TWIST - This Week in State Tax

Welcome to TWIST for the week of March 18, 2024 featuring Sarah McGahan from KPMG’s Washington National Tax state and local tax practice.

Today we are covering proposed legislation in several states addressing the taxation of short-term rentals and the obligations of accommodations platforms. We are also summarizing pending franchise tax legislation in Tennessee. On the corporate income tax side, guidance has been issued in Oregon addressing nexus and P.L. 86-272 and we are reminding calendar year taxpayers that the due date to make a Montana water’s-edge election is approaching.

In Montana, unitary combined groups wishing to file on a water’s-edge basis must make a valid election every three years. The election must be made within the first 90 days of the tax year for which the election is to become effective. For example, a calendar year taxpayer would need to make the election by March 30, 2024, for the 2024 tax year and the two subsequent years. March 30 falls on a Saturday this year, therefore the election due date should be pushed to the next business day.

The Oregon Department of Revenue recently posted new guidance on its website for “foreign” corporations, meaning corporations with headquarters outside Oregon. The guidance explains situations in which taxpayers are considered to be doing business in Oregon, provides a list of nexus creating activities, and addresses P.L. 86-272. The Department suggests that companies read the Multistate Tax Commission’s statement on P.L. 86-272 for more information. This statement was revised in 2020 to address activities occurring over the Internet. It is unclear whether the reference to the statement as a source of additional information means that the Department has formally adopted the statement.

Legislation has been introduced in both chambers of the Tennessee General Assembly that, if enacted, would authorize franchise tax refunds for certain taxpayers.  Currently, the franchise tax is imposed on the greater of apportioned net worth, or the actual value of real and tangible personal property owned or used in Tennessee. The Senate version of the bill was recently amended and appears to be advancing with a committee vote scheduled for March 19, 2024. Senate Bill 2103 would delete the section of the statute setting forth the alternative franchise tax measure based on real and tangible personal property. Further, the bill would adopt a new section of law governing refunds for taxpayers that previously paid on the property measure.

During the current legislative sessions, certain states are considering legislation addressing the taxation of short-term rentals and obligations of platforms that facilitates sales of accommodations.