Key Takeaways
- Property Tax in the News
- A Review of May's SALT Developments
- WI Upholds Limits of PL 86-272
- OK Reduces Individual Tax Rates, Brackets
- State Impacts of the Big, Beautiful Bill
Welcome to this edition of our roundup of state tax developments. Consider the Eide Bailly State & Local Tax team for your state tax planning, compliance, and incentive needs.
The Year of the Property Tax - Billy Hamilton, Tax Notes ($):
It’s easy to understand why. According to a recent LendingTree analysis, median property taxes in the United States rose by an average of 10.4 percent between 2021 and 2023 — the most recent available data — and taxes have continued to rise since then.1 More than 72 percent of metropolitan areas with at least 200,000 residents saw above-average increases in property tax bills last year, according to Attom, a property data and real estate analytics firm.
For many homeowners, the problem has flown well past annoying and has begun to feel like an existential threat. Their homes are at risk, and there’s no help in sight. Jared Walczak of the Tax Foundation told MarketWatch in a recent interview that a “property tax revolt” is underway, calling back to the property tax revolt that began in the late 1970s after the passage of Proposition 13 in California during a similar period of rising property taxes and widespread taxpayer unrest. Open revolt or not, the unrest among homeowners has brought property tax relief to the top of the legislative agenda in many states.
Florida's Property Tax Reform Push: Weighing the Options Amidst a Lack of Consensus on the State Budget - Joseph Johns, Tax Foundation:
Governor Ron DeSantis (R) recently convened a roundtable focused on property tax relief where he outlined his own tax policy priorities. His recommendations diverged sharply from the sales tax reductions under consideration in the Florida House, so DeSantis extended the legislative session until June 6 to resolve these and other differences.
State & Local Tax Takeaways From May - Maria Koklanaris, Law360 ($):
Among them was New York, which will reduce income taxes on lower-to middle-income taxpayers, increase payroll taxes for big businesses in the New York City metro area and allow tax liabilities to be pushed out to partners under a budget bill that Gov. Kathy Hochul, a Democrat, signed May 9.
In Washington state, Democratic Gov. Bob Ferguson signed several tax bills May 20 to raise revenue to close a $16 billion shortfall. One bill will expand the sales tax to various services including digital advertising.
State-By-State Roundup
Colorado
Colo. Creates Employee-Owned Biz Tax Breaks - Jacqueline McCool, Law360 ($):
H.B. 1021, which was signed Friday by Democratic Gov. Jared Polis, authorizes state income tax deductions of up to $1 million of federal taxable income for worker-owned cooperatives. The bill also allows businesses to deduct capital gains realized during its conversion to employee ownership. Both deductions will be available to be claimed from 2027 to 2037.
The bill also creates a new refundable tax credit available until 2031 of up to $167,000 per year for an entity that assists in the conversion of a business to employee owned.
New York
NY Sales Tax Applies To Firm's Investment System Sales - Jacqueline McCool, Law360 ($):
In an advisory opinion released Wednesday, the department said the firm owes sales tax on its sales of the systems. The systems' main functionality is giving clients access to investment management platforms, the department said, which have software that gives businesses advice on buying stock or risk management.
The software used is standard regardless of the individualized client information, the department said, so sales of the systems are sales of prewritten software subject to tax.
Ohio
Ohio GOP Budget Plan Includes Flat Income Tax - Michael Nunes, Law360 ($):
Oklahoma
Oklahoma Reduces Tax Rates, Brackets - Melissa Menter, Eide Bailly:
Rhode Island
Rhode Island Reminds Taxpayers of Website Accessibility Features - Melissa Menter, Eide Bailly:
Texas
Texas Lawmakers OK Tax Exemption For Internet Access - Michael Nunes, Law360 ($):
. . .
The bill would exclude internet access services from the list of services that are subject to the state's 6.25% sales tax.
Texas defines internet access services as any service that enables users to access content, information, email or other services offered online.
Wisconsin
Wis. Court Says PL 86-272 Can't Shield Fla. Travel Co. - Michael Nunes, Law360 ($):
The appeals court, however, ruled that the law didn't apply to [Taxpayer] because it was selling travel services, which aren't considered tangible personal property.
Justices Fault Wis. For Denying Tax Break to Charities - Maria Koklanaris, Law360 ($):
In a 9-0 decision authored by Justice Sonia Sotomayor, the court agreed with the charities, overturning a ruling by the Wisconsin Supreme Court and remanding the case back to that court.
Tax Bites: Tips, Tricks and Opportunities in SALT
John Gupta, Principal, Eide Bailly:
As it stands, the House’s “Big, Beautiful Bill” would have far-reaching implications in the realm of state taxation. The permanent cap increase to the individual state and local tax deduction is a national story that has brought a new meaning to the term SALT at kitchen tables across the US. And as with all federal tax bills, there has been heavy discussion regarding its impact to state budgets. Every state is facing hard decisions as to whether they can conform their income tax codes to the federal changes or must decouple from some or all provisions to balance their budgets.
But the Big Beautiful Bill has several less talked about impacts related to state taxation. While receiving less attention, they have the potential to materially impact a wide range of businesses. For example, did you know that under the bill:
- Popular state level elections (known as “SALT Cap Workarounds” or “PTETs”) would no longer be viable for many personal service businesses, including those engaged in accounting, law, healthcare, consulting, financial and brokerage services, athletics, performing arts, and more?
- Public Law 86-272 would be expanded so that businesses could engage in many more activities in a state without becoming subject to the state’s income tax?
- Sales/use taxes paid or accrued on business purchases would no longer be federally tax deductible for any partnership or S Corporation?
Each of these items have a strong chance of being removed or modified during the remainder of the legislative process. However, due to their significance to so many businesses, their progress should be closely monitored. Please consult Eide Bailly’s State and Local tax team or National Tax Office’s Legislative Affairs team for more information.
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