Ernst & Young's State and Local Tax Weekly newsletter for May 1 and May 8 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

Maine law advances IRC conformity date, addresses certain OBBBA provisions, establishes a pass-through entity tax and an individual income tax surcharge

On April 10, 2026, Governor Janet Mills signed into law the supplement budget bill for FY 2026–2027 (LD 2212), which includes several tax related provisions. Key tax changes are discussed below.

Federal conformity and decoupling from One Big Beautiful Bill Act (OBBBA): Maine's date of conformity to the IRC is updated to December 31, 2025 (from December 31, 2024). While Maine generally conforms to the OBBBA, the state decouples from select provisions. (These changes are in LD 2212 unless otherwise noted.)

Domestic research and experimental (R&E) expenditures: Maine over multiple years phases-in conformity to the IRC Section 174A deduction for domestic R&E expenditures. During the phase-in period, a corporation's federal taxable income (FIT) and an individual's adjusted gross income (FAGI) is increased by the amount of the deduction claimed under IRC Section 174A(a) or Section 70302(f)(2) of the OBBBA, multiplied by the applicable percentage.

For tax years beginning on or after January 1, 2025, and before January 1, 2031, a subtraction modification is allowed equal to the sum of the following:

1. An amount equal to the amortization deductions allowed for domestic R&E expenditures under former IRC Section 174 (pre-OBBBA enactment) for expenditures paid or incurred in tax years 2022 through 2025, for which the above addition modification was required.
2. An amortization deduction for domestic R&E expenditures, except those described in (1), for which the above addition modification was required in a prior tax year.

Qualified production property: Maine decouples from the federal bonus depreciation for qualified production property, requiring taxpayers to add back the amount of the net deprecation attributable to the deprecation deduction claimed under IRC Section 168(n).

A subtraction modification is allowed in an amount equal to the net increase in depreciation attributable to the depreciation deductions allowed under IRC Sections 167 and 168 that would have applied had the taxpayer not claimed the IRC Section 168(n) deduction on the property subject to the above addback in a prior year. When such property is disposed, the amount of any gain or loss includable in federal taxable income must be adjusted for Maine income tax purposes. The subtraction modification for such property for all tax years may not exceed the addition modifications for the same property.

Bonus depreciation under IRC Section 168(k): Provisions of LD 2188 (enacted April 13, 2026) continue Maine's decoupling from bonus depreciation under IRC Section 168(k). For tax years beginning on or after January 1, 2025, taxpayers are required to add back an amount equal to the net increase in depreciation attributable to the depreciation deduction claimed under IRC Section 168(k).

Qualified opportunity zones: Taxpayers are required to add back gain excluded from federal gross income under IRC Section 1400Z-2(a) with respect to amounts invested in qualified opportunity zones after December 31, 2026. When property acquired after December 31, 2026, is sold, taxpayers must add back an amount equal to any increase in basis made by the taxpayer under IRC Sections 1400Z-2(b)(2)(B)(iii) or 1400Z-2(c). A subtraction modification is allowed to the extent the amount of gain subject to addback is included in FTI/FAGI in a prior tax year.

Global intangible low-taxed income (GILTI) / net CFC tested income (NCTI): The reference to GILTI is updated to NCTI, to reflect changes made by the OBBBA.

Qualified small business stock: For individual income tax purposes, taxpayers are required to add back the amount of gain from the exchange or sale of qualified small business stock that they received and excluded on their federal tax return as provided by IRC Section 1202(a)(1), with respect to sales of such stock first acquired after July 3, 2025.

Elective pass-through entity tax: For tax years beginning on or after January 1, 2026, a pass-through entity (generally, partnerships and S corporations)¹ may elect to be subject to tax at the entity level (the PTET). The election must be made annually on a timely filed return, including extensions. The election is irrevocable after the due date for filing the return (inclusive of any extensions). The amount of the PTET is equal to the "taxable income" of the electing pass-through entity (PTE) multiplied by the highest marginal tax rate on individuals.² Credits available in chapter 822 of the Maine tax code may not reduce the PTET for the entity.

The PTE's taxable income is the aggregate total distributive share of income for the PTE's "qualified members" for the given tax year, plus the amount of PTETs imposed on the PTE that are substantially the same as the Maine PTET. Qualified members are individuals, trusts, or estates that are direct owners³ in an electing PTE.

A qualified member of an electing PTE is allowed a refundable credit against income tax equal to 90% of the amount of the tax required to be reported to a qualified member by the electing PTE. The credit is allowed if the electing PTE paid the PTET and provided sufficient information on its tax returns to identify the qualified member and their distributive share of PTET paid by the entity.

An electing PTE is generally required to make estimated tax payments that are comprised of the PTET imposed, plus 10% of the tax reported to its nonresident qualified members to account for the difference between the tax owed and the 90% PTET credit available to qualified members. De minimis thresholds may excuse a PTE from the estimated payment requirement.

Resident qualified members are still required to file Maine income tax returns. However, they are allowed a credit equal to the amount of income tax imposed by another state, a political subdivision thereof, or any pollical subdivision of a foreign country. A credit equal to the individual's distributive share of tax imposed by another jurisdiction on a PTE that is substantially similar to Maine's PTET may be available if the income subject to the substantially similar tax would be sourced to such other state using Maine's sourcing rules.

Income tax surcharge: For tax years beginning on or after January 1, 2026, a 2% income tax surcharge is imposed on the portion of an individual's Maine taxable income in excess of:

• $1 million for single individuals
• $1.5 million for heads of households
• $1.5 million for married individuals filing a joint return (half the amount for married filing separately).

Maine Laws 2026, ch. 650 (LD 2212), signed by the governor on April 10, 2026; ch. 662 (LD 2188), signed by the governor on April 13, 2026.

INCOME/FRANCHISE

Arkansas: New law (HB 1001) reduces the highest corporate income tax rate, which is imposed on corporations with net income exceeding $11,000, from 4.3% to 4.1% effective for tax years beginning on or after January 1, 2027. The law also modifies the individual income tax brackets and reduces the highest rate from 3.9% to 3.7%, effective for tax years beginning on or after January 1, 2026. Ark. Laws 2026 (First extraordinary Session, 2026), Act 1 (HB 1001), signed by the governor on May 6, 2026.

Georgia: New law (HB 463) reduces the corporate, pass-through entity and individual income tax rates to 4.99% (from 5.19%), effective for tax years beginning on or after January 1, 2026. Future reductions would reduce the rate by 0.125% annually starting in 2027 until the rate reaches 3.99%. The annual rate reduction would be delayed by one year for each year that prospective annual reductions in the standard deduction are delayed. Ga. Laws 2026, Act 465 (HB 463), signed by the governor on May 11, 2026.

Illinois: The Illinois Department of Revenue has proposed amendments to 86 Ill. Adm. Code 100.2430 to reflect recent statutory changes⁴ related to the addback of certain interest and intangible expenses or costs paid to 80/20 affiliates, ordering rules for interest expense deduction limited under IRC Section 163(j), and the repeal of certain exceptions to the addback rules. Ill. Register, Vol. 50, Issue 17 (April 24, 2026).

Kansas: New law (SB 300) requires certain manufacturers of alcoholic liquor to apportion business income to the state using a single sales factor apportionment formula (SFF). Effective for tax years beginning on or after January 1, 2027, the requirement to use a SSF apportionment applies to qualifying Kansas investors who, during the tax year, have (1) an average value of real and tangible personal property owned or rented and used in Kansas with an average value of at least $5 million, and (2) a total amount of compensation paid in Kansas exceeding $2 million. General manufacturers, including all other manufacturer of alcoholic liquor, must continue to use the three-factor (property, payroll and sales) apportionment formula. SB 300 also deletes statutory references to global intangible low-taxed income in the subtraction modification for income under IRC Section 951A. As revised, taxpayers are required to subtract from federal adjusted gross income,100% of income under IRC Section 951A, before any deduction allowed under IRC Section 250(a)(1)(B). Kan. Laws 2026, SB 300, signed by the governor on April 27, 2026.

Maryland: New law (SB 163) requires the Maryland Comptroller to study state taxation of federal tax-exempt income. The Comptroller has until December 1, 2026, to issue a report to the Governor and the General Assembly that includes the following information: (1) the number of Maryland residents who have foreign earned income within the meaning of IRC Section 911(b)(1) and whose foreign earned income exceeds the limitation under IRC Section 911(b)(2); (2) the aggregate amount of that income; and (3) the countries from which such residents earned the foreign earned income. SB 163 takes effect on July 1, 2026. Md. Laws 2026, ch. 315 (SB 163), signed by the governor on April 28, 2026.

New York: On May 7, 2026, the New York Supreme Court, Appellate Division, Third Department (court), upheld a lower court ruling in American Catalog Mailers Association that 20 NYCRR Section 1-2.10 (hereafter, regulation), which identifies protected and unprotected internet activities under P.L. 86-272,⁵ is not preempted by federal law. In so holding, the court said that "[f]or now, it suffices to conclude that plaintiff did not demonstrate that the regulation, 'as written,' revokes franchise tax immunity where Public Law 86-272 requires it, or that the regulation obstructs the purpose for which that statute was enacted … ." American Catalog Mailers Assn. v. N.Y. Dept. of Taxn. and Fin., 2026 NY Slip Op 02908 (N.Y. Sup. Ct., App. Div. 3rd Dept., May 27, 2026).⁶

Oklahoma: New law (HB 4028) extends through 2031 (from 2026) the deduction from Oklahoma taxable income or Oklahoma adjusted gross income equal to the amount of qualified equity investment in an eligible Oklahoma venture capital entity made by an accredited investor. For purposes of this deduction, a "qualified equity investment" is defined as "a transfer of cash or its equivalent by an accredited investor to an eligible Oklahoma venture capital company and for purposes of the deduction … in an amount not in excess of [$25 million] by an accredited investor during a taxable year." HB 4028 takes effect on January 1, 2027. Okla. Laws 2026, HB 4028, became law without the governor's signature on May 3, 2026.

SALES & USE

Colorado: New law (SB26-128) creates a sales and use tax exemption to incentivize destination management companies to bring such business to the state. Starting July 1, 2027, the sales and use tax exemption applies to the sale, storage, use or consumption of tangible personal property, commodities or services sold by a destination management company, if it paid tax on such items upon acquisition. The law defines a "destination management company" as a business primarily engaged in providing or arranging for the provision of at least six destination management services in Colorado, among other requirements. Destination management services include (1) booking and managing entertainers; (2) coordinating tours or recreational activities; (3) organizing meeting, conference or event registration; (4) staffing meetings, conferences, transportation or other events; (5) event management; (6) catering or meal coordination; (7) providing shuttle system services; or (8) providing airport meet-and-greet services (e.g., providing airport permits, manifest management services, porterage and passenger greeting services). SB26-128 takes effect on August 12, 2026. Colo. Laws 2026, ch. 85 (SB26-128), signed by the governor on May 4, 2026.

Georgia: New law (HB 463) repeals the state's sales and use tax exemptions for the following: (1) the rental of videotape or motion picture film to those who charge an admission fee to view the videotape or film; (2) printed advertising inserts or advertising supplements distributed in Georgia or as part of any newspaper for resale; (3) the sale of machinery, equipment and materials incorporated into and used in the construction or operation of certain clean rooms; (4) sales of certain mechanically propelled watercraft by a licensed dealer to a person living outside the state; and (5) sales of machinery and equipment or repair, replacement, or component parts for such machinery and equipment used for the primary purpose of reducing or eliminating air or water pollution. HB 463 took effective upon the governor's approval. Ga. Laws 2026, Act 465 (HB 463), signed by the governor on May 11, 2026.

Maryland: New law (HB 933) modifies the State's sales and use tax multiple points of use (MPU) certificate provisions for the purchase and use of specified digital codes, digital products and taxable data and information technology (IT) services. Effective January 1, 2027, a buyer can issue an MPU certificate if: (1) it registers with the Maryland Comptroller for a sales and use tax account, (2) following registration, it requests and obtains authorization from the Comptroller to issue MPU certificates, and (3) it has paid all undisputed taxes to Comptroller or provided for payment of tax in an approved manner. Authorization to issue an MPU is valid for at least two years, unless suspended or revoked by the Comptroller. Buyers may apply for a renewal of such authorization not more than 90 days before the current authorization expires. The Comptroller may deny the buyer's request for authorization or renewal of authorization for buyer's fraud, gross negligence, misuse of an MPU certificate, late tax payments or other similar reason. The Comptroller will notify each vendor that has received an MPU certificate from a buyer whose authority to issue these certificates has been revoked. On receipt of such notification, a vendor becomes responsible for collecting or paying and remitting the tax on sales to the buyer whose authorization has been revoked. An MPU certificate provided to a vendor will remain in effect for all future purchases until the buyer rescinds the MPU, the vendor is notified by the Comptroller that the buyer's authorization has been revoked, or the vendor knows or should know that the buyer's authorization has been revoke. Authorized buyers may rescind an MPU certificate issued to a vendor. Authorized buyers must generate an MPU certificate for each vendor from which they intend to make purchases subject to the MPU certificate. Md. Laws 2026, ch. 198 (HB 933), signed by the governor on April 28, 2026.

Maryland: New law (SB 388) provides that sales and use tax imposed on data or information technology services (as described in NAICS Sector 518, 519, or 5415) or system software or application software publishing services (as described in NAICS Sector 5132), or a digital code or digital product does not apply to the sale if both the vendor and the buyer are members of the same affiliated group. These provisions take effect July 1, 2026. Md. Laws 2026, ch. 351 (SB 388), signed by the governor on May 12, 2026.

Massachusetts: The Massachusetts Department of Revenue (MA DOR) in response to the penny shortage caused by the end of the penny production, issued guidance to vendors on calculating sales tax on cash transactions that have been rounded to the nearest nickel. The MA DOR explained that sales tax is calculated to the exact cent based on the sales price. Tax must be remitted in the exact amount shown of the receipt or invoice before rounding. Thus, rounding does not affect the calculation of sales tax. Mass. Dept. of Rev., Directive 26-1: Elimination of the Penny — Effect on the Collection of Sales Tax (May 5, 2026).

Oklahoma: New law (SB 44) extends the sales tax exemption for sales of tangible personal property or services to governmental and nonprofit entities (collectively, entity) to sales made to contractors and subcontractors with whom the entity has entered into a contract necessary for carrying out such contract. SB 44 takes effect on November 1, 2026. Okla. Laws 2026, SB 44, signed by the governor on May 11, 2026.

Oklahoma: New law (HB 3661) makes permanent the sales tax exemption for commercial forestry service equipment available to businesses engaged in logging timber and tree farming. The exemption is limited to forwarders, skid steer loaders, soil compactors, fellers, bunchers, track skidders, wheeled skidders, hydraulic excavators, and delimbers. Without this change the exemption would have sunset in January 2027. HB 3661 takes effect on November 1, 2026. Okla. Laws 2026, HB 3661, signed by the governor on May 12, 2026.

BUSINESS INCENTIVES

Alabama: New law (HB 517) creates the Talent Readiness and Industry Needs (TRAIN) Act, provisions of which create a tax credit that can offset state income tax and financial institution excise tax of an eligible employer that allows a qualified employee to serve as a career and technical education programs instructor at an eligible educational institution. The credit equals the portion of the employee's salary paid by the employer for time directly attributable to teaching at the educational institution. A credit is also available to qualified employers that donate to community development foundation to support a designated career and technical educational (CTE) program or to supplement the salaries of CTE program instructors. To claim the credit, an employer must meet certain conditions. The credit cannot reduce a taxpayer's tax liability by more than 50%. Unused credits may be carried forward for up to five years, but they may not be transferred. The tax credit can be claimed starting January 1, 2027. The aggregate amount of tax credits allowed is capped at $10 million per year, with the credits claimed by entities making donation to community development foundations capped at $4 million per year. The amount of tax credit available to any single taxpayer is limited to $250,000 per year. Ala. Laws 2026, Act 606 (HB 517), signed by the governor on April 16, 2026.

Georgia: New law (HB 463) repeals various tax credits, including tax credits for: (1) eligible teleworking expenses; (2) manufacturers of personal protective equipment; (3) manufacturers of medical equipment and supplies, pharmaceuticals and medicine; (4) base year port traffic increases; (5) alternative fuel, low-emission and zero-emission vehicles and electric vehicle chargers; (6) businesses headquartered in the state; (7) businesses engaged in manufacturing cigarettes for exportation; and (8) business enterprises that purchase or lease a motor vehicle to provide transportation for employee. Ga. Laws 2026, Act 465 (HB 463), signed by the governor on May 11, 2026.

Kansas: New law (HB 2464) extends the angel investor tax credit program through 2031 (from 2026). The law also extends through 2031 (from 2026) the following tax credits related to the aviation industry: (1) the credit for employer expenditures for tuition reimbursement, (2) the credit for employer expenditures for employee compensation, and (3) the credit for employee income. HB 2464 takes effect and will be in force from and after its publication in the statue book. Kan. Laws 2026, HB 2464, signed by the governor on April 9, 2026.

Kentucky: New law (HB 869) modifies various tax credit provisions and creates a new certified mixed-use rehabilitation credit. HB 869 enhances the Kentucky Business Investment Program by: (1) expanding the definition of "eligible company" to include a company that is engaged in research and development activities; (2) modifying the definitions of "eligible costs," specifically "start-up costs" for owned economic development projects and for leased economic development projects; (3) expanding the definition of "start-up costs" to include recurring software subscriptions or licensing fees covering a period not to exceed one year from activation of the project, and the initial software and licensing costs association with each new full-time job created; and (4) increasing the wage target to 200% (from 125%) of the federal minimum wage in heritage counties (formerly enhanced incentive counties), and 300% (from 150%) of the federal minimum wage is any other county. Companies receiving preliminary approval after July 1, 2026, for certain incentives under the Business Investment Program may be eligible to receive additional incentives, including a credit equal to 2.25% of wages paid to full-time employees that maintained an economic development project in a heritage county, with the amount of credit reduced to 1.25% of such wages if the project is located in any other county. The law also replaced several references to an "enhanced incentive county" with a "heritage county."

HB 869 increases the cap on the skilled training investment tax credit. A company may claim 50% of the amount of approved costs incurred in connection with its program of occupational upgrade training and skills upgrade training, with a cap of $4,500 (from $2,000) per trainee for an approved company in a heritage county and $3,500 per trainee for an approved company located in any other county. A company has three years (up from one year) to complete such training programs.

HB 869 also creates a new certified mixed-use rehabilitation credit that is available for tax years beginning on or after January 1, 2028, but before January 1, 2032. The credit is refundable and transferable. The credit equals 20% of eligible rehabilitation expenses incurred during the tax year and is limited to $25 million per eligible taxpayer and $50 million for all tax credits preliminarily approved for each calendar year. If the amount of credits preliminary approved for a calendar year exceed the $50 million cap, taxpayers will receive a pro rata share of the credits. HB 869 describes the information that must be included in the credit application.

Lastly, HB 869 creates a new alternative jet fuel credit that is available for tax years beginning January 1, 2029, but before January 1, 2035. The credit is nonrefundable and nontransferable. The credit ranges from $0.50 up to $2.50 per gallon depending on how the eligible feedstock blended with the alternative jet fuel is processed. The amount of credit is capped at $2 million per eligible taxpayer per tax year and $20 million in total credits certified in a calendar year. HB 869 took effect upon approval by the governor, with applicable periods noted above. Ky. Laws 2026, ch. 198 (HB 869), signed by the governor on April 27, 2026.

Maryland: New law (SB 388) enhances and extends various tax credit programs. The law extends the sunset dates of the following credits: (1) the job creation tax credit is extended to January 1, 2032 (from 2027); (2) the research and development tax credit may not be approved for a tax year beginning after December 31, 2030; (3) the employer security clearance costs tax credit is extended through tax years beginning before January 1, 2033 (from before January 1, 2028); and (4) the build our future grant program ends on June 30, 2030.

The law also modifies the income tax credit available to businesses in a focus area for wages paid to focus area employees. Business that do not claim an enhanced tax credit for a focus area employee may claim a credit of up to: (1) $3,000 of the wages paid to each qualified employee who is an economically disadvantage individual and is not hired to replace an individual whom the business employed in that or any of the three prior tax years; or (2) $1,000 of the wages paid to each qualified employee who is not an economically disadvantaged individual and is not hired to replace an individual whom the business employed in that or any of the three prior tax years. Businesses that satisfy the enhanced tax credit requirements may qualify for a credit of up to: (1) $4,500 of wages paid to each focus area employee who is an economically disadvantaged individual and is not hired to replace an individual whom the business employed in that year or any of the three prior tax years; and (2) $1,500 of the wages paid to each focus area employee who is not an economically disadvantaged individual and is not hired to replace an individual whom the business employed in that or any of the three prior tax years.

Starting July 1, 2026, the law allows a Regional Institution Strategic Enterprise zone (RISE zone) to be renewed for an additional five years, and for the approval of one extraordinary RISE zone in a single county or municipal corporation for an area that promotes quantum computing. The law also allows a business entity that is certified as consistent with the target strategy of the RISE zone and that has qualified property located in an enterprise zone or focus area to concurrently claim the property tax credits under Md. Tax Code Sections 9-103 and 9-103.1. The total property tax credits in the tax year may not exceed 100% of the property tax that would otherwise be due. Md. Laws 2026, ch. 351 (SB 388), signed by the governor on May 12, 2026.

Oklahoma: New law (HB 4426) extends the sunset date of the income tax credit for qualified economic development expenditures through tax years ending December 31, 2032 (from December 31, 2027). HB 4426 takes effect on November 1, 2026. Okla. Laws 2026, HB 4426, signed by the governor on May 5, 2026.

Oregon: New laws (HB 4052) creates a new "de novo bank" tax credit. The credit is computed by determining the amount of tax that would otherwise by imposed on a de novo bank, up to $1 million in each of three consecutive tax years, beginning with the tax year in which such bank commences business in Oregon. The amount of the credit may not exceed the taxpayer's tax liability for the tax year. A de novo bank may carry forward unused tax credit for up to three years. A "de novo bank" does not include banks that are formed by, merged with or converted by a taxpayer that filed an Oregon tax return in any preceding tax year. The de novo bank tax credit is available to Oregon-chartered banks that commence business in Oregon in tax years beginning on or after January 1, 2027, and before January 1, 2033. HB 4052 takes effect on June 5, 2026. Ore. Laws 2026, ch. 36 (HB 4052), signed by the governor on March 31, 2026.

PROPERTY TAX

Georgia: New law (HB 1261) extends the level 1 freeport exemption from ad valorum tax to include certain goods in inventory for electric utilities. Specifically, a county or municipality may provide an ad valorem tax exemption for inventory of electric utility equipment, including motors, fuses, turbines, cable, boilers, regulators, steel, concrete, masonry, poles, transformers, capacitors, circuit breakers, insulators, switchgear, and any other capital equipment and supplies held in inventory by the utility for use in the normal course of business in Georgia. The ad valorem tax exemption does not apply to electric utility equipment that has been incorporated into operating electric generation, distribution or transmission facilities. An application for a level 1 freeport exemption must include a summary of inventory of finished goods and parts held in the ordinary course of an electric utility taxpayer's operations that will be incorporated into any electric generation, distribution, or transmission infrastructure located in Georgia through construction, improvement, repair or maintenance. HB 1261 takes effect on July 1, 2026. Ga. Laws 2026, Act 483 (HB 1261), signed by the governor on May 11, 2026.

Mississippi: New law (SB 2824) extends the renewable energy project ad valorem tax exemption to initial construction that begins no later than December 31, 2031 (from December 31, 2027). An exemption from ad valorem taxation must be authorized by a county board of supervisors and/or municipal governing authority before July 1, 2030 (from July 1, 2026). SB 2824 takes effect from and after July 1, 2026. Miss. Laws 2026, SB 2824, signed by the governor on March 25, 2026.

Oklahoma: New law (SB 1122) requires the State Board of Equalization to assess property of broadband service providers at 15% of its fair cash value. The law defines "broadband service providers" as "a subclass of public service corporations consisting of any company, corporation, trustee, receiver, or other person offering broadband-based services including fixed or mobile Internet access, Voice over Internet Protocol, or Internet protocol television, to end-user consumers." SB 1122 takes effect on January 1, 2027. Okla. Laws 2026, SB 1122, became law without the governor's signature on April 29, 2026.

CONTROVERSY

Maine: New law (LD 2178), effective January 1, 2027, replaces the Board of Tax Appeals (BTA) with an Independent Office of Tax Appeals (OTA) within the Department of Administrative and Financial Services. The OTA will hear and decide appeals from decisions of the State Tax Assessor. All cases pending with the BTA on January 1, 2027, will transfer to the OTA for review of jurisdiction. Maine Laws 2026, ch. 734 (LD 2178), signed by the governor on April 16, 2026.

PAYROLL & EMPLOYMENT TAX

Maryland: The Maryland Department of Labor announced that it has published final regulations governing the state's paid family and medical leave insurance (PFMLI) program and has also provided other details concerning the program's upcoming implementation. In 2022, the Maryland legislature enacted SB 275, establishing a statewide PFLMI program designed to provide eligible employees with paid, job protected leave for specified family and medical reasons, funded through payroll contributions from employers and employees. Since enactment, the program's implementation timeline has been delayed twice by subsequent legislation, reflecting the state's effort to allow additional time for regulatory development, system readiness and employer preparation. Employers will begin making contributions to the program starting January 1, 2027, and starting January 1, 2028, eligible Maryland employees will be entitled to up to 12 weeks of paid, job-protected leave for qualifying family or medical reasons. The program is financed by mandatory payroll contributions, with the total contribution rate for 2027 set at 0.9% on wages up to the annual Social Security wage limit. The contribution rate is split evenly between employees and employers with 15 or more employees, while employers with fewer than 15 employees are exempt from the employer portion of the contribution. For additional information on this development, see Tax Alert 2026-1058.

Missouri: On April 7, 2026, St. Louis, Missouri voters approved Proposition E to continue the city's 1% earnings tax for an additional five-year period. The ballot question was placed before voters through Board Bill 100, enacted as Ordinance No. 72067, which provides that the earnings tax continues if approved by a majority of voters. For additional information on this development, see Tax Alert 2026-0995.

New York: New York has significantly increased the Metropolitan Commuter Transportation Mobility Tax (MCTMT) rates for most large employers, materially increasing the potential cost of noncompliance. With higher rates now in effect, even relatively small errors in identifying covered employees and/or computing the correct MCTMT liability can result in additional, and potentially substantial, assessments. Tax Alert 2026-1054 explains the MCTMT, the cost of noncompliance and steps employers should consider.

Utah: The Utah State Tax Commission has updated Publication 14, Withholding Tax Guide, which contains the revised withholding formula and tables resulting from the decrease in the personal income tax rate effective retroactive to January 1, 2026. The updated withholding formula/tables apply to payroll periods beginning on and after June 1, 2026. For more on this development, see Tax Alert 2026-1045.

MISCELLANEOUS TAX

Iowa: New law (HF 2739) imposes a new health care-related tax on health maintenance organizations (HMO). Starting with calendar year beginning January 1, 2026, each HMO transacting business in Iowa is subject to a health-care related tax equal to 0.95% of the applicable percentage of taxable funds. (The "applicable percent" is defined in Iowa Code Section 432.2.) The law defines "taxable funds" as: (1) payment received by an HMO for health care services, insurance, indemnity, or other benefits that enrollees are entitled to through the HMO; and (2) payments made by an HMO to providers for health care services or to insurers for insurance indemnity, or other authorized service benefit, except a payment made by an HMO that qualifies as both a payment received and a payment made will be considered taxable funds under (1). Taxable funds do not include certain payments made to the HMO by the US Secretary of Health and Human Services. The law sets forth the payment requirements and deadlines for the new health care-related tax. An HMO that fails to timely pay the new tax could have their license suspended or revoked. Iowa Laws 2026, HF 2739, signed by the governor on March 25, 2026.

Oklahoma: New law (SB 1280) extends the sunset date of the additional 0.095% petroleum excise tax through July 1, 2031 (from July 1, 2026). The rate will reduce to 0.085% on July 1, 2031. SB 1280 takes effect on July 1, 2026. Okla. Laws 2026, SB 1280, signed by the governor on April 29, 2026.

UPCOMING WEBCASTS

Tuesday, July 14, 2026. Navigating state tax implications for REITs: A journey from basics to advanced concepts (1:00-2:00 pm ET / 10:00-11:00 am PT). This webcast will examine the state and local tax treatment of real estate investment trusts (REITs), addressing the technical complexities with practical approaches. We will go through common pitfalls with REIT state income tax reporting: dividends-paid-deduction mechanics, net operating loss (NOL) utilization and combined reporting regimes. As we delve into more advanced considerations, we will discuss transaction and transfer-tax obligations, emerging legislative developments, and critical 2025 filing season considerations. The following topics will be discussed: (1) REIT basic concepts for state and local taxation; (2) dividends-paid-deduction complexities; (3) NOL utilization considerations; (4) combined reporting requirements; (5) transaction and transfer-tax considerations; (6) state legislative updates impacting REITs; and (7) filing season reminders for tax year 2025. Register here.

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.