State Tax News & Views: Colorado creates new credits, Illinois extends NOL cap, inheritance tax in ancient Rome, and more.

By Bailey Finney
June 14, 2024

Key Takeaways

  • SCOTUS may provide ruling on Philly SALT case
  • NHL teams succeed in low tax states
  • New Colorado tax credits 
  • CT and IL NOL changes
  • Hawaii standard deduction increase 
  • Iowa Form 100A is ready
  • New York payroll tax increase quickly rejected 
  • New York PTET guidance provided
  • Few states remain who tax Social Security benefits
  • Tax Policy Corner
  • Tax History Corner

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We continue our bi-weekly summer schedule for State Tax News & Views. Our next state post will appear June 28.



Philly Tax Case Could Give Answers On Reach Of Localities - Maria Koklanaris, Law360 Tax Authority ($):

The U.S. Supreme Court, presented with a Philadelphia resident's claim that the city's refusal to credit her Delaware state taxes paid against her city wage tax liabilities discriminated against interstate commerce, could answer questions about how much agency localities have to tax work performed elsewhere, panelists said Monday.

The justices will be looking for the solicitor general's opinion on whether the city's policy is in violation of the commerce clause, the panelists noted. That could shed light not only on taxation by local jurisdictions but also on whether tax credits can be considered separately or must be aggregated. In the Zilka case, the courts said it was constitutionally OK to consider them separately, in which a city credited city taxes, but was under no obligation to aggregate the taxes and credit state taxes too.

Winning the Stanley Cup Is More Taxing Than Ever - Laine Higgins, Wall Street Journal:

In theory, taxes should affect all North American professional sports equally. But that’s not the case with hockey, which has different salary cap rules and geographic dynamics than the NFL, NBA and Major League Baseball.

Since 2020, as the league’s salary cap has increased just 2.4%, the teams making deep playoff runs have tended to be from states with lower tax rates. Of the 20 teams that made it to the conference finals or an equivalent round, 11 hailed from Florida, Texas or Nevada—all states without personal income tax.



State-By-State Roundup



Colorado Enacts $700M Child Tax Credit - Sanjay Talwani, Law360 Tax Authority ($):

Colorado created a child tax credit worth about $700 million annually under legislation signed Friday by Democratic Gov. Jared Polis. Polis signed H.B. 1311 into law, creating a refundable credit that's available starting in the current tax year. 

For taxpayers at the lowest income level, the credit is worth $3,200 for children under 6 and $2,400 for children ages 6 to 16. The credit gradually decreases for taxpayers with higher incomes and reaches zero for joint filers with federal adjusted gross incomes of $85,000 and for other filers with incomes of $75,000.


Colorado Expands Social Security Income Tax Subtraction - Emily Hollingsworth, Tax Notes ($):

H.B. 24-1142, signed into law on June 6, will allow taxpayers ages 55 to 64 to deduct all their federally taxable Social Security income from state income tax if their adjusted gross income is below $75,000 for single filers or $95,000 for joint filers. The measure takes effect for tax years beginning on or after January 1, 2025.


Colo. To Allow Tax Credits For Gifts Through Intermediaries - Jaqueline McCool, Law360 ($).

"S.B. 16, which Polis signed into law Friday, will allow taxpayers to claim credits for charitable donations that are made to intermediaries that forward the contributions to qualifying recipient organizations."



Conn. Extends Biz Net Loss Deduction Carryforward Window - Zak Kostro, Law360 Tax Authority ($):

Connecticut will extend by 10 years the window when companies may carry forward a net operating loss deduction for corporation business tax purposes and will allow a deduction for some combined groups affected by the state's shift to combined reporting, under a bill signed by the governor. H.B. 5524, which Democratic Gov. Ned Lamont signed Thursday, extends the period from 20 to 30 income years when corporations may carry forward a net operating loss deduction for corporation business tax purposes, according to an analysis by the state's Office of Legislative Research.



Hawaii To Adjust Income Tax Brackets, Up Standard Deduction - Zak Kostro, Law360 Tax Authority ($):

H.B. 2404, which Democratic Gov. Josh Green signed Monday, will adjust the state's individual income tax brackets and incrementally increase the standard deduction over a seven-year period through 2031, according to a conference committee report and a news release published by the governor's office. The legislation will raise the standard deduction amounts for each filing status for taxable years 2024, 2026, 2028, 2030 and 2031 and will adjust income tax brackets for each filing status for taxable years 2025, 2027 and 2029, according to the conference committee report.



Ill. Budget Has Higher Cap On NOLs, Sports Betting Tax Hike - Maria Koklanaris, Law360 Tax Authority ($):


Illinois will extend a cap on corporate net operating loss deductions, increase its sports betting tax and reduce sales tax rebates for retailers under a $53.1 billion fiscal year 2025 budget signed Wednesday by Democratic Gov. J.B. Pritzker. 

The budget, passed by the General Assembly with no Republican support, includes about $725 million in tax increases to close a funding gap. It also eliminates the state's 1% tax on groceries and creates a child tax credit, which Illinois has never had before. The credit is worth up to $300 for households with children under 12.



New Iowa Form 100A is Ready for Those Claiming 2023 Iowa Capital Gain Deduction for Sale of Breeding or Dairy Livestock - Kristine Tidgren, Ag Docket:

House File 2649, signed by the Governor on May 15, 2024, restores this deduction, allowing taxpayers to exclude capital gain from the sale of certain livestock from the computation of net income for individual income tax purposes. This law, applying to those farmers who earn more than 50 percent of their gross income from farming, applies retroactively to include the 2023 tax year.


New York

Hochul’s floated payroll tax hike rejected by lawmakers - Nick Reisman, Politico:

State lawmakers immediately nixed Gov. Kathy Hochul’s proposal to increase a tax on New York City businesses — a plan intended to recover money that would have been generated by congestion pricing tolls.

In effect, Hochul’s latest proposal might be even more politically unpalatable than the congestion pricing plan she abruptly scrapped in the first place, lawmakers said. Rejecting a payroll tax increase to offset lost revenue deepens uncertainty over the future of mass transit capital improvements.


New York Updates Passthrough Entity Tax Guidance - Emily Hollingsworth, Tax Notes ($):

Ryan Cleveland, a spokesman with the department, told Tax Notes June 4 that the guidance changes were primarily to address inquiries from taxpayers and to make technical corrections. The updates also reflect a statutory correction made by New York City clarifying that trusts and estates are also eligible for the passthrough entity tax, he said.


New Jersey 

NJ Corp. Tax Overhaul Regs Expected By Nov., Director Says - Paul Williams, Law360 Tax Authority ($). 

"New Jersey is on track to release regulations this fall on an omnibus law from last year that changed several provisions of the state's corporate income tax system, the state Division of Taxation's acting director said Thursday."



Vermont Governor Vetoes Property Tax Hike, Tax on Remote Software - Paul Jones,Tax Notes ($).

"Scott announced in a June 6 release that he vetoed H. 887, this year’s yield bill, which was approved by lawmakers May 10. The bill would have funded the state’s schools, in part through a 13.8 percent average increase to property taxes in the state."



Tax Policy Corner


An EPIC-ally Bad Idea in Nebraska - Billy Hamillton,Tax Notes ($):


The proposal, known as the Nebraska EPIC Option Consumption Tax Act, meaning “Eliminate all Property, Income and Corporate taxes,” seeks to do that and more. It would eliminate the state’s property, income, sales, and inheritance taxes, and replace them with a 7.5 percent “consumption tax” paid on almost all retail sales of goods and services. Groceries would remain tax free, and existing excise taxes on motor fuel, liquor, and tobacco would remain, as would some government fees. Purchases of farm and business equipment would be exempt.

The EPIC option would make the problems presented by the governor’s proposal worse by several orders of magnitude. It wouldn’t be good for the state and its citizens, regardless of how appealing it sounds when described by a petition circulator outside a supermarket or in a 30-second television ad. Moreover, putting all of a state’s revenue eggs in a single basket is a sure recipe for years of budget problems.



Retiring State Taxation of Social Security Benefits - Emily Hollingsworth, Tax Notes ($):


Only 10 states tax Social Security as of press time, and taxes on other pensions and annuities have also been reduced or eliminated in many states. At the same time, the number of retirees in the United States has increased beyond predictions, according to a study published in the Federal Reserve Bank of St. Louis Review.


Tax History Corner


Tax on inheritance has been around since the Roman Empire: 

Inheritance taxes are one of the oldest forms of taxation, dating back to the Roman Empire, which levied a one-twentieth-portion tax on inherited property in order to pay the pensions of veteran soldiers. The basis of the modern inheritance tax, however, was established during the Middle Ages in the feudal arrangement whereby all land and property was ultimately owned by the sovereign, whose permission was required to transfer any property upon death of the owner. If there were no direct descendants, relatives of the deceased could obtain the property through payment of a “relief.” In many European countries, including Great Britain, the Netherlands, Spain, and Portugal, modern inheritance taxes can be traced back directly to these “reliefs.”


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Material discussed is meant to provide general information and it is not to be construed as specific investment, tax or legal advice. Keep in mind that current and historical facts may not be indicative of future results. This is meant for educational purposes only. Information presented should not be considered investment advice or a recommendation to take a particular course of action. Always consult with a financial professional regarding your personal situation before making any financial decisions.