This episode of the Eversheds Sutherland SALT Shaker Podcast policy series discusses a Connecticut legislative proposal that would create a wage compensation tax. The proposal is currently included in the Connecticut budget and is specifically meant to alleviate the SALT deduction cap put in place by the Tax Cuts and Jobs Act 2017 for wage earners. Although New York implemented a similar proposal in 2019, the Connecticut proposal turns that program on its head by letting an employee (as opposed to the employer) decide whether to participate. The current proposal is fairly bare bones, presenting many troubling, unanswered questions.

The episode ends with a new feature—“surprise nontax question”—that host and Partner Nikki Dobay and her guests each answer!

Nikki is joined by colleagues Charlie Kearns, a partner in the Washington, DC office, and Michael Hilkin, counsel in the New York office.

The Eversheds Sutherland State and Local Tax team has been engaged in state tax policy work for years, tracking tax legislation, helping clients gauge the impact of various proposals, drafting talking points and rewriting legislation. This series, which is focused on state and local tax policy issues, is hosted by Partner Nikki Dobay, who has an extensive background in tax policy.

Questions or comments? Email SALTonline@eversheds-sutherland.com.

 

 

 

 

 

 

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Georgia Governor Brian Kemp has signed into law House Bill 451, which provides temporary ad valorem tax relief to Georgia manufacturers to mitigate the economic and logistical disruptions caused by the COVID-19 pandemic.

Under HB 451, for property tax year 2021, manufacturers claiming Georgia’s Level 1 Freeport exemption pursuant to O.C.G.A. § 48-5-48.2(c)(1) may elect to claim the amount of finished goods inventory entitled to exemption based on the value of qualifying finished goods inventory as of either January 1, 2020 or January 1, 2021. As a result, Georgia manufacturers who have been forced to hold finished goods inventory for more than one (1) year may obtain relief from unintended property tax liabilities for tax year 2021.

Property tax returns, including Form PT-50PF (Application for Freeport Inventory Exemption) for property tax year 2021 were generally due by April 1, 2021, prior to the effective date of HB 451. Accordingly, Georgia manufacturers should evaluate potential methods to obtain the relief provided under the legislation for tax year 2021.

Read the full Legal Alert here.

Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!

We will award prizes for the smartest (and fastest) participants.

This week’s question: Which state recently enacted property tax relief for manufacturers to mitigate the disruptive effects from COVID-19?

E-mail your response to SALTonline@eversheds-sutherland.com.

The prize for the first response to today’s question is a $25 UBER Eats gift card.

Answers will be posted on Saturdays in our SALT Weekly Digest. Be sure to check back then!

State taxation of a nonresident employee’s equity award, such as nonqualified stock options (NQSOs) or restricted stock units (RSUs), has long been a thorn in the side of many tax practitioners, payroll departments, and – of course – employees. In Appeal of Prince, California’s Office of Tax Appeals (OTA) recently addressed the state’s taxation of nonresident income.

In this SALT@Work column for the Journal of Multistate Taxation and Incentives, Eversheds Sutherland attorneys Charlie Kearns and Chelsea Marmor discuss the Appeal of Prince decision and rationale, and its potential application in other states.

 

On April 7, 2021, Virginia H.B. 1800 was passed by the Virginia General Assembly. Included in the Budget Bill was a one-time combined unitary return reporting requirement (“Reporting Requirement”) that is intended to allow the Virginia Department of Taxation (“Department”) the ability to study the tax impact of combined reporting. Specifically, corporations that are subject to Virginia income tax are required to file a one-time combined unitary report (“Report”) which shows the difference between the amount of tax the corporation would pay if it filed a unitary combined return and the amount of tax based on its current Virginia filing methodology. A workgroup that was established as part of House J.R. 563 will use this Report to assess the feasibility of transitioning to a unitary combined reporting system in the Commonwealth.

Until recently, there was virtually no guidance on how the Report, due July 1, 2021, must be prepared and filed with the Department. On April 29, 2021, the Department released guidance that provides some additional detail regarding the preparation of the Report. The guidance provides that the following entities are excluded from the Report:

  • Corporations that are required to file a premiums license tax or bank franchise tax return;
  • Corporations that are incorporated outside the United States and that have 80% or more of the average of their property, payroll and sales factors outside the United States; and
  • Corporations not subject to federal income tax because they have federal tax treaty protection.

Additionally, the guidance provides that the Report should include the following information for the 2019 tax year:

  • Number of unitary group members not currently filing in Virginia;
  • Details regarding the calculation of federal taxable income, including net operating loss deduction and eliminations;
  • Details regarding the calculation of Virginia taxable income, including modifications, nonapportionable business income tax (both allocated to or outside of Virginia) and business income;
  • Apportionment factor method, including whether the taxpayer files using a single sales factor or multi-factor method;
  • Details regarding the composition of each apportionment factor;
  • Amount of tax credits claimed; and
  • The amount of certain other taxes paid in the Commonwealth (telecommunications company tax, electric suppliers company tax, etc.)

Based on the above details, taxpayers must submit a Report computing Virginia corporate income tax using both a Joyce and Finnigan apportionment method and compare the amount of tax due under both methods with the amount of tax that would be due using its current Virginia filing method.

The Report is for informational purposes and no tax is required to be paid with the return. However, there is a $10,000 penalty for failing to file the report.  The report is due by July 1, 2021 and no extensions of time are permitted.

On April 15, 2021, the New York Tax Appeals Tribunal (“Tribunal”) dismissed a taxpayer’s exception to an order of an Administrative Law Judge (“ALJ”) on the grounds that the exception was not timely filed.  The Tribunal determined that the ALJ’s order was properly mailed to the taxpayer on June 11, 2020, that an exception to the order was due on or before July 13, 2020, and that the taxpayer filed the exception on or after July 20, 2020. The taxpayer asserted that the filing delay was due to circumstances relating to the COVID-19 pandemic. However, the Tribunal explained that, while the taxpayer may have had good cause to request an extension, an extension was not requested within the 30-day time period provided by statute.

While not explicitly addressed in the decision, the Tribunal’s conclusion appears to be consistent with recent guidance on the Tribunal’s website regarding the applicability of Executive Orders issued by Governor Cuomo in 2020 that tolled statutes of limitations for certain judicial proceedings. In contrast to guidance issued by the New York City Tax Appeals Tribunal (“City Tribunal”), which stated that the Governor’s Executive Orders tolled deadlines for City Tribunal proceedings, the Tribunal stated on its website throughout 2020 that it does not have “the authority to waive statutory deadlines” and therefore “any petition, exception, or request for an extension of time to file an exception must be filed (postmarked or put in the custody of an authorized delivery carrier) by the current statutory deadline.” Eversheds Sutherland’s article addressing the conflicting approaches to the applicability of the Executive Orders, and the need for Governor Cuomo to clarify the applicability, can be found here.

In the Matter of the Petition of Shahid Mahmood, Dkt. No. 828168 (N.Y. Tax Appeals Tribunal Apr. 15, 2021).

On May 3, the Kansas Legislature overrode Governor Kelly’s veto of SB 50.  As a result, marketplace facilitators will now be required to collect sales and use tax beginning July 1, 2021 if they exceed a $100,000 nexus threshold.  The legislation also requires marketplace facilitators to collect 911 fees beginning April 1, 2022. Please see our previous post here for more information about the marketplace facilitator collection provisions in SB 50.

In addition to requiring marketplace collection, the legislation also decouples the state from GILTI and 163(j) and eliminates the state’s ten-year net operating loss carryforward cap for losses incurred in tax year 2018 or later, among other provisions.

On April 29, California AB 71 was approved by the Assembly Housing and Community Development Committee. AB 71 was approved by the Assembly Committee on Revenue and Taxation earlier in April. The bill will now head to the Assembly Appropriations Committee for consideration. The Appropriations Committee is typically the final committee to consider a bill before it goes to an Assembly floor vote. Please see our previous post here for more information on AB 71’s proposed corporate tax increases, including the inclusion of GILTI and repatriation income of affiliated corporations in a California taxpayer’s gross income.

On April 27, Illinois Governor J.B. Pritzker appointed retired Circuit Court Judge Edward Washington II to the Illinois Independent Tax Tribunal. The appointment was for a vacant position, so it appears that Judges Brian F. Barov and James M. Conway will continue in their roles.

Edward Washington II was a judge of the 5th Subcircuit of the Cook County Judicial Circuit Court in Illinois from 2002 to 2017. He also served in the cabinet with the Illinois Attorney General’s Office and on the Illinois Commerce Commission. Most recently, he was a member of Nixon Peabody’s Complex Commercial Disputes practice group in Chicago.

Judge Washington is the first administrative law judge appointed to the Tribunal by Governor Pritzker and will join Judge Barov and Chief Judge Conway, both of whom have been with the Tribunal since its inception in 2014. Although it is not clear if Judge Washington has “substantial knowledge of State tax laws” as required by the Illinois Independent Tax Tribunal Act, 35 ILCS §1010/1-30, he does have an extensive judicial experience, serving as a Circuit Court Judge for fifteen years.