SALT outlook, trends and predictions for 2018
Grant Thornton’s 2018 Outlook, Trends and Predictions Alert focuses on how we believed 2017 would unfold from a state and local tax (SALT) perspective, and how these predictions lined up with what actually happened. We have also included 10 new predictions on critical SALT issues which we believe will dominate in 2018.
Read our SALT outlook here
Keep up with the latest state and local tax developments by reading our SALT Alerts. They are labeled by state so that you can easily find the ones that apply to you. The following are the most recent alerts:
Supreme Court considers landmark Wayfair case
On April 17, 2018, the U.S. Supreme Court considered oral arguments in South Dakota v. Wayfair, a case that may have groundbreaking implications with respect to sales and use tax nexus standards. Last year, the South Dakota Supreme Court unanimously affirmed a circuit court’s decision that a law requiring certain remote sellers that do not have a physical presence in South Dakota to collect sales tax on sales made in the state is unconstitutional.
Arizona enacts federal conformity and apportionment updates
On April 5, Arizona Gov. Doug Ducey signed legislation to conform to selected provisions of the Disaster Tax Relief and Airport and Airway Extension Act of 2017 (“Disaster Relief Act”), the Tax Cuts and Jobs Act (“TCJA”) and the Bipartisan Budget Act of 2018 (“Budget Act”) that are effective for the 2017 tax year.
Georgia imposing bright-line nexus collection on some retailers
On May 3, 2018, Georgia Gov. Nathan Deal signed H.B. 61 enacting significant changes to sales and use tax laws, including imposing a bright-line nexus rule on certain sellers of tangible personal property. Effective Jan. 1, 2019, any seller that conducts 200 or more separate retail sales of tangible personal property for Georgia delivery or obtains more than $250,000 in gross revenue from such sales is considered a dealer that must either register to collect and remit sales tax or notify customers of use tax obligations and report to the state that such requirements have been fulfilled.
Iowa enacts major tax reform legislation
On May 30, 2018, Iowa Gov. Kim Reynolds signed legislation, S.F. 2417, which provides major tax reform. Under S.F. 2417, Iowa’s individual income tax rates will be immediately reduced, corporate income tax rates will be reduced beginning in 2020, the income tax law is conformed to recent federal income tax changes generally beginning in 2019, and the sales tax is expanded to include many digital and online computer services, along with an aggressive expansion of Iowa’s sales tax nexus provisions.
Kentucky enacts major tax reform legislation
On April 27, 2018, Kentucky enacted major tax reform legislation, H.B. 487, without the signature of Gov. Matt Bevin. This legislation supersedes similar tax reform legislation, H.B. 366, which had been enacted over the governor’s veto earlier in April. H.B. 487 updates the Internal Revenue Code (IRC) conformity date, imposes a flat tax rate, adopts mandatory unitary combined reporting, enacts single sales factor apportionment for most taxpayers, and adopts market-based sourcing for sales other than sales of tangible personal property.
New York state budget provides extensive tax reform
New York Gov. Andrew Cuomo signed the final FY18-19 New York State budget legislation on April 12, 2018. The legislation makes significant changes to the New York state tax system in response to federal tax reform provisions contained in H.R. 1, commonly referred to as the Tax Cuts and Jobs Act (TCJA). The new provisions are generally effective for tax years beginning on or after Jan. 1, 2018, unless otherwise specified. This legislation, in combination with the New York state tax reform enacted in 2014, represents a significant transformation of the New York state tax system.
New York aggregates transactions to trigger real estate transfer tax liability
The New York State Tax Appeals Tribunal recently reversed a Division of Tax Appeals decision and held that a series of real property interest transfers was properly aggregated and therefore did not qualify for the “mere change in form” exemption under the New York State (NYS) Real Estate Transfer Tax (RETT). In doing so, the Tribunal declined to consider the step transaction doctrine which was recently applied to render the same series of transactions taxable under the New York City (NYC) Real Property Transfer Tax (RPTT).
Maryland enacts single sales factor apportionment, Amazon incentives, income tax reform
On April 24, 2018, Maryland Gov. Larry Hogan signed legislation adding Maryland to the expanding list of states that have adopted single sales factor apportionment for corporate net income tax purposes.
Ohio Supreme Court rejects amortizable amount reduction of CAT NOL credit in tax-free reorganization
On April 24, 2018, the Ohio Supreme Court held that the Ohio Tax Commissioner should not have reduced the amortizable amount of the taxpayer’s net operating loss (NOL) credit against the commercial activity tax (CAT) to reflect the amount of cancellation-of-debt income (CODI) from the taxpayer’s bankruptcy.
Oregon Supreme Court denies use of apportionment formula
On April 12, 2018, the Oregon Supreme Court denied a taxpayer’s election to use the equally-weighted three-factor apportionment formula provided by the Multistate Tax Compact.
Oregon updates federal tax conformity date
On April 10, 2018, Oregon Gov. Kate Brown signed Senate Bill (S.B.) 1529 updating Oregon’s conformity to the Internal Revenue Code (IRC) to the version in effect as of Dec. 31, 2017. Notably, S.B. 1529 selectively adopts provisions relating to the IRC sections which were enacted or amended as part of federal tax reform, including an addition to income under IRC Sec. 965 (related to the one-time repatriation tax) for tax years beginning on or after Jan. 1, 2017.
Tennessee decouples from some federal tax reform provisions
On May 21, 2018, Tennessee Gov. Bill Haslam signed legislation1 addressing recently enacted federal tax reform and decoupling from some of the provisions contained in H.R. , more commonly known as the Tax Cuts and Jobs Act (TCJA). Specifically, Tennessee decouples from the new federal interest deduction limitation and the provisions that would tax certain state economic development incentives.
Utah reduces corporate, personal tax rates
Utah has enacted legislation reducing the state’s corporate and personal income tax rates for tax years beginning on or after Jan. 1, 2018. The legislation also makes a series of revisions to the state’s apportionment provisions and allows corporations to pay state taxes owed on the deferred foreign income under IRC Section 965 in installments.
Wisconsin adopts portions of federal tax reform provisions
On April 3, 2018, Wisconsin Gov. Scott Walker signed legislation addressing recently enacted federal tax reform,1 with substantial decoupling from federal tax reform provisions contained in H.R. 1, commonly referred to as the Tax Cuts and Jobs Act (TCJA)