Doeren Mayhew’s state and local tax (SALT) advisors highlight the most significant SALT updates from across the country to ensure your business stays up-to-date. Here are the top headlines from the past month.

Various State Individual Income Tax Changes


Arizona signed several bills into law within the past month, including:

  • Arizona S.B. 1828, which reduces the individual income tax rate and replaces the four brackets with a single rate starting at 2.55%, effective date of Jan. 1, 2022. The individual income tax rate will be further reduced when general fund revenue exceeds certain threshold amounts.
  • Arizona S.B. 1827, which establishes a 4.5% capped rate levied on income subject to the individual income tax surcharge, with an effective date of Jan. 1, 2021.
  • Arizona S.B. 1783, which creates the “small business gross income tax,” allowing business owners to elect to pay and file a separate state tax return on their pass-through income. The income reported and tax under this new category will be excluded from the taxpayer’s normal Arizona personal income. The rate starts at 3.5% for the 2021 tax year and reduces every year until it reaches 2.5% in the 2025 tax year. This bill can help reduce individual income tax for high earners who have pass-through income and goes into effect Jan. 1, 2021.


With the passing of Ohio H.B. 110, the personal income tax rate is reduced by 3% across all brackets and the total number of brackets are also reduced. The bill also eliminates personal income tax for taxpayers generating less than $25,000 in income. Beginning in 2026, capital gains through the sale of ownership interest in an Ohio-based business may be deducted against taxable income. Also, a deduction for some or all capital gains from state-certified venture capital entities headquartered in Ohio will be allowed in 2026.

Various State Corporation Income Tax Changes


California A.B. 150 was signed into law and offers tax credits ranging from $2,500 to $10,000 for each hire of a homeless individual, with an annual max of $30,000 per taxpayer, effective Jan. 1, 2021.


Florida H.B. 7059 was signed into law and goes into effect July 6, 2021. The bill updates Florida’s conformity to the Internal Revenue Code (IRC) as of Jan. 1, 2021, but decouples from certain recent federal tax provisions, including:

  • IRC Section 163(j) for taxable years beginning after Dec. 1, 2018, and before Jan. 1, 2021. Taxpayers will need to add back the difference between the interest expense allowed under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (limited to 50% of adjusted taxable income) and the Tax Cuts and Jobs Act (TCJA) (limited to 30% of adjusted taxable income).
  • The accelerated federal deduction for qualified improvement property (QIP). Taxpayers will need to add back the 100% accelerated depreciation and depreciate QIP pursuant to IRC section 167(a), as if the CARES Act had not been enacted.

The bill also increases the business meal expense deduction temporarily from 50% to 100%.

SALT Cap Workaround


Arizona H.B. 2838 was signed into law and goes into effect Jan. 1, 2021, and allows a partnership or S-corp to elect to pay a 4.5% tax on its taxable income, and its partners and shareholders can receive a personal state income tax credit equal to their share of the entity-level tax paid.


California A.B. 150 was signed into law and allows a partnership or S-corp to elect to pay a 9.3% tax on pass-through income, and its partners and shareholders can receive a personal state income tax credit equal to their share of the entity level tax paid. The bill goes into effect Jan. 1, 2021.


Massachusetts H. 4002 was sent back by Governor Charlie Baker to amend certain provisions on July 16, 2021. The original bill allows eligible pass-through entities to elect to pay a 5% excise tax on their Massachusetts income, and pass-through owners can claim a refundable credit equal to 90% of their share of the taxes paid. However, the Governor sent back the bill recommending pass-through owners should be allowed a credit equal to 100% of their share of taxes paid.

COVID-19-Related State Bills and Updates


California Executive Order N-07-21 was signed with an immediate effective date on June 11, 2021, which rescinds pandemic-related orders allowing remote employees to work in California without creating corporate income tax nexus.


Missouri S.B. 226 was vetoed by Governor Mike Parson on Jul. 9, 2021. The proposed legislation would have granted COVID-19 tax relief for business owners affected by “restrictive orders,” but the Governor disagreed with the bill since the language of the bill is problematic. The Governor stated the provision for property tax credits is overly broad.


Ohio H.B. 110 was signed into law with various effective dates based on different provisions. For tax year 2021, employers can withhold state income tax based on the employer’s location. Also, remote workers may seek refunds for state tax withholding when duties were not performed within the employer’s primary work location due to the pandemic.

Additional State Bills and Updates


California S.B. 129 was signed into law and created the “Golden State Stimulus II,” which will send stimulus payments framed as tax refunds to state residents with less than or equal to $75,000 annual earnings. The payments will be sent out beginning in September 2021.

New Jersey

New Jersey signed four bills on July 8, 2021, aiming to prevent employers from misclassifying employees as independent contractors. Notably, bill A.5891 creates the new office of Strategic Enforcement and Compliance within the Department of Labor and Workforce Development to oversee and coordinate enforcement of state wage, benefits and tax laws. Bill A.1171 requires the state to create a database of certified payroll information filed by public works contractors.

New Mexico

New Mexico’s amendments to the gross receipts tax are effective July 7, 2021. The amendments define digital goods as “digital products delivered electronically…a digital good generally takes the form of a license to use and which property is stored, conveyed and used in a digital or electronic format. Digital goods are generally intangible property for purposes of the Gross Receipts and Compensating Tax Act.”

The amendments also clarify when nexus is created: “a person that does not have a physical presence in New Mexico has substantial nexus if, in the preceding calendar year, the person has at least $100,000 New Mexico taxable gross receipts.”

Additionally, “for periods after July 1, 2021, if a purchaser acquires services performed outside the state in a transaction that was not subject to the gross receipts tax and subsequently makes taxable use of that service in New Mexico, the service is subject to the gross receipts tax. For services that were performed outside the state, the taxable use in New Mexico is not subject to compensating tax unless that use is the initial use of the service.”


Ohio H.B. 110 was signed into law, with various effective dates based on different provisions. Regarding sales and use tax, the bill classifies employment services and employment placement services as exempt from sales tax effective Oct. 1, 2021.

Multiple States – Biden Budget Proposals’ Impact on State Taxes

Shield Provisions

President Biden’s proposed SHIELD (Stopping Harmful Inversions and Ending Low-tax Developments) provisions could have a material state tax impact, as it changes the federal tax base. The SHIELD provisions would limit deductions made by American taxpayers to related parties outside the U.S.

Elimination of the Step-Up in Basis at Death

This base change proposal would affect state individual income tax. Under the Green Book proposal, a donor or deceased owner of an appreciated asset would realize a capital gain (with $1 million exclusion per person) at the time of transfer.

Increase in Corporate Income Tax Rate

This increase may result in more deductions for state corporate taxable income.

GILTI Changes

Biden’s proposal would reduce the IRC Section 250 deduction from 50% to 25%. Taxpayers in the states following Global intangible low-taxed income (GILTI) will have an increase in the effective state tax rate on GILTI.

Limitation on Deductions for Items Used to Compute Federal Tax Credits

States will generally pick up the deduction limitation, but they might not provide the corresponding state tax benefits.

For more information on how these new provisions may affect your business, contact Doeren Mayhew’s dedicated state and local tax CPAs today.