10 April 2026 State and Local Tax Weekly for April 3 and April 10 Ernst & Young's State and Local Tax Weekly newsletter for April 3 and April 10 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. Washington enacts sales and use tax and business and occupation tax changes and clarifications, including future tax relief On March 30, 2026, Washington Governor Bob Ferguson signed SB 6346, to provide sales and use tax and business and occupation (B&O) tax relief. To pay for these and other changes, SB 6346 imposes a new income tax on individuals with income of $1 million or more (discussed below). The sales and use tax and B&O tax changes in SB 6346 do not take effect until 2029; however, these changes will be null and void if a court of final jurisdiction invalidates Washington's new income tax. On the same day, the governor signed SB 6113, which makes technical and administrative clarifications. SB 6346 — Sales and use tax and B&O tax relief effective January 1, 2029:A law enacted in 2025 (ESSB 5814) imposed sales tax on certain services (see Tax Alert 2025-1125). SB 6346 will repeal the sales tax on the following services:
Tax will continue to apply to sales of advertising services, unless it is a sale between members of an affiliated group. SB 6346 will exempt sales of the following products from sales and use tax: (1) grooming and hygiene products, (2) diapers (adult and children), and (3) over-the-counter drugs. In addition, SB 6346 will increase: (1) the small business B&O tax credit to $125 per month for non-service businesses and to $375 per month for service businesses (from $55 and $160 per month, respectively), and (2) the annual taxable income threshold for the B&O tax return to $250,000 (from $125,000).
The Washington Department of Revenue (Department) is extending a grace period for sellers to not collect sales tax on these services through June 30, 2026, when the new exemptions take effect, if there is an existing contract between the buyer and seller for the services. SB 6346 — B&O tax changes effective July 1, 2026: A law enacted in 2025 imposes a 0.5% B&O tax surcharge rate on businesses with Washington taxable income exceeding $250 million beginning in 2026. (See Tax Alert 2025-1125.) Effective July 1, 2026, SB 6346 exempts several types of Washington taxable income from the surcharge including amounts:
SB 6113 — Various technical corrections and administrative changes: SB 6113 makes various technical corrections and changes requested by the Department. Many of the changes relate to the sales tax on services and the B&O tax surcharge adopted in 2025. These changes apply retroactively to October 1, 2025. Definitions: SB 6113 adds examples of "investigation services" to include providing investigation, detective, and personal background check services. It also excludes direct hires, paymaster services and independent contractors from the definition of "temporary staffing services." The law clarifies that certain activities do not meet the definition of "live presentations," including classes provided by preschools, elementary schools, secondary schools and institutions of higher education as part of their accreditation. (Note the similar but slightly different "live presentations" definition clarifications listed previously in SB 6346.). SB 6113 also consolidates the list of activities excluded from the definition of a retail sale when sold between affiliated entities into one section and clarifies that sales of custom software and customization of prewritten computer software between affiliates are not retail sales.
The law exempts bailment transactions from use tax when the present user's bailor or donor has already paid sales or use tax, and it exempts the use of any service subject to sales tax if the service is rendered by the taxpayer's own employees in the course of their employment. SB 6113 clarifies that the use of a digital automated service that is incidental to the underlying service provided by a business does not make the underlying service subject to retail sales tax if: (1) the digital delivery is solely for the purpose of transmitting or exchanging communications between the service provider and the buyer, (2) there is no consideration paid for the electronic communications, and (3) the underlying service is subject to a B&O tax classification other than retailing. The law disallows the use of a direct pay permit for purchasing athletic or fitness facility services and allows the use of a direct pay permit for purchases of information technology services. It also amends the definition of a retail sale to exclude any service provided by a public agency to another public agency pursuant to an interlocal agreement. SB 6113 also codifies the Department's guidance for a transition period for taxpayers with qualifying existing contracts for service activities that have been classified as retailing activities. The transition period begins October 1, 2025, and ends March 31, 2026. Taxpayers with a qualifying existing contract may elect to treat the amounts received during the transition period as gross income subject to retailing B&O tax and retail sales tax or service and other activities B&O tax. If a taxpayer with a qualifying existing contract does not make an election during the transition period, the amounts received will be subject to retailing B&O tax and retail sales tax. Advertising: Under SB 6113, advertising services are eligible for the multiple points of use sales tax exemption. Businesses that purchase disseminated advertising services for use both inside and outside Washington may claim the sales tax exemption by providing the seller with an exemption certificate but must report use tax on the portion used in Washington. For use tax purposes, sourcing of advertising services is based on the locations where the related advertisements are viewed by a user or otherwise interacted with by a user. The Department will provide sourcing methodologies for the advertising services if a taxpayer is unable to determine the location of use. In this case, the Department may authorize or require an alternative method that includes internet statistics and population. The Department will require the taxpayer to source the services statewide if the taxpayer is unable to determine the local level within Washington due to a lack of information. Other B&O tax clarifications and changes: SB 6113 adds the following services to the definition of a wholesale sale if the services are not sold at retail: information technology training and technical support, custom website development, investigation and security services, temporary staffing services, and advertising services. The law adds that gross income subject to B&O tax under the payment card processing classification may be subject to the rate surcharge for specified financial institutions and the workforce education investment surcharge on advanced computing businesses. This clarification to the payment card processing classification applies retroactively to January 1, 2026. The law also clarifies the small business B&O tax credit applies to the tax imposed on credit unions merging with a regulated bank and the terms "property" or "personal property" include products sold through the use of digital codes. Peer-to-peer car sharing tax clarifications and changes: SB 6113 includes peer-to-peer car sharing in the definition of "marketplace facilitator" and excludes the term from the definition of "travel agency services." Further, a peer-to-peer car sharing program is prohibited from allowing a vehicle to be placed on a digital network or software application for the purpose of making the vehicle available for sharing unless the peer-to-peer car sharing program first requests an electronic certification from the shared vehicle owner as to whether the shared vehicle owner obtained the shared vehicle as a vehicle for resale. The law also clarifies that peer-to-peer car sharing transactions are not subject to the additional motor vehicle sales tax. For additional information on this development, see Tax Alert 2026-0853. On March 30, 2026, Washington Governor Bob Ferguson signed into law SB 6346, which imposes a new income tax on individuals beginning in 2028. With a $1 million standard deduction, the tax is effectively imposed only on millionaires. Income tax: Historically Washington State has not had an individual income tax. Beginning January 1, 2028, Washington will impose an income tax on individuals "on the receipt of Washington taxable income." The tax equals 9.90% multiplied by an individual's Washington taxable income. Washington base income and Washington taxable income: Washington base income is calculated as an individual's federal adjusted gross income (FAGI) with modifications for items including, but not limited to: long-term capital gains and losses; capital gains subject to the state's capital gains tax; interest income from state and local debt obligations (aside from those issued by Washington State or a political subdivision thereof); certain state, local, B&O and Washington public utility taxes; income from incomplete non-grantor trusts; and income derived from federal obligations. A modification is not required if it has the effect of duplicating an item of income or deduction. Items excluded from FAGI are also excluded from the Washington income tax, unless specifically included. In addition, Tribal treaty income is exempt from the calculation. In computing Washington taxable income, taxpayers begin with their Washington base income with several adjustments. These adjustments include a standard deduction of $1 million per individual or per household in the case of a spouse or domestic partner (regardless of whether they file joint or separate returns); a deduction for charitable contributions to a qualified organization, capped at $100,000 per household; and an add back for the distributive share of tax expenses incurred by a pass-through entity (PTE) that elects to pay the pass-through entity tax (PTET) to the extent it has been deducted in calculating the taxpayer's FAGI. Further adjustments include required additions and permitted deductions tied to specific activities and income types. Taxpayers must add back their distributive share of tax expenses incurred by a PTE that elects to pay the PTET, to the extent those expenses were deducted in computing FAGI. Taxpayers also must deduct an amount equal to 90% of Washington-allocated wagering losses for the tax year. Credits that can be claimed against the income tax: A nonrefundable credit is allowed for income tax paid by a resident individual, or by a PTE owned by the individual, to another state or a political subdivision of another state on income that is also subject to Washington's income tax. Individuals may claim a nonrefundable credit for several categories of taxes, including the amount of Washington B&O tax or public utility tax paid for income also subject to income tax and the amount of Washington capital gains tax imposed for the same tax year. Unused credits cannot be carried forward or backward. Allocation and apportionment of income — generally: A Washington resident is defined as an individual who meets either a domicile-based test or a statutory presence test during the tax year. Under the statutory presence test, an individual who is not domiciled in Washington is nevertheless treated as a resident if they maintain a place of abode in Washington and are physically present in the state for more than 183 days during the year. Resident individuals must allocate all income to Washington. An individual who qualifies as a resident for only a portion of the tax year (for example, due to a change in domicile or physical presence) is treated as a resident for that portion of the year. Income is then prorated between resident and nonresident periods under the income tax's allocation and apportionment provisions. Nonresident individuals will allocate income derived from Washington sources to the state. A nonresident will not have to allocate income to Washington if they performed services in the state for five or fewer days in the calendar year. This exclusion does not apply to nonresident professional athletes, student athletes and entertainers. Allocation and apportionment of nonresident income from business activity: The law provides rules for apportioning and allocating nonresident income from business activities conducted in Washington that generally follow the Uniform Division of Income for Tax Purposes Act. These rules apply to a nonresident's income derived from or connected with a business, trade or profession carried on in Washington (hereafter, business activity), including a sole proprietorship and any distributive share of a PTE from such business activity. Income is apportioned to Washington using a single receipts factor. Receipts from the sale of tangible personal property are in the state if the property is delivered or shipped to a purchaser in the state. A throwback rule applies to receipts from tangible personal property where the property is shipped from an office, store, warehouse, factory or other place of storage in Washington and the purchaser is the US government or the taxpayer is not taxable in the state of purchase. Market-based sourcing rules apply to receipts from sales of non-tangible personal property (e.g., intangible property, services, real property). Elective PTET: Beginning January 1, 2028, PTEs may elect to pay a 9.90% PTET. The PTET election is made annually by filing an election with the Washington Department of Revenue by the due date prescribed by the Department, which by statute cannot be later than June 15 of the tax year. Once made, the election is irrevocable for the tax year. Owners may opt out of PTET participation, and the PTET election may exclude owners who choose not to participate. Nevertheless, the PTE must list the participating and nonparticipating owners at the time the PTE elects into the PTET for the tax year. Participating owners of an electing PTE include their distributive share of income from the PTE to determine their Washington base income subject to the newly enacted income tax. Participating owners are also allowed a non-refundable credit against that income tax for their proportionate share of PTET paid by the PTE. Unused credits may be carried forward or backward and applied to another tax year. Constitutional challenge: A lawsuit challenging Washington's newly enacted income tax was filed on April 9, 2026. The plaintiffs are seeking a declaratory judgment that the new income tax is "unlawful and invalid" in violation of Washington Constitution Art. VII, section 1 as a tax imposed at non-uniform rates on property, and Art. VII, section 2 as a tax on personal property that exceeds the 1% limit.1 The new income tax also faces referendum efforts. For additional information on this development, see Tax Alert 2026-0852. Maryland: New law (SB 284) decouples from bonus depreciation deductions for qualified production property under IRC Section 168(n) and bonus depreciation provisions under IRC Section 168(k), as added and amended by the federal One Big Beautiful Bill Act (OBBBA). Specifically, manufacturing entities must add or subtract from federal adjusted gross income (FAGI) an amount that reflects the depreciation deduction provided under IRC Section 167(A) and the adjusted basis of property by limiting the additional allowance under IRC Section 168(k) to 20% of the adjusted basis of the qualified property. Taxpayers must add or subtract from FAGI an amount that reflects the depreciation deduction under IRC Section 167(A) and the adjusted basis of property without regard to the additional allowance under IRC Section 168(n). These changes apply to all tax years beginning after December 31, 2025. SB 284 also modifies pass-through entity tax (PTET) provisions. The definition of "pass-through entity's taxable income" is revised so that for resident members, the pass-through entity's (PTE's) taxable income means the portion of the PTE's income that is (1) equal to the member's distributive or pro rata shares of the PTE, or (2) at the election of the PTE, derived from or reasonably attributable to the PTE's trade or business in Maryland. The law sets forth how to calculate tax due based on whether the PTE makes an election to use the second method to calculate the PTE's taxable income and whether the member is a resident or nonresident or an individual or a corporation. The Maryland Comptroller issued a tax alert to describe the alterations to the calculation of a PTE's taxable income and the affect this change has on 2026 PTE quarterly estimated payments. Lastly, SB 284 directs the Comptroller, in consultation with stakeholders, to study the impact of the change in the calculation of Maryland income tax for PTEs electing to pay the PTET and changes to the federal cap on itemized deductions under the OBBBA. The report is due annually by December 1 and it should include findings and recommendations on: (1) the operational impact of the law changes, (2) an assessment of potential changes to federal S corporation elections, and (3) an analysis of alternative tax calculation options for PTEs for each reporting periods. Changes to the PTET provisions apply to all tax years beginning after December 31, 2026. Md. Laws 2026, ch. 6 (SB 284), signed by the governor on April 8, 2026; Md. Dept. of Treas., "Changes to Tax Year 2026 Pass-Through Entity Estimated Payments" (April 13, 2026). Michigan: The Michigan Department of Treasure issued a notice, stating that the income tax rate for individuals and fiduciaries for the 2026 tax year will be 4.25%. Under Michigan law, if certain revenue conditions related to the general fund and the rate of inflation are met, the individual income tax rate for individuals and fiduciaries would be reduced for the tax year. The State Treasure, the Director of the Senate Fiscal Agency and the Director of the House Fiscal Agency jointly agreed that conditions for the temporary rate reduction were not present, and as such, the individual income tax rate will remain 4.25% for the 2026 tax year. This rate applies to individuals, fiduciaries and flow-through entities paying the Michigan flow-through entity tax. Mich. Dept. of Treas., Notice "4.25% Income Tax Rate for Individuals and Fiduciaries in 2026 Tax Year" (April 15, 2026). Oregon: New law (SB 1507) updates the state's date of conformity to the Internal Revenue Code (IRC) to December 31, 2025 (from December 31, 2023), effective for tax years beginning on or after January 1, 2026. For corporate and individual income tax purposes, add back to federal taxable income is required for the difference between the amount allowed as a bonus depreciation deduction under IRC Section 168(k) as applicable to the taxpayer's tax year and the amount that would be allowed as a deduction under IRC Section 168(k) as amended and in effect on December 1, 2017. Rather, such amounts are deducted in accordance with IRC Section 168(k) in effect on December 1, 2017. This change applies to property placed in service in tax years beginning on or after January 1, 2026. The law also requires individuals to add back to federal taxable income the amount of gain from the exchange or sale of qualified business stock they received and excluded on their federal income tax return as provided for by IRC Section 1202. This change applies to tax years beginning on or after January 1, 2026. Ore. Laws 2026, ch. 142 (SB 1507), signed by the governor on April 9, 2026. Oregon: New law (SB 1510) updates statutory references from global intangible low-taxed income (GILTI) to net CFC tested income (NCTI), to reflect changes made by the One Big Beautiful Bill Act (OBBBA). SB 1510 also extends the elective pass-through entity tax through tax years beginning before January 1, 2028 (from before January 1, 2026). Ore. Laws 2026, ch. 75 (SB 1510), signed by the governor on March 31, 2026. South Carolina: New law (HB 4216), retroactive to January 1, 2026, simplifies the state personal income tax rate structure and lowers the top tax rate from 6.0% to 5.21%. If revenue goals are met, the law allows for rate reductions in future years until the top marginal income tax rate is 1.99%. S.C. Laws 2026, Act No. 110 (HB 4216), signed by the governor on March 30, 2026. Texas: The TX Comptroller issued proposed amendments to 34 Tex. Admin. Code Section Rule Section 3.558 "Margin: Cost of Goods Sold" to incorporate a recent policy that conforms the franchise tax to the current year federal income tax provisions, except where a statute or rule references the IRC, in which case the taxable entity must compute such amounts using the 2007 IRC. As an example of how this rule would apply, the cost of goods sold (COGS) deduction depreciation rules, which do not expressly reference the IRC, align with the bonus depreciation provisions of the OBBBA (i.e., the current year IRC). Recovery claimed under IRC Section 197, however, would be determined under the 2007 IRC, as the IRC is specifically referenced by statute. On the 2026 franchise tax report, a taxpayer also may include in its COGS deduction a one-time net deprecation adjustment for qualifying assets. Proposed amendments would specify the proper order of applying the one-time net depreciation adjustment with other allowable costs and procedures for when the adjustment results in the entity's margin being reduced below zero. The term "qualifying assets" would be defined as "those placed in service prior to the accounting year begin date on the 2026 report, if the assets have not been disposed of prior to this date and are associated with and necessary for the production of the goods." Proposed amendments would allow any unused net depreciation adjustment to be carried forward until exhausted. For franchise tax reports before the 2026 report, an entity would use the 2007 IRC to determine the allowable depreciation, including amounts for which the entity elected to expense certain depreciable business assets under IRC Section 179. Proposed amendments also would implement recent statutory changes concerning expenses paid with qualifying grant proceeds received for broadband deployment in Texas and expenses paid with qualifying loan or grant proceeds received for COVID-19 relief, among other changes related to film and broadcasting and movie theaters. Tex. Register, Vol. 51 No. 14, April 3, 2026. Arizona: New law (HB 2938) mandates rounding of certain cash transactions. Sellers that do not use or do not have pennies available at a point of sale are required to apply Swedish rounding to the total transaction amount. Under this method, the total transaction amount is rounded to the nearest five-cent increment as follows: if the total transaction amount ends in (1) one, two, six or seven cents, the total transaction amount is rounded down to the nearest multiple of five cents, or (2) three, four, eight or nine cents, the total transaction amount is rounded up to the nearest multiple of five cents. Rounding applies to a final total transaction amount of a cash transaction after taxes, fees and other charges are calculated. Rounding does not apply to non-cash transactions, such as transactions paid by credit card, debit card, electronic funds transfer, or mobile payment applications. Sellers must post a notice stating "cash transactions are rounded to the nearest five-cent increment pursuant to state law"; such notice must be visible to customers at the point of sale. Sellers may not apply any other rounding method. HB 2938 took effect immediately. The Arizona Department of Revenue has issued guidance on the new rounding rules, including a list of FAQs. Ariz. Laws 2026, ch. 5 (HB 2938), signed by the governor on March 12, 2026; Ariz. Dept of Rev., News: "Arizona Cash Transaction Rounding Law: Guidance for Businesses" (April 9, 2026). Colorado: In response to a ruling request from a company that provides card payment processing services and fraud detection to international online merchants that sell their products or services to customers in various countries, the Colorado Department of Revenue (CO DOR) found that the company is not a retailer making sales or doing business in Colorado. The CO DOR also determined that the company is not a marketplace facilitator, a consignee or auctioneer, or a salesperson, representative or peddler. Accordingly, the company is not liable or responsible for collecting and remitting Colorado sales tax. Colo. Dept. of Rev., PLR 26-003 (March 16, 2026). Idaho: New law (SB 1350) provides for rounding when a seller is unable to settle a cash transaction to the whole cent using U.S. coin or currency. Under the law, a seller may round either the total amount due for the transaction or the amount of change due back to the purchaser to the nearest multiple of five cents as follows: (1) if the final digit is one, two, six or seven, the amount is rounded down to the nearest multiple of five cents; or (2) if the final digit is three, four, eight or nine, the amount is rounded up to the nearest multiple of five cents. These provisions also apply to any cash refunds of purchases. Tax is computed on the total sales price before any rounding. For purposes of this provision, the total amount due means "the sum of the total sales price plus any applicable taxes, fees, or other charges calculated to the nearest cent." SB 1350 takes effect on July 1, 2026. Idaho Laws 2026, ch. 241 (SB 1350), signed by the governor on March 31, 2026. Nebraska: New law (LB 901) repeals various sales and use tax exemptions, effective July 1, 2026. Notably, the law repeals the sales and use tax exemption for the sale, lease or rental of and the storage, use or other consumption in Nebraska of tangible personal property and services acquired by a data center located in the state, that are assembled, engineered, processed, fabricated, manufactured into, attached to, or incorporated into other tangible personal property for the subsequent use at a physical location outside the state. Other repealed sales and use tax exemptions include those for: (1) biochips used for the purposes of conducting genotyping or the analysis of gene expression, protein expression, genomic sequencing or protein profiling of plants and animals; (2) mineral oil applied to grain as a dust suppressant; and (3) personal property used in C-BED projects or community-based energy development projects. Neb. Laws 2026, LB 901, signed by the governor on April 7, 2026. South Dakota: New law (HB 1254) exempts from sales tax the sale of any soil amendment if 500 pounds or more of the product is sold in a single sale to be used exclusively for agricultural purposes. The term "soil amendment", as defined by S.D. Code Section 38-19A-1, means "any substance which is intended to improve the physical, chemical, or other characteristics of the soil or improve crop production, except the following: commercial fertilizer, unmanipulated animal manures, unmanipulated vegetable manures, pesticides, lime or lime sludge produced by a water treatment facility, sewage sludge … and compost … ." HB 1254 takes effect on July 1, 2026. S.D. Laws 2026, HB 1254, signed by the governor on March 27, 2026. Washington: New law (SB 6231) eliminates the sales and use tax exemption for data center refurbishment and replacement of server equipment as of July 1, 2026. Wash. Laws 2026, ch. 266 (SB 6231), signed by the governor on April 1, 2026. Wisconsin: New law (AB 657) creates a sales and use tax exemption for tangible personal property or property under Wis. Stat. Section 77.52(1)(c) (collectively, "property") exclusively and directly used for a nuclear fusion technology project. The property must be used solely at the project's location. The exemption also applies to purchases of property made by construction contractors who transfer such property to their customers in fulfillment of real property construction activity. For purposes of this exemption, "nuclear fusion technology project" means a "project that has the purpose of undertaking the controlled fusion of atomic nuclei or research thereupon, including energy generation, propulsion systems, materials research, medical isotope production, neutron sources, plasma physics research, and any other application making use of fusion reactions or fusion-enabling technologies." AB 657 takes effect on July 1, 2026. Wis. Laws 2025, Act 165 (AB 657), signed by the governor on April 2, 2026. Wisconsin: New law (AB 670) creates a sales and use tax exemption for the purchase of machinery and equipment consumed or destroyed in use exclusively for qualified research by a person engaged in contract research services. The term "contract research services" means "research conducted by a person on behalf of a customer that, if conducted by employees of the customer, would constitute qualified research." Qualified research includes such research that is funded by (1) a member of a combined group for another member of the combined group, and (2) customers for whom contract research services are provided. AB 670 takes effect on July 1, 2026. Wis. Laws 2025, Act 190 (AB 670), signed by the governor on April 3, 2026. Federal: In Revenue Procedure 2026-14, the IRS and Treasury set forth the procedure for the chief executive officer (CEO) of any state, US territory or the District of Columbia to nominate population census tracts as Qualified Opportunity Zones (QOZs) under the new requirements enacted under the "One Big Beautiful Bill Act" (OBBBA)(see Tax Alert 2025-1418). QOZs are designated on a rolling, 10-year basis, with the first determination period beginning on July 1, 2026, and the new census tract designations becoming effective on January 1, 2027. For additional information on this development, see Tax Alert 2026-0851. Louisiana: The Louisiana Department of Revenue (LA DOR) issued guidance on changes to the inventory tax credit (ITC) made by law enacted in 2024 and 2025. Under the law changes, C corporations, estates and trusts are prohibited from earning the ITC for ad valorem taxes paid on or after July 1, 2026; an exception applies to cooperatives allowed a federal income tax deduction for patronage dividends paid or allocated to their members. Entities taxed as a partnership and S corporations, however, may continue to earn the ITC. The ITC earned by a C corporation for ad valorem taxes paid from January 1, 2025, through June 30, 2026, is nonrefundable, with taxpayers allowed to carryforward any unused portion of the credit for up to 10 years. Taxpayers prohibited from earning the ITC are allowed an additional 10-year carryforward period for ITC that did not expire before December 31, 2025. The LA DOR further explained that for tax periods beginning on or after January 1, 2026, and due to current treatment of S corporations as flow-through entities, the entire amount of ITC earned by an S corporation will flow through to its shareholders and may be claimed on the shareholder's individual or fiduciary income tax returns. (Under prior law, S corporations were treated as C corporations.) The LA DOR noted that S corporations should attach to its Louisiana income tax return a schedule showing the allocation of the ITC to its shareholders as well as copies of property tax assessments and proof of payment. La. Dept. of Rev., Revenue Information Bulletin No. 26-011 (March 27, 2026). Maryland: New law (SB 284) caps the total amount of final tax credit certificates issued by the Department of Commerce (Department) under the "More Jobs for Marylanders" tax credit program to $15 million for fiscal year 2027. If the amount of tax credits the Department is required to issue exceeds $15 million, credits will be issued to qualified business entities on a pro rata basis. Md. Laws 2026, ch. 6 (SB 284), signed by the governor on April 8, 2026. Nebraska: New law (LB 901) modifies various tax credit provisions. The renewable energy tax credit available to producers of electricity generated by a new renewable electric generation facility sunsets on June 30, 2026. The law modifies the Nebraska Advantage Research and Development Act by eliminating the ability to use the credit as a refundable credit claimed on the taxpayer's income tax return. It also modifies the ImagiNE Nebraska Act by removing from the list of "qualified location" waste treatment and disposal — NAICS Code 5622. These changes take effect July 1, 2026. Neb. Laws 2026, LB 901, signed by the governor on April 7, 2026. Oregon: New law (HB 4084) modifies the new job tax credit enacted under SB 1507 (Ore. Laws 2026) to limit its availability by adding new requirements to qualify for the credit. The credit can be claimed against corporate and individual income and excise taxes by a taxpayer engaged in a qualified industry as a primary business, for each new job in Oregon created by the taxpayer during the tax year. A "qualified industry" means a business that operates in any of the following sectors: (1) advanced manufacturing, (2) bioscience and biotechnology, (3) clean technology, (4) food and beverage processing, (5) forestry and wood products, (6) high technology, and (7) outdoor gear and apparel. The credit is equal to $1,000 for each net new job created; a taxpayer may not receive a credit for more than 10 new jobs created per tax year. To be eligible for the credit, the compensation for the employment position must be at least 150% of the applicable minimum wage. Taxpayers seeking to claim the credit must first receive written certification of eligibility from the Oregon Business Development Department. A taxpayer may carry forward unused credit for up to three succeeding tax years. The credit is available for tax years 2026 through 2031. HB 4084 takes effect on June 5, 2026. Ore. Laws 2026, ch. 50 (HB 4084), signed by the governor on March 31, 2026. Utah: New law (HB 507) beginning on May 6, 2027, prohibits political subdivisions from providing incentives to a large load data center, unless certain conditions are met. A municipality or county may provide incentives to a large load data center (1) only if it is located within a regionally significant development zone (as described by the law) and (2) with regionally significant development zone funds. A regional economic development authority (REDA) may provide an incentive to a large load data center (1) if it is located in a project area created by the REDA, (2) the project area overlaps with a regionally significant development zone, and (3) the incentive is funded by regionally significant development zone funds that have been shared with the REDA or the REDA's project area funds, subject to a maximum cap of 60% of property tax increment generated within the overlapping project area. In addition, a county that levies a county energy excise tax or a municipality that levies a municipal energy tax may provide up to 80% of the revenue generated by the tax as an incentive to a large load data center. For purposes of this provision, a sales tax exemption under Utah Code Section 59-12-104 does not constitute a tax incentive. Lastly, political subdivisions that entered into an agreement to provide incentives to large load data centers, or that have adopted a survey area resolution to provide incentives to large load data centers, before May 6, 2027, may continue to provide the incentives but may not extend the terms of the agreement or increase the value of the incentives under the agreement. Utah Laws 2026, HB 507, signed by the governor on March 25, 2026. Washington: New law (SB 6346) increases eligibility for the Working Families' Tax Credit by lowering the age limit to 18 and adding a need and payment standard for cash assistance provided to eligible low-income persons. This change is effective for applications submitted beginning in calendar year 2029. Wash. Laws 2026, SB 6346, signed by the governor on March 30, 2026. Wisconsin: New law (SB 482) extends the period for which any unused nonrefundable research tax credit may be carried forward and credited against Wisconsin income or franchise tax otherwise due from 15 years to 50 years. The change to the carry over period first applies retroactively to all research tax credits claimed and carried over from prior tax years that have not been used to offset tax, refunded or expired on April 10, 2026 (i.e., effective date of SB 482). Wis. Laws 2025, Act 220 (SB 482), signed by the governor on April 8, 2026. Nebraska: New law (LB 901), effective January 1, 2027, eliminates the personal property tax exemption under Neb Stat. Section 77-202 for certain property used by a data center. Specifically, the exemption is eliminated for tangible personal property acquired by a person operating a data center in Nebraska, that is assembled, engineered, processed, fabricated, manufactured into, attached to, or incorporated into other tangible personal property for the subsequent use at a location outside Nebraska by the data center operator. Neb. Laws 2026, LB 901, signed by the governor on April 7, 2026. Washington: New law (HB 1960) exempts from property tax all personal property used primarily for the generation of renewable energy in a qualified renewable energy facility/battery electric storage system that becomes operational, or a qualified renewable energy facility that is repowered, on or after January 1, 2028. The personal property used primarily for the generation of renewable energy in a qualified renewable energy facility/a qualified renewable energy facility that became operational before January 1, 2028, will be exempt from property tax if certain conditions are met and the facility opts into the new state renewable energy excise tax. Such renewable energy facilities and battery electric storage systems must file an annual report that contains certain information, including repowering of the personal property exempt under this section. HB 1960 takes effect on January 1, 2028. Wash. Laws 2026, ch. 260 (HB 1960), singed by the governor on April 1, 2026. Alabama: New law (SB 167) revises the standard for judicial review of agency rulings to provide that when interpreting any statute or rule, the court "may consider, but shall not defer to, an agency's interpretation … " Instead, a court must interpret the meaning and effect of the statute or rule without any presumption as to correctness. In an action brought by or against an agency, the court, after applying all customary tools of interpretation, is required to "exercise any remaining doubt in favor of a reasonable interpretation." SB 167 takes effect on October 1, 2026. Ala. Laws 2026, Act No. 319 (SB 167), signed by the governor on March 31, 2026. West Virginia: New law (SB 392), effective retroactive to January 1, 2026, lowers the top marginal personal income tax rate from 4.82% to 4.58% and similarly reduces each lower bracket's tax rate by roughly 5%. The highest withholding rate is now 4.58%. The West Virginia Tax Division has issued an updated withholding formula reflecting the newly reduced tax rates. W.V. Laws 2026, SB 392, signed by the governor on March 31, 2026. For more on this development, see Tax Alert 2026-0864. Nebraska: New law (LB 901) imposes a 10% excise tax on retail sales of kratom products to consumer, starting January 1, 2027. This tax is in addition to all other state and local occupation, privilege, sales or use taxes. Neb. Laws 2026, LB 901, signed by the governor on April 7, 2026. Washington: New law (HB 1960), starting January 1, 2028, imposes a state renewable energy excise tax on the privilege of using a qualified renewable energy facility for an electric power source in Washington or for using a battery electric storage system. Tax applies to qualified renewable energy facilities/battery electric storage systems: (1) that begin operation on or after January 1, 2028, or (2) for systems in operation before January 1, 2028, when one of the following occur: (a) the repowering of a project, or (b) the project developer opts into the renewable energy excise tax. Counties also may impose a local renewable energy excise tax for the privilege or using a battery electric storage system or a qualified renewable energy facility for an electric power source in Washington. The law sets forth the rates of the new state and local energy excise taxes. HB 1960 takes effect on January 1, 2028. Wash. Laws 2026, ch. 260 (HB 1960), singed by the governor on April 1, 2026. Washington: New law (SB 6228) removes the preferential 0.138% B&O tax rate for warehousing and reselling prescription drugs, effective January 1, 2027. Instead, for calendar year 2027, a 0.5% B&O tax applies to gross income of a business for warehousing and reselling drugs for human use pursuant to a prescription, with the rate reduced to 0.35% starting January 1, 2028. Effective January 1, 2027, the B&O tax rate on critical access pharmacies making retail sales is 0.138%. A critical access pharmacy is an independent pharmacy meeting certain conditions. Wash. Laws 2026, ch. 265 (SB 6228), signed by the governor on April 1, 2026. Washington: New law (HB 2487) in response to recent litigation, modifies the B&O tax exemption for insurance business activities. Previously, the exemption applied to "any person in respect to insurance business upon which a tax based on gross premiums is paid to the state." This verbiage in effect extended the B&O tax exemption to businesses which were associated with insurance activities but did not provide insurance policies. Under the new law, the exemption only applies to "the person who paid the insurance premium tax" as well as: (1) gross premiums and prepayments received by a health care service provider exempt from premium taxes; (2) consideration received by an insurer for annuities regulated by RCW 48.23 (life insurance and annuities) and 48.24 (group life and annuities); and (3) gross premiums received by an assigned risk plan where premium taxes were paid by a servicing carrier for such plan. This change applies both prospectively and retroactively to October 2, 2019. HB 2487 makes changes to the advanced computing B&O tax surcharge applicable to insurance affiliated groups and requires the Washington Department of Revenue (Department) to waive penalties and interest otherwise due for delinquent B&O taxes resulting from a person that previously claimed the B&O tax exemption. The Department must allow such persons to enter into a three-year repayment schedule for taxes owed. This provision applies to taxes, penalties and interest owed for delinquent taxes due on gross income of the business between October 2, 2019, and March 31, 2026. Applications for penalty and interest waiver, and the repayment schedule, must be submitted to the Department on or before December 31, 2026. Wash. Laws 2026, ch. 263 (HB 2487), signed by the governor on April 1, 2026. Federal: In a declaration filed on March 31, 2026, with the United States (US) Court of International Trade (CIT), US Customs and Border Protection (CBP) reported material progress on its new Consolidated Administration and Processing of Entries (CAPE) functionality within the Automated Commercial Environment (ACE) to calculate and refund International Emergency Economic Powers Act (IEEPA) duties. CBP also refined the CAPE Phase 1 scope to align with orders the CIT issued on March 20 and March 27, 2026. Phase 1 will process unliquidated entries and entries within the 90-day voluntary reliquidation window. CBP estimates that Phase 1 can cover approximately 63% of IEEPA paid/deposited entries, with later phases to address entries that are liquidated and final and other complex scenarios. (Liquidation of an entry being imported into the US occurs when the CBP determines the total duties, taxes and fees due on the imported goods. Either CBP or the importer may request voluntary reliquidation within 90 days of liquidation to correct errors. The importer may file a protest within 180 days of liquidation.) Phase 1 will exclude entries flagged for reconciliation, entries designated on drawback claims, entries subject to an open protest, entries not filed in ACE or missing an ACE liquidation status, and certain entries subject to Anti-Dumping and Countervailing Duties (AD/CVD). Electronic refunds are mandatory for all IEEPA refunds. For more on this development, see Tax Alert 2026-0781. Federal: United States (US) President Trump issued a proclamation on April 2, 2026 entitled "Adjusting Imports of Pharmaceuticals and Pharmaceutical Ingredients into the United States" (the Proclamation), having concluded that US reliance on imported patented pharmaceuticals and related ingredients poses a threat to national security. The Proclamation asserts that imports of patented pharmaceuticals, associated active pharmaceutical ingredients (APIs) and key starting materials (KSMs) threaten US national security and imposes a 100% ad valorem tariff on products listed in Annex I, with targeted carveouts and reduced-rate pathways. For additional information on this development, see Tax Alert 2026-0787. Federal: On April 2, 2026, United States (US) President Trump issued a proclamation titled "Strengthening Actions Taken to Adjust Imports of Aluminum, Steel, and Copper into the United States," modifying the tariff regimes established under Proclamations 9704 (aluminum), 9705 (steel), and 10962 (copper) pursuant to Section 232 of the Trade Expansion Act of 1962. The proclamation modifies the tariff regimes such that 25% ad valorem duties apply to the full customs value of covered articles and their derivatives, rather than a 50% ad valorem duty on the covered metal content alone and clarifies the scope of products covered by these tariffs. For additional information on this development, see Tax Alert 2026-0788. Federal: On April 10, 2026, US Customs and Border Protection (CBP) sent a Cargo Systems Messaging Service bulletin and published a webpage with updates on its development of the Consolidated Administration and Processing of Entries (CAPE) Portal to administer International Emergency Economic Powers Act (IEEPA) duty refunds. CAPE is designed to process importer claims, remove IEEPA-specific Chapter 99 Harmonized Tariff Schedule (HTS) provisions from entry summaries, recalculate duties and interest and route consolidated electronic refunds, while allowing CBP review and standard liquidation/reliquidation controls. For more on this development, see Tax Alert 2026-0845. International — European Commission: The Group on the Future of Value-Added Tax (VAT) of the European Commission (GFV) has published the minutes of its 51st meeting, which took place on March 3, 2024. The meeting addressed implementing the VAT in the Digital Age (ViDA) package. For full details of this package, see EY Global Tax Alerts, EU Council approves VAT in the Digital Age (ViDA) package, dated March 12, 2025, and EU details on VAT in the Digital Age (ViDA) package, dated November 7, 2024. The meeting included discussions on the platform economy, one-stop-shop (OSS) guidelines on single VAT registration (SVR) and digital reporting requirements. For additional information on this development, see Tax Alert 2026-0876. International: Outlining value-added tax (VAT) systems in 153 jurisdictions, the 2026 edition of our annual reference book, Worldwide VAT, GST and Sales Tax Guide, is now available in an interactive map format (as well as to download as a pdf) on ey.com. This Guide covers a wide range of topics related to taxes on consumption, including information about the scope of the tax in each jurisdiction, who is liable, rates, time of supply, recovery of input tax by taxable persons and non-established businesses, invoicing, returns and payment and penalties. Where applicable, chapters detail the VAT or GST provisions related to the digital economy (including online platforms), e-invoicing and digital tax administration measures. The content is current as of January 1, 2026. 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: 2026-1227 | ||
