Although 2020 brings a “same as last year” feel from a Federal tax perspective, the States have been busy issuing modifications. Altogether, 34 states have major tax changes that took effect as of January 1.
In addition to the changes below; Wisconsin, Oklahoma, Connecticut, Louisiana, Rhode Island, and New Jersey have enacted provisions allowing for pass-through entities to be taxed at the entity level; reducing the amount of state and local taxes paid by individuals.
It is always a good idea to consult with your Lurie advisor on potential state and local implications, but especially this year with the vast modifications. If you haven’t discussed state and local taxes lately, give us a call today!
|State||Individual||Corporate Income||Estate & Gift||Sales Tax||Other|
|Arizona||De minimis exemption decreases from $200,000 to $150,000 - dropping further to $100,000 in 2021. Remote sellers exceeding this threshold in direct sales for the current or prior calendar year are required to collect the transaction privilege tax (TPT) - Arizona's unique sales tax.|
|Arkansas||Top marginal rate drops from 6.9 to 6.6 - further dropping to 5.9% in 2021. Middle rates drop from 6.0 to 5.9%.||NOL carryforward period increases from five to eight years in 2020 and to 10 years in 2021.|
|Connecticut||No longer levying a Business Entity Tax (BET) - previously, owners of S corporations, LLCs, and partnerships paid this tax every other year in the amount of $250.||Exemption phase-in to reach $5.1M in 2020 and will match the federal exemption in 2023.||Select services will be included in the sales tax base (including parking garages, meters, and related parking services; interior design services; and dry cleaning and laundry services (excluding coin-operated laundry services).|
|Florida||Rate reductions from 5.5 to 4.458%; retroactive to January 1, 2019 and effective for tax years 2020 and 2021.||Commercial lease tax (special sales tax remitted by commercial real estate owners but paid by their tenants) drops from 5.7 to 5.5%|
|Georgia||De minimis exemption for small remote sellers drops from $250,000 to $100,000.|
|Hawaii||Becomes the first state to align its income tax economic standards with the sales tax – Income tax filings are required for any individual, estate, or business with 200 or more transactions or more than $100,000 in sales.||Becomes the first state to align its income tax economic standards with the sales tax – Income tax filings are required for any individual, estate, or business with 200 or more transactions or more than $100,000 in sales.||Becomes the first state to align its income tax economic standards with the sales tax – Income tax filings are required for any individual, estate, or business with 200 or more transactions or more than $100,000 in sales.|
Estates valued at above $10M taxed at 20% - applies to decedents dying in 2020.
|Marketplace facilitators with $100,000 or more in income sourced to Hawaii or at least 200 transactions in the state are required to collect and remit its General Excise Tax (the state sales tax).|
|Illinois||Franchise tax (historically imposed on C Corporations) will be phased out between 2020 and 2023. In 2020, the first $30 in franchise tax liability will be exempted and, by 2024, no tax will be owed.||Marketplace facilitators required to collect sales tax when they have $100,000 or more in sales or at least 200 transactions in the state.|
Sales tax on a vehicle’s trade-in-value (on any trade-in above $10,000).
|7% tax on wholesale marijuana sales made to dispensaries as well as retail excise taxes of 10%, 20%, or 25% depending on THC content or product type. A local option tax of up to 3% takes effect in July 2020.
New excise tax on parking services paid by drivers for the privilege of parking in a designated space, garage, or other area.
New and increased vehicle registration fees.
|Indiana||Financial institutions tax rate falls from 6.25 to 6.0%; ultimately reducing to 4.9% by 2023.|
State corporate income tax rate is on a similar phasedown schedule with rates changing each July.
|Iowa||Fully conforms to federal expensing provisions under §179 while conforming to federal repeal of the deferral of gain or loss for the like-kind exchange of property. Will have a rolling IRC conformity going forward.|
|Kansas||Itemized deductions including medical, real estate taxes, personal property taxes, and qualified residential interest and mortgage interest premiums will be the same as federal provisions; no longer discounted. |
Child and dependent care credits will be offered at 25% of the federal amount, up from 18.75%.
|Hybrid and electric vehicles subject to annual license fees of $50 and $100, respectively.|
|Kentucky||Certain businesses with tangible personal property less than $1,000 do not need to file the TPP tax return.|
|Louisiana||3% excise tax applied to the retail sales of CBD products.|
|Maine||Earned income tax credit (EITC) will increase from 5 to 12 % of the amount available under Federal law; with a few modifications.||Vapor tax of 43% of the wholesale price in effect on January 2nd rather than January 1st.|
|Maryland||Phasing in a new single sales factor apportionment formula – phase-in will be complete by 2022.|
|Massachusetts||Single-rate individual income tax declines from 5.05 to 5%.||Payroll tax imposed in addition to the income tax.|
|Michigan||De minimis exemption of $100,000 in sales or 200 transactions and establishment of sales tax collection requirements for marketplace facilitators.|
|Minnesota||Increase in estate tax exemption – will reach $3M for 2020 and beyond.|
|Mississippi||Phasedown of its franchise tax (began in 2018 and continues through 2028). In 2020, the rate will drop down to 2.0 from 2.25%.|
|Missouri||Corporate rate reduction from 6.25 to 4%. This change was partially paid for by requiring most corporations (except for specified industries) to use single sales factor apportionment and market-based sourcing of service income, where, previously, they could select the more favorable of single sales factor or evenly weighted three-factor apportionment.|
Franchise tax levied on financial institutions will be 4.48 instead of 7.0%.
|Montana||Lodging sales tax increases from 3 to 4%. This is in addition to the existing 4% lodging facility use tax, bringing total lodging taxes to 8%.|
|Nevada||Local diesel taxes of up to 5 cents per gallon.
Franchise tax levied on financial institutions will be 4.48 instead of 7.0%.
New fee for electric vehicle licenses with an initial fee of $125 and a renewal fee of $80.
30% excise tax on the wholesale price of vapor products.
|New Hampshire||Conformity to net interest limitation and 50% of GILTI in the corporate tax base. Graduated fee schedule for insurance premium taxes|
Graduated fee schedule for insurance premium taxes.
|Vapor product taxation: 30 cents per milliliter of liquid containing nicotine for “closed cartridge” devices and 8% of the wholesale price of container of liquid containing nicotine for “open system” products.|
|New Jersey||Additional tax rate for taxpayers paying the Corporation Business Tax with taxable New Jersey income above $1M – reduces rate to 1.5% for 2020 and 2021.|
|New Mexico||Require mandatory worldwide combined reporting for unitary groups unless the group makes a water’s edge combined or consolidated group election under the federal code, in which case they can make such an election for NM purposes but must do so for at least seven years in a row.|
|New York||Increases estate tax’s basic exclusion amount from $5.74M to $5.85M.|
|North Carolina||Standard deduction increases by 7.5% for all filing statuses.||Market-based sourcing will be used to apportion income for purposes of calculating corporate income and franchise tax liability.|
|Ohio||Attorneys and lobbyists are no longer eligible for favorable treatment of $250,000 of deductible business income before applying the 3% tax rate.|
|Oregon||New Corporate Activity Tax (CAT) imposed on all business entities that have Oregon income above $1M at a rate of 0.57% of Oregon gross receipts above $1M plus $250.|
|Pennsylvania||Businesses with $500,000 in gross receipts sourced to Pennsylvania are required to file a Corporate Net Income Tax (CNIT) return; regardless of physical presence.|
|Tennessee||“Hall Tax” continues to phase out with the rate dropping from 2 to 1%. Starting in 2021, will no longer have an individual income tax.||Decouples from 163(j) – net interest limitation.|
|Texas||REMINDER - Texas imposes margins tax based on economic presence as of 2019.|
|Utah||Rates reduced from 4.95 to 4.66%.||Rates reduced from 4.95 to 4.66%.||Sales tax base will broaden to select new goods and services in April.|
|Vermont||Increase in estate tax exemption to $4.25M from $2.75M.|
|Virginia||Reduced sales tax rate of 1.5% from 4.3% for feminine hygiene products and diapers.|
|Washington||An additional 1.2% business & occupation (B&O) tax on financial institutions that are members of a consolidated group having at least $1B in annual net income.||State’s economic nexus threshold drops the 200 transactions requirement. Moving forward, remote sellers will only be required to collect the state’s sales tax if they have over $100,000 in sales into Washington.|
|West Virginia||Phase-out of taxes on Social Security benefits for taxpayers with income not exceeding $50,000 (single) or $100,000 (MF). 35% of a qualifying taxpayer’s benefits will be exempt from income taxes moving to 65% in 2021 and 100% in 2022.|
|Wisconsin||Marketplace facilitators will be required to collect and remit sales tax if they are over $100,000 in sales or 200 transactions into Wisconsin.|