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 selected state and local tax (SALT) developments in several states which may be important to you.

Alabama

PTEs Have More Time to File 2023 Entity Level Taxation Election: On May 1, 2024, the Alabama Department of Revenue (Department) issued a Press Release extending the due date for certain pass-through entities (PTE) to file the election to be taxed at the entity level for the 2023 tax year. The Department noted in this Release that in the spirit of recent legislation during the 2024 Legislative Session that moves the due date of the PTE election to coincide with the due date of the return for the 2024 tax year and beyond, the Department is extending the deadline for the 2023 tax year to help those taxpayers who showed an intention to make the election but erroneously failed to do so by the original due date. According to the Department, such taxpayers may have either made estimated payments or filed required returns as if the election had been made. As stated by the Department in this Release, the Department will recognize elections to be taxed at the entity level that are filed using MyAlabamaTaxes no later than the due date of the 2023 electing pass-through entity return with applicable extensions, as elections validly made by the due date for those pass-through entities who: (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 further noted that taxpayers meeting any of these requirements and wanting to make the election must access MyAlabamaTaxes to make the election for the 2023 year, and there is not a paper alternative for this online election. The Release provides sources for additional guidance and FAQs on pass-through entity elections. More information can be found here.

District of Columbia

Reminder Regarding "Clean Hands" Mandate: The Office of Tax and Revenue (OTR) published a reminder regarding the District's "Clean Hands" mandate. In this reminder, the OTR notes that taxpayers can request a "Certificate of Clean Hands" that demonstrates that they are in compliance with their District obligations; and that individuals and businesses are to be denied city goods or services (that is, licenses, permits, grants, contracts) if there is a debt owed to the District of more than $100 or if they have not filed required District tax returns. In order to receive a Certificate of Clean Hands, the OTR notes that a taxpayer must: (i) not owe more than $100 in any fees, fines, taxes, or penalties to the OTR unless the debt is included in a valid payment agreement and is compliant with the Department of Employment Services; (ii) be fully registered for all required tax types; and (iii) have submitted all the required District tax returns. The OTR further notes that a taxpayer can request a Certificate of Clean Hands online at MyTax.DC.gov. According to this reminder, a taxpayer having a District tax obligation must have a MyTax.DC.gov account to generate the Certificate; otherwise, if the taxpayer does not have a District tax obligation, a manual request can be submitted without logging in, by using the link to "Request a Certificate of Clean Hands" without logging into MyTax.DC.gov. The OTR's reminder sets forth other information regarding the Certificate of Clean Hands, as well as resources to address questions pertaining to the Certificate. More information can be found here.

Florida

Two Sales Tax Holidays Announced: On May 8, 2024, the Florida Department of Revenue (Department) announced two sales tax holidays that will be effective at different times in the remainder of 2024. As published in Tax Information Publication #24A01-05, the Department announced that the Freedom Month Sales Tax Holiday on Specific Admissions and Outdoor Activities Supplies would be effective July 1, 2024, through July 31, 2024. During such time, and according to that Publication, sales tax is not due on the retail sale of admissions to music events, sporting events, cultural events, specific performances, movies, museums, state parks, and fitness facilities; and additionally, exempt from the sales tax during this holiday period are electric scooters, eligible boating and water activity supplies, camping supplies, fishing supplies, general outdoor supplies, and residential pool supplies. Separately, and as announced in Taxpayer Information Publication #24A01-06, a sales tax holiday for Tools Commonly Used by Skilled Trade Workers will be effective from September 1, 2024, through September 7, 2024. According to such Publication, and during that sales tax holiday period, tax is not due on the retail sale of eligible items related to tools commonly used by skilled trade workers – but does not apply to rentals of any eligible items, nor to sales within a theme park, entertainment complex, public lodging establishment, or an airport. Both of these Publications set forth a listing of eligible items as well as addressing many questions regarding the administration of these sales tax holidays. More information can be found here and here.

Georgia

Legislation Reducing Carryover Period for Unused Tax Credits: On May 6, 2024, Governor Kemp signed a House Bill 1181 law, now designated as Act 598, reducing the period over which certain tax credits can be utilized. According to this new legislation, the period for carrying forward unused jobs tax credit, investment tax credit, and certain machinery and telecommunications facility tax credits, is reduced from ten years to five years; and the carryover period for other miscellaneous credits such as film and video production credits, is reduced from five to three years. This new legislation becomes effective January 1, 2025, and is applicable only to the unused tax credits generated during the taxable years beginning on or after January 1, 2025. More information can be found here.

Louisiana

Natural Gas Severance Tax Rate Effective July 1, 2024: The Louisiana Department of Revenue (Department) recently issued Revenue Information Bulletin No. 24-011 dealing with the natural gas severance tax rate that is effective July 1, 2024, through June 30, 2025. According to that Bulletin, the natural gas severance tax rate for that period has been set at 9.8 cents (currently 25.1 cents through June 30, 2024) per thousand cubic feet (MCF) measured at a base pressure of 15.025 pounds per square inch absolute and at the temperature base of 60 degrees Fahrenheit. The Department notes in this Bulletin that such tax rate is set each year by multiplying the natural gas severance tax base rate of 7 cents per MCF by the gas base rate adjustment determined by the Secretary of the Department of Energy and Natural Resources, as further addressed in this Bulletin. The Department did note in this Bulletin that gas produced from an inactive or orphan gas well is subject to a reduced severance tax rate equal to fifty percent or twenty-five percent of the severance tax rate, respectively; which according to the Bulletin would produce a tax rate of 4.9 cents per MCF for inactive gas and 2.45 cents per MCF for orphan gas effective during that July 1, 2024, through June 30, 2025 period. This Bulletin also contains sources for questions regarding the natural gas severance tax rate. More information can be found here.

Maryland

Private Letter Rulings: The Comptroller of Maryland (Comptroller) issued Technical Bulletin No. 44 in late December 2023, which provides guidance and procedures for submitting a petition for private letter rulings (PLRs). This Technical Bulletin deals only with PLRs requested and issued under Tax-General Article §13-1A-02 of the Maryland Code Annotated – noting that PLRs are a formal type of guidance issued by the Comptroller to a specific taxpayer, and they are intended to address complex or novel questions applying to a specific prospective transaction. The Bulletin goes on to state that a petitioner must comply with the requirements set forth in this Technical Bulletin for the issuance of a PLR. The Bulletin further states that a PLR is a final, written, non-appealable determination that is applicable to a specific set of facts regarding the application of state tax laws and regulations and other matters over which the Comptroller has administrative responsibility. Additionally, the Bulletin notes that topics on which a PLR may be requested include income tax (individual, corporation, pass-through entity, employer withholding, and fiduciary), sales and use tax, motor fuel tax, motor carrier tax, alcoholic beverage tax, tobacco tax, admissions and amusement parks, digital advertising gross revenues tax, estate tax, and boxing and wrestling tax. The Bulletin also sets forth how to submit a petition for a PLR, as well as a number of other topics regarding a PLR. Further, the Bulletin includes Q&As regarding matters pertinent to obtaining a PLR, including the question of "What if I disagree with the ruling?" – the response to which is that a PLR is binding only on the Comptroller, and PLR is not binding on the petitioner. In essence, as stated in the Bulletin, a PLR serves to put the petitioner on notice as to the Comptroller's treatment of the transaction; and if the petitioner proceeds with the transaction, taking a position contrary to the Comptroller's treatment, and disagrees with a subsequent assessment or refund denial, the assessment or refund denial may be appealed pursuant to applicable Maryland law. More information can be found here.

Mississippi

Charitable Contribution Credits Reminder: The Mississippi Department of Revenue (Department) issued a Notice reminding business taxpayers that applications for the charitable contribution credit in the 2024 calendar year and thereafter will only be accepted through the new online system. The Department stated in that Notice that paper applications will not be accepted for any calendar year after 2023. More information can be found here.

North Carolina

Taxable Digital Audiovisual Work: The North Carolina Department of Revenue (Department) has recently issued a Private Letter Ruling pertaining to whether certain live, not pre-recorded, audio/video entertainment accessible through the taxpayer's website is subject to the North Carolina sales tax. Although the facts in this Ruling are highly redacted, the Department ultimately concluded that the fees paid for accessing the taxpayer's website are subject to the sales tax. In rendering such a conclusion, the Department noted that the sales tax applies to "certain digital property" which includes "specified digital products" and which in turn include "digital audiovisual works." Further, the term "digital audiovisual works" includes a series of related images, that when shown in succession, impart an impression of motion, together with accompanying sounds, if any, and that is transferred electronically. The Department concluded that the live video and video content on the taxpayer's website meets the definition of digital audiovisual work because it provides a series of related images, that when shown in succession, impart an impression of motion, together with accompanying sounds and is transferred electronically. More information can be found here.

South Carolina

Sale of Partnership Interest: The South Carolina Department of Revenue (Department) has issued Private Letter Ruling # 24-1 addressing how a taxpayer's sale of an interest in a multistate partnership that does business in South Carolina should be reported to South Carolina for income tax purposes. The Department noted that the taxpayer was an active owner in a tiered pass-through entity structure comprised of two limited liability companies that are treated as partnerships for tax purposes. Those partnerships, according to the Ruling, conducted business in multiple states, including South Carolina. The taxpayer worked full-time as president and executive officer of one of the partnerships until retirement, and in 2021 the taxpayer sold his interest in that partnership resulting in a $2.6 million long-term capital gain. The taxpayer asked the Department if the entire $2.6 million gain on the sale of partnership interest is a South Carolina gain, or whether a portion of the gain is "out-of-state income/gain." The apportionment ratio for the partnerships in the year of the sale was 2.4 percent for South Carolina. The Department in this Ruling determined under these facts that ownership interest was connected to the taxpayer's business, and therefore the gain from the sale should not be allocated to South Carolina but rather the taxpayer should apportion 2.4 percent of any portion of the gain that is not directly allocated to South Carolina. In addition, the Department noted that if the partnerships owned any Internal Revenue Code Section 751 assets at the time of sale, the portion of the taxpayer's gain attributable to those assets should be reported as ordinary income, with the remainder of the gain, if any, reported as a long-term capital gain. More information can be found here.

Tennessee

Franchise Tax Property Measure Repeal/Possible Refunds: The Tennessee franchise tax was initially enacted in 1935, and since that time the calculation of the tax has been based upon the higher of the taxpayer’s net worth (net worth measure) or the actual value of real or tangible property owned or used by the taxpayer in Tennessee (minimum measure). However, because of concerns relating to the unconstitutionality of the minimum measure, the 2024 Legislature passed, and the Governor has now signed a new law, 2024 Public Chapter 960, eliminating the minimum measure from the calculation of the franchise tax effective for tax years ending on or after January 1, 2024. Additionally, this new law provides the process for possible refunds to be available to taxpayers who calculated and paid their franchise tax obligations based upon the minimum measure for tax years ending on or after March 31, 2020, and for which a return was filed with the Tennessee Department of Revenue (Department) on or after January 1, 2021. There are numerous issues associated with this new law, including the disclosure of taxpayer names and applicable refund ranges associated with those taxpayers issued a refund under this new law. The Department has issued Notice # 24-05 outlining prominent parts of this new law, including many aspects of the refund process. Additionally, our Firm's Tax Alert dated May 1, 2024, addresses various aspects of this repeal and refund initiative. More information can be found here.

Texas

Disaster Relief Information: On April 30, 2024, Governor Abbott issued a disaster proclamation declaring a state of disaster in certain counties in Texas, such proclamation being amended on May 2, 2024. The Governor's proclamation certified that severe storms and flooding that began on April 26, 2024, and included heavy rainfall, flash flooding, and other disaster events, caused widespread and severe property damage, injury, or loss of life or property. A significant number of Texas counties are included within this proclamation. Taxpayers affected by the disaster may be eligible for an extension of time to file and pay taxes due. According to information on the Comptroller's website, extensions are available upon request only. Information required for the request is set forth on the website. A contact number is also included if assistance is needed with respect to the extension request. More information can be found here.

Virginia

Guidelines/Deadline for Retroactive Taxable Year 2021 PTE Election: The Virginia Department of Taxation (Department) recently issued Guidelines, Document No. 24-12, with respect to a pass-through entity (PTE) having the option to pay an elective income tax (PTET) for taxable year 2021. By way of brief background, the Virginia General Assembly enacted legislation in 2022 that permitted a PTE to make an election for PTET, such legislation being effective for taxable years beginning on or after January 1, 2021; and also allowed the corresponding refundable income tax credit to certain PTE owners for income tax paid by the PTE if the PTE makes the election and pays the elected income tax imposed at the entity level. During the 2023 Session, the General Assembly removed the requirement that the PTE be 100 percent owned by a natural person or persons eligible to be shareholders of an S corporation in order to make the election to pay the PTET. These changes are effective for taxable years beginning on or after January 1, 2021. The Guidelines published by the Department state that they are intended to provide guidance to taxpayers regarding the elective income tax and corresponding refundable credit. The Guidelines set the criteria for making the election retroactive for the 2021 year as well as address the required filing by PTE of the retroactive taxable year 2021 PTET returns and the accompanying schedules and making any tax payments electronically. The Guidelines provide that an electing PTE is required to pay in full the PTET owed by the time they file their 2021 Form 502 PTET and must file that Taxable Year 2021 Form 502 PTET by September 16, 2024. The Guidelines provide that no retroactive Taxable Year 2021 PTET returns will be accepted after that date, and there are no extensions or late filing options. The Guidelines contain various other information regarding this retroactive option. Further, the Guidelines include information for an eligible owner claiming a refundable PTE credit against a Virginia income tax. More information can be found here.