Ernst & Young's State and Local Tax Weekly newsletter for December 5 and December 12 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

Illinois decouples from select provisions of OBBBA, extends and modifies the film credit

On December 12, 2025 Illinois governor signed into law SB 1911, provisions of which modifies the state's income tax laws to address select changes made by the One Big Beautiful Bill Act (OBBBA).¹ Of note, SB 1911 does the following:

• Continues to decouple from bonus depreciation under Internal Revenue Code (IRC) Section 168(k)
• Decouples from special depreciation for qualified production property under IRC Section 168(n), applicable to tax years 2026 and after
• Modifies the statutory state deduction for 50% of global intangible low-taxed income (GILTI) to include net controlled foreign corporation tested income (NCTI), specifically stating: "[f]or taxable years ending on or after December 31, 2025, 50% of the amount of [GILTI] or [NCTI] received or deemed received or paid or deemed paid under [IRC] Sections 951 through 965" (italics indicates new text)
• Makes the elective pass-through entity tax (PTET) permanent by removing its sunset date; without this change, the elective PTET would have been limited to tax years ending on or after December 31, 2021, and starting before January 1, 2026
• Removes the expiration date of the subtraction for the amount of the taxpayer's excess business loss disallowed as a deduction under IRC 461(l)(1)(B)

In addition, SB 1911 extends the Film Production Services Tax Credit Act through 2038; specifically, taxpayers will not be awarded any credits under this Act for tax years beginning on or after January 1, 2039 (from January 1, 2033). SB 1911 also modifies various provisions of the film production services tax credit, including those related to withholding tax on compensation paid to a loan out company. SB 1911 increases and enhances the amount of credit for an accredited production commencing on or after July 1, 2025; modifies the definition of "Illinois labor expenditure" and limits the wages paid to nonresidents that will qualify as Illinois labor expenditures, applicable to productions commencing on or after July 1, 2025.

SB 1911 took effect upon becoming law.

District of Columbia enacts emergency bill to decouple from select OBBBA provisions

The District of Columbia Mayor Muriel Bowser allowed to become law, without her signature, emergency legislation, B26-0457 (the law), that decouples from select federal tax changes made by the One Big Beautiful Bill Act (OBBBA). As emergency legislation, B26-0457 will be effective for a 90-day period, expiring on March 3, 2026. Provisions of the law apply as of January 1, 2025, unless otherwise provided.

Business income tax provisions: The law modifies the gross income of a corporation, financial institution, unincorporated business and partnership (each an "entity"). An entity is allowed to deduct all ordinary and necessary expenses paid or incurred during the tax year that are deductible under Internal Revenue Code (IRC) Section 162(a), except as follows:

• IRC Section 174A — For tax years beginning after December 31, 2021, the domestic research and experimental (R&E) expenditure deduction under IRC Section 174A is: (i) charged to the capital account, and (ii) allowed as an amortized deduction ratably over the five-year period beginning with the midpoint of the tax year in which these expenditures are paid or incurred.
• Taxpayers are not allowed to make an election to file an amended return "pursuant to [IRC Section] 174A(f)(1)" or make an election under "[IRC Section] 174A(f)2)"²
• IRC Section 163(j) — In calculating the business interest limitation under IRC Section 163, adjusted taxable income is determined under IRC Section 163(j)(8)(A) except that IRC Section 163(j)(8)(A)(v) does not apply. In addition, "floor plan financing interest" under IRC Section 163(j)(9) does not apply.
• IRC Section 168(k) — Disallows the special depreciation allowance under IRC Section 168(k).
• IRC Section 168(n) — Disallows the special depreciation allowance under IRC Section 168(n).
• IRC Section 179 — Allows a deduction for the cost of property which the taxpayer has elected to be treated as not chargeable to capital account under IRC Section 179. The deduction is limited to the lesser of $25,000 or the actual cost of the property for the year in which it was placed in service.
• IRC Section 1400Z — Provides for the criteria that must be met for amounts invested in a qualified opportunity fund (QOF) after December 31, 2026, to realize:
• reduced capital gains tax liability through a 10% step-up in basis, if invested in a QOF for five years, pursuant to IRC Section 1400Z-2(b)
• abatement of capital gains tax on an investment of capital gains held in a QOF for at least 10 years, pursuant to IRC Section 1400Z-2(c)

The law may allow for a depreciation deduction for an investor in a shared equity financing agreement under D.C. Code Section 47-3507. The bill also modifies D.C. Code Section 47-1811.04 "Bases — Determination of depreciation deduction," to provide that no adjustments will be made for special depreciation allowance under IRC Section 168(n) and that a depreciation deduction may be allowed for an investor in a shared equity financing agreement under D.C. Code Section 47-3507.

Individual income tax provisions: For tax years beginning after December 31, 2024, individuals, estates and trusts must include any income or gain excluded from federal gross income under IRC Section 1202(a) (i.e., the qualified small business stock exclusion).

For individual income tax purposes, the law modifies the standard deduction; instead of providing the same amount as the federal standard deduction, the District sets the amount. The law also repeals certain individual, estate and trust tax provisions related to deductions under D.C. Code Sections 47-1803.03 and creates a new D.C. Code Section 47-1803.04 to specify which individual, estate and trust deductions are allowed and those that are not. Deductions that are not allowed include but are not limited to the following: (1) qualified business income under IRC Sections 63(b)(3) or 199A, (2) qualified tips under IRC Section 224, (3) qualified overtime compensation under IRC Section 225, and (4) personal car loan interest under IRC Section 163(h)(4).

For additional information on this development, see Tax Alert 2025-2409.

Louisiana will implement combined state and parish sales and use tax return effective January 1, 2026, for December sales taxes

The Louisiana Uniform Local Sales Tax Board (Board) has announced that it is implementing a new combined state and parish sales and use tax (SUT) return for taxpayers with SUT filing obligations in the state. This combined return will replace both the Louisiana state return and multiple parish returns, with filings hosted by the Parish E-File (PEF) system. Taxpayers will need to register with the PEF system to obtain a unique identification number (discussed further) that will link all local returns to the state return.

Despite stakeholders' expectations for a delay in the go-live date signaled by Board in October, the change will take effect on January 1, 2026, for taxpayers' December 2025 filings.

Before the January filing (for December sales), taxpayers must obtain a unique identification number on the PEF website. To obtain the number, PEF users must provide a physical location address, as well as both the state and local account numbers, along with any required documentation (business license and incorporation documents). The PEF system will generate the ID for the location. All reporting accounts must have a valid account number; otherwise, the ID number will not be generated. For additional information on this development, see Tax Alert 2025-2541.

INCOME/FRANCHISE

District of Columbia: New law (B26-0265) delays the net deferred tax liability deduction, applicable for a combined group whose net deferred tax liability was increased as a result of the enactment of the combined reporting provisions. 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." D.C. Laws 2025, L26-0055 (B26-0265), became law on December 6, 2025. This change was previously enacted under an emergency bill, B26-0340, that expired on December 2, 2025.

Missouri: The Missouri Department of Revenue proposed amendments to its consolidated income tax return rule, 12 CSR 10-2.045. The proposed amendments would update the method of determining interstate apportionment for certain consolidated filers and update the rule's references to apportionment methods, among other changes. Mo. Dept. of Rev., Proposed Rules 12 CST 10-2.045 (Mo. Register, Vol. 50, No. 23, December 1, 2025).

New Jersey: In response to the renaming of global intangible low-taxed income (GILTI) as net controlled foreign corporation tested income (NCTI) and foreign derived intangible income (FDII) as foreign-derived deduction eligible income (FDDEI) under the One Big Beautiful Bill Act, the New Jersey Division of Taxation (NJ DOT) said on its website that treatment of these concepts for New Jersey Corporation Business Tax purposes is unchanged. The NJ DOT said that treatment "remains as set forth in the published guidance and regulations" and that "[w]hen reviewing prior materials … any reference to GILTI refers to NCTI and any reference to FDII refers to FDDEI." N.J. Div. of Taxn., "Federal Renaming for GILTI and FDII Under the One Big Beautiful Bill Act for Corporation Business Tax" (last updated December 4, 2025).

New Jersey: The New Jersey Division of Taxation (NJ DOT) revised its technical bulletin on the IRC Section 163(j) limitation for corporation business tax (CBT) filers to add references to the One Big Beautiful Bill Act (OBBBA). The NJ DOT said that "[t]here is no change to the way [IRC Section 163(j)] income is reported on New Jersey returns." N.J. Div. of Taxn., TB-87(R) "Guidance for Corporation Business Tax Filers on the IRC §163(j) Limitation" (revised December 4, 2025).

New Jersey: The New Jersey Division of Taxation (NJ DOT) said on its website that New Jersey conforms to federal changes made by the One Big Beautiful Bill Act (OBBBA) for charitable contribution deductions to the extent they are consistent with the New Jersey Corporation Business Tax Act (CBT). The NJ DOT explained that the starting point for taxable income under the CBT is entire net income (ENI) before net operating losses (NOLs) and special deductions, with specific statutory modifications. The OBBBA's changes to charitable contribution deductions affect total deductions that are above ENI before NOLs and special deductions. The NJ DOT noted that for Gross Income Tax (GIT) purposes there are no provisions similar to the IRC provisions allowing charitable deductions. Accordingly, there are no changes for GIT purposes. N.J. Div. of Taxn., "One Big Beautiful Bill Act (OBBBA) - Changes to Charitable Contribution Deductions" (last updated December 1, 2025).

Tennessee: The Tennessee Department of Revenue (TN DOR) issued a notice on federal bonus depreciation conformity. Tennessee conforms to federal bonus depreciation provisions that exist and apply under the Tax Cuts and Jobs Act (TCJA); applicable to assets purchased on or after January 1, 2023, for which the taxpayer has taken federal bonus depreciation. Under the TCJA, bonus depreciation phases-out by 2027 (80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026 and 0% in 2027 and after). The One Big Beautiful Bill Act (OBBBA) provides for 100% bonus depreciation for qualified property acquired after January 19, 2025. Tennessee does not conform to the OBBBA's bonus depreciation provisions as it "remains coupled with the TCJA bonus depreciation provisions." Accordingly, taxpayers taking federal bonus depreciation deductions under the OBBBA will have to adjust their Tennessee excise tax return and apply the applicable bonus deprecation percentage set forth in the TCJA. The TN DOR further stated that the state does not conform to the OBBBA's bonus deprecation for qualified production property (IRC Section 168(n)), noting that this provision does not exist in the TCJA. Because Tennessee does not conform to this provision, for excise tax purposes such property is depreciated in accordance with federal Modified Accelerated Cost Recovery System depreciation provisions applicable to nonresidential real property. Taxpayers may need to adjust their excise tax returns. Tenn. Dept. of Rev., Notice #25-36 "Federal Bonus Depreciation Conformity" (December 2025).

Tennessee: The Tennessee Department of Revenue (TN DOR) issued a notice on the state's excise tax treatment of the federal employee retention credit (ERC). The TN DOR explained that federal law requires an eligible employer reduce its federal income tax deduction for wages and certain related expenses by the amount of ERC they receive. The starting point of the Tennessee excise tax considers the reduced federal deduction and, as such, the "ERC is included in the excise tax base in this manner." Further, the TN DOR said that the excise tax deduction for certain federally disallowed expenses does not apply to the ERC. Thus, federally disallowed expenses related to the ERC "cannot be deducted under this provision and are not otherwise deductible for excise tax purposes." The TN DOR describes when the excise tax return must match the corresponding federal tax return in relation to the ERC. Tenn. Dept. of Rev., Notice #25-37 "Excise Tax Treatment of Federal Employee Retention Credit" (December 2025).

SALES & USE

District of Columbia: New law (B26-0265) eliminates the previously enacted sales and use tax rate increase from 6.0% to 6.5%, which was set to take effect on October 1, 2025 (see Laws 2024, L25-0217). The 6.0% rate will remain through September 30, 2026. B26-0265 does not change the scheduled sales and use tax rate increase to 7.0%, which is set to take effect on October 1, 2026. B26-0265 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%.) D.C. Laws 2025, L26-0055 (B26-0265), became law on December 6, 2025. This change was previously enacted under an emergency bill, B26-0340, which expired on December 2, 2025.

Georgia: The Georgia Department of Revenue (GA DOR) issued a bulletin on its policy regarding cash transactions following the federal government ending the production of the penny, which has caused a penny shortage. For cash transactions where exact change would be required, the GA DOR's policy is that "[i]f the sales price plus sales tax results in a total that cannot be collected without pennies, dealers may round the total amount due to the next lowest, next highest or nearest nickel." The GA DOR said that the amount of sales tax collected and remitted should not be recalculated. Sales tax is due on the initial sales price before any rounding by the dealer. The GA DOR noted that this is an evolving issue and that it may change its guidance if any changes are made to state or federal law or policy. Lastly, the GA DOR said that this bulletin should not be used to justify a rounding decision that is more than four pennies. Ga. Dept. of Rev., Policy Bulletin SUT 2025-02 (December 5, 2025).

Idaho: The Idaho Department of Revenue (ID DOR) issued a reminder to short-term rental marketplaces that booking fees charged to customers are subject to tax; taxes that apply include sales tax, travel and convention tax, and auditorium district tax if the lodging is in an auditorium district. The ID DOR noted that these taxes may apply to other lodging and lodging-related sales. The ID DOR has posted additional information on lodging taxes here and a list of common charges and which taxes apply to such charges here. Idaho Dept. of Rev, "Common Charges for Property and Services for hotels, motels, and other providers of short-term lodging or rentals in Idaho" (December 5, 2025).

Louisiana: The Louisiana Department of Revenue updated its guidance on the application of sales and use tax on digital products and related services to clarify "what qualifies as digital audiovisual works, what does not fall under website hosting, and what qualifies as communication and collaboration tools." La. Dept. of Rev., "Sales and Use Tax on Digital Products and Related Services" (updated November 2025).

Michigan: The Michigan Department of Treasury issued an updated bulletin on the application of the state's sales and use tax to the construction industry generally and contractors; the bulletin does not address the tax base for manufacturers/contractors that affix their product to the real estate of others, among other issues. Topics discussed include the following: (1) taxable sales to contractors and use tax for conversions; (2) exempt sales to contractors and core charge credit and refund, with focused discussions on nonprofit hospitals, qualified nonprofit housing, qualified water or air pollution control facilities, qualified data centers, Indian Tribes, qualified business activity (Enterprise Zones), foundations for certain machinery or equipment used in industrial processing, property to be affixed to and becoming a structural part of real estate located outside the state, and property purchased or acquired for eligible activity in transformational brownfield plans; (3) contractors engaged in retail sales; and (4) who is a retailer (supplier to the contractor) for sales and use tax purposes. The guidance includes several examples. Mich. Dept. of Rev., Revenue Administrative Bulletin 2025-18 (updated December 11, 2025).

Michigan: The Michigan Department of Treasury (MI DOT) issued a notice on its policy regarding rounding a transaction up or down to the nearest nickel due to the penny shortage caused by the federal government's ending of the production of the penny. The MI DOT said that rounding does not affect the calculation of the sales and use tax due because the state's sales and use tax rounding requirement (i.e., seller computes sales or use tax to the third decimal place and rounds up to a whole cent when such decimal point is greater than four or rounds down to a whole cent if it is four or less) applies before the seller uses its own rounding convention. Accordingly, the seller should calculate tax based on the sales price and then round as needed to address the penny shortage; the notice includes examples. The MI DOT recommends that retailers separately itemize on the customer's bill, receipt, invoice, etc., any additional amounts collected due to rounding. While the notice focuses on cash transactions, the MI DOT said the notice also applies to retailers that may choose to apply this rounding to their credit transactions. The MI DOT also noted that the notice only applies to sales and use tax legal obligations and "does not address or provide guidance on the application of any other applicable laws." Mich. Dept. of Treas., "Sales and Use Tax Notice Regarding Federal Phase Out of the Penny" (December 8, 2025).

South Dakota: The South Dakota Department of Revenue (SD DOR) issued guidance on the application of the state's sales tax and applicable municipal sales tax to shipping and delivery charges. Generally, sales tax applies to delivery and handling charges when the product delivered in South Dakota is taxable and does not apply to these charges when such products are not taxable. Delivery charges include shipping, transportation, postage, handling, crating, packing and fuel charges. If a transportation company is used to deliver the product and the retailer charges the customer for the delivery service, the retailer must include the charges in their taxable receipts. If both taxable and nontaxable products are shipped together, tax is due on the portion of the delivery charge for the taxable products. The portion of delivery charge is determined by using either the percentage of the sales price of taxable products compared to the total sales or by using the weight of the taxable products compared to the total weight of all property in the shipment. S.D. Dept. of Rev., "Shipping and Transportation" (November 2025).

Texas: The Texas Comptroller of Public Accounts (Comptroller) issued guidance on rounding cash transactions due to the penny shortage caused by the federal government's ending of the production of the penny. The Comptroller explained that taxpayers remit the amount of sales tax calculated on the sales price of the taxable item, regardless of the method of payment used by the taxpayer's customers. In regard to cash transactions, if the amount of the sales price and tax due is an amount that cannot be collected without pennies, the Comptroller said retailers may round the transaction to "the next lowest or next highest nickel, as they see fit, and the [Comptroller] will not adjust the sales price or recalculate tax due." If, however, the retailer rounds past the next lowest or highest nickel, the Comptroller said it would adjust the sales price and recalculate the tax due. The Comptroller made clear that this guidance only applies to cash transactions and that there should be no change to the tax calculation for the transaction using other payment methods, e.g., credit card or check. The Comptroller also noted that taxpayers collecting and remitting tax must keep sufficient records to substantiate any rounding. Tex. Comp. of Pub. Accts., Star No. 202512001M (December 1, 2025).

BUSINESS INCENTIVES

Indiana: The Indiana Department of Revenue (IN DOR) issued guidance on the new Railroad Tax Credit for Qualified Infrastructure Investment, describing the credit for qualified new rail infrastructure expenditures (new rail credit) and the credit for qualified rail expenditures (rail expenditure credit). The two credits, the IN DOR noted, have different qualifications and different caps. The new rail credit equals 50% of the qualified new rail expenditures or $500,000, whichever is less. The aggregate amount of credit is limited to $5 million per fiscal year. The rail expenditure credit is equal to $3,500 times the number of Class 2 or Class 3 miles in Indiana owned or leased by the taxpayer at the end of the tax year or 50% of the qualified rail expenditures, whichever is less. The aggregate amount of rail expenditure credit is capped at $9.5 million per fiscal year. For purposes of both credits, if the expenditures occur in multiple years, the expenditures count as occurring in the year the project is completed. Credits are claimed against the taxpayer's state adjusted gross income tax liability. Credits will be awarded based on the order in which the application is received. Credit applications may be submitted at any time during the fiscal year in which the project is completed or the immediately following fiscal year. The bulletin also discusses credit limitations and pass-through of the credit, claiming the credit and assigning the credit. Ind. Dept. of Rev., Income Tax Information Bulletin #125 (December 2025).

PROPERTY TAX

New York: New law (SB 8012) amends the real property tax law to add provisions related to the assessment of solar or wind energy systems. Under the amended law, the assessed value for solar or wind energy systems is determined by a discounted cash flow approach that includes as expenses: (1) certain host community benefit payments, (2) expenses associated with the decommission of solar and wind energy systems and (3) community solar subscriber management costs associated with solar energy systems. The law also deems federal investment and production tax credits granted by the IRC and environmental values, such as renewable energy credits, to be intangible assets and not included as revenue streams. SB 8012 took effect immediately. N.Y. Laws 2025, ch. 575 (SB 8012), signed by the governor on December 3, 2025.

COMPLIANCE & REPORTING

Louisiana: The Louisiana Department of Revenue (LA DOR) issued guidance on the expanded mandatory electronic filing and payment requirements. The LA DOR said that it is expanding the electronic filing and payment mandates to include the following: (1) all sales and use tax returns (except the Louisiana Consumer Use Tax Return, the Fair, Festivals, and Other Special Events Sales Tax Return, and the Watercraft Sales Tax Payment Certifications); (2) all withholding tax returns; (3) submission of federal Forms 1099-NEC; (4) oilfield site restoration fees; and (5) annual informational and composite income tax returns filed by S corporations. The expanded requirements generally apply to all returns and payments submitted on or after January 1, 2026. An exception to this general rule, is that the electronic filing mandate applies to all Forms L-3, Transmittal of Withholding Tax Statement, beginning January 1, 2027. Failure to comply with these electronic filing and payment requirements will result in the assessment of a penalty. La. Dept. of Rev., Revenue Information Bulletin No. 25-030 (December 3, 2025).

CONTROVERSY

South Dakota: The South Dakota Department of Revenue (SD DOR) issued guidance of the state's audit process. The SD DOR said that businesses that have been licensed by the SD DOR may be audited at any time and that businesses are chosen for audit either by an automated system or manual selection. Factors that are considered for audit selection include the type of business, prior audits and tax filing history. The guidance describes record retention requirements, including the length of time records should be retained, the types of documentation that may support a taxpayer's deduction to gross receipts, and documentation that will help identify services and use taxable items. The guidance also describes the steps in the audit process, the procedures for appealing and audit, and paying audit assessments. S.D. Dept. of Rev., Tax Facts: "Audits" (December 2025).

PAYROLL & EMPLOYMENT TAX

Federal — Multistate: From tax filing to taxability, there is so much to consider when closing the year and starting anew, and with federal, state and local rules constantly changing, preparing a year-end payroll checklist is no simple task. To get you started, we have compiled a sample checklist of items to consider for 2025 and 2026, and state charts to guide you through the federal and state Form W-2 and electronic filing requirements that apply. Our 2025 payroll year-end checklist includes: (1) a sample year-end checklist; (2) 2026 federal holidays; (3) 2025 federal Forms W-2/1099 electronic filing requirements; (4) 2025 state Form W-2 filing requirements; and (5) year-end employment tax reporting compliance. For additional information on this development, see Tax Alert 2025-2393.

Federal — Multistate: During our December 10, 2025, webcast, 2025 Employment tax year in review, panelists discussed numerous federal state and local topics to consider for year-end 2025 and 2026. For your reference, the webcast slide deck, as well as links to various year-end special reports (e.g., 2025 payroll year-end checklist, US employment tax rates and limits for 2025), are available via Tax Alert 2025-2493. The replay of the webcast is available here.

Oregon: The Oregon Department of Revenue (DOR) has announced that it is pausing implementation of the planned increase to the Statewide Transit Tax that was scheduled to take effect on January 1, 2026. While signatures are being validated for a potential ballot referral, employers should continue to withhold the tax at the current rate of one-tenth of 1% (0.001). The Statewide Transit Tax was originally enacted in 2017 through House Bill (HB) 2017 as a one-tenth of 1% payroll tax. During a special legislative session in 2025, the Legislature adopted HB 3991, which was signed into law by Governor Tina Kotek in November. HB 3991 amends Oregon Revised Statutes (ORS) 320.550 to increase the tax rate to two-tenths of 1% (0.002) beginning January 1, 2026, and provides emergency funding to support Oregon's roads, bridges and transit systems. Following the special session, petitioners began collecting signatures for Initiative Petition 302 to refer HB 3991 to Oregon voters. On December 12, 2025, the signatures were submitted to the Oregon Secretary of State. If the bill is successfully referred to the ballot, the pause on the rate increase will remain in effect pending the outcome of the election. The DOR will continue to provide updates to employers throughout this process on its website. For additional information on this development, see Tax Alert 2025-2540.

MISCELLANEOUS TAX

Ohio: The Ohio Department of Taxation is proposing to amend Ohio Admin. Rule No. 5703-29-13, to modify the definition of "agent" for Commercial Activity Tax purposes to incorporate changes due to recent judicial developments. The proposed amended rule would provide that an agency relationship generally does not exist when a person who enters a contract with a client is reimbursed for its expenses incurred in performance of the contract. In addition, amounts received from the client to reimburse the person for its expenses would be considered gross receipts; such gross receipts could not be deducted from the person's gross receipts. The proposed amended rule would use as an example of this rule, an instance in which a company that provides food services to an Ohio client enters a management-fee contract.

GLOBAL TRADE

International — Saudi Arabia: On October 27, 2025, the Minister of Finance, in his capacity as Chairman of the Board of Directors of the Zakat, Tax and Customs Authority, issued Decision No. (1447-88-5), approving and implementing amendments to specific Harmonized System (HS) codes and their related subheadings in the Integrated Customs Tariff Schedule, which is based on the international system of classification of goods developed by the World Customs Organization. Additionally, the Minister of Finance issued Decision No. (1447-88-7) dated November 14, 2025, revising the customs duty rates for the specified HS codes, as a schedule provided in Decision No. (1447-88-5), taking into account the ceilings that Saudi Arabia committed to with the World Trade Organization. For more on this development, see Tax Alert 2025-2468.

VALUE ADDED TAX

International — Kenya: On October 23, 2025, the High Court (court) determined in Commissioner of Domestic Taxes v Sendy Limited that digital platforms that exercise significant control over transactions and connect service providers and customers are deemed principal suppliers for value-added tax (VAT) purposes. This means that the digital platforms are deemed to supply the entire service rather than merely providing access to the platform, and therefore, are liable for VAT on the full customer payment, not just the platform's commission. The court also found that a private ruling cannot override a proper statutory interpretation of the law by a court of competent jurisdiction. The Kenya Revenue Authority had issued a private ruling concluding that the taxpayer was liable for VAT only on commissions, but this did not shield the taxpayer from the court's decision that the law imposes VAT liability on the full customer payment. For more on this decision, see Tax Alert 2025-2429.

WEBCASTS

Wednesday, January 28, 2026. Employer-paid leave and childcare tax credits update under OBBBA: What companies need to do now (1:00-2:00 pm ET / 10:00-11:00 am PT). The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, made the employer credit for paid family and medical leave under IRC Section 45S and the employer-provided childcare tax credit under IRC Section 45F permanent and enhanced the credits in tax years starting after December 31, 2025. These enhancements will expand eligibility and allow more employers to access potentially significant funds under the credits. Join Ernst & Young LLP tax and credits and incentives professionals for a webcast covering the following topics: (1) specific enhancements made to each of the credits; (2) a review of complimentary state tax credits for childcare and paid leave; (3) anticipated positive impacts for employers; and (4) actions employers can take to prepare for participation in these credits. Register.

Because the matters covered herein are complicated, State and Local Tax Weekly should not be regarded as offering a complete explanation and should not be used for making decisions. Any decision concerning matters covered herein should be reviewed with a qualified tax advisor.