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
Further Guidance as to Pass-Through Entity Elections: The Alabama Department of Revenue (Department) has adopted Rule 810-3-36-.01, effective February 13, 2022, providing more guidance with respect to the election available for Alabama S-corporations and Subchapter K entities for purposes of paying the Alabama income tax at the entity level (Electing PTEs). The statutory authorization for this election was enacted during 2021 and the Department previously issued certain guidance regarding the election's availability (see our April 13, 2021 publication). Rule 810-3-36-.01 provides that an Electing PTE does not include a single member limited liability company, estates, trusts, a business trust, and disregarded entities, except in the capacity as an owner, member, partner, or shareholder of the Electing PTE. Further, the Rule addresses the determination of taxable income for purposes of the Electing PTE, as well as the requirements for such an election. With respect to the requirements, the Rule provides the Electing PTE must make the election on Form PTE-E, Pass-Through Entity Election Form, and must submit the Form electronically to the Department via My Alabama Taxes (MAT) on or before the 15th day of the third month following the close of the tax year for which the entity elects to be taxed as an Electing PTE. The Rule states such election is binding for the year on which it is approved and all subsequent tax years until a request to revoke the election is made. The Rule also sets forth certain transition requirements when an entity is transitioning to an Electing PTE. More information can be found here.
District of Columbia – Updates Reported
Business Franchise Tax Obligations: On January 19, 2022, the Office of Tax and Revenue (OTR) published Tax Notice 2022-01 providing clarification of those instructions for Form 2021 D-30 dealing with the unincorporated business franchise tax return for the tax year 2021. The OTR stated in that Notice that the District had enacted legislation in 2020, effective January 1, 2021, clarifying the taxable income of unincorporated businesses includes gain from the sale or other disposition of any assets, including tangible assets and intangible assets, including real property and interests in real property, in the District even when the sale or other disposition results in the termination of an unincorporated business. However, the Notice further stated that the printed version of the booklet for 2021 D-30 did not contain this instruction and instead included language that this gain should be reported on the owner’s individual return. The OTR stated in Notice that it will publish updated instructions for the 2021 D-30 that can be found on OTR’s homepage, but will not be printing new booklets or instructions. More information can be found here.
Florida – Updates Reported
Tax Credit Associated with New Worlds Reading Initiative: The Florida Department of Revenue (Department) issued on February 7, 2022, Tax Information Publication No: 22ADM-O1 discussing the method for receiving a tax credit for monetary contributions to the administrator of the New Worlds Reading Initiative or to those eligible charitable organizations of the Strong Families Tax Credit. This Publication states contributions to the foregoing programs are eligible to receive a dollar-for-dollar credit against the following Florida taxes: corporate income tax; excise tax on liquor, wine, and malt beverages; gas and oil production tax; insurance premium tax; and use tax due under a direct pay permit. The Publication further states that taxpayers who wish to participate in either of these programs must apply to the Department to receive a tax credit allocation; and the fastest and easiest way to apply for a tax credit allocation according to this Publication is by visiting the Department’s multi-tax credit webpage at floridarevenue.com/taxes/multitaxcredits. The Publication, which includes various conditions and requirements for receiving the credit, can be found here.
Georgia – Updates Reported
Rate Adjustment for Transportation Services Tax: On February 28, 2022, the Georgia Department of Revenue (Department) issued a Transportation Services Tax Bulletin which, effective April 1, 2022, notices the rate for the transportation services tax is being adjusted to reflect the effect of annual inflation or deflation for the cost of living that consumers in Georgia experience on an average during the immediately preceding calendar year. The Department states in this Bulletin effective for April 1, 2022 through March 31, 2023, the transportation services tax as to for-hire ground transport trip is 54 cents per trip, and the tax for shared for-hire ground transport trip is 27 cents per trip. More information can be found here.
Louisiana – Updates Reported
Guidance as to Partnership Filing Requirements for the 2021 Tax Year: On February 15, 2021, the Louisiana Department of Revenue (Department) issued Revenue Information Bulletin No. 22-007, as amended February 24, 2022, so as to address the filing requirements for partnerships for the 2021 tax year. In this Bulletin, the Department addresses various filing requirements including returns for partnerships on a calendar year basis are due May 16, 2022 for the 2021 calendar year. The Department further stated a six-month extension may be requested on or before the original due date, and returns for partnerships on a fiscal year basis are due on or before the 15th day of the fifth month after the close of the fiscal year. The Department also noted in this Bulletin a return is required for partnerships doing business in Louisiana or any partnership deriving income from Louisiana sources. Pursuant to the earlier referenced amendment to this Bulletin, the Department stated due to unexpected delays with the availability of electronic filing of the Form IT-565, the requirement to file the Form for partnerships with only Louisiana residents as partners is waived for the 2021 year. Separately, with respect to composite partnership returns, the Department stated in this Bulletin beginning with the 2021 tax year, the Louisiana Composite Partnership Return has been discontinued as a standalone tax return; and, instead, the composite partnership information is reported on Schedule 6922 and attached to the Form IT-565. This Bulletin also addresses certain situations in which a partnership is not required to file a partnership return, as well as addresses various partnership account registrations issues. More information can be found here.
Maryland – Updates Reported
First and Second Quarter Individual Income Tax Estimates Extended to July 15, 2022: The Comptroller of Maryland (Comptroller) recently issued Tax Alert 02-23-2022A which superseded the previous Tax Alert issued on January 19, 2022 (see our February 15, 2022 publication) so as to address the first and second quarterly due dates for the estimated payments for the tax year 2022 individual income tax obligations. The Tax Alert issued January 19, 2022 addressed various extensions relative to the 2021 year, but did not apply to the 2022 year. This Tax Alert 02-23-2022A supersedes the previous Alert so as to not only restate the extensions applicable to the 2021 year, but also provide that effective February 23, 2022 the due dates for the first and second quarter individual income tax estimated payments for the tax year 2022 have been extended to July 15, 2022. This extension of the first and second quarterly estimated declarations and payments is further addressed by the Comptroller in Tax Alert 02-23-2022B, which provides the extension applies to both resident and nonresident individuals with a tax year 2022 estimated tax payment requirement. This Alert 02-23-2022B also provides for individuals who are on a fiscal year basis, the due date for any tax year 2022 estimated tax declarations and payments would be due on or before July 15, 2022, is now extended to July 15, 2022. More information can be found here and here.
Mississippi – Updates Reported
Mississippi Medical Cannabis Act: The Mississippi Department of Revenue (Department) issued an Immediate Release on February 4, 2022, addressing the anticipated rollout of the Department’s involvement with respect to the Mississippi Medical Cannabis Act signed into law on February 2, 2022. In the Release, the Department stated under the Act the Department will be responsible for licensing, regulating, and enforcing the law for medical cannabis dispensaries; and the Department is committed to meeting the statutory deadlines and requirements of the Act. Further, the Department stated Alcoholic Beverage Control Enforcement will be the point division for licensing and regulating dispensaries; and licensed cultivators will be responsible for collecting and remitting excise tax to the Department. Further, all licensed dispensaries will be responsible for collecting and remitting the standard sales tax. Further questions about the Act may be addressed to the Department at the site referenced in the Release. More information can be found here.
North Carolina – Updates Reported
Estimated Tax Interest Relief for Farmers/Fishermen: On February 25, 2022, the North Carolina Department of Revenue (Department) issued an Important Notice informing eligible farmers and fishermen of a recently enacted law that affects an exception to the requirement to make estimated tax payments for the tax year 2021. Under this new North Carolina law, signed in February 2022, the Department will not assess estimated tax interest on any farmer or fisherman if the individual files a North Carolina individual income tax return and pays the tax shown due on the tax return by April 15, 2022. According to this Important Notice, this relief is being provided due to the later-than-usual signing of the North Carolina budget, which caused a delay in the opening of the 2022 North Carolina tax filing season. As such, a farmer or fisherman who has a tax year ending on December 31, 2021, may have difficulty electronically filing their 2021 North Carolina individual income tax return by March 1, 2022, the normal deadline for filing that tax return. This estimated tax interest relief for a farmer or fisherman is automatic if the individual files the 2021 individual income tax return and makes the full payment shown on that return by April 15, 2022. More information can be found here.
South Carolina – Updates Reported
Interest Rate for Period Beginning April 1 through June 30, 2022: On February 25, 2022, the South Carolina Department of Revenue (Department) issued Information Letter #22-3 setting forth the interest rate to be applied to underpayments and overpayments (with certain conditions as to overpayments, as noted below) for the period beginning April 1, 2022 through June 30, 2022. The interest rate is 4 percent; however, the Department noted in this Information Letter that with respect to the interest rate on refunds for the fiscal year 2021 – 2022 (July 1, 2021 through June 30, 2022), South Carolina law directs the Department to reduce the rate of interest paid on eligible refunds by a total of three percentage points from the rates listed in the Information Letter, which apparently produces an interest rate on refunds of one percent. More information can be found here.
Tennessee – Updates Reported
Excise Tax to be Decoupled from Federal R&D Treatment: Prior to January 1, 2022, federal tax law allowed a business to deduct research and development (R&D) costs in the year that such costs were incurred. However, the Federal Tax Cuts and Jobs Act of 2017 (2017 Act) contained various tax provisions intended to raise revenues, one of which being to change the then-current deduction for R&D costs such that taxpayers are required beginning in 2022 to amortize such R&D costs over five years instead of currently deducting those costs. Nevertheless, and as the result of the recent passage of House Bill 2144/Senate Bill 2397 in the 2022 Tennessee Legislature, the Legislature has just approved decoupling the Tennessee excise tax from the federal treatment of such costs provided by the 2017 Act, thus encouraging taxpayers to continue to locate and expand R&D facilities in Tennessee. More information can be found here. This legislative initiative, effective for tax years beginning on after January 1, 2022, will now be sent to the Governor for signature. The Governor is expected to sign this legislation.
Texas – Updates Reported
Approved 2022 Franchise Tax Preparation Software Providers: On February 24, 2022, the Comptroller’s Office updated and published information regarding approved franchise tax preparation software providers for and through the 2022 reporting year. Those providers are set forth in the updated publication, together with related software information. More information can be found here.
