In this edition of the SALT SHAKER, we cover important State and Local Tax updates from New Jersey, Delaware, Pennsylvania, Georgia, Connecticut, Maryland and New York for August 2018.
Assembly Bill 3438 requires the Director of the Division of Taxation to establish a tax amnesty program, to be held for no more than 90 days and to end no later than January 15, 2019.
The actual dates of the amnesty have yet to be specified. Any qualified taxpayer that has failed to pay any state tax that is due may pay the full amount of tax and 50% of the interest due as of November 1, 2018 without penalty or associated fees. The Amnesty will not apply to any penalties that are owed due to civil fraud or criminal conduct, and those taxpayers that are under criminal investigation for any state tax matter may not participate in the amnesty.
The time frame for the Amnesty’s application for state tax liabilities are for those due on or after February 1, 2009 and prior to September 1, 2017. The bill further imposes a non-waivable 5% penalty in addition to all other penalties or interest upon any state tax liability that is eligible to be satisfied during the amnesty period for those taxpayers who fail to do so.
Effective after 12/31/2018, this new Delaware credit will allow qualified investors a refundable tax credit against their personal income tax equal to 25% of their qualified investment in a qualified small business. Before claiming the credit, the qualified investor must maintain the investment (minimum of $10,000 cash for individuals) for 180 days and if the investment is not held for at least three years, with exceptions, all or a portion of the credit must be repaid. Both the small businesses and investors will need to apply and pay an application fee up to $500 with the Director of the Division of Small Business, Development, and Tourism to become certified as “qualified”. For the calendar year 2019, this application must be made available on the Division’s website by November 1, 2018. In addition to paying an application fee, in order to receive certification, a business must meet strict criteria, a few include:
The Pennsylvania Department of Revenue issued guidance providing that it would not allow 100 percent bonus depreciation under IRC § 168(k) for assets placed in service after September 27, 2017 pursuant to the Tax Cuts and Jobs Act. The guidance indicated a taxpayer would receive no additional depreciation deduction on those assets until the entity either sold or otherwise disposed of those assets.
On June 28, 2018, Governor Tom Wolf signed Senate Bill 1056, clarifying that qualified property placed in service after September 27, 2017, a corporate taxpayer is required to add back federal bonus depreciation for Corporate Net Income Tax (“CNI”) purposes. The corporate taxpayer will then be entitled a depreciation deduction on that property equal to the depreciation on the property for the taxable year as determined in accordance with IRC §§ 167 and 168 without the application of Internal Revenue Code § 168(k). The revised law applies for tax years beginning on or after January 1, 2017.
Effective January 1, 2019, retail sellers of tangible personal property located outside of Georgia will be required to either register to collect and remit sales tax or notify customers that sales or use tax may be due for those taxpayers that either:
The term “delivered” is defined to include both physical and electronic deliveries which are to be used, consumed, distributed, stored for use or consumption in Georgia.
If the retailer is choosing to comply with the notice and reporting requirements, they must send a sales and use tax disclosure statement to every purchaser who completed $500 in aggregate purchases throughout the year. In addition, the retailer must file a copy of the annual disclosure sent to purchasers with the Georgia Department of Revenue by January 31 of the following year. This will include various information including the total amount paid by each purchaser during the previous year.
In response to the federal Tax Cuts and Jobs Act’s limitation of the state and local tax deduction, the Governor of Connecticut has enacted a relief bill which includes:
This 6.99% tax is imposed on partnerships, LLCs, and S Corporations that do business in Connecticut or have income derived from or connected with Connecticut source. This is an entity level tax based on federal income with Connecticut adjustments, and an election can be made to use an alternative tax base. The PET will be offset with a refundable personal or corporate income tax credit of 93.01% of the PET tax paid. It is important to know that the IRS may not respect efforts by states to bypass the $10,000 state and local limitation and it is still up in the air on whether they will try to challenge the Connecticut PET.
Connecticut has already decoupled from the federal bonus depreciation under IRC § 168(k) which requires individuals to addback that amount when calculating Connecticut taxable income. For any asset placed in service after September 27, 2017, in which bonus depreciation was taken, a subtraction can now be taken equal to 25% of the disallowed federal bonus depreciation for each of the next four succeeding taxable years.
Beginning on September 27, 2017, both corporate and personal income taxpayers will be required to addback 80% of the deductions claimed under IRC § 179. Similar to bonus depreciation, 25% of the disallowed § 179 deduction may be taken in each of the four succeeding years.
Maryland Governor has signed legislation enacting single sales factor apportionment for calculating Maryland corporate income tax. It will be phased in over five years, and corporations will be using 100% sales beginning in tax year 2022. The phase-in will look like the following:
Effective January 1, 2019, The Employer Compensation Expense Tax (ECET) is a new optional tax that employers can elect to pay if they have employees that earn more than $40,000 in annual wages. The optional tax covers employee wages that are paid for the calendar year to each employee who is employed in New York for whom the employer is required to withhold New York State tax. It will be phased in over three years as follows:
For questions on state tax, contact our State and Local Services Group by filling out the form below.