Pennsylvania Updates

---

Governor Shapiro signed Pennsylvania’s spending plan from the budget bill into law almost a month past the due date of June 30th. There are still pending issues that need be addressed when the legislature returns to session in September with the expectation for a final package in October. The following are items Pivot Strategic Consulting is looking out for in the future:

• No broad-based tax changes but maintains CNI rate reduction with possible accelerated rate reductions under consideration
• Increased EITC and OSTC Programs
• Property Tax/Rent Rebate expansion – increases income limits and maximum rebates ($1,000) with cost-of-living adjustments
• Tax credits for teachers, police, and emergency personnel
• Child and dependent tax credits – expands from 30% to 35% and a 5% increase up to 50% of federal credit
• State earned income tax credit (25% of federal)
• Potential Pass-Through Entity tax associated with the federal cap on state and local deductions and resident partner tax credit (allow partners of partnerships to use the credit similar to S Corp members)
• Expand NOL limit from 40% to 80% over 4 years
• Combined reporting
• Accelerated sales tax elimination
• Sales tax on professional services
• Provides update to voluntary disclosure guidelines limiting lookback from 6 years to 4

Other State & Local Tax Updates

_____________________________________________________________________________

Arkansas Lowers the Highest Corporate Net Income Tax

For tax years beginning on or after January 1, 2023, Arkansas has lowered the highest corporate net income tax rate from 5.3% to 5.1%.  In addition, the state is phasing out the “throwback rule” starting January 1, 2024, with complete phase-out by 2030. The throwback rule states that sales of tangible property that are not taxable in the destination state are “thrown back” to the state where the sale originated, even though that’s not where the income was earned.

Ohio Releases Information on Changes to Commercial Activity Tax

Effective for calendar year 2024, Ohio eliminates annual minimum tax and the exclusion amount for gross receipts to be subject to the tax from $1M to $3M and up to $6M for 2025 and years thereafter. Taxpayers with receipts under the exclusion amount will not be required to file a return.  Annual returns will no longer be allowed, and quarterly returns must now be filed.  Ohio CAT filers that will no longer be subject to a minimum tax and will be below the new receipt’s threshold should cancel their CAT account once the final annual return is filed for 2023.

New Jersey’s Governor Signs Major Tax Legislation

In July, Governor Murphy signed a significant tax legislation which makes significant changes to the Corporation Business Tax, including the composition of a Unitary Business. In addition, having an excess of $100,000 of New Jersey revenues creates nexus for Corporation Business Tax (notwithstanding Public Law 86-272 protection). Lastly, it should be noted that Corporations no longer need to affirmatively elect S Corporation status, it will follow federal election.

Various State & Local Tax Updates

Kentucky – Separately stated delivery charges are no longer subject to sales and use taxes in Kentucky.  The state also imposed sales and use tax on various services as found in the June Issue of Kentucky Department of Revenue .

Louisiana – Requires single remittance system for state and local sales and use tax effective January 1, 2024.

Maine – Established “Taxpayer Advocate Division” within the Comptroller’s Office to assist taxpayers and representatives in various tax matters. 

Maryland – Established “Taxpayer Advocate Division” within the Comptroller’s Office to assist taxpayers and representatives in various tax matters. 

Oklahoma –  The state has eliminated franchise tax beginning in 2024.