) aircraft tie-down or storage spaces at airports. The FL DOR noted that the October 1, 2025 repeal of the commercial rent tax does not impact these rentals as they are specifically excluded from commercial rentals. Fla. Dept. of Rev., TIP No. 25A01-11 (August 22, 2025).

Rhode Island: The Rhode Island Department of Revenue, Division of Taxation (RI DOT), issued an advisory on the increase to the local hotel tax rate and new whole home short-term rental tax on residential dwellings. Starting January 1, 2026, all short-term rentals, including hotels, are subject to a local hotel tax and the rate of the local hotel tax increases to 2% (from 1%). Also starting January 1, 2026, a new 5% whole home short-term rental tax will be imposed on the short-term rental of a residential dwelling in its entirety (e.g., houses, condos, mobile homes, including vacation rentals and rentals offered through an online hosting platform). The RI DOT explained that state and local tax is based on the date of occupancy and, as such, the tax rate in effect at the time of occupancy applies to all short-term rentals. The RI DOT noted that if full payment for a 2026 rental is made in 2025, the tax collected should be at the 2025 rate and the difference in the tax rate should be charged at the time of checkout from the rental. R.I. Dept. of Rev., Div. of Taxn., Advisory 2025-16 (August 29, 2025).

Rhode Island: The Rhode Island Department of Revenue, Division of Taxation, issued guidance on the application of the state's sales tax on short-term parking. Effective October 1, 2025 the state's 7% sales tax applies to all short-term parking services (i.e., "any parking space in or on a parking facility for a patron, where the duration of occupancy of the space is less than once month.") Examples of taxable short-term parking services include paid parking garages, paid event parking, and paid beach parking, even parking lots and garages operated by a city, a town or the state. R.I. Dept. of Rev., Div. of Taxn., Advisory 2025-14 (August 21, 2025).

Washington: The Washington Department of Revenue (WA DOR) has issued various guidance on services that will be subject to the state's sales and use tax on October 1, 2025 (see Tax Alert 2025-1125). The WA DOR has issued interim guidance statements on: advertising services; live presentations; information technology services; custom website development services; investigation, security, and armored car services; temporary staffing services; custom software; digital automated services exclusions; and contracts existing before October 1, 2025. The WA DOR's "Services newly subject to retail sales tax" webpage includes responses to frequently asked questions and other information.

BUSINESS INCENTIVES

Colorado: On August 18, 2025, the Colorado Department of Revenue (CO DOR) adopted new Rule 39-22-567 "Quantum Facility Investment Credit Recapture." The intent of the new rule is to clarify when the CO DOR will disallow the quantum facility investment credit and require its recapture. Under the new rule, the Office of Economic Development (OED) is required to notify the qualified applicant and the CO DOR that the credit has been disallowed and recapture is required because the qualified applicate, during the compliance period, (1) sold, transferred, abandoned or repurposed a substantial portion of the qualifying fixed capital assets for which they were allowed a credit, or (2) ceased to operate the shared quantum facility in Colorado. The CO DOR must receive such notification from the OED before it can disallow the credit and require recapture. The new rule takes effect on September 30, 2025.

Connecticut: New law (SB 1497) establishes a refundable income tax credit in an amount equal to 20% of the amount paid by an eligible farmer for farm investment property. "Farm investment property" is machinery and equipment purchased by an eligible farmer on or after January 1, 2026 and buildings and structural components of buildings that are acquired, constructed, reconstructed or erected by an eligible farmer and placed in services on or after January 1, 2026, that meet the following criteria: (1) it is located in Connecticut; (2) it has a class life of more than four years; (3) it was acquired by an eligible farmer from a person other than a related person; (4) it was not acquired to be leased, and are not leased, to another person during the 12 full months following their acquisition or placement in service; and (5) it will be held or used in Connecticut by the eligible farmer in the ordinary course of agricultural production for at least five years following the date of acquisition or placement in service. The amount of credit that exceeds the taxpayer's tax liability will be treated as an overpayment and will be refunded, without interest, to the taxpayer. A taxpayer claiming a credit under this provision may not claim a credit under any other provision with respect to the same acquisition. The law provides for the recapture of the credit, if certain conditions are not met. SB 1497 takes effect on, and applies to income and tax years beginning on or after, January 1, 2026. Conn. Laws 2025, Pub. Act 25-152 (SB 1497), signed by the governor on July 1, 2025.

New Jersey: New law (S.4618) extends and enhances the film and digital media content production tax credit program, which is administered by the New Jersey Economic Development Authority (EDA). The credit program is extended through the privilege period commencing before July 1, 2049 (from July 1, 2039). The percentage of the tax credit available to a taxpayer designated as a New Jersey studio partner is increased to 40% (from 35%) and for a taxpayer designated as a New Jersey film-lease production company it is set at 35%; the 30% credit for taxpayers other than a New Jersey studio partner or New Jersey film-lease production company is unchanged. A film credit issued to a taxpayer, including the purchaser or assignee of a tax credit transfer certificate, may first be taken by the tax certificate holder for the tax period for which it was issued, for the period in which it was issued, or in any tax period during the time a business is required to maintain the project at a location in New Jersey, subject to carryforward provisions. The tax credit certificate holder may transfer the credit on or after the date of issuance for use by the transferee in the tax period for which it was issued, or in any of the next successive tax periods; subject to carryforward provisions. In addition, S.4618 does the following: (1) expands the definition of "film" to including ongoing televisions production that relocated to New Jersey and features news or current events (not including a sports event), promotional activities and economic development initiatives; (2) expands eligibility for certain post-production activities to include qualified digital media content production expenses incurred from post-production; (3) removes certain requirements for the total film production expenses for a reality show; (4) provides for an additional tax credit, not to exceed 5% of the taxpayer's qualified film production expenses or qualified digital media content production expenses, for hiring residents from certain areas in New Jersey and for promoting the state; (5) caps the aggregate amount of credit available for approval each year; (6) defines "New Jersey film-lease post-production company" and "qualified post-production company" and modifies the definitions of "New Jersey film-lease production company," "New Jersey studio partner," "qualified film production expenses" and eliminates the definitions of "independent post-production company" and "television series that relocated to New Jersey"; (7) requires the state to repurchase unused tax credits and tax credit transfer certificates awarded under the film and digital media content production tax credit program in an amount equal to 95% of the credit's value, subject to certain conditions; and (8) modifies recapture provisions. S.4618 took effect immediately and applies to application submitted after the effective date. N.J. Laws 2025, ch. 81 (S.4618), signed by the governor on June 30, 2025.

PROPERTY TAX

Connecticut: New law (SB 1497) increases the property tax exemption for farm machinery (except motor vehicles) to $250,000 (from $100,000) in assessed value. The farm machinery must be owned and kept in Connecticut, or be held in trust for any farmer or group of farmers operating as a unit, a partnership or a corporation, the majority of stock of which is held by members of a family who are actively engaged in farm operations. This change takes effect on, and applies to assessment years commencing on or after, October, 1, 2025. Conn. Laws 2025, Pub. Act 25-152 (SB 1497), signed by the governor on July 1, 2025.

Oregon: New law (HB 2078) extends the sunset date of the property tax exemption for multiunit rental housing through January 2, 2033 (from January 2, 2027). HB 2078 took effect on September 26, 2025. Ore. Laws 2025, ch. 193 (HB 2078), signed by the governor on May 28, 2025.

Oregon: New law (HB 2074) extends the sunset date of the property tax exemption for vertical housing development projects through January 1, 2032 (from January 1, 2026). HB 2074 took effect on September 26, 2025. Ore. Laws 2025, ch. 191 (HB 2074), signed by the governor on May 28, 2025.

Oregon: New law (SB 99) extends the sunset date of the property tax incentive benefit program for brownfield development to January 2, 2033 (from January 2, 2027). SB 99 took effect on September 26, 2025. Ore. Laws 2025, ch. 531 (SB 99), signed by the governor on July 17, 2025.

COMPLIANCE & REPORTING

Hawaii: The Hawaii Department of Taxation issued guidance on the withholding of income tax for nonresident individual partners and beneficiaries. Under Hawaii law, partnerships, estates and trust must withhold tax in an amount equal to the highest marginal tax rate applicable to a nonresident taxpayer multiplied by the taxpayer's distributive share of income attributable to Hawaii. (Taxpayers must keep records supporting the calculation of the withholding amount.) The withholding requirement does not apply to publicly traded partnerships, instead they must file an annual information return that includes certain information of each unit holder with Hawaii sourced income. Partnerships that elect pass-through entity (PTE) taxation also are not subject to the withholding requirement, if the entity properly made the PTE election and makes the required PTE tax payments. Partnerships, estates and trusts must withhold tax for nonresident individual partners and beneficiaries; it is not required to withhold tax for partners or beneficiaries that are a corporation, PTE, estate, trust or other entity. Haw. Dept. of Taxn., Tax Information Release 2025-03 (September 5, 2025).

CONTROVERSY

Colorado: On August 18, 2025, the Colorado Department of Revenue adopted new Rule 39-22-601.5-1, to provide guidance to partnerships and partners on reporting and payment requirements related to federal partnership adjustments. The new rule addresses the following topics: (1) state partner representative, (2) partnership federal adjustments report, (3) reporting partners' shares of federal adjustments, (4) partnership election to pay the amount due in lieu of tax on partners, (5) making estimated tax payments, and (6) alternative reporting and payment methods. The new rule takes effect on October 15, 2025.

Illinois: The Illinois Department of Revenue (IL DOR) will administer a time-limited tax amnesty program from October 1, 2025, through November 17, 2025.⁴ Amnesty applies to taxes administered by the IL DOR that were due for any tax period ending after June 30, 2018, and before July 1, 2024. The IL DOR will waive all interest and penalties otherwise due and will not seek civil or criminal prosecution of those who participate in, and comply with the terms of, the amnesty program. Amnesty eligible taxes include: income tax, sales/use tax (both state and most local taxes), telecommunications taxes, and most other taxes. The telecommunications infrastructure maintenance fee is also eligible for amnesty. For more information on this development, see Tax Alert 2025-1928.

Illinois: The Illinois Secretary of State will administer a time-limited franchise tax amnesty program from October 1, 2025 through November 17, 2025.⁵ Franchise tax amnesty applies to all taxpayers owing a franchise tax or license fee imposed under Art. XV of the Business Corporation Act of 1983 (Art. XV) 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 and paying all franchise tax liabilities due, the Secretary will waive applicable penalties and interest⁶ and will not pursue civil or criminal prosecution for the time period that amnesty has been granted. Taxpayers eligible to participate in the franchise tax amnesty program include domestic (Illinois) corporations, foreign corporations authorized to transact business in Illinois and foreign corporations that have been transacting business in the state without authority. For additional information on this development, see Tax Alert 2025-1926.

Illinois: The Illinois Department of Revenue (IL DOR) adopted amendments to 86 Ill. Adm. Code Sec. 760.230 "Electronic Filing of Returns or Other Documents." When taxpayers are required to electronically file returns, forms or other documents, methods that will constitute an electronic signature include, but are not limited to, the following: (1) a personal identification number assigned to the taxpayer by the IL DOR, (2) a taxpayer selected password that has been accepted by the IL DOR, (3) a taxpayer selected email address, (4) the last four digits of a taxpayer's social security number, (5) one of the approved methods for when the use of an electronic signature is not required. When the use of a signature is not required, the following electronic signature methods may be used: (1) a scanned or digitized image of a handwritten signature; (2) a handwritten signature input onto an electronic signature pad; (3) a handwritten signature, mark or command input on a display screen with a stylus devices; or (4) an electronic signature created by a third-party software that requires two-factor authentication. A taxpayer may submit a request to the IL DOR to use an electronic signature method not listed as an approved method for when use of an electronic signature is not required. The amended regulation took effect on August 11, 2025. Ill. Dept. of Rev., 86 Ill. Adm. Code Sec. 760.230 (Ill. Register, Vol. 49, Issue 34, August 22, 2025).

PAYROLL & EMPLOYMENT TAX

Multistate: The August 2025 Payroll Month in Review, which summarizes the latest employment tax and other payroll developments is now available. This issue highlights developments in US federal, state and local payroll and human resources matters, and it features the insight "Missouri has a unique requirement for computing nonresident income tax withholding." For a copy of the August 2025 issue see Tax Alert 2025-1785.

Ohio: Governor Mike DeWine signed into law HB 96, which implements a two-year phased transition to a flat personal income tax rate. Specifically, retroactive to January 1, 2025, the top personal income tax rate is reduced from 3.5% to 3.125%. Effective January 1, 2026, a flat personal income tax rate of 2.75% applies to income over $26,050. For 2025 and 2026, personal exemptions are not subject to inflation indexing. For additional information on this development, see Tax Alert 2025-1744.

MISCELLANEOUS TAX

California: The California Department of Tax and Fee Administration (CDTFA) issued a special notice on the state's new covered battery-embedded (CBE) waste recycling fee. Starting January 1, 2026, the fee will be imposed on the sale or lease of a CBE product, which is "a product containing a battery that is not designed to be easily removed from the product by the user or the product with no more than commonly used household tools," such as a smartphone. CBE products do not include the following: (1) certain medical devices, (2) covered electronic devices that are subject to the covered electronic waste recycling fee, (3) certain energy storage systems, and (4) certain electronic nicotine delivery systems. The following are required to register for and pay the fee: (1) retailers selling or leasing CBE products for in-state use; (2) a consumer who purchases CBE products for personal or business in-state use but did not pay the fee at the time of purchase; (3) a retailer that removes CBE product from inventory for use and not for sale; and (4) a vendor collecting the fee from the retailer. The notice includes information on registering for the fee as well as return and payment due dates. Cal. Dept. of Tax and Fee Admin., Special Notice L-990: New Covered Battery-Embedded Waste Recycling Fee Beginning January 1, 2026 (August 2025).

Maryland: On August 15, 2025, the U.S. Court of Appeals for the Fourth Circuit held that Maryland's Digital Advertising Tax, which took effect in 2022, violates the First Amendment to the U.S. Constitution by prohibiting companies from visibly passing on the tax as a separate "fee, surcharge, or line-item" on customer invoices. The ruling reverses a decision by the U.S. District Court for the District of Maryland, which concluded that while the prohibition restricted certain types of speech, it was not unconstitutional. On appeal, the Fourth Circuit concluded that the prohibition impermissibly regulates protected speech; namely, the court explained that while the prohibition did not forbid companies from passing on the tax, it "restricts the ways that a price increase can be communicated." The court remanded the case to the District Court to determine an appropriate remedy for this single issue. The court previously had ruled that the federal courts lacked jurisdiction to decide the validity of the tax as-a-whole, and that such challenges should be brought in state court. Chamber of Commerce of U.S.A. v. Lierman, No. 24-1727 (4th Cir. August 15, 2025).

GLOBAL TRADE

Federal — International: The August 2025 edition of Trade Talking Points provides updates on the following: (1) the latest United States (US) trade policy and tariff announcements, covering the revisions to tariffs imposed under the International Emergency Economic Powers Act 1977; the removal of de minimis for US imports; section 232 steel and aluminum tariff inclusions; and barriers lifted in Australia for US beef imports; (2) United Kingdom (UK) government initiatives and trade policy developments, including the plan for small and medium-sized businesses, an overview of sector plans, the EU lifting duties on British steel imports and developments with Switzerland and Egypt; (3) UK Trade Remedies Authority launching of the Trade Remedies Advisory Service and anti-dumping measures on bicycles from China; and (4) European Commission anti-dumping measures on epoxy resin imports and Chinese imports, and China's World Trade Organization complaint against Canadian steel tariffs. The August 2025 Trade Talking Points is available via Tax Alert 2025-1754.

Federal: On August 28, 2025, the Office of the United States Trade Representative (USTR) published a notice providing an extension until November 29, 2025 for product exclusions stemming from the Section 301 investigation into China's acts, policies and practices related to technology transfer, intellectual property and innovation (Section 301 tariffs). This decision follows prior notices in which the USTR modified actions to exclude certain products from additional duties. (For background, see EY Global Tax Alert, USTR extends certain exclusions from China Section 301 tariffs, dated June 3, 2025.) The notice explains that the USTR decided to extend these exclusions based on continued public comments and the advice of advisory committees, recognizing the ongoing impact of China's trade practices on United States economic interests. For additional information on this development, see Tax Alert 2025-1786.

Federal — Japan: On September 4, 2025, United States (US) President Donald J. Trump issued an Executive Order "Implementing the United States-Japan Agreement," which was initially framed on July 22, 2025. The Executive Order describes the agreement as designed to establish a new era of trade relations between the US and Japan, grounded in principles of reciprocity and shared national interests. Further, the agreement aims to reduce the US trade deficit with Japan, boost the US economy and strengthen the manufacturing and defense industrial base. The agreement includes a comprehensive tariff framework to level the playing field for American producers while addressing national security needs, the Executive Order explains. It also reflects Japan's commitment to enhancing market access for US goods and services. For additional information on this development, see Tax Alert 2025-1803.

Federal: On September 5, 2025, US President Donald J. Trump signed an EO titled "Modifying the Scope of Reciprocal Tariffs and Establishing Procedures for Implementing Trade and Security Agreements." The EO states that it aims to address national security concerns and rectify trade practices contributing to the US trade deficit. The EO introduces 0% tariffs for certain imports from aligned partners, contingent on their commitments to remedy certain trade practices. Additionally, the EO revises Annex II and establishes a new "Potential Tariff Adjustments for Aligned Partners" Annex. For more on this development, see Tax Alert 2025-1863.

International: On August 22, 2025, Prime Minister Mark Carney announced that Canada would remove retaliatory tariffs on United States (US) goods specifically covered under the Canada-US-Mexico free trade agreement (CUSMA). This announcement followed US confirmation that Canadian exports to the US that are CUSMA compliant will not be subject to US tariffs imposed under the International Emergency Economic Powers Act. However, Canada will continue to impose tariffs on steel products, aluminum products and motor vehicles originating in the US, in accordance with the US Surtax Order (Steel and Aluminum 2025), SOR/2025-95 (the Steel and Aluminum Order) and the US Surtax Order (Motor Vehicles 2025), SOR/2025-118 (the Motor Vehicles Order). For additional information on this development, see Tax Alert 2025-1890.