TWIST - May 17, 2021

Welcome to TWIST for the week of May 17, featuring Sarah McGahan from the Washington National Tax State and Local Tax practice.

First up, legislation has been enacted in Idaho that reduces the state’s corporate income tax rate from 6.925 percent to 6.5 percent effective January 1, 2021. The state’s highest individual income tax rate is also reduced to 6.5 percent.

In Arkansas, the Department of Finance and Administration concluded that allowing access to, and use of, software over the internet is not a specifically enumerated taxable service. Therefore, Arkansas sales and use tax did not apply to the sale of a company’s cloud-based software application.

In Maryland, the Court of Special Appeals concluded that  the Comptroller’s decision to require an alternative apportionment formula was entitled to a more than the usual presumption of correctness, and once the Comptroller has selected an alternative method, the taxpayer bears the heavy burden of establishing that the alteration was unfair. The court concluded that the Comptroller had correctly required a group of corporations to use a single-sales factor formula in computing their Maryland taxable income.

Finally, the U.S. Treasury published an interim final rule that implements the provisions of the American Rescue Plan Act. Recall, the Act allocated $350 billion in funds to support states and local governments. Importantly, the Act prohibits states from using these funds to offset a reduction in net tax revenue. The rule provides guidance on how Treasury will measure whether a state has a reduction in net tax revenue and carves out certain types of tax changes that won’t be counted in making this determination.

Thank you for listening to TWIST and stay well.