17 September 2026 State and Local Tax Weekly for August 21 and August 28 Ernst & Young's State and Local Tax Weekly newsletter for August 21 and August 28 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. District of Columbia budget bill decouples from select OBBBA provisions, delays sales and use tax rate increase, increases hotel and car rental tax rates, requires BAT study District of Columbia Mayor, Muriel Bowser, has let emergency legislation (B26-0724 (the law)) implementing the District's Fiscal Year 2027 Budget become law without her signature.
As emergency legislation, B26-0724 will be effective for a 90-day period, expiring on November 11, 2026.1 Business income tax provisions: The law modifies the calculation for determining the gross income of corporations, financial institutions, unincorporated businesses and partnerships (each an "entity"). Under the law, an entity is allowed to deduct all ordinary and necessary expenses paid or incurred during the tax year that are deductible under Internal Revenue Code (IRC) Section 162(a), except as follows:
The law continues to disallow the special depreciation allowance under IRC Section 168(k) and continues to allow a deduction for the cost of property the taxpayer has elected to be treated as not chargeable to capital account under IRC Section 179. The deduction, however, is limited to the lesser of $25,000 or the actual cost of the property for the year in which it was placed in service. For amounts invested in a qualified opportunity fund (QOF) after December 31, 2026, the law addresses how taxpayers may benefit from: (1) reduced capital gains tax liability through a 10% step-up in basis, if invested in a QOF for five years, pursuant to IRC Section 1400Z-2(b); and (2) abatement of capital gains tax on an investment of capital gains held in a QOF for at least 10 years, pursuant to IRC Section 1400Z-2(c). The law may allow for a depreciation deduction for an investor in a shared equity financing agreement under D.C. Code Section 47-3507. Individual income tax provisions: The law modifies the standard deduction, with the District setting the amount for individual income tax filers, rather than relying on the federal standard deduction. For tax years ending December 31, 2025, the deduction is: (1) $15,000 for single individuals or married individuals filing separately; (2) $22,500 for head of households; (3) $30,000 for married individuals filing a joint return or surviving spouses. For tax years beginning after December 31, 2025, but before January 1, 2030, the standard deduction will be the same amounts as provided for 2025, adjusted annually to account for changes in the cost-of-living. For tax years beginning after December 31, 2029, the standard deduction is the same as the federal standard deduction. For tax years beginning after December 31, 2024, and ending before January 1, 2026, individuals, estates and trusts must include any income or gain excluded from federal gross income under IRC Section 1202(a) (i.e., the qualified small business stock exclusion), provided that the sale or exchange of the qualified small business stock occurred on or after December 31, 2025. The law repeals certain individual, estate and trust tax provisions related to deductions under D.C. Code Sections 47-1803.032 and creates a new D.C. Code Section 47-1803.04 to specify which individual, estate and trust deductions are allowed. The law allows a deduction for capital gains from a QOF. Deductions for qualified tips under IRC Section 224, qualified overtime compensation under IRC Section 225 and personal car loan interest under IRC Section 163(h)(4) are allowed for tax years beginning after December 31, 2025 (deductions for these are not allowed for tax years beginning before January 1, 2026). Effective for tax years beginning after December 31, 2025, the law allows a nonrefundable credit against income tax on individuals, estates and trusts whose adjusted gross income includes a distributive share of net income from an unincorporated business or share in income of an S corporation. The credit is limited to the lesser of: (1) the person's pro rata share of the franchise taxes actually paid under the income tax on corporations, financial institutions or unincorporated businesses, or (2) the income tax imposed on residents and nonresidents. This credit only applies if the unincorporated business or corporation filed a franchise tax return for the year in which the credit is claimed and paid all tax due. Pass-through entity taxation: In computing District gross income, the law requires a taxpayer that claims a credit for taxes paid to another state,3 territory or possession or political subdivision of the United States, to add back the taxpayer's distributive or pro rata share of any tax imposed on and paid by a pass-through entity to such jurisdiction. Add back is required to the extent the tax was deducted from the pass-through entity's gross income in determining its federal taxable income. This addback requirement applies to tax years beginning after December 31, 2025. Transaction taxes: The law delays the previously enacted sales and use tax rate increase from 6.0% to 7.0% that was set to take effect on October 1, 2026. The 6.0% rate will remain through September 30, 2027, and the 7.0% rate will begin on October 1, 2027. The law makes permanent the increase to the rate of the additional sales and use tax on gross receipts for transient lodgings or accommodations. A 2023 law temporarily increased the rate from 0.3% to 1.3%, which was set to sunset on September 30, 2027. The law repeals the sunset date. The law also increases the tax rate on gross receipts from the sale of or charges for the rental or leasing of rental vehicles and utility trailers to 11% (from 9.25%). This rate change takes effect on October 1, 2026. This rate also applies to the sale or charges from transactions for sharing a vehicle or utility trailer made through a marketplace, including peer-to-peer sharing programs, regardless of whether the rental vehicle or utility trailer is owned by a rental operator or is part of a rental fleet. Other tax related provisions: The law makes several other tax-related changes, including the following:
For additional information on this development, see Tax Alert 2026-1962. In Dollar Bank, FSB v. Harris,4 the Ohio Supreme Court (court) affirmed an Ohio Board of Tax Appeals' (BTA) decision that upheld the Department of Taxation's (Department) denial of a financial institution's request for a refund of Financial Institutions Tax (FIT). The court held that Ohio's FIT "regressive rate" structure does not violate the Dormant Commerce Clause of the U.S. Constitution because it is internally consistent, does not result in double taxation, and does not discriminate against interstate commerce. Ohio levies the FIT on banks and other financial institutions for the privilege of doing business within the state. The tax is computed by determining a financial institution's total equity capital based on its equity holdings, including stocks and retained earnings. Ohio equity capital is calculated by multiplying total equity capital by an apportionment factor consisting of total gross receipts from Ohio activities compared to total gross receipts from all locations. The FIT then applies a three-tiered rate structure against total Ohio equity capital. The rate structure, which is regressive based on the amount of business the bank does in the state, applies as follows:
The taxpayer is a chartered federal savings bank headquartered in Pennsylvania, with branches in Pennsylvania, Ohio, Virginia, and Maryland. The taxpayer filed refund claims with the Department for tax years 2016 through 2020, arguing that the FIT was unconstitutional because the rate structure forces interstate banks to pay a higher effective tax rate than a similarly sized bank operating exclusively in Ohio. The Department denied the refund request, noting that it lacks authority to determine the constitutionality of a statute. The BTA affirmed, and the taxpayer appealed to the Ohio Supreme Court. The court focused on the "fair apportionment requirement" established in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977) and the "internal consistency" test most recently articulated in Comptroller of Treasury of Maryland v. Wynne, 575 U.S. 542 (2015). The internal consistency test asks whether the identical application of a tax by every state would place interstate commerce at a disadvantage compared with intrastate commerce. The court concluded that Ohio's FIT satisfied both the fair apportionment requirement and internal consistency test because the state taxes only the portion of a bank's equity capital attributable to its Ohio business. The court observed that if every state adopted the same formula, each state would tax only the discrete portion of equity capital attributable to business in that state and no part of a bank's equity capital would be taxed by more than one state. Moreover, the court concluded that the FIT applies evenhandedly regardless of whether a taxpayer is an interstate or intrastate business. Two banks with the same amount of Ohio equity capital pay the same Ohio tax rates, irrespective of their operations elsewhere. The court also addressed the taxpayer's "aggregation" approach, indicating that the taxpayer attempted to "rephrase" the internal consistency test to ask whether a multistate bank would pay more in the aggregate across all states than a bank conducting the same business entirely within a single state. The court noted that the U.S. Supreme Court has never adopted the taxpayer's aggregation approach.5 Finally, the court emphasized that the Constitution imposes no single apportionment formula on the states and that states have "broad discretion to configure their systems of taxation as they deem appropriate." The court noted that the Commerce Clause does not erect a per se barrier against tax policies designed to achieve "fair encouragement of in-state business" or to "compete with other States for a share of interstate commerce." For additional information on this development, see Tax Alert 2026-1855. Federal: Proposed regulations (REG-117130-25) published on August 20, 2026 (the Proposed Regulations), provide guidance on the new category of "excluded property sales income" added by the One Big Beautiful Bill Act (OBBBA). Consistent with Notice 2025-78, the Proposed Regulations would define the scope of income and gain from sales or other dispositions of intangible property and depreciable, amortizable, or depletable property that is excluded from deduction-eligible income (DEI) and, therefore, from foreign-derived deduction eligible income (orFDDEI). For more on this development, see Tax Alert 2026-1826. Multistate: The Multistate Tax Commission (MTC) has adopted revisions to its special industry regulation on airlines (Reg. IV.18.(e)). As revised, the special regulation applies to airlines and with respect to the sourcing of points or miles, the regulation also applies to certain other taxpayers related to an airline. The revised regulation defines "passenger transportation receipts" as "selling air transportation services to transport passengers and their baggage" and "selling or renting property or services to be used or consumed by passengers during the course of transportation." Such services include sales of capacity on its aircraft to other airlines or entities in order to transport passengers, ticket sales under agreement (e.g., codesharing agreements) with other airlines, baggage fees, sale of points or miles that may be redeemed by the purchaser or a third party for air travel, sales of food or liquor, sale of on-flight services such as wi-fi and entertainment, and rental of pet crates. "Freight transportation receipts" means an airline's revenue from selling air transportation services to transport freight, packages or mail and receipts from selling or renting property or services that will be consumed or used during the course of the flight. The revised regulation modifies the receipts factors. The numerator of the sales factor is the total amount of receipts of the taxpayer in the state during the tax year. "Total receipts" in the state include: (1) the taxpayer's transportation receipts in the state during the income year, and (2) any other receipts attributable to this state during the year under the state's general allocation and apportionment statutes and regulations. A taxpayer determines its transportation receipts for the year by multiplying its transportation receipts by the departure ratio (i.e., the ratio of the number of departures of its aircraft in this state weighted by the value of aircraft by type to the number of departures of its aircraft everywhere weighted by the value of aircraft by type). When a non-airline taxpayer and an airline are related parties, the taxpayer will source receipts from its sale of points or miles that may be redeemed by the purchaser or a third party for air travel by applying the applicable departures ratio. Receipts from the sale of aircraft including aircraft parts are not included in either the numerator or denominator of the receipts factor. The revised regulation adds examples of the receipts factor calculation. The regulation was revised on July 30, 2026. A state would have to adopt the revised regulation for it to be effective in that state. Maine: The Maine Revenue Services (MRS) provided guidance on the state's new pass-through entity tax (PTET), which applies to tax years beginning on or after January 1, 2026. A pass-through entity (PTE) must make an annual election to be subject to the PTET; the MRS said that the filing of the annual return constitutes a PTE's election to be subject to the PTET. The amount of the PTET for each tax year is the distributive share of income of all qualified members increased by the PTET paid to Maine and to other states with PTETs substantially similar to Maine's PTET multiplied by the highest marginal individual income tax rate, excluding the 2% surcharge. For 2026, the PTET rate is 7.15%. Qualified members may claim a credit equal to 90% of their distributive share of Maine PTET paid. Starting in 2026, annual PTET returns must be filed electronically through the Maine Tax Portal or the combined federal/state Modernized e-file program. Returns and payments are due by the 15th day of the third month following the end of the electing PTE's tax year. Estimated payments must be made by the 15th day of the 4th, 6th, 9th and 13th months following the beginning of the electing PTE's tax year. For tax year 2026, estimated PTET payments must be made through the Maine Tax Portal. The MRS further stated that estimated PTET payments are required for payments due on or after July 29, 2026 and that underpayment of estimated PTET penalties will not be applied during the first year of the PTET program. Maine Rev. Serv., Maine Tax Alert (Vol. 36, Issue 10, August 2026 and Vol. 36, Issue 12, August 2026 - #3). Michigan: The Michigan Department of Treasury (MI DOT) issued guidance on calculating the premiums tax and retaliatory tax liability for a unitary business group (UBG) of insurers. The MI DOT explained that the UBG first must identify its members that are foreign or alien insurers (collectively, foreign insurers) and those that are domestic insurers. A UBG with no foreign members should calculate one combined premiums tax liability based on the combined tax attributes of all its member, while a UBG with a foreign member starts its calculation by determining whether its foreign members, as a group, have a retaliatory tax liability. Because Michigan's retaliatory tax is imposed only on foreign insurers, a UBG's retaliatory tax liability is computed by considering the tax attributes of the UBG's foreign members. The tax attributes of the UBG's domestic members are not included in the retaliatory tax calculation. If the UBG determines that its foreign members have a retaliatory tax liability the UBG would pay the tax for the foreign insurers in lieu of the premiums tax. The premiums tax liability would be based on the combined attributes of the UBG's domestic member. If the foreign members, as a group, do not pay retaliatory tax liability, the combined premiums tax liability is based on the combined tax attributes of all its members, foreign and domestic. The MI DOT indicated that it is developing new forms and instructions for use with tax year 2026 and interim schedules for use in tax year 2025 and for prior years that are open. Mich. Dept. of Treas., Notice: "Calculating Premiums Tax and Retaliatory Tax Liability for a Unitary Business Group of Insurers" (August 11, 2026). New York City: New law (2026/133) retroactively decreases the credit residents may claim against their New York City (City's) personal income tax for their share of the City unincorporated business tax (UBT) paid by a partnership in which they are a partner or business of which they are a proprietor.6 The credit is a percentage of the amount determined under NYC Admin. Code Section 11-1706(c)(3) (hereafter, "determined amount"). The credit remains the same for those making less than $1 million but is decreased for those making $1 million or more retroactively to tax years beginning on or after January 1, 2026. For tax years beginning on or after January 1, 2026, the credit amount is determined as follows: (1) for city taxable income of $142,000 but less that $1,000,000, the credit is 23% of the determined amount; (2) for city taxable income of $1,000,000 or more but less than $1,250,000, the credit is a percentage of the determined amount, calculated by subtracting from 23%, a percentage determined by subtracting $1,000,000 from city taxable income, dividing the result by $250,000 and multiplying by 8%; and (3) for city taxable income of $1,250,000 or more, the credit is 15% of the determined amount. These changes took effect immediately and apply with retroactive effect as of January 1, 2026. N.Y.C. Laws 2026, 2026/133 (Int. No. 972), became law without the mayor's signature on August 18, 2026. For additional information on this development, including the credit amount for tax years beginning before January 1, 2026, see Tax Alert 2026-1939. Colorado: In response to a ruling request, the Colorado Department of Revenue (CO DOR) said that when tangible personal property purchased at wholesale is withdrawn from inventory in Colorado for promotional or giveaway purposes it is subject to use tax in Colorado at the time of withdrawal if the purchaser did not pay sales tax at the time of purchase. If the tangible personal property is purchased outside of Colorado and brought into the state for use, it is subject to Colorado consumer use tax, but the taxpayer may claim a credit against Colorado use tax for any legally imposed use tax previously paid to another state. The CO DOR said these rules apply if the tangible personal property was purchased at retail outside the state or at wholesale and pulled from inventory outside the state. The credit first applies to state-level use tax owed and then to any subdivision, such as a special district. Colo. Dept. of Rev., GIL 26-003 (June 25, 2026). Georgia: In response to a ruling request from an online company that provides ancestral and health history reports via DNA testing and analysis, the Georgia Department of Revenue (GA DOR) addressed various sales and use tax issues related to the provision of these services. The GA DOR explained that when a product is not received by the purchaser at the seller's business location, the sale is sourced to the location where it is received by the purchaser, including the location listed on the delivery instructions. Thus, when a DNA testing kit is received by a customer at its designated Georgia address, the service transaction is sourced to Georgia. The GA DOR further stated that DNA testing services are not taxable in Georgia as they are not specifically designated as such. The GA DOR also determined that the sale of DNA testing service and the DNA testing kits are not a taxable bundled transaction because the true object of the transaction is the DNA testing service. Thus, the DNA testing service is not taxable in Georgia, but the DNA testing kit is subject to use tax. Because the company is the end user of the DNA testing kit, it is liable for Georgia use tax on the kits. The GA DOR noted that the company may claim a credit against its Georgia use tax liability for like sales and use taxes lawfully imposed by another state. To claim the credit the company must show proof of payment of the other state tax. Ga. Dept. of Rev., Letter Ruling SUT-2026-02 (June 22, 2026). Pennsylvania: Governor Josh Shapiro issued an Executive Order (EO) directing the Pennsylvania Department of Revenue to update the Computer Data Center Equipment Exemption Program Guidelines to ensure that applicants for the sales and use tax exemption comply with the Governor's Responsible Infrastructure Development (or GRID) requirements starting on or after August 18, 2026. The Governor's GRID requirement focuses on energy affordability, transparency and community engagement, workforce and economic development, and environmental protection. Pa. Gov., Executive Order 2016-05 (August 18, 2026). Texas: In response to a ruling request from a company that specializes in independent dispute resolution (IDR) under the Federal No Surprises Act (NSA), the Texas Comptroller of Public Accounts concluded that the company's IDR services are subject to the state's sales and use tax because they fall within the definition of taxable insurance services as insurance claims adjustments or claims processing. The company works directly with medical service providers and the company's activities are performed on behalf of a medical service provider to resolve disputed amounts related to an insurance claim. The Comptroller found that this activity "constitutes the supervising, handling, investigating, and settling of payment for an insurance claim under the definition of insurance claims adjustment or claims processing … " Accordingly, the company's services are taxable insurance services. Tex. Comp. of Pub. Accts., STAR System No. 202607009L (July 10, 2026). Federal: Notice 2026-50 (Notice), released on August 14, 2026, modifies and amplifies Notice 2026-1 to expand the scope and duration of the existing safe harbor for the IRC Section 45Q credit for carbon oxide sequestration. The Notice also clarifies that the safe harbor may be used for purposes of determining the amount of qualified carbon oxide subject to the IRC Section 45Q recapture rules. Lastly, the Notice extends the safe harbor's applicability. Rather than being limited to storage occurring during calendar year 2025, the relief now applies to secure geological storage occurring on or after January 1, 2025, and through the end of the calendar year in which Treasury and the IRS issue future interim guidance or proposed regulations addressing IRC Section 45Q measurement, reporting and verification requirements. For more on this development, see Tax Alert 2026-1834. Delaware: New law (HB 310) excludes a "large energy use facility" from the definition of a "qualified facility" for purposes of determining eligibility for tax credits, which can be claimed against the corporation income tax, and license fee reductions for job creation and qualified investment in business facilities. As modified a "qualified facility" is defined as "any qualified property that is not a large energy use facility located within this State that constitutes a new facility or an expanded facility and that is used by the taxpayer in or in connection with a qualified activity." A "large energy use facility" is defined as "a facility that does any of the following: 1. Uses or is projected to use a monthly maximum demand of 75 megawatts or greater at a load factor of 85% or greater. 2. Uses a monthly maximum instantaneous demand of 100 megawatts or greater. 3. Uses or is able to use a monthly maximum demand of 30 megawatts or greater and is primarily engaged in providing a service described under code 518210 of the 2022 North American Industry Classification System." The law allows multiple facilities to be aggregated and treated as a "large energy use facility" if the electric utility (or the electric utility's regulatory body) determines that the facilities "would pose reliability risks to the electric system because of their electricity use, proximity, and operational characteristics." A "large energy use facility" does not include a facility that stores, processes, refines or transfers crude petroleum or petroleum products in bulk quantities. Excluded facilities do not count toward aggregation. This exclusion does not apply to a new facility that after August 26, 2026, adds uses unrelated to the storage, processing, refining, or transfer of crude petroleum, petroleum products in bulk quantities, or other energy storage materials, if the energy use of the new facility meets the thresholds specified in the definition of a "large energy use facility." A "large energy use facility" also must produce or procure sufficient renewable energy within Delaware to power its operations. Del. Laws 2026, HB 310, signed by the governor on August 26, 2027.7 Hawaii: The Hawaii Department of Taxation issued guidance on the changes made to the state's motion picture, digital media and film production income tax credit by law enacted in 2026 (Act 185). These changes include (1) the additional 5% credit for qualified productions whose workforce is at least 80% local hires and (2) the independent third-party certification requirement. For purposes of the local hire credit, the term "workforce" includes producers, executive producers, co-producers, directors, screenwriters, lead and supporting cast, extras, day players, stunt performers, individuals who provide technical services off camera, and other individuals who provide services that are customarily considered above- or below-the-line services in the film industry. An individual can only be counted once in determining the number of individuals in the workforce and the number of local hires. An individual will qualify as a local hire if the individual is a resident during the calendar year for which the credit is being claimed. For split-year productions, whether the production qualifies for the additional 5% credit will be based on whether it had a workforce of 80% local hires in each respective calendar year. The guidance lists documentation a qualified production should maintain to support its claim for the additional credit. The guidance also describes the requirements and procedures that a qualified certified public accountant should adhere to when issuing a third-party certification. Taxpayers claiming the film credit have 90 days following the end of the tax year in which the qualified production costs were expended to submit the certification. Haw. Dept. of Taxn., Tax Information Release No. 2026-03 (August 24, 2026). Michigan: New law (SB 966) requires the State Housing Development Authority, in cooperation with the Michigan Department of Treasury, to establish, implement and administer the housing opportunity tax credit program. The authority will not issue an award for an annual housing opportunity tax credit for a qualified project that exceeds the lesser of the amount necessary for the financial feasibility of the qualified project or the adjusted annual federal credit amount for the qualified project. Those seeking the credit must submit an application in a form and manner prescribed by the authority. The authority will give preference to qualified projects that use in-state manufactured building components. Credits will be awarded on a first-come, first-served basis. For 2027, the aggregate amount of housing opportunity tax credit that the authority may issue approval notices for is capped at $42 million. The cap will be adjusted annually by the percentage increase in the US Consumer Price Index. The authority will send approval notices to applicants. The approval notice also must state that the approved credit is contingent on the authority's approval of a final cost certification and the issuance of an eligibility statement, which will state the amount of credit that may be claimed in each year of the credit period. The law provides guidance for claiming the credit if the applicant is a pass-through entity, and it defines several key terms related to the credit. Mich. Laws 2026, Pub. Act 23 (SB 966), signed by the governor on July 21, 2026. A related bill (HB 5806), effective for tax years beginning on and after January 1, 2027, allows qualified taxpayers to claim the housing opportunity tax credit against corporate and individual income taxes. The credit is equal to the amount listed on the allocation report for the qualified taxpayer. HB 5806 sets forth the process for claiming the credit. When a federal low-income housing tax credit claimed for a qualified project for which the Michigan housing opportunity tax credit has also been claimed, is subject to federal recapture or is disallowed, the taxpayer is required recapture the portion of the Michigan housing opportunity tax credit that is equal to the amount of the federal credit that is recaptured or disallowed. The housing opportunity tax credit is claimed after all other nonrefundable credits. The amount of credit that exceeds the qualified taxpayer's tax liability may be carried forward for up to 10 years; the excess amount may not be refunded. Mich. Laws 2026, Pub. Act 30 (HB 5806), signed by the governor on July 21, 2026. Another related bill (HB 5807), effective for tax years beginning on or after January 1, 2027, allows an alien or foreign insurer that is a qualified taxpayer in calculating the total burdens imposed by another state or country on a Michigan-based insurer, to subtract a housing opportunity tax credit for a qualified project. The credit is equal to the amount of the credit listed on the allocation report for the qualified taxpayer for the qualified project. Mich. Laws 2026, Act 31 (HB 5807), signed by the governor on July 21, 2026. New Hampshire: New law (HB 1102) increases the cap on research and development (R&D) tax credits that can be claimed by an entity against the state's business profits tax. Effective January 1, 2027, the cap on the R&D credits that an entity can claim is increased to $100,000 (from $50,000). Effective January 1, 2028, the aggregate value of all R&D credits that can be issued by the commissioner to taxpayers claiming the credit in any fiscal year is increased to $10 million (from $7 million). N.H. Laws 2026, ch. 338 (HB 1102), governor veto overridden on August 19, 2026. New Jersey: New law (SB 4390) — the "End Data Center Tax Credits Act" — reduces the annual amount of tax credits available to data centers under the Next New Jersey program from $500 million to $250 million. SB 4390 took effect immediately. N.J. Laws 2026, ch. 77 (SB 4390), signed by the governor on August 27, 2026. Delaware: New law (HB 462) allows a school board in a district located entirely within New Castle County to use different tax rates for residential and non-residential properties in the district. If a school board uses different rates, the tax rates must be uniform for all real property in the same classification. A district's non-residential tax rate must be at least equal to its residential tax rate but may not be more than 1.85 times the residential tax rate. The law provides that vocational-technical school districts may not use different tax rates for residential and non-residential properties under these provisions. These changes took effect upon enactment. Del. Laws 2026, HB 462, enacted without the governor's signature on August 5, 2026. New Hampshire: New law (HB 1103) modifies the definition of "qualifying structure" for purposes of the community revitalization property tax relief credit to include buildings or structures being used for commercial or industrial purposes, in whole or in part, if such use is converted to residential use, in whole or in part, in a residential conversion zone. The law also provides that, for the period of time determined by a local governing body, the property tax on a qualifying structure will not increase as a result of the structure's substantial rehabilitation, the new construction of housing units that meet certain requirements, or conversion from office, industrial, or commercial use to residential use. A qualifying structure is eligible for tax assessment relief, beginning on the issuance of a certification of occupancy or completion of construction of new housing units, for a period of up to seven years if no workforce housing is created or up to 15 years if workforce housing is created (these new periods are a change from the previously provided period of up to 10 years). For purposes of these provisions "commercial use" and "industrial use" have the same meaning as provided in NH RSA 72:80. The provisions of HB 1103 took effect on August 31, 2026. N.H. Laws 2026, ch. 212 (HB 1103), governor veto overridden on July 2, 2026. California: The California Franchise Tax Board issued a legal ruling discussing the application of the statute of limitations on overcollection of amounts it receives through involuntary collection action. The FTB explained that when there is an overpayment of tax, a credit or refund will not be allowed after four years from the original due date of the return, four years from the date the return was filed, or one year from the date of the overpayment, whichever is later, unless the taxpayer files a claim before the period expires. The statute of limitation period, however, does not apply to the return of payments resulting from an overcollection. The FTB said that an overcollection is not an overpayment and as such an overcollection amount "can be returned even if the statute of limitations for filing a claim for refund has expired." The FTB noted that interest is not allowed on the return of an overcollection; interest is allowed on overpayments. The ruling applies these rules to various situations. Cal. FTB, Legal Ruling — 2026-02 (August 21, 2026). Texas: The Texas Comptroller of Public Accounts (Comptroller) is conducting a temporary tax amnesty program for "unauthorized insurance premium tax" for nonadmitted captive insurance companies (i.e., unlicensed captive insurance companies) and their insureds through December 31, 2026. Nonadmitted captive insurance companies that participate in the amnesty program and come into compliance with the state's insurance premium tax law will have otherwise applicable penalties and interest waived and be subject to a four-year lookback period. Certain arrangements are excepted from the unauthorized insurance premium tax and would fall outside the scope of this amnesty program, including the lawful transaction of surplus lines insurance under Chapter 981 of the Texas Insurance Code, independently procured insurance on which premium tax has been paid under Chapter 226, and captive insurers authorized under Chapter 964 that pay premium tax under Chapter 223A and maintenance taxes under Tex. Ins. Code Section 964.068. To participate in this amnesty program, an unlicensed captive insurance company, and those who are insured by one, must file Forms 25-108, Texas Annual Insurance Tax Report (Unauthorized Insurance), and 25-123, Texas Annual Insurance Tax Report — Supplement (Unauthorized Insurance) for insurance tax years 2022 through 2025. This covers insurance written from January 1, 2022 through December 31, 2025. To qualify for amnesty, the forms must be filed by December 31, 2026. Forms 25-108 and 25-123 are available on the Texas Insurance Tax Forms webpage. For additional information on this development, see Tax Alert 2026-1885. Federal: Proposed legislation entitled the Multi-State Worker Tax Fairness Act of 2026 (H.R. 10142) would limit the ability of a state to impose tax on the income of a nonresident individual telecommuter and other multi-State workers to the period of time when such individual is present in or physically working in the state. A state could not impose income tax on the compensation of a nonresident for "any period of time" when the nonresident is physically present in another state. For purposes of determining "physical presence", a state could not deem a nonresident individual present in or working in the State when: (1) the nonresident individual is present at or working at home for convenience, or (2) their work at home or home office fails any convenience of the employer (or similar) test. In determining the "period of time" with respect to compensation paid, a State could not deem a period of time when the nonresident individual is physical present in another State and performing certain tasks in the other State to be: (1) time that is not normal work time (unless deemed as such by the employer), (2) nonworking time (unless deemed as such by the employer), or (3) time with respect to which no compensation is paid (unless deemed as such by the employer). If approved as currently proposed, these provisions would take effect upon enactment. H.R. 10142 was introduced on August 24, 2026. A similar bill was considered in 2024. Idaho: The Idaho State Tax Commission has updated its Table for Percentage Method Withholding and the Table for Wage Bracket Withholding to reflect the expiration of the state's child tax credit of $205 per qualifying child which applied for tax years 2018 through 2025 under Idaho Code Section 63-3029L. The tax rate of 5.3% (unchanged) now applies to annual wages over $15,000 (previously $16,100) for single filers and heads of household and to wages over $30,000 (previously $32,200) for married filers. Employers are instructed to apply these changes immediately. For additional information on this development, see Tax Alert 2026-1829. Maine: The Maine Revenue Services updated its withholding tables/formula to reflect the added personal income tax on individual income that exceeds $1 million ($1.5 million for joint filers and heads of households). The change applies retroactively to January 1, 2026 under LD 2212. Employers must implement the revised withholding tables/formula as soon as possible. If supplemental wages (such as bonuses, commissions, overtime pay, etc.) are paid separately from regular wages, employers may withhold at a flat rate of 5%. For additional information on this development, see Tax Alert 2026-1830. Maryland: The Maryland Department of Labor has issued detailed guidance for employers on registering for the state's paid Family and Medical Leave Insurance (FAMLI) program. Online registration is mandatory for any employer with one or more Maryland employees in advance of the contribution start date of January 1, 2027. After registration, employers are automatically enrolled in the state plan unless they pursue an approved private plan option. Registration is intended to establish access for future contribution, reporting and claim administration activities. The initial registration must be completed by an Authorized Officer, that is, the company's owner or partner, executive director, CEO, CFO, COO, president, secretary, household employer, or another designated individual with equivalent legal authority. After registration, the employer can grant a third-party administrator access. For additional information on this development, see Tax Alert 2026-1816. West Virginia: In response to an opinion request, the West Virginia Attorney General determined that an oil and gas lease agreement between the State and an energy company is a "lease" exempt from the excise tax on real property transfers. Pursuant to the four-year lease agreement, the State grants the energy company the right to explore and drill for oil and gas in a designated area. In return, the energy company made a per acre "bonus" payment, and if it finds, produces and sells oil and gas from the property, it must pay the state a percentage of the gross proceeds as a royalty. Under West Virginia law a person who delivers, accepts or presents any document for recording must pay an excise tax on the privilege of transferring title to real estate. A stamp is affixed to the document (e.g., any deed, instrument or writing that grants, conveys or otherwise transfer real property within the state) once the tax is paid. A lease does not qualify as a document. While "lease" is not defined by the statute, the West Virginia Supreme Court of Appeals has defined it as "a letting out of property for use during a definite period which is always for a shorter term than the lessor has in the premises." The Attorney General determined that the terms of the agreement between the State and energy company "track traditional terms of oil and gas leases" and that the presence of a "bonus is merely consideration for the agreement and doesn't affect this outcome." W.Va. Atty. Gen., Op. Re: Application of Excise Tax to Oil and Gas Lease Agreement (August 24, 2026). Federal — Canada: On August 21, 2026, United States (US) Customs and Border Protection (CBP) issued Cargo Systems Messaging Service (CSMS) #69606660, providing guidance to importers, brokers and filers on implementing the additional 50% Section 338 duties on certain Canada-origin goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. ET on August 22, 2026. The duties, imposed by Proclamations 11046, 11047, and 11048 and originally effective August 19, 2026, were temporarily suspended by Proclamation 11056 until 12:01 a.m. ET on 22 August 2026 to allow continued US-Canada negotiations. After those negotiations were suspended, the duties took effect as scheduled on August 22, 2026. The guidance establishes Harmonized Tariff Schedule of the United States (HTSUS) headings 9903.03.12 through 9903.03.16 and addresses duty rates, interaction with other duties, Chapter 98 treatment, foreign trade zone admission, drawback eligibility and the order of HTSUS reporting on entry summaries. Canada has announced its intent to impose dollar-for-dollar counter-tariffs on certain US-origin goods, expected to take effect on September 8, 2026. For additional information on this development, see Tax Alert 2026-1819. International — Portugal: Ordinance No. 298/2026/1, published on July 16, 2026, introduces new forms for the Value-Added Tax (VAT) Return, Annex R and the annexes relating to VAT adjustments reported in fields 40 and 41. These changes go beyond merely aligning the VAT Return with recent legislative developments. Rather, they significantly enhance VAT reporting requirements, introducing additional levels of detail and reinforcing the quality, accuracy and transparency of information disclosed by taxable persons. For additional information on this development, see Tax Alert 2026-1767. 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: 2026-1981 | ||
