State and local taxes impact almost every taxpayer, and developments in any one jurisdiction can be frequent and sometimes confusing. In this newsletter edition, we will briefly summarize certain state and local tax (SALT) developments in several states which may be important to you.
Alabama – Updates Reported
Extended Filing Deadline for Taxpayers in Declared Disaster Areas: On February 28, 2023, the Alabama Department of Revenue (Department) published an announcement that the Department is offering tax relief to Alabama taxpayers who reside or who have a business in federally declared disaster areas in Alabama where damage was caused by severe weather in January 2023. According to this announcement, the Department will grant filing and payment extensions directly affected by the severe storms. As noted in this announcement, Alabama taxpayers residing in such disaster areas have until October 16, 2023, to file tax returns and make tax payments due on or after January 12, 2023, and before October 16, 2023. The announcement also states that taxpayers in these areas who file and pay on or before October 16, 2023, will be eligible for penalty and interest relief during the extension period. This extension, according to the announcement, applies to all taxes administered by the Department other than taxes and registration fees due under the International Fuel Tax Agreement and the International Registration Plan. Affected taxpayers filing for Individual Income Tax, Corporate Income Tax, Pass-Through Entities, Business Privilege Tax, or Withholding Tax may submit a penalty waiver request using the Department's form PWR, which can be accessed at the link set forth in this announcement. Further, the announcement set forth various telephone contact information for additional guidance. More information can be found here.
District of Columbia – Updates Reported
Housing Tax Credit Transfer Requirements Addressed: On February 14, 2023, the Office of Tax and Revenue (OTR) issued Notice 2023-02, addressing the requirements for transferring credits available for "qualified projects" located in the District. As stated in this Notice, a "qualified project" means a rental housing development in the District that, after October 1, 2021, receives an allocation of federal low-income housing tax credits under Internal Revenue Code Section 42(h)(1) or (4) or a commitment to extend low-income housing pursuant to Code Section 42(h)(6)(B) between the owner and the Department executed on or after October 1, 2021. This Notice then addresses the eligibility requirement to receive low-income housing credits, followed by addressing the requirements for an owner to transfer, sell, sign, or otherwise allocate the tax credits to a subsequent taxpayer. As referenced in this Notice, the owner of the tax credits may transfer, sell, assign, or allocate some or all of the tax credits to parties eligible pursuant to the applicable provisions of the D.C. Code; and the owner is not limited on the number of transactions to transfer, sell, assign or otherwise allocate the tax credits to subsequent holder, so long as the number of tax credits transferred, sold, assigned, or allocated does not exceed the maximum given for the qualifying project. The Notice also states that for any transfer, sale, assignment, or allocation to be valid, the transferee must certified to the CFO of the OTR that the qualifying owner received consideration in an amount consistent with that Notice, and that the owner who makes a transfer to another unrelated party shall submit to the CFO and the Commissioner of the OTR a statement that the recipient of the transfer, sale, assignment, or allocation is eligible, and shall provide the appropriate information so that the tax credit may be properly allocated. The Notice provides some examples of transfer situations, and also provides contact information for additional questions. More information can be found here.
Florida – Updates Reported
Electronic Filing of Florida Partnership Information Return: On March 7, 2023, the Florida Department of Revenue (Department) published Tax Information Publication No: 23C01-01, advising that for the tax years beginning on or after January 1, 2022, the Florida Partnership Information Return may be filed electronically. According to this Publication, electronic filing of Form F-1065 is available through the Internal Revenue Service's Modernized e-File federal/state program using approved software. The Publication also states that every partnership doing business, earning income, or existing in Florida that has a partner subject to the Florida Corporate Income/Franchise Tax must file the Florida Form F-1065. Further, the Publication states that a limited liability company is considered a partnership if classified as a partnership for federal income tax purposes. The Publication sets forth various contact information for questions. More information can be found here.
Georgia – Updates Reported
Extended Deadline for Taxpayers Impacted by Severe Weather: On February 23, 2023, the Georgia Department of Revenue (Department) published an announcement that certain deadlines for taxpayers have been extended until May 15, 2023, for those taxpayers impacted by severe weather on January 12, 2023. According to this announcement, this extension will impact Georgia taxpayers in Butts, Crisp, Henry, Jasper, Meriwether, Newton, Pike, Spalding, and Troup Counties. Following IRS precedent, the announcement states that individuals who reside in and businesses whose records required for tax compliance are located in the disaster area will receive the extended deadline. Further, the extension applies to return filing, tax payment, and other time-sensitive acts as specified by the IRS. Affected taxpayers who had a valid extension to file their 2021 return that was due to expire on February 15, 2023, will now have until May 15, 2023, to file that return. According to the announcement, the relief also includes quarterly estimated income tax payments due January 26, 2023, and the quarterly payroll and excise tax returns normally due on January 31, 2023, and on April 30, 2023. However, this postponement of time to file and pay does not apply to information returns in the W-2 and 1099 series, nor to certain other return and payment requirements as set forth in the announcement. More information can be found here.
Legislation Authorizing Personal Income Tax Refunds: On March 17, 2023, Governor Brian P. Kemp signed into law HB 162, which grants a personal income tax refund to individual filers. The refund will be $250 for single filers and $500 for joint filers. To be eligible for a refund, taxpayers must have filed returns for both the calendar year 2021 and 2022. The Department of Revenue anticipates that it will begin issuing refunds within six to eight weeks and that the majority of refunds will be issued by July 1, 2023. More information can be found here.
Louisiana – Updates Reported
Fresh Start Proper Worker Classification Initiative: On February 15, 2023, the Louisiana Department of Revenue (Department) issued Revenue Information Bulletin No. 23-010 regarding the Fresh Start Program that became effective January 1, 2023. Under this Program, employers who have been misclassifying a class or classes of workers as independent contractors will be allowed to reclassify those workers and voluntarily disclose such reclassification to the Department without liability for prior periods. To qualify, according to this Bulletin, the employer must have consistently treated the class or classes of workers as non-employees for the last three years, and all employees in the same class must have been treated similarly. Further, the employer according to this Bulletin must have filed all IRS forms 1099 – NEC (or the predecessor IRS Form) for all workers in the class. Further, if income taxes were withheld or unemployment contributions were made for a worker, the Bulletin states that such worker would be treated as an employee and the employer is disqualified from seeking relief under the Program. Still further, if unemployment insurance contributions were made for the worker, the worker was treated as an employee and again the employer is disqualified. According to the Bulletin, qualifying businesses must submit an application for the Program to the Department between January 1, 2023 and December 31, 2023, at the email address set forth in the Bulletin. Further information is provided in this Bulletin with respect to the Department's review of the application. The Bulletin also sets forth contact information regarding questions as to qualification and application for the Program. More information can be found here.
Maryland – Updates Reported
Interest Rate for Late 2022 Individual Income Taxes: The Comptroller of Maryland (Comptroller) has published an announcement stating that interest is due at the rate of 9.0 percent annually or 0.75 percent per month for any month or part of a month that a tax is paid after the original due date of the 2022 Individual Tax Return but before January 1, 2024. The announcement provided contact information with respect to calculating interest for tax paid on or after January 1, 2024, with respect to the 2022 return. More information can be found here.
Mississippi – Updates Reported
Fair Market Value Notice for Cannabis Excise Tax: The Mississippi Department of Revenue (Department) issued Notice 72-23-01, dated January 1, 2023, regarding the cannabis excise tax. The Department stated in this Notice that a 5 percent excise tax shall be applied to the sales price of a cultivation facility's first sale or transfer of cannabis flower or cannabis trim to a medical cannabis establishment with no common ownership. The Department also stated in this Notice that with respect to the first sale or transfer of cannabis flower or cannabis trim to a medical cannabis establishment having common ownership with the cultivator, the 5 percent excise tax shall be calculated using the fair market value of the cannabis flower or cannabis trim with respect to such first sale or transfer. For such purposes, the fair market value of medical cannabis flower or medical cannabis trim is set by the Department in regard to levying the excise tax on the first sale or transfer of medical cannabis flower or medical cannabis trim between cultivators and other common ownership medical cannabis establishments. The Department then provides in this Notice the fair market value that will be assigned to flower sold to common interest establishment and to trim sold to common interest establishment. That fair market value will be recalculated by the Department twice per calendar year, on January 1 and July 1. The Notice contains contact information for any questions. More information can be found here.
North Carolina – Updates Reported
Individual Income Tax Refunds Being Issued: The North Carolina Department of Revenue (Department) issued a statement on March 10, 2023, that the Department officially began issuing 2022 Individual Income Tax refunds on that date. The Department further stated that taxpayers may begin receiving refunds through the mail and through direct deposit during the week of March 13, 2023. More information can be found here.
South Carolina – Updates Reported
Interest Rate Changed: On February 16, 2023, the South Carolina Department of Revenue (Department) issued Information Letter #23-2, which announced an interest rate change for the period from January 1, 2023, through June 30, 2023. According to this Information Letter, the interest rate is now set at 7 percent, up from 6 percent for the period from October 1, 2022, through December 31, 2022. Also according to this Letter, this interest rate is to be applied to underpayments and overpayments of taxes, and the rate is compounded daily except simple interest applies to the underpayment of declaration of estimated tax. Notwithstanding the foregoing, the Letter further states that for the fiscal year of July 1, 2022 through June 30, 2023, South Carolina law directs the Department to reduce the rate of interest paid on eligible refunds by total of 3 percentage points from the rate published in this Letter. More information can be found here.
Tennessee – Updates Reported
Sales By Pharmaceutical Company Not Subject to Business Tax: On February 24, 2023, the Tennessee Court of Appeals rendered a decision in the case of Eisai, Inc. vs. David Gerregano, Commissioner of Revenue, State of Tennessee, holding that pharmaceutical sales by the taxpayer/plaintiff were not subject to the business tax because such sales were non-taxable "wholesaler-to-wholesaler" sales and, separately, because the pharmaceuticals did not constitute "tangible personal property" as that term is defined in Tennessee Code Annotated, Section 67-4-702(a)(23). With respect to the latter reasoning, the Appeals Court noted that Section 67-4-702(a)(23) exempts products that are "inserted or affixed to the human body by physicians or dispensed in the treatment of patients by physicians." Based upon the facts presented, the Appeals Court determined that there was no dispute that the pharmaceuticals sold by the taxpayer to certain specialized distributors are drugs that are administered directly to the patient by the health care provider; and that such specialized distributors were created to serve the medical service provider market that administers infused drugs and other medicines requiring sophisticated dispensation methods overseen by medical professionals. The Appeals Court also noted that the medical service providers who bought these drugs from the specialized distributors inserted or affixed them to the human body or dispensed them in the course of treating their patients. In essence, these pharmaceuticals were used, as noted by the Appeals Court, by physicians in the course of providing medical services to their patients. As such, the Appeals Court determined that the pharmaceuticals do not constitute "tangible personal property" since the definition of that phrase does not include any substances of any nature inserted or affixed to the human body by duly licensed physicians in the treatment of patients. More information can be found here.
Texas – Updates Reported
Approved 2023 Franchise Tax Preparation Software Providers: The Comptroller's Office has recently published an update regarding approved Franchise Tax preparation software providers for 2023. That update provides a listing of approved software providers for electronic submissions of Franchise Tax Reports through 2023, as well as listing of approved software providers for original printable reports for Franchise Tax through 2023. This update states that software developers, distributors and users are responsible for how data is gathered and processed through the software programs, and questions about a provider's product should be directed to the provider. The listing of approved software providers for electronic submission was updated as of February 8, 2023, and the listing of approved software providers for Franchise Tax printable forms was updated as of March 2, 2023. More information can be found here.
