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 SALT developments in several states which may be important to you.
Alabama – Updates Reported
Annual Wholesale Oil License Fee Return: On September 6, 2022, the Alabama Department of Revenue (Department) posted an announcement that the annual wholesale oil license fee return is due October 14, 2022, for the periods of October 1, 2021, through September 30, 2022. The Department noted in this announcement that if a company was issued a Supplier License, a Permissive Supplier License, or an Importer License by the Department, then the Return must be submitted. The Department also noted that electronic filing is mandatory, and that all Returns must be filed through My Alabama Taxes at https://myalabamataxes.alabama.gov. Further, the announcement noted that any wholesale or license fee liability exceeding $750 must be paid electronically and that the company must log into its account between October 1, 2022, and October 14, 2022, to submit the required Return and payment. More information can be found here.
District of Columbia – Updates Reported
Tax Changes Effective October 1, 2022, for Various Taxes: On September 2, 2022, the Office of Tax and Revenue (OTR) published an announcement reminding taxpayers, tax professionals, software providers, businesses, and others about tax changes that were enacted in the Fiscal Year 2023 Budget Support Emergency Amendment Act of 2022 and take effect October 1, 2022, unless otherwise noted. Those changes with respect to real property taxation include the Seniors and Individuals with Disabilities Real Property Tax Increase Limit Amendment Act of 2022, which provides that the senior citizen assessment cap credit limits taxable assessment increases to 2 percent beginning with tax year 2023; Disabled Veterans Homestead Exemption Amendment Act of 2022, which establishes a $445,000 homestead deduction for individual real property owners having total and permanent disability resulting from a service-incurred condition; and Tax Abatements for Housing in Downtown Act of 2022, which establishes tax abatements for certain real property undergoing a change of use to provide at least 10 housing units. Further, with respect to individual income tax, the District Earned Income Tax Credit for the tax year 2022 has been increased to 70 percent of the federal earned income tax credit, and the New District of Columbia Tax Rate Schedule for 2022 is set forth in this publication. Other changes are also noted for various taxpayers. More information can be found here.
Florida – Updates Reported
Electronic Digital Signatures: On August 24, 2022, the Florida Department of Revenue (Department) issued Tax Information Publication No: 22ADM-07, addressing the use of electronic digital signatures. This Publication stated that the Department accepts electronic digital signatures, because they have the same force and effect as a written signature under Florida law. As noted in this Publication, taxpayers and their representatives may use established, secured messaging systems to submit documents with electronic signatures, such as a power of attorney form or other documents that must be signed. As further noted in this Publication, the Department will accept images with signatures (scanned or photographed) in any of the following file types: TIFF, JPG, JPEG, PDF (Adobe Reader), Microsoft Office suite, or ZIP. Accepted electronic digital signatures, according to the Publication, are those using encryption techniques that provide proof of original and unchanged documentation in one of those file types. Further, the Publication states that Department employees may use electronic digital signatures when signing documents sent to taxpayers or authorized representatives. More information can be found here.
Georgia – Updates Reported
Income Tax/Domicile for Tax Liability Purposes: Generally, voting in a jurisdiction, being licensed to drive in a jurisdiction, and claiming the homestead exemption for a residence are indications of being domiciled in that jurisdiction and being subject to income taxes based on residence. In a decision earlier this year, the Georgia Tax Tribunal, in Perkinson V. Robyn A. Crittenden, Commissioner, Docket No. 2116694 & 2118458, found those elements were not dispositive of the issue of domicile for Georgia income tax purposes. Larry Perkinson was an employee of Saudi Aramco working in Saudi Arabia from 2009 until 2019, when he retired. Before 2014, neither Mr. Perkinson nor his wife had any business or financial contact with Georgia. In 2014, Mrs. Perkinson's mother, then living in Texas, began to decline in health. To provide a residence for her closer to family, Larry Perkins and his wife bought a residence in Georgia. The same year, they obtained Georgia driver's licenses and registered to vote in Georgia. They also registered their automobiles in Georgia and had their bank and credit card statements sent to the Georgia address. In 2015, Mrs. Perkinson returned to the United States and began to live in the Georgia residence. Mr. Perkinson continued to live in an apartment in Saudi Arabia until his retirement in 2019 and came to Georgia on his annual leave. The Tax Tribunal noted that Saudi Arabia did not have a path to citizenship for residents at any time. Despite Mr. Perkinson enjoying the tax benefit of the homestead exemption, which is available only to Georgia residents, the Court held that Mr. Perkinson did not form an intent to become a Georgia resident until his retirement in 2019 and thus was not liable for Georgia income taxes until that time. More information can be found here.
Louisiana – Updates Reported
Proposed Rule Requiring Electronic Returns/Payments by Vapor Products Dealers: The Louisiana Department of Revenue (Department) published a Notice of Intent to promulgate rules requiring every retail dealer of vapor products that files a Louisiana Tobacco Tax Return for Retail Dealers of Vapor Products to be required to file the return and all reports electronically with the Department using the electronic format. It also requires all payments by a retail dealer of vapor products to be electronically transferred to the Department on or before the 20th day after the close of the reporting period using the electronic format provided by the Department. The Department stated that a public hearing will be held on September 27, 2022, at 9:00 a.m. at the address set forth in the Notice. Further, written comments will be accepted by the Department until 4:30 p.m., September 26, 2022, at the address set forth in the Notice. More information can be found here.
Maryland – Updates Reported
Letter of Intent Required for Privately Designed and Printed Tax Forms: In Administrative Release No. 26, Revised September 2022, the Comptroller of Maryland (Comptroller) set forth the procedures for computer-printed substitute forms to be used in place of the income tax forms produced and distributed by the Comptroller. Pursuant to this Release, the Comptroller will accept only those substitute forms that conform to the corresponding official forms, comply fully with the requirements set forth in this Release, and do not have an adverse impact on tax processing. Further, the Release states that while it deals primarily with paper documents, it also includes other processing and filing mediums, such as optical character recognition, electronic filing, etc. The Release then sets forth numerous requirements for substitute forms to be used for Maryland income tax purposes. One such requirement is that software vendors and tax return preparers who want to file substitute privately designed and printed tax forms and/or computer-generated and computer-prepared tax forms, or create such forms for sale, must develop such substitutes using the guidelines within the Release. These substitutes, unless excepted by this Release, must be approved by the Comptroller's Revenue Administration Division, and all entities intending to file substitute forms must submit a signed Income Tax Letter of Intent by October 31, 2022. More information can be found here.
Mississippi – Updates Reported
Water Crisis/Extension of Return Due Date: On September 7, 2022, the Mississippi Department of Revenue (Department) issued Notice 80-22-002 addressing relief for victims of the Mississippi water crisis. As stated in this Notice, the Department will follow the federal extension due date of February 15, 2023, granted to victims of the water crisis beginning August 30, 2022. The Notice also provides that taxpayers that reside, have a business, or whose records are located in Hinds County have until February 15, 2023, to file individual income tax returns, corporate income and franchise tax returns, pass-through entity tax returns, and quarterly estimated payments due between August 30, 2022, and February 15, 2023. Taxpayers located within this area, according to the Notice, that have a valid extension to file their 2021 tax returns will now have until February 15, 2023, to file such returns. The Notice further states that this extension does not apply to any other tax types or payments due on prior liabilities. Further, the Notice states that any disaster-area taxpayer who receives a penalty notice should contact the Department's office at the number set forth in the Notice to receive abatement. More information can be found here.
North Carolina – Updates Reported
Student Loan Forgiveness Currently Considered Taxable Income: On August 31, 2022, the North Carolina Department of Revenue (Department) published an announcement stating that at the present time, student loan forgiveness excluded from federal income under Internal Revenue Code (Code) Section 108(f)(5) is currently considered as taxable income in North Carolina. In that regard, the Department notes that as part of the American Rescue Plan, Congress enacted Section 108(f)(5) of the Code to expand the types of student loan forgiveness that would not be treated as taxable income for purposes of federal income tax. However, the Department notes that the North Carolina General Assembly did not adopt Section 108(f)(5) of the Code for purposes of the state income tax and, therefore, student loan forgiveness excluded under that Code Section is currently considered taxable in North Carolina. According to this announcement, the Department is monitoring any further enactments by the General Assembly that could change the taxability of student loan forgiveness in North Carolina. More information can be found here.
South Carolina – Updates Reported
Interest Rate Change/Student Loan Debt Forgiveness Not Taxable: On August 31, 2022, the South Carolina Department of Revenue (Department) published Information Letter #22-13 announcing that an interest rate of 6 percent will be applicable for the period from October 1, 2022, through December 31, 2022, with respect to underpayments of tax, and that the rate is compounded daily except that simple interest applies to the underpayment of declaration of estimated tax. This rate also applies to overpayments, with the caveat that the Department is directed to reduce that rate paid on eligible refunds by a total of three percentage points from the listed rates. Separately, the Department published Information Letter #22-14 on September 1, 2022, stating that during the 2022 Legislative Session, South Carolina conformed to the Internal Revenue Code as of December 31, 2021, including conformity to the Internal Revenue Code Section 108(f)(5) which applies to certain student loans that are forgiven for federal income tax purposes and excluded for federal taxable income, and thus are also excluded from South Carolina taxable income, according to this Information Letter. More information can be found here and here.
Tennessee – Updates Reported
Sales/Use Tax Not Applicable to Electronic Subscription Magazines: On September 12, 2022, the Tennessee Department of Revenue (Department) posted Letter Ruling #22-06, dated August 8, 2022, addressing the question of whether the Tennessee sales and use tax applied to print and electronic magazines, publications, and databases. The Taxpayer in this Ruling is a nonprofit, Internal Revenue Code Section 501(c)(3) corporation headquartered in a state other than Tennessee. The Taxpayer provided customers with several products, including subscription access to electronic versions of various magazines featuring certain content; and the print versions of said magazines were distributed from a location outside Tennessee on a weekly basis via the U.S. Postal Service. The print versions of those publications were delivered to the Postal Service at a location outside of Tennessee and any news gathering and reporting was performed remotely. The Ruling stated that the Taxpayer did not have any activities in Tennessee. Electronic versions of the magazines were available daily by email or through the Taxpayer's website. Additionally, the Taxpayer offered subscription access to electronic versions of its publication, as well as information available electronically, through its website. Further, the Taxpayer's Library allowed subscribers to access various types of information, including documents and news of interest, and the Taxpayer's Directory provided information to professionals, officials, and organizations. With respect to the application of the Tennessee sales and use tax, the Department determined that the subscriptions to the print and electronic versions of the Taxpayer's primary publications are exempt from the tax since those products constitute a "magazine," which is statutorily exempt under certain circumstances in Tennessee. Further, the Department stated that although specified digital products are generally subject to the tax, the electronic versions of the Taxpayer's primary publications are exempt because electronic magazines are not considered taxable-specified digital products. Still further, the Department determined that even though access to the electronic publications in databases must take place through some software function, the functionality of the software was limited to access and search functions merely incidental to the information services the customers are accessing. Thus, under the true object test that is used to determine the taxability of a product when the non-taxable component is the true object and the taxable components are merely incidental, the Department concluded that the incidental use of computer software to access the Taxpayer's publications and databases does not subject the Taxpayer's offerings to the tax. More information can be found here.
Texas – Updates Reported
Proposed Manual for the Appraisal of Timberland: The Comptroller's Office filed a proposed rule with the Texas Secretary of State on August 12, 2022, that was published in the Texas Register on August 26, 2022, regarding the proposed adoption of the Manual for the Appraisal of Timberland dated March 2022. As set forth in the publication notice, this manual provides both the eligibility requirements for timberland to qualify for productivity appraisal and the methodology for appraising qualified timberland and restricted-use timberland. Copies of this manual can be obtained from the Comptroller's Office at the address set forth in the publication notice. As referenced in that notice, the earliest possible date of adoption is September 25, 2022, and the comment period also ends on that date. More information can be found here.
