State Tax News & Views Golden State and Gold Coins Edition

March 3, 2023

Welcome to this week's state and local tax roundup. Think of Eide Bailly for your state tax needs, whether you are dealing with income taxes, sales taxes, or business incentives and credits.


Supreme Court Rules Against Delaware in Unclaimed Property Dispute - Andrea Muse, Tax Notes ($):

The U.S. Supreme Court has ruled against Delaware in its dispute with 30 other states over unclaimed MoneyGram agent checks and teller’s checks.

In a February 28 opinion written by Justice Ketanji Brown Jacksonthe Court unanimously concluded in Delaware v. Pennsylvania and Arkansas v. Delaware that both the agent checks and the teller’s checks are sufficiently similar to money orders and should escheat under the federal Disposition of Abandoned Money Orders and Traveler’s Checks Act (FDA).

Related: What is unclaimed property and why should you care about it?


California Governor Signals Opposition to Wealth Tax - Paul Jones, Tax Notes ($):

Although the governor’s office generally doesn’t comment on pending bills, “the governor has consistently opposed a new wealth tax at the state level," a spokesperson for Newsom said, indicating that the latest proposal (A.B. 259) likely wouldn't become law even if lawmakers pass it.


A.B. 259, introduced by State Assembly member Alex Lee (D), was announced this year as one of several bills proposed by progressive lawmakers in eight states to increase taxes on wealth, estates, capital gains, and income. It seeks to establish a wealth tax of 1.5 percent on the portion of a California resident’s worldwide net worth that exceeds $1 billion ($500 million for married taxpayers filing separately), which would go into effect in tax year 2024.


Biz Purchases In Nebraska, Lobsters In Maine: SALT In Review - David Brunori, Law360 Tax Authority ($):

There is a bill in the great state of Nebraska that we should all hope passes. The bill, L.B. 496, would provide sales and use tax exemptions for business purchases of products and services. There have been few better proposals ever introduced in state legislatures. We should salute the sponsor, Sen. Lou Ann Linehan, R-Elkhorn.

The sales tax is a tax on final consumption. The sales tax should never, ever fall on business purchases. That idea is irrefutable. Every honest public finance expert believes that. When businesses pay sales tax, three bad things occur. First, the tax makes the initial purchase more expensive, which could deter or delay business spending. Why would that ever be good?


State-by-state update


California extends filing and payment deadline to October 16, 2023 for many counties affected by storms - Melissa Menter, Eide Bailly:

Relief applies to BOTH filing and payment deadlines falling between January 8, 2023 and October 16, 2023, including:
-Individual returns and payments
-Quarterly estimated payments
-Business entity tax returns, and
-Pass-through entity elective tax payments

Link: More Time to File State Taxes for Californians Impacted by December and January Winter Storms. "Residents and businesses in Alameda, Alpine, Amador, Butte, Calaveras, Colusa, Contra Costa, Del Norte, El Dorado, Fresno, Glenn, Humboldt, Inyo, Kings, Lake, Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Mono, Monterey, Napa, Nevada, Orange, Placer, Riverside, Sacramento, San Benito, San Bernardino, San Diego, San Francisco, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Siskiyou, Solano, Sonoma, Stanislaus, Sutter, Tehama, Trinity, Tulare, Tuolumne, Ventura, Yolo, and Yuba counties who have been affected by severe winter storms, flooding, landslides, and mudslides are eligible for tax relief."


ERC refunds are not taxable income for California - Jennifer Barajas, Eide Bailly. "The FTB has reconsidered its position regarding California’s tax treatment of the Employee Retention Credit (ERC) and will not require taxpayers to include any portion of the ERC on their California tax return." Link: California Treatment of the Employment Retention Credit.



Colorado DOR Proposes Changes to Rule on Other State Tax Credit - Emily Hollingsworth, Tax Notes ($). "The draft rule clarifies the credit allowed to members of a partnership or S corporation for the tax imposed by another state or to a passthrough entity that files a composite return on behalf of its members, as well as the documentation to be filed with the Colorado DOR."



DeSantis Takes Disney's District Keys, Appoints New Board - Lauren Berg, Law360 Tax Authority. "Florida Gov. Ron DeSantis on Monday signed a bill granting state control of The Walt Disney Co.'s once self-governing district encompassing its Orlando theme parks, legislation that came about to punish the company for its opposition to what detractors call the state's 'Don't Say Gay' law."

New Name, New Board, Same Florida Tax Privileges for Disney - Matthew Pertz, Tax Notes ($). "But H.B. 9B prevents the dissolution of Reedy Creek and maintains Disney’s ability to issue tax-exempt bonds and collect ad valorem taxes to avoid passing the district's debt onto the state, which would have happened if the district had been eliminated under S.B. 4-C."



Georgia extends tax filing deadline for storm victims - Melissa Menter, Eide Bailly. "Georgia has extended the tax filing deadline for individual and corporate income, sales and use, property, trust income, sales and excise tax filers who had a valid extension to file their 2021 return on or before Feb. 15. The deadline has been extended to May 15."



Kansas Bills Would End Sales Tax on Groceries, Reduce Income Tax Rates - Emily Hollingsworth, Tax Notes ($):

The bills — S.B. 248, S.B. 33, and S.B. 169 — were sponsored by the Senate Assessment and Taxation Committee and were approved in the Senate February 23.


S.B. 169, which was approved by the Senate 22 to 17, would eliminate the individual income tax for single filers earning up to $5,225 and joint filers earning up to $10,450 and replace the state's graduated income tax rates with a new flat rate of 4.75 percent for single filers earning more than $5,225 and joint filers earning more than $10,450.

The bills, passed by a Republican chamber, face an uncertain future in a state with a Democratic governor.



Mass. Gov. Pitches Capital Gains Rate Cut In $742M Tax Plan - Sanjay Talwani, Law360 Tax Authority ($):

The proposal from Massachusetts Gov. Maura Healey includes cutting the tax rate on capital gains on assets held less than one year from 12% to 5%, the same rate imposed on long-term capital gains and most other income. (AP Photo/Mary Schwalm)

Healey's proposal includes cutting the tax rate on capital gains on assets held less than one year from 12% to 5%, the same rate imposed on long-term capital gains and most other income. The proposal would also eliminate taxes on estates of up to $3 million, establish a child and family tax credit, increase the renter's deduction and make several other changes

Tax(relief)achusetts - Lisa Kashinsky, Politico. "Healey surprised Democrats on and off Beacon Hill by pitching an expansive tax-relief package that surpasses former Gov. Charlie Baker’s in scope and in cost. She's calling for a $3 million estate-tax threshold, up from the $2 million marker floated last year. And she's reviving a part of Baker's plan that lawmakers nixed: taxing short-term capital gains at 5 percent rather than 12 percent."



Minn. Biz Groups Resist Gov.'s Capital Gains Tax Hike Plan - Sanjay Talwani, Law360 Tax Authority ($). "The tax package in Minnesota Democratic Gov. Tim Walz's bill, H.F. 1938, alongside payments and credits aimed at low- and middle-income earners, would raise the current 9.85% tax rate on capital gains and dividends by 1.5 percentage points on gains of more than $500,000 and by 4 percentage points on gains greater than $1 million.:



Mont. Lawmakers OK Top Income Tax Rate Cut, EITC Boost - Michael Nunes, Law360 Tax Authority ($). "S.B. 121, approved by the House of Representatives on Wednesday by a 68-30 vote, would cut the state's top income tax rate to 5.9%, from 6.5%, on income over $20,500 for single filers and $41,000 for couples in 2024. The bill would also increase the state's earned income tax credit to 10% from 3%."

Governor Greg Gianforte is expected to sign the bill. The rate cuts are set to take effect in 2024.

Mont. Lawmakers OK Replacing Capital Gains Tax Deduction - Zak Kostro, Law360 Tax Authority ($). "H.B. 221, which passed the state Senate by a 34-16 vote Tuesday after having cleared the House Feb. 2, would replace a 30% deduction for net long-term capital gains that is set to take effect in tax year 2024, according to a fiscal note. In place of the deduction, the bill would impose taxes on capital gains at rates of 3% or 4.1%, the fiscal note said."

Mont. Lawmakers OK Biz Equipment Tax Break Boost To $1M - Jared Serre, Law360 Tax Authority ($). "H.B. 212, which would increase the exemption from the current $300,000, passed the state Senate on Tuesday by a 33-17 vote. The legislation was approved by the House of Representatives by a 67-32 vote in early February."


New Jersey

New Jersey Governor's Budget Would Reduce Taxes, Increase Surplus - Matthew Pertz, Tax Notes ($). "The governor's budget would sunset the temporary 2.5 percent corporation business tax surcharge. 'When the surcharge expires in December, New Jersey will no longer have the nation’s highest corporate tax rate,' according to the plan."


West Virginia

West Virginia Senate Advances Compromise Tax Cut Bill - Benjamin Valdez, Tax Notes. 

The West Virginia Senate rapidly advanced a proposal to reduce the personal income tax and provide personal property tax rebates, signaling a long-sought compromise with House lawmakers and Gov. Jim Justice (R) on tax cuts.

The Senate approved an amended version of H.B. 2526, a House-passed personal income tax cut, on a vote of 33 to 0 February 25 after suspending rules that require a bill to be read over three consecutive days. The modified proposal would reduce each personal income tax bracket starting in tax year 2023, provide rebates for the car tax and the business inventory tax, and provide property tax credits for disabled veterans.

WVa bill would give tax credits to ex-residents to move back - AP, Via Washington Post:

West Virginia’s Senate passed a bill Monday that would give $25,000 in tax credits to former residents who move back to the state to work.

The Senate passed the bill unanimously and sent it to the House of Delegates.

Those eligible for the tax credit had to live and work in West Virginia for at least 10 years or were born in the state. They had to live outside of the state for at least 10 consecutive years prior to 2023.



Utah Senate OKs Bill Seeking Cannabis Biz Tax Credit - Jerred Serre, Law360 Tax Authority. "Under the legislation, licensed sellers of medical cannabis would be eligible to claim a nonrefundable credit valued at 2.1% of cannabis-generated taxable income."

Link: S.B. 278. According to the article, the Utah legislature winds up work today. You can monitor the action here.



Vermont Senate OKs SALT Cap Workaround - Benjamin Valdez, Tax Notes ($):

Senate lawmakers during a brief March 1 session approved S. 45 via a voice vote. The bill, sponsored by Sen. Thomas Chittenden (D), would allow passthrough entities to elect to pay tax at the entity level and owners to claim a partial credit of 90 percent of their share of taxes paid. The bill would take effect for tax years beginning on or after January 1, 2023.

The entity-level tax would be paid at the second-highest marginal income tax rate, which is currently 7.6 percent.



Va. Conforms To Federal Tax Code Changes - Zak Kostro, Law360 Tax Authority. "S.B. 882, which Youngkin signed Monday, advances the state's date of conformity to the federal tax code from Dec. 31, 2021, to Dec. 31, 2022, according to a summary in a fiscal impact statement. The update allows Virginia to conform to the Inflation Reduction Act  and tax-related provisions in the 2023 Consolidated Appropriations Act , according to the summary."



Major Tax Increases, Reform in Washington State Remain Unclear - Paul Jones, Tax Notes ($). "A bill to replace the gross receipts tax on businesses with a Texas-style margin tax faces opposition from influential business groups, and a high-profile proposal to tax a portion of rich Washingtonians’ wealth also hasn’t made much progress. But it’s too early to count those proposals out completely, or to foreclose on the prospects of other tax legislation."


Good as gold? 

Iowa has advanced a bill to eliminate state income tax on gains on sales of gold and silver from income taxation. HF 208 cleared a House Ways and Means subcommittee this week. From the bill explanation: 

This bill excludes from the computation of net income for purposes of the individual income tax the capital gain from the sale of bullion, coins, or currency and includes capital loss from such a sale. For purposes of the bill, “bullion” means bars, ingots, or commemorative medallions of gold, silver, platinum, palladium, or a combination of these where the value of the metal depends on its content and not the form. “Coins” or “currency” means a coin or currency made of gold, silver, or other metal or paper which is or has been used as legal tender.

The bill applies to tax years beginning on or after January 1, 2024.

A similar bill (SB 100) has cleared the Missouri Senate. Leading to the question: why? The Tenth Amendment Center has an explanation: "Repealing taxes on precious metal bullion takes a step toward treating gold and silver as money instead of commodities. Taxes on precious metal bullion erect barriers to using gold and silver as money by raising transaction costs." But there's more:

Repealing taxes on gold and silver also takes the first step in the process of abolishing the Federal Reserve system by attacking it from the bottom up – pulling the rug out from under it by working to make its functions irrelevant at the state and local levels, and setting the stage to undermine the Federal Reserve monopoly by introducing competition into the monetary system.

In an age of cell-phone payments, it's not clear that there is a big demand for going back to bullion. As the federal government continues to tax bullion sale gains, restoring gold and silver as a standard means of exchange still has many steps to go. 

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