27 February 2026 State and Local Tax Weekly for February 20 and February 27 Ernst & Young's State and Local Tax Weekly newsletter for February 20 and February 27 is now available. Prepared by Ernst & Young's State and Local Taxation group, this weekly update summarizes important news, cases, and other developments in U.S. state and local taxation. US Supreme Court rules IEEPA does not authorize presidents to impose tariffs; US implements global 10% import tariff under Section 122 of the Trade Act of 1974 The United States (US) Supreme Court has held, in a 6-3 decision issued on February 20, 2026, that the International Emergency Economic Powers Act (IEEPA) does not give the President authority to impose tariffs. The Court's decision encompasses two consolidated cases — Learning Resources Inc. et al. v. Trump and Trump v. V.O.S. Selections, Inc., et al. — which challenged tariffs that President Trump imposed after declaring national emergencies to address (1) the influx of illegal drugs from Canada, Mexico and China, and (2) "large and persistent" trade deficits. The measures included a 25% duty on most Canadian and Mexican imports, a 10% duty on most Chinese imports, and a baseline "reciprocal" tariff of at least 10% on imports from all trading partners, with some countries facing higher rates. Lower courts reached different procedural postures but concluded IEEPA did not authorize the President to impose these tariffs; the Supreme Court granted review and consolidated the cases. In reaching its decision, the High Court vacated and remanded the district court's decision in Learning Resources for lack of jurisdiction and affirmed the Federal Circuit's decision in V.O.S. Selections. With Chief Justice John Roberts writing for the majority, the Court held that IEEPA does not authorize the President to impose tariffs. The majority emphasized that Article I of the Constitution vests Congress with the power to levy duties and that IEEPA's text lists specific authorities including blocking, prohibiting, and regulating importation, but does not mention tariffs or duties. The Court rejected the argument that the power to "regulate … importation" silently includes the power to tax, noting Congress has historically delegated tariff authority explicitly and with limits when it intends to do so. The Court also observed that no other US president had used IEEPA to impose tariffs in the statute's 50-year history. The majority concluded that reading IEEPA to confer open-ended tariff authority would mark a transformative, and unauthorized shift of Congress's core taxing power to the Executive branch. The opinion applied separation-of-powers principles and cited past "major questions" cases as cautioning against finding sweeping delegations in ambiguous text, particularly where Congress's power of the purse is concerned. Concurring opinions agreed with the bottom line — that IEEPA does not convey authority on the President to impose tariffs — but Justices Elana Kagan, Sonia Sotomayor and Ketanji Brown Jackson would have reached the result using ordinary statutory interpretation without invoking the major-questions doctrine. Further, Justice Jackson said she would also have consulted legislative history. Dissenting, Justices Brett Kavanaugh, Clarence Thomas and Samuel Alito said they read the statute differently. The justices did not decide whether, and to what extent, importers are entitled to refunds of IEEPA-based tariffs already paid. Those questions are remanded for lower-court resolution. For additional information on this development, see Tax Alert 2026-0486. Following the Supreme Court's decision in Learning Resources Inc., the President issued a proclamation titled "Imposing a Temporary Import Surcharge to Address Fundamental International Payments Problems," establishing a temporary 10% ad valorem global import tariff under Section 122 of the Trade Act of 1974, which permits the temporary imposition of tariffs of up to 15% ad valorem in cases of "large and serious" balance-of-payments deficits. The Proclamation adds a 10% ad valorem global import tariff on all articles imported, effective 12:01 a.m. ET on February 24, 2026, through 12:01 a.m. ET on July 24, 2026, unless expressly suspended, modified or terminated earlier, or extended by Congress (Section 122 permits up to 150 days, up to 15%). The Harmonized Tariff Schedule of the United States (HTSUS) will be modified as provided in Annex I; the US Trade Representative (USTR) may issue additional technical modifications through a subsequent Federal Register notice. The tariff does not apply to products detailed in Annex I and Annex II. An exception also is provided for goods loaded onto a vessel and in transit on the final mode of transit prior to US entry before 12:01 a.m. ET on February 24, 2026 and entered for consumption (or withdrawn from a warehouse for consumption) before 12:01 a.m. ET on February 28, 2026. For more on this development, see Tax Alert 2026-0504. Virginia changes IRC conformity, decouples from certain OBBBA provisions, makes elective pass-through entity tax permanent On February 20, 2026, Governor Abigail Spanberger signed into law HB 29, which includes several changes to Virginia's income tax laws.1 Notably, HB 29 changes how the state conforms to the Internal Revenue Code (IRC) from rolling conformity to fixed-date conformity, conforming to most provisions in the One Big Beautiful Bill Act (OBBBA). HB 29 also removes the sunset date for elective pass-through entity tax (PTET). IRC conformity and OBBBA: Virginia has moved from rolling to fixed-date conformity to the IRC and now conforms to the IRC as it existed on December 31, 2025. The law also conforms to any amendment to federal law that extends the expiration date of a federal tax provision to which Virginia conforms, or has previously conformed, with certain exceptions. Accordingly, and as explained by the Virginia Department of Taxation (Department), Virginia conforms to provisions of the OBBBA to the extent the provisions affect the computation of federal taxable income (corporations) or federal adjusted gross income or federal itemized deductions (individuals).
HB 29 decreases Virginia's deduction for disallowed business interest expenses under IRC Section 163(j). Effective for tax years beginning on and after January 1, 2025, the state deduction for disallowed business interest decreases to 20% (from 50%) of interest disallowed on the federal return. The law also modifies the subtraction from federal taxable income for amounts included under IRC Section 951A2 by changing "global intangible low-taxed income" to "net controlled foreign corporation tested income," aligning to changes under the OBBBA. PTET: HB 29 makes permanent the elective PTET. Without this action, the election would only have been available for tax years beginning before 2027. HB 29 also makes permanent Va. Code Ann. Section 58.1-332(C)(2), which deems state income tax paid by a pass-through entity (PTE) under the law of another state that is substantially similar to Virginia's elective PTET to have been paid by the PTE's individual owners. For additional information on this development, see Tax Alert 2026-0614. Illinois: On February 18, 2026, Governor JB Pritzker presented his FY27 budget. The governor said his "FY27 budget prioritizes affordability without raising taxes on working people." The governor is proposing a two-year pause on the new authorization of data center tax credits. He is also proposing a new monthly social media platform fee that would vary based on the number of monthly active Illinois users on whom the social media company collects data. The governor's budget would adjust the net operating loss (NOL) deduction cap sunset to a phased in approach. Starting in FY2027, a business would be allowed to apply the NOL deduction to their current year tax liability until a cap of 20% of current earnings is reached. The cap over the next three fiscal years would increase to 40%, 60% and 80%. Other tax-related changes in the governor's budget would: (1) realign the tax treatment for table electronic games at casinos, (2) modernize the state's research and development tax credit so that it corresponds to the federal tax credit and can be transferred for a fee, and (3) create a new tax incentive program, EDGE Essentials, to provide withholding benefits to independent grocery stores and pharmacies in a food or pharmacy desert. District of Columbia: The District of Columbia City Council and District Attorney General determined Temporary bill B26-0458 became law as of February 11, 2026, despite federal disapproval of the temporary bill via H.J. Res. 142. Impacted federal provisions include IRC Sections 174A, 163(j), 168(k), 168(n), 179 and 1400Z. The changes in B26-0458 are the same as the changes that were enacted under emergency legislation that expired on March 3, 2026. (See Tax Alert 2025-2409 for a detailed discussion.) As a temporary bill, B26-0458 is effective for 225 days, expiring on September 25, 2026. Michigan: The Michigan Department of Treasury issued a taxpayer notice on provisions of the One Big Beautiful Bill Act (OBBBA) Michigan decoupled from via Act 24 of 2025, with a focus on adjustments related to the 2025 tax year. The guidance addresses Michigan decoupling adjustments for the business interest expense limitation in IRC Section 163(j), bonus deprecation under IRC Section 168(k), bonus depreciation for qualified production property under IRC Section 168(n), research and experimental expenses under IRC Sections 174 and 174A and transition rules under OBBBA Section 70302, and IRC Section 179 deduction. Mich. Dept. of Treas., Taxpayer Notice: "Decoupling Michigan's Income Taxes from Certain Internal Revenue Code (IRC) Provisions" (February 25, 2026). North Carolina: The North Carolina Department of Revenue (NC DOR) issued FAQs regarding the impact of federal tax law changes on state individual and corporate income tax returns for tax year 2025, including changes made by the One Big Beautiful Bill Act (OBBBA), the Federal Disaster Tax Relief Act of 2023 and the Disaster Related Extension of Deadlines Act. The NC DOR said that the state currently conforms to the IRC as of January 1, 2023. Thus, in computing North Carolina income taxpayers cannot include in adjusted gross income (individuals) and federal taxable income (corporations) these federal laws. The NC DOR's guidance includes an example of adjustments and modifications that would have to be made due to nonconformity to these federal bills. The NC DOR noted that taxpayers impacted by the differences in the Code must include a reconciliation schedule with their 2025 NC income tax return. N.C. Dept. of Rev., Important Notice: Impact of Federal Law on North Carolina Individual and Corporate Income Tax Returns for Tax Year 2025 (January 8, 2026); Webpage: Questions and Answers About the Impact of Federal Law on N.C. Individual and Corporate Income Tax Returns for Tax Year 2025 (last updated February 27, 2026). Oklahoma: The Oklahoma Tax Commission adopted amendments to Okla. Admin. Code Section 710:50-17-51(8), regarding a corporation's adjustments to its federal taxable income to arrive at Oklahoma taxable income — specifically, dividends, add references to net CFC tested income (NCTI), a federal provision created by the One Big Beautiful Bill Act. Under the rule, in calculating Oklahoma taxable income, global intangible low-taxed income (GILTI) included in federal income under IRC Section 951A is considered dividend income and is allocated to the taxpayer's domiciliary. The amended rule now provides that in calculating Oklahoma taxable income, foreign income inclusion under IRC Section 951A (NCTI), is considered dividend income that is allocated to the taxpayer's domicile. The adopted amended rules were submitted to the governor and legislature on January 20, 2026. Okla. Register (Vol. 43, No. 11, February 17, 2026). South Dakota: New law (SB 19) updates the South Dakota bank franchise tax date of conformity to the Internal Revenue Code to January 1, 2026 (from January 1, 2025). This change takes effect July 1, 2026. S.D. Laws 2026, SB 19, signed by the governor on February 13, 2026. South Dakota: New law (SB 18) amended the bank franchise tax by repealing certain adjustments to taxable income related to bad debt deductions. Prior to repeal, the adjustments required taxpayers to: (1) add to taxable income (a) bad debt deductions in excess of credits deemed worthless and charged off within the tax year and (b) any amount subsequently received on account of a bad debt previously charged off as a deduction; and (2) subtract any adjustment to taxable income because of a change in the method used to compute the federal bad debt deduction when the deduction was already included in taxable income for bank franchise tax purposes. SB 18 takes effect July 1, 2026. S.D. Laws 2026, SB 18, signed by the governor on February 13, 2026. Texas: The Texas Comptroller of Public Accounts (TX Comptroller) adopted amendments to 34 Tex. Admin. Code Section 3.587 "Margin: Total Revenue" (hereafter "final rule") to incorporate a recent policy that conforms the franchise tax to the current year federal income tax provisions.3 Historically, the TX Comptroller required a taxpayer to use the IRC in effect for the federal tax year beginning January 1, 2007 (hereafter 2007 IRC) when computing federal income and deductions taken into account in determining taxable margin. The final rule provides that, for Texas franchise tax reports due in 2026 and forward, taxpayers should calculate Texas franchise tax using amounts from the federal income tax return determined under the current IRC in effect for the applicable tax year, except where the Texas statute or rule expressly references the IRC. Where the statute or rule specifically references the IRC, the taxpayer must follow the 2007 IRC. The final rule also provides that the subtraction from total revenue of foreign royalites and foreign dividends does not include foreign-derived intangible income (FDII) or global intangible low-taxed income (GILTI) or, after the OBBBA, foreign-derived deduction eligible income (FDDEI) or net CFC tested income (NCTI). The final rule makes other modifications to incorporate recent statutory changes. The final rule was filed with the Secretary of State on February 9, 2026, and it took effect on March 1, 2026. Maryland: The Maryland Comptroller of the Treasury adopted new and amended regulations related to the state's sales and use tax and digital advertising tax. Among the changes, COMAR Sections 03.06.01.01 "personal, professional, or insurance services" was amended by updating the description of "purchases" and "sales" adding examples regarding web hosting and web design to these terms. Section 03.06.01.03 "repairs of tangible personal property, digital codes and digital products" was expanded to add references to "taxable services." Amendments to Section 03.06.01.05 "food for human consumption" removes the definition of "snack food," removes snack food sold through a vending machine from the list of sales of food for human consumption that are not subject to tax, and provides that "food" does not include cannabis products. Section 03.06.01.07 "sales where it is impractical to establish the amount of property or service to be resold" is amended to add references to taxable services and to prohibit a buyer who provides a vendor with a multiple points of use certificate that includes a resale to a related entity from applying for a refund based on a claim that it was impractical at the time of purchase to establish the amount of property to be resold. Amendments to Section 03.06.01.08 "taxable price defined" add references to digital code and digital product and provide that a charge for a taxable service are not deductible from the total consideration before the computation of tax. Section 03.06.01.11 "printing" is amended to remove provisions on sales of photographic materials. Amendments to Section 03.06.01.21 "time of collection" expand the description of when the tax authority can defer collection of tax and provide several examples of this rule. Amendments to Section 03.06.01.25 "transactions in interstate commerce" presume that the sale of digital code, digital product, data or information technology service, a software publishing service, or a taxable service is made in the state of the customer's tax address. Section 03.06.01.28 "lease of tangible personal property, digital codes, digital products, data or information technology services, and software publishing services" is amended to provide that tax applies to the entire lease payment of such items if they are used within Maryland at any time during the lease payment period and to provide when tax applies to an entire lease payment that includes taxable and nontaxable services. Regulations are added to provide guidance on taxing "data or information technology services and software published services" (new Section 03.06.01.48), "multiple points of use certificates" (new Section 03.06.01.49), and "applicable rate for data or information technology services and software publishing services" (new Section 03.06.01.50). Section 03.06.03.02 "administrative and procedural regulations sales and use, and admission and amusement taxes" is amended to set record retention requirements for multiple points of use certificates. Amendments to Section 03.12.01.01 "digital advertising tax" revise definitions of "digital advertising services," "digital interface," "other comparable advertising services," and "programmatic." These new and amended regulation were adopted on February 10, 2026, and they take effect on March 2, 2026. Amended regulations COMAR Sections 03.06.01.01, .03, .05, .07, .08, .11, .21, .25, .28 and .47, and new subsections .48, .49 and .50; Section 03.06.03.03 and Section 03.12.01 (Md. Register, Vol. 53 Issue 4, February 20, 2026). (The regulations were adopted as proposed in Md. Register, Vol. 52 Issue 26, December 26, 2025. Washington: The Washington Department of Revenue issued guidance on rounding cash transactions due to the penny shortage caused by the federal government's ending of the production of the penny. In a cash transaction that requires change be given, a retailer may choose to round up or down to the nearest nickel. Regardless of the rounding method used, sales tax remains due on the sales price before round is applied. The WA DOR's guidance includes examples. Note, pending legislation, HB 2334, would establish rounding rules due to the penny shortage. Wash. Dept. of Rev., "Interim guidance statement regarding the elimination of the penny" (February 26, 2026). Wyoming: New law (SF 80) allows the Wyoming Department of Revenue to provide sales and use tax notices electronically if the contact information provided by the taxpayer includes an electronic communication option. This change takes effect on July 1, 2026. Wyo. Laws 2026, ch. 20 (SF 80), enacted on February 27, 2026. Wyoming: New law (SF 79) incorporates use tax administration provisions into the sales tax administration provisions and repeals duplicative use tax administration chapter from the statute. The use tax will be administered in the same manner and as the sales tax. SF 79 makes conforming amendments. Local optional use taxes that are imposed before the bill's effective date, i.e., July 1, 2026, will continue to be administered like local option sales taxes. Wyo. Laws 2026, ch. 19 (SF 79), enacted on February 27, 2026. Federal: In Notice 2026-15 (the Notice, released February 12, 2026), the Treasury Department and IRS provided interim guidance on the enhanced foreign-entity-of-concern (FEOC) restrictions for renewable energy projects, which were created by Public Law 119-21, also known as the One Big Beautiful Bill Act. The Notice provides temporary guidance on calculating the amount of prohibited materials used in a project through either the direct cost method or through a combination of interim safe harbors for the purpose of qualifying for IRC Section 45X, 45Y or 48E credits. The guidance clarifies how to compute material assistance cost ratios under IRC Sections 45X, 45Y and 48E (taxpayers must make these calculations for each facility and eligible component) and sets forth temporary-identification, cost-percentage and supplier-certification safe harbors. The guidance also clarifies how to track components and provides limited circumstances where item-specific tracking is not necessary. For additional information on this development, see Tax Alert 2026-0457. Louisiana: The Louisiana Department of Revenue adopted amendments to LAC Section 61:I.1909 "Work-Based Learning Tax Credit-Eligible Apprentice" to provide a general description of the credit, documentation requirements for an eligible apprentices. The credit is available for tax periods beginning after December 31, 2025. The work-based learning tax credit is nonrefundable, and it is equal to $2.50 for each hour of employment for each eligible apprentice, intern or youth worker (collectively, worker), not to exceed 1,000 hours for each eligible worker. A completed tax credit certification form as well as other required documentation must be attached to the taxpayer's Louisiana income tax return. Taxpayers should maintain supporting documentation. The amended regulation describes the documentation a taxpayer is responsible for maintaining or submitting to the Department of Revenue, including the reporting the number of hours worked during the tax period for each eligible apprentice. (La. Register, Vol. 52, No. 2, February 20, 2026). West Virginia: New law (SB 1) creates the WV First Small Business Growth Program, which will be administered by the West Virginia Department of Commerce (Department). Growth funds will have to apply to the Department to have an equity investment certified as a capital investment eligible for credits. The law lists the information that must be included in the application and specifies when the Department will deny an application. The Department will begin accepting credits 90 day after the effective date of SB 1, and it will certify capital investments in the order received. Applications received on the same day will be certified in proportion to the amount of all capital investment authority applications requested. The amount of credits that can be awarded during the year is limited to $15 million, excluding amounts of credit carried forward. A credit cannot be claimed against a growth investor's state tax liability for any investor's tax year beginning before calendar year 2029; credits that cannot be claimed due to this provision may be carried forward for use in any of the five subsequent tax years (the credit may not be carried back). Credits claimed under this program are not refundable or saleable on the open market. Credits earned or allocated to a pass-through entity may be allocated to the partners, members and shareholders of such entity. The Department may recapture credits under certain circumstances, including when the growth fund fails to invest 100% of its capital investment authority in qualified investments in West Virginia within three years of the initial credit allowance. Eligible businesses that receive a qualified investment (or affiliates of such businesses) are prohibited, directly or indirectly, from (1) owning or having a right to acquire an ownership interest in a growth fund or member/affiliate of a growth fund, or (2) loaning to or investing in a growth fund or any member/affiliate of a growth fund. Growth funds must file an annual report by June 30 during the compliance period. SB 1 took effect from passage, February 16, 2026. W.Va. Laws 2026, SB 1, signed by the governor on February 23, 2026. Delaware: New law (S.S. 1 for SB 228) allows the Office of Finance for New Castle County to conduct quality control review of the accuracy of a tax parcel's new assessed value resulting from a general reassessment when any of the following exist: (1) a clerical, mathematical or factual mistake occurred during the general reassessment process; (2) a non-residential tax parcel with a assessed value resulting from the new general reassessment of at least $300,000 but decreased from the prior assessed value or the percentage changes in the new assessed value is not more than 50% of the median increase in non-residential properties in that county from the new general reassessment; or (3) a non-residential tax parcel's assessed value from the new general reassessment is at least 25% less than the actual sale price from the parcel's most recent sale within the five years preceding the new general reassessment. The Office of Finance has until September 30, 2026, to make any revisions or corrections under these provisions. The law took effect upon becoming law. Del. Laws 2026, S.S. 1 for SB 228, became law without the governor signature on February 11, 2026. Louisiana: The Louisiana Department of Revenue (LA DOR) announced that beginning with the 2025 tax year, it will no longer require a pro forma federal income return or nonresident worksheet for shareholders, partners and members of a pass-through entity making a pass-through entity tax election. Such documentation will be required upon the LA DOR's request. Shareholders, partners and members are still required to submit Form R-6981 "Statement of Owner's Share of Entity Level Tax Items". The LA DOR, however, suggested taxpayers consider submitting a pro forma federal return or nonresident worksheets when the deduction shown on Form R-1968 does not result in an accurate account of income taxable in Louisiana. The LA DOR has proposed amendments to LAC 61:I.1001 "Election of Pass-Through Entities" to reflect these updated documentation requirements. La. Dept. of Rev., RIB 26-007 "Documentation Requirements for Certain Pass-Through Entity Elections" (February 10, 2026); (La. Register, Vol. 52, No. 2, February 20, 2026). New York: New law (A.9431) "modernizes and clarifies" the New York Department of Taxation and Finance's (Department) authority to accept electronic signatures. The law requires the tax commissioner to develop procedures for the use or acceptance of digital/electronic signatures on any declaration, statement or other document used by the Department. The electronic signature procedures must conform, to the extent possible, to the electronic signature procedures used by the IRS. Those authorized by a valid power of attorney form administered by the Department or the New York City Department of Finance to act on behalf of a taxpayer, may use an electronic signature to sign any declaration, statement, or other document required to be signed by the Departments. These provisions take effect on July 1, 2027. These new provisions also replace provisions regarding use of an electronic signature by a person granted a valid power of attorney to sign New York State and City related tax documents enacted in 2025 under S. 52/A.249. Effective immediately, the 2025 law is amended to change its effective date to July 1, 2027. The 2025 law is repealed as of July 1, 2027. N.Y. Laws 2026, ch. 3 (A.9431), signed by the governor on February 13, 2026. Minnesota: The Minnesota Department of Employment and Economic Development (DEED) issued a fact sheet addressing state and federal tax and reporting for leave benefits and contributions under the state's paid family and medical leave insurance (PFMLI) program. Minnesota Paid Leave provides paid family and medical leave benefits funded through mandatory payroll premium contributions shared by employers and employees. Under Minnesota law, premium collection began January 1, 2026, which is also when paid leave benefits became available. Employers remit PFMLI premiums quarterly to the DEED. For 2026, the program is funded through a total premium of 0.88% of employee wages (0.61% for medical leave and 0.27% for family leave), up to the Social Security wage base rounded to the nearest $1,000 ($185,000 for 2026). Small employers pay a reduced premium of 0.66% for 2026. The premium rate is subject to annual review and adjustment, subject to a statutory maximum. The statute requires that employers pay at least 50% of the total premium. Employers may choose to pay more than their required minimum share, but employees cannot be required to pay more than 50% of the total premium. The premium rate is subject to annual review and adjustment, subject to a statutory maximum. The guidance explains the taxability of paid leave benefits, the deductibility of employer and employee premium contributions, voluntary state and federal income tax withholding options, and payroll and information reporting considerations. The guidance also reflects recent federal updates affecting the delay in applying the third-party sick pay rules to medical leave benefits. For additional information on this development, see Tax Alert 2026-0503. Ohio: The Ohio appropriations legislation for fiscal year 2026-27 (HB 96) makes several changes to the state's unemployment insurance (SUI) law. Effective January 1, 2026, a Technology and Customer Service Fee (surcharge) applies to contributory and reimbursing nonprofit employers. For contributory employers, this surcharge is 0.15% of SUI covered wages per employee — the maximum rate allowed under the law. Because this surcharge is not used for the payment of unemployment benefits, it is excluded from state contributions when completing the federal Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. For a reimbursing nonprofit organization or nonprofit organization group, the fee may not exceed $13.50 per organization or group. The state must collect the fee whenever the organization or group of organizations files or renews a surety bond required under continuing law. A filed surety bond must be in force for no less than two calendar years. The law also reduces the time an employer has to provide information requested by the state for use in determining an individual's right to unemployment benefits. The new limitation is 10 working days after the request is sent instead of 10 calendar days. The penalty for failure to timely respond to state requests for information can be substantial. Under current law, failure to comply with a requirement of the state's unemployment compensation law can result in a fine of not more than $500 for a first offense and a fine of $25 up to $1,000 for each subsequent offense. Beginning January 1, 2026, a late SUI payment bears interest at the rounded federal short-term rate, not to exceed 15%. Under prior law, a late SUI payment bore interest at the annual rate of 14% compounded monthly. For more on this development, see Tax Alert 2026-0492. Alabama: New law (SB 109) establishes a peer-to-peer car sharing program and provides for the taxation of peer-to-peer car sharing when certain conditions are met. Effective October 1, 2026, the Alabama privilege or license tax is imposed on the business of leasing or renting an automobile used for peer-to-peer car sharing. Gross proceeds collected by a peer-to-peer car sharing program as a leasing facilitator is subject to the tax only for transactions where the shared vehicle was not subject to applicable sales and use taxes upon purchase in the jurisdiction in which the shared vehicle owner purchased the vehicle or the sales and use tax was not paid at the time of initial titling and registration in the state. A shared vehicle owner is required to certify that they paid the applicable sales and use tax upon purchase or at the time of initial titling and registration in Alabama. The peer-to-peer car sharing program must retain records of the vehicle owner's certification. Starting October 1, 2026, the peer-to-peer car sharing program must collect and remit applicable local rental taxes. Ala. Laws 2026, Act 111 (SB 109), signed by the governor on February 24, 2026. New Jersey: The New Jersey Division of Taxation (NJ DOT) issued guidance on a new $3.00 per day surcharge imposed on certain hotels. The surcharge will apply starting January 1, 2026, on hotels in a qualifying city and the hotel occupancy is subject to sales tax. A qualifying city is a city of the first class (i.e., a city with a population exceeding 150,000). Currently, the only city that meets this requirement is Newark. Affected hotels should collect the surcharge at the time of payment. The surcharge is in addition to other taxes, including the New Jersey sales tax, hotel/motel occupancy fee, and municipal occupancy tax, and any other tax, assessment or fee imposed on hotel occupancies. The surcharge must be separately stated on the invoice provided to the purchaser. N.J. Div. of Taxn., Webpage "Surcharge on Certain Hotel Occupancies" (February 27, 2026). Puerto Rico: In Circular Letter 26-03, Puerto Rico's Treasury Department (PRTD) announced the benefit and contribution limits for qualified retirement plans under Section 1081.01(a) of the Puerto Rico Internal Revenue Code of 2011, as amended (the PR Code). These limits apply to tax years beginning on or after January 1, 2026. Additionally, Section 1081.01(h) of the PR Code requires the PRTD to report the applicable limits that are announced by the US Internal Revenue Service (IRS) and will apply to plans qualified under the PR Code. For more on this development, see Tax Alert 2026-0555. 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: 2026-0971 | ||
