Key Takeaways
- Colorado and Washington Mixing Revenue Raisers with Targeted Relief
- Florida and Virginia Will Return In Special Legislative Sessions
- A Challenge to Chicago's Social Media Tax
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Alternative Apportionment is Viable When Single-sales Factor Overstates State Income
Welcome to this edition of our roundup of state tax developments. The State Tax News and Views is published weekly. Consider the Eide Bailly State & Local Tax team for your state tax planning, compliance and incentive needs.
March Madness brings brackets, buzzer‑beaters, and plenty of surprises—and the SALT landscape this month is no exception. As legislative sessions wind down, several states are making last‑minute pushes to pass or amend tax legislation, with changes coming right up against the clock. For taxpayers, the outcome of these buzzer‑beater developments may have lasting implications well beyond the tournament.
First-Round Matchups: States vs. Taxpayers
COLORADO
Colorado Enacts Law to Reduce Property Tax for Farmers, Ranchers - Emily Hollingsworth, Tax Notes ($):
Gov. Jared Polis (D) announced that he signed S.B. 26-010 into law on March 9.[...]S.B. 26-010 revises and expands the definitions of the words “farm,” “ranch,” and “livestock” under Colo. Rev. Stat. section 39-1-102 for property tax purposes.
Notably, the bill specifies that farms and ranches are classified as tracts of land predominantly used to produce agricultural products for profit. It also expands the definition of ranch to include land primarily used for grazing livestock to obtain profit through a pasture-based operation.
MISSISSIPPI
Mississippi Moves to End NIL Income Tax for College Athletes - Matthew Pertz, Tax Notes ($):
H.B. 4014 passed the House by a bipartisan 76–32 vote on February 25. It will require a three-fifths vote from the Senate to reach Republican Gov. Tate Reeves’s desk.
NEW YORK
New York Lawmakers Propose Higher Corporate, Personal Income Taxes - Emily Hollingsworth, Tax Notes ($):
The Assembly and the Senate unveiled their respective budget plans March 10. The proposed personal income and corporate tax increases are likely to spark familiar negotiations with Gov. Kathy Hochul (D), who didn't include lawmakers' tax hike proposals in last year's final budget.
WASHINGTON
Washington Legislature Approves Millionaire's Tax - Paul Jones, Tax Notes ($):
S.B. 6346 is set to be signed by Gov. Bob Ferguson (D), likely setting the stage for a legal fight before the state supreme court and a potential ballot repeal effort by conservative opponents. The tax won't take effect for a couple of years in anticipation of that fight.
Bracket-Busters
Heading for the Exits: When Sports Teams Leave Town - Billy Hamilton, Tax Notes ($):
[...]
Even though basketball is the junior sport among the big four professional sports, its teams have been quickest to move. By my count, NBA teams have jumped cities 23 times since 1951.
[...]
Early on, when professional leagues were newly formed, teams relocated because of financial difficulties, because of acquisitions, or to position themselves in larger markets. Other factors played a role, but money was always the common denominator, and that hasn’t changed.
[...]
Included in the equation in many of these moves are new stadiums and a willingness for cities to share their cost with the team to sweeten whatever deal is on the table.
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The years change, the cities change, and the teams change, but the pattern of cities and states throwing wads of cash at pro sports teams repeats with no end in sight. Using stadiums and other incentives has become just another wrinkle in the decades-old interstate competition between the states, and just another wrinkle in cities’ searches for new sources of bragging rights.
COLORADO
Colorado Considers Legislation to Tax Phantom Income - Jared Walczak, Tax Foundation:
[...]
Colorado has long kept its individual and corporate income taxes relatively simple, with broad bases, low rates, and substantial conformity to federal tax policy. That makes these two departures from sound tax policy stand out all the more: both would position Colorado as an extreme outlier.
WASHINGTON
Washington Lawmakers OK Estate Tax Cut, End to Data Center Tax Break - Paul Jones, Tax Notes ($):
S.B. 6231 would eliminate the sales and use tax exemption for purchases of equipment, labor, and services related to the refurbishment of existing data centers, beginning July 1, 2026.
Buzzer-Beaters: Last Minute Legislation
FLORIDA
Florida Lawmakers end session without budget or property tax deal, setting up special session - Forrest Saunders, WFLX:
The unusual ending came as deep divisions between the House and Senate stalled negotiations on key priorities, forcing leaders to plan at least one special session next month to finish the job.
[...]
One of the session’s biggest unresolved issues was property tax relief. The House passed a proposal that would place a new non-school homestead exemption on the 2026 ballot, but the Senate declined to take it up, raising concerns about the impact on smaller local governments.
[...]
The other major unfinished task is the state budget, which lawmakers are constitutionally required to pass each year.House Speaker Danny Perez said lawmakers will return to Tallahassee next month to complete the work.
NEW MEXICO
New Mexico Rejects Trump Tax Cuts, Adopts Levy on Foreign Income - Michael Bologna, Bloomberg Tax ($):
The corporate income tax changes were tucked into an omnibus tax bill (SB 151) signed Wednesday by Gov. Michelle Lujan Grisham (D). The bill included several additional features, including new state tax credit and exemption programs benefiting local news organizations, physicians, and developers of affordable housing.
[...]
The omnibus tax bill decouples New Mexico from the federal tax code’s Section 168(k), relating to bonus depreciation of assets; Section 168(n), the new deduction for qualified production property; and Section 163(j), relating to the deduction for interest paid by businesses.New Mexico will conform, however, to the Trump administration provision that allows states to tax a larger portion of international corporate income.
VIRGINIA
Virginia Impasse Over Data Center Tax Break Punts Budget Talks - Andrea Vittorio and Daniel Moore, Bloomberg Tax ($):
Gov. Abigail Spanberger (D) must convene a special session for considering the budget bill after the Democrat-controlled legislature wrapped up its 2026 regular session March 14 without reaching a deal.
One of the main points of contention in budget negotiations is the state’s sales tax exemption for data centers. The Senate proposed ending the carveout, while the House of Delegates sought to extend the program but add restrictions.
Full Court Presses: Judicial Developments
ILLINOIS
NetChoice Alleges Chicago's Social Media Tax Violates ITFA - Cameron Browne, Tax Notes ($):
In a March 13 complaint in NetChoice v. Chicago filed in the Illinois Circuit Court of Cook County, NetChoice argues that Chicago's social media tax should be declared invalid because it is preempted by the ITFA, is an unlawful occupational tax under the Illinois Constitution, and violates the due process and commerce clauses of the U.S. Constitution.
TEXAS
Texas High Court: Comptroller's Apportionment Rules Are Valid - Cameron Browne, Tax Notes ($):
In its March 13 decision in NuStar Energy LP v. Hancock, the state supreme court determined that an administrative rule regarding the apportionment of receipts of the sale of personal property at the place of delivery did not conflict with the state’s apportionment statute.
SEASONED WITH SALT
Tax Tips, Tricks and Opportunities
State Income Tax Single Sales Factor Trend and Opportunities for Alternative Apportionment - Tom Marin, Eide Bailly
State income taxation for businesses is a constantly evolving area. Apportionment of income and the legislative push toward single sales factor (“SSF”) has been trending for decades. Currently, for states that impose a net income tax, almost 80% prescribe to use of an optional or mandatory SSF method to apportion business income. The remaining states use a 3-factor formula (contemplating in-state property, payroll and sales compared to the same everywhere) or some variation of such.
There has been a great deal of debate with respect to how business income should be fairly apportioned to the states. As usual, with debate comes controversy. In a recent case, Smithfield Packaged Meats Corp. v. California Franchise Tax Board, case #21STCV39637, Superior Court of California, 2/26/2026, the Court found that Smithfield was entitled to use a 3-factor apportionment method on two grounds: (1) Smithfield is an agricultural business which is statutorily allowed to use a 3 factor formula and (2) importantly, even if they weren’t determined to be an agricultural business, Smithfield would still be entitled to use a 3 factor formula under “alternative apportionment” as the SSF method doesn’t fairly represent their activities in CA. The decision grants Smithfield a refund of $900K+ associated with its CY 2014 filing.
Implication for multistate taxpayers
Although not controlling in other states (and still appealable in CA), the decision in Smithfield signals the potential for the continued assertion of alternative apportionment methods. Specifically:
• The decision shows that taxpayers can successfully argue that SSF apportionment fails to fairly represent business activity, especially when property and payroll are significant components of operations.
• The decision reinforces that alternative apportionment is available when the standard formula is distortive, even outside the agricultural context.
• Because many states have shifted to SSF apportionment, this case may influence courts elsewhere.
Businesses should continue to evaluate the impact of SSF in the context of their multistate filings and challenge whether such a method produces a fair representation of their business activities in a given state.
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