Doeren Mayhew’s state and local tax (SALT) advisors share the latest SALT news across the country to keep your business in the know. Below is the latest news related to SALT legislation:

Maryland Becomes First State to Tax Digital Advertising

Maryland’s Senate and House of Delegates overrode Governor Larry Hogan’s veto on imposing a digital advertising tax in February 2021, meaning businesses who specialize in digital advertisement services will be subject to taxes moving forward. The bill defines “digital advertising services” as advertisement services through a digital interface, including software, websites or applications, as well as banner advertising, search engine advertising, interstitial advertising and other advertising services.

Taxes will be imposed on businesses with global annual gross revenues of at least $100 million and deriving gross revenue from digital advertising in Maryland of at least $1 million. Tax rates will vary from 2.5% to 10%, depending on the taxpayer’s global annual gross revenue. The new tax is applicable to all taxable years beginning after Dec. 31, 2020, and the first estimated quarterly payment (at least 25% of the “reasonably estimated” tax based on 2021 Maryland digital advertising tax revenues) is due to the state’s Comptroller by April 15, 2021.

Alabama Enacts Significant Corporate Tax and COVID-19 Relief

Alabama has already made drastic tax system changes this year. Here are seven notable revisions for tax years beginning on and after Jan. 1, 2021:

  • Adoption of a single-sales factor apportionment.
  • Repeal of the “throwback” rule, meaning sales of tangible property that is not taxable in the destination state are no longer “thrown back” into the state where the sale originated.
  • Creation of an elective SALT limitation deduction workaround. This is a pass-through entity tax to allow for pass-through entities to be taxed at the state’s highest marginal individual income tax rate.
  • Exemption of federal COVID-19 relief from state taxation. The following are now exempt from income tax:
    1. Economic impact payments.
    2. Advanced refunds.
    3. Grants.
    4. Small business loans forgiven under the Paycheck Protection Program (PPP). Note, the exemption conforms to the federal treatment of PPP expenses.
  • Decoupling of the federal Global Intangible Low Taxed Income (GILTI), meaning Alabama taxpayers no longer will pay tax on GILTI.
  • Changes in the treatment of the federal interest limits under Section 163(j). When it comes to consolidated group members filing separate Alabama returns:
    1. If the federal consolidated group is not limited under Section 163(j), it is not subject to Alabama state-level limitation.
    2. If the federal consolidated group is limited under Section 163(j), Alabama state-level limitation is calculated on a separate entity basis.
  • Reinstatement and expansion of credits and incentives under the Growing Alabama Act, including:
    1. Expanding credits to the financial institutions excise tax, the insurance premium tax and the public utility license tax.
    2. Increasing the annual cap for credits from $10 million to $20 million.
    3. Offering a credit to corporations and individuals who contribute cash to state and local economic development organizations that boost economic growth in industrial sites, industrial and research parks, inland ports and intermodal facilities, and STEM marketing and accelerator programs.
    4. Extending the dates and increasing the cap on job credits for the Alabama Jobs Act.

If you are domiciled or conduct business in Maryland or Alabama and have questions about how these new tax provisions may impact your business, contact Doeren Mayhew’s dedicated SALT advisors today.