Detailed Multistate Development
On Election Day, voters will be asked to decide on certain significant state and local tax measures. In many instances, approval of these measures will result in tax rate changes, or new taxes. In California, voters are being asked to end decades of established policy as to how commercial and industrial properties are taxed. Below is a summary of certain key measures.
— California Proposition 15. If approved, this initiative would repeal aspects of Proposition 13, which allows property to be reassessed to fair market value for property tax purposes upon a change in ownership only. Under Proposition 15, commercial and industrial properties would be reassessed to fair market value once every three years. Proposition 13 protections would continue to apply to owners whose total commercial and industrial property in California is not valued at more than $3 million and residential real estate, including tenant-occupied properties.
— Illinois Allow for Graduated Income Tax Amendment: This measure would amend the Illinois Constitution to allow the state to impose graduated individual income tax rates. If approved, effective January 1, 2021 rates for individuals and corporations will increase. Recall, legislation enacted in 2019 (Senate Bill 687) established the graduated tax rates that would apply if voters approved the constitutional change and adopted a contingent corporate income tax rate increase to 7.99 percent (not including the replacement income tax). Because the corporate income tax rate and the highest individual income tax rate must be within a specific ratio of each other, the corporate income tax rate will increase upon approval of the graduated income tax amendment.
— Colorado Proposition 116: If approved, this measure would decrease the income tax rate applicable to corporations and individuals from 4.63 percent to 4.55 percent.
— City of San Francisco: There are three tax Propositions of interest to business taxpayers. Proposition F would overhaul the City’s Gross Receipts Tax regime, including increasing gross receipts tax rates for all businesses when the measure is fully implemented. Initially, the rates imposed on certain businesses (hospitality, retail) would be reduced to account for COVID-19. This measure would also repeal the Payroll Expense Tax, revise the annual registration fee for certain businesses and increase the exemption threshold. Proposition F would also impose additional taxes if courts ultimately struck down the Homelessness Gross Receipts Tax and the Early Child Care and Education Tax imposed on taxpayers engaged in the business of leasing commercial space in properties in the City. Proposition I would double the reality transfer tax rates for properties valued at over $10 million. Proposition L would adopt an additional gross receipts tax that would apply to businesses whose highest paid managerial employee earns more than 100 times the median compensation of employees.
— Portland Metro Measure 26-218: If approved, this would allow Portland to impose an up to .75 percent payroll tax on the payroll of employers with more than 26 employees. The revenues from this tax would be dedicated to transportation and infrastructure improvements.
Please stay tuned to TWIST for updates on these measures.
This Week's Developments