This month's SALT Select is dedicated to the memory of our colleague and friend, Robert L. Wollfarth, Jr. and the many contributions he made to our Firm.
State and local taxes impact almost every taxpayer, and developments in any one jurisdiction can be frequent and sometimes confusing. ln 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
Extension Provided for Making Pass-through Entity Election: By press release dated July 10, 2023, the Alabama Department of Revenue (Department) is extending the due date for certain pass-through entities to file the election to be taxed at the entity level for the 2022 tax year. In its release, the Department stated that the extension is being provided to help those taxpayers who showed an intention to make an election but erroneously failed to do so by the original due date. The Department also stated in the release that elections will be recognized to be taxed at the entity level that are filed using My Alabama Taxes no later than the due date of the 2022 electing pass-through entity return with applicable extensions, as elections validly made by the due date for those pass-through entities which: (i) timely filed the required entity tax return, as if the election had been properly made for the year; (ii) timely made an electing pass-through entity extension payment; or (iii) made an entity-level tax payment prior to the due date of the respective return. The Department also stated in the release that beginning July 10, 2023, taxpayers meeting any of the above requirements and wanting to make the election must access My Alabama Taxes to make the election for the 2022 year, and that there is not a paper alternative for this online election. The release provided information for additional guidance and FAQs on the pass-through entity election process. More information can be found here.
District of Columbia – Updates Reported
UCC New Forms for Filing: The Office of Tax and Revenue (OTR) has recently published Tax Notice 2023-05, entitled Uniform Commercial Code Article 9 Amendments-New Forms for Filing. This Tax Notice, which supersedes Tax Notice 2013-01, provides that effective July 1, 2023, the only versions of Article 9 forms that will be accepted for filing are those provided at the IACA International Association of Commercial Administrators website. The forms referenced in that Notice include the UCC Financing Statement Form UCC1, UCC Financing Statement Addendum Form UCC1Ad, UCC Financing Statement Amendment Form UCC3, and UCC Financing Statement Amendment Addendum Form UCC3Ad. More information can be found here.
Florida – Updates Reported
Sales Tax Exemption for Building Materials Used in Affordable Housing Construction: On July 5, 2023, the Florida Department of Revenue (Department) published Tax Information Publication No.: 23A01-17, entitled Exemption for Building Materials Used in Construction of Eligible Residential Units for Affordable Housing. As noted in this Publication, and effective July 1, 2023, the Department stated that building materials used to construct eligible residential units for affordable housing are exempt from Florida sales and use tax; and that this exemption is available only through a refund of previously paid sales and use tax and only applies to sales of building materials that occur on or after July 1, 2023. The Publication then sets forth the definition of "affordable housing development", "building materials", "eligible residential units", and "newly constructed". The Department states in this Publication that a refund may be claimed by the person who owns the eligible residential unit at the time it is substantially completed; or by a municipality, county, or other governmental unit or agency, or nonprofit community-based organization if the materials are paid for from the funds of a community development block grant, the State Housing Initiatives Partnership Program, or a similar grant or loan program. The Department further states in the Publication that only one exemption through a refund of previously paid taxes may be claimed for any eligible residential unit. Further, the Department notes that a refund will not be granted unless the amount to be refunded exceeds $500; and, in addition, the refund may not exceed the lesser of $5,000 or 97.5 percent of the Florida sales or use tax paid on the cost of building materials. The Publication then sets forth the forms to be used and submitted for a refund to the Department. More information can be found here.
Georgia – Updates Reported
Proposed Sales Tax Rule Amendment Involving High-Technology Data Center Equipment: On June 9, 2023, the Georgia Department of Revenue (Department) issued Notice SUT-2023-01 entitled Proposal to amend Rule 560-12-2-.117 High-Technology Data Center Equipment. In that Notice, the Department stated that the purpose of the proposed amendment pertains to the sales and use tax exemption for certain high-technology data center equipment at O.C.G.A. Section 48-8-3(68.1). This proposed amendment makes numerous changes to the existing Rule involving the exemption for such equipment, including definitional changes; the scope of the exemption; the minimum investment threshold for the exemption; certificates for the exemption; annual reports; the impact on certain income tax credits; among other changes. More information can be found here.
Louisiana – Updates Reported
Adjustments to Federal Income Tax Deduction for Disaster-Related Casualty Losses: On June 29, 2023, the Louisiana Department of Revenue (Department) published Revenue Information Bulletin No. 23-017 explaining the impact of recent legislation to the federal income tax deduction for individuals impacted by Hurricane Ida. As referenced in this Bulletin, the Department stated that affected taxpayers in a federally declared disaster area have the option under federal law of claiming disaster-related casualty losses on their federal income tax return for either the year in which the event occurred or the prior year. The Department further notes in the Bulletin that if the individual elects to claim the loss in the prior year, the individual amends the prior year income tax return to claim a federal tax refund attributable to the disaster loss. The Department goes on to explain that if a Louisiana individual income taxpayer amends his or her federal income tax return, the taxpayer is required to amend the Louisiana income tax return – the reason for such requirement being that the amendment to the Louisiana income tax return is required because Louisiana income tax return largely piggybacks the federal income tax return. By way of example, the Department stated that a change in the federal income tax liability as a result of an amended federal income tax return changes the Louisiana income tax deduction for federal income tax liability. With respect to casualty losses, the Department in the Bulletin states that an amended federal income tax return that increases the deduction for personal casualty losses related to Hurricane Ida, which is a qualified major disaster, reduces federal income tax liability; however, this reduction in federal income tax liability results in reduced a Louisiana income tax deduction for federal income tax liability. As a result, the Louisiana income tax deduction for the federal income liability decreases, and the Louisiana income tax liability increases. The Department then states that to avoid this result, legislation was enacted in 2023 that provides state specific relief to accompany the federal relief; and, as a result of such legislation, Louisiana individuals are generally not required to file amended 2020 or 2021 Louisiana income tax returns if the only reason for the amended federal income tax return was to claim the federal relief provision for personal casualty losses related to Hurricane Ida. The Bulletin sets forth contact information for questions. More information can be found here.
Maryland – Updates Reported
Sales and Use Facts 2023-2024: On June 15, 2023, the Comptroller of Maryland (Comptroller) published a Tax Alert addressing several sales and use tax enactments during the 2023 Legislative Session. According to the Alert, those enactments included a new law effective July 1, 2023, providing that adult-use cannabis can be sold from a licensed dispensary or on-site consumption establishment to a consumer who is at least 21 years old. This new enactment imposes a sales and use tax rate of 9 percent on the retail sale of adult-use cannabis beginning July 1, 2023, and sets forth other licensing and regulatory provisions. More information regarding the cannabis reform legislation can be found in that Alert. Another enactment discussed in this Alert is the application of the sales and use tax to home amenity rentals beginning July 1, 2024. According to this Alert, the amenity rentals include the temporary use of residential property, excluding bedrooms, for not more than 15 consecutive hours; and the Comptroller noted that common home amenities available for rental include, but are not limited to, residential swimming pools, saunas, and barbeque areas. This new enactment also allows counties and municipalities to impose local taxes on home amenity rentals. Separately, the Alert notes that the annual interest rate for the calendar year 2023 is 9 percent; and that the Comptroller will publish the 2024 interest rates later this year at marylandtaxes.gov. More information regarding these and other enactments can be found here.
Mississippi – Updates Reported
2023 Sales Tax Holiday: On July 7, 2023, the Mississippi Department of Revenue (Department) published the Official Guide to the Sales Tax Holiday for articles of clothing, footwear or school supplies, which this year will take place on July 28 and 29, 2023. According to the Official Guide, the holiday will apply to articles of clothing, footwear, or school supplies if the sales price of a single item is less than $100. The Guide defines the term "clothing", "footwear", and "school supplies" among other definitions. The Guide also addresses the applicability of the tax holiday in situations involving special sales promotions and discounts, and other retail promotion activities. Additionally, the Guidance sets forth a listing of eligible and non-eligible items for clothing, footwear and accessories, as well as a listing of eligible school supplies. More information can be found here.
North Carolina – Updates Reported
Reminder As to Installment Payment Agreement Possibility: The North Carolina Department of Revenue (Department) has continued to publish Important Information regarding situations where a taxpayer is unable to pay the tax liability in full. According to the published Important Information, the Department may be able to establish a payment installment agreement for tax liabilities if the taxpayer has received a Notice of Collection from the Department. However, if an installment payment agreement request is submitted and the taxpayer has not received a Notice of Collection, the request will not be processed according to the Department. Other information needed to submit an installment payment agreement request can be found here.
South Carolina – Updates Reported
Proposed Rulings as to Tax Credits for Hiring Veterans and Incarcerated Individuals: On July 7, 2023, the South Carolina Department of Revenue (Department) published two proposed Revenue Rulings for consideration by the public, one of which involves income and other tax credits for hiring veterans and the other involves tax credits for hiring formerly incarcerated individuals. As noted in the proposed Ruling involving veterans, a tax credit is available for any taxpayer who hires a veteran of the Armed Forces of the United States on or after June 22, 2022, but before January 1, 2027, to participate in a registered apprenticeship program certified by the United States Department of Labor. In that regard, the proposed Ruling states that an employer may claim the credit for up to three years if all the requirements of the statute are met; and that the credit for each eligible employee is $3,000 for the first year of employment, $2,500 for the second year of employment, and $1,000 for the third year – but may not exceed the taxpayer's liability for that year. The proposed Ruling involving the hiring of formerly incarcerated individuals makes similar statements regarding the amount of the credit, with the hiring occurring after 2021 but before 2027 to participate in such a registered apprenticeship program. Both proposed Rulings provide an overview of the respective credits and set forth various Q&As addressing the various criteria required to be eligible for the credit. Public comments for both proposed Rulings must be received by the Department by July 28, 2023; and a conference (if requested) will be scheduled by the Department for August 3, 2023 at the time and place set forth in each Ruling. More information can be found here and here.
Tennessee – Updates Reported
2023 Tax Legislation: In early June 2023, the Tennessee Department of Revenue (Department) published a Legislative Summary of all of the tax legislation enacted during 2023 Legislative Session. That published Summary addresses new legislation involving the franchise and excise taxes, the business tax, sales and use taxes, alcoholic beverage taxes, among others. Those summaries can be found here.
Texas – Updates Reported
Fraud Alerts: The Comptroller's Office has published an Alert addressing the reporting and investigation of suspected fraud, theft, waste, abuse and scams impacting taxpayers and that Office. The Comptroller noted that suspected fraud concerning his Office can be reported by using the contact information in that Alert. Further, the Alert sets forth various other resources for reporting suspected fraud, as well as provides a listing of Alerts previously issued by the Comptroller's Office regarding various fraud circumstances. More information can be found here.
