Doeren Mayhew’s state and local tax (SALT) advisors highlight trending SALT topics from across the nation to keep your business up-to-date. Check out these popular updates from the past month and how they may impact your business:

State Individual Income Tax Changes


The Arizona Supreme Court affirmed a lower trial court’s denial of enjoining the imposition of the tax surcharge on high-income Arizona individual taxpayers. The tax surcharge was imposed by Proposition 208, which was passed in 2020. The Arizona Supreme Court found Proposition 208 “unconstitutional to the extent it mandates expending tax revenues in violation of the Education Expenditure Clause.”

State Corporation Income Tax Changes


Minnesota passed H.F. 9 with varying effective dates based on certain provisions. The bill includes the following:

  • Minnesota retained its general conformity to the Internal Revenue Code (IRC) as of Dec. 31, 2018, and expanded its state conformity to include certain provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Consolidated Appropriations Act of 2021, Further Consolidated Appropriations Act of 2020 and American Rescue Plan Act.
  • Paycheck Protection Program (PPP) loans are excluded from taxable income and business expenses paid with PPP loans are deductible.
  • Eligible taxpayers can enjoy a film production credit of up to 25% of eligible production costs paid in the taxable year. One of the requirements is the taxpayer will need to spend at least $1 million in the taxable year to receive the credit. This credit is available for 2021 through 2024.

New Hampshire

New Hampshire passed S.B. 101, which is effective July 1, 2021. This bill increased the minimum gross business income required for filing a business profits tax return from $50,000 to $92,000.

New Hampshire also passed S.B. 103, which is  effective Oct. 9, 2021. This bill waived certain business registration, licensing and taxation requirements for out-of-state businesses and employees temporarily performing work in New Hampshire during a declared state of emergency.

New York City

A New York City administrative law judge determined that payments to the Domestic International Sales Corporation (DISC), whose only shareholders were the active partners of the firm, may not be deducted for unincorporated business tax purposes under New York City’s administrative code.

State Partnership Audit Regime Updates


Minnesota’s passing of H.F. 9 also adopted an audit regime allowing a partnership to elect to pay the state assessment resulted from a federal audit or amended return. These provisions are effective retroactively for taxable years beginning in 2018.


Virginia released its Guidelines for Reporting Federal Tax Adjustments, which is effective Oct. 14, 2021. The new guideline states that partnerships must submit a report to the state tax department and the partnership’s members about the partnership-level adjustments within 90 days after the federal audit adjustment was determined.


The Washington Department of Revenue posted guidelines regarding the business and occupation tax credit. The credit is for the creation of new employment positions dedicated to providing certain services to international customers. The employment positions providing the international services must be located in specific geographical areas to be eligible for the credit. The amount of the credit is $3,000 per year for each qualified employment position created.

SALT Cap Workaround


In addition to state corporation income tax changes and updates to the state partnership audit regime, Minnesota’s H.F. 9 also allowed pass-through entities to elect to file and pay Minnesota state tax at the entity level. This provision is effective for tax years beginning after Dec. 31, 2021.


The passing of Illinois S.B. 2531 allows partnerships (excluding publicly traded partnerships under IRC Section 7704) and S-corporations to elect to pay an entity-level state tax of 4.95% on its net income. Partners and shareholders of electing entities will receive a state income tax credit equal to the amount of the tax paid on their pass-through income. The bill applies to tax years ending on or after Dec. 31, 2021, and beginning before Jan. 1, 2026.

New York

The New York Department of Taxation and Finance has issued guidance regarding its new Pass-Through Entity Tax (PTE Tax) in the form of a Technical Memorandum, TSB-M-21(1)C,(1)I and a new webpage dedicated to the tax.

COVID-19 Related State Bills and Updates


The Hawaii Department of Taxation issued private letter ruling (PLR) No. 2021-01 regarding individual income tax residency. The PLR stated that although a nonresident taxpayer conducted work online, the taxpayer was still subject to Hawaii income tax since the taxpayer was present in Hawaii over 200 days.

New Jersey

The New Jersey Division of Taxation announced the temporary waiver for business and sales tax nexus for remote employees due to COVID-19 will end on Oct. 1, 2021. Under the new guideline, employers will be required to source “income based on where the service or employment is performed and withhold New Jersey gross income tax.”

Rhode Island

Rhode Island released new guidance for recipients of forgiven PPP loans addressing how recipients who have yet to file their 2020 tax returns should proceed if their forgiven PPP loan amount exceeds $250,000 (called the “increment” which must be included in income for Rhode Island tax purposes). Residents with loan forgiveness amounts exceeding $250,000 for the 2020 tax year who have not yet filed their state tax return were advised to file the return but not include the increment of loan forgiveness that is taxable for Rhode Island purposes.

Additional State Bills and Updates


California has been authorizing localities to impose their own real estate transfer taxes “on each deed, instrument, or writing any lands, tenements, or other realty sold within the county.” California did not explicitly impose transfer taxes on the transfer of properties subject to a lease, but through various case law, it was determined that a transfer of property subject to a lease with the remaining term of 35 years or more does not result in a change in ownership, while the creation of a lease of more than 35 years is a change in ownership, which is subject to the transfer tax.


Illinois calculated franchise tax using a corporation’s net worth, paid-in capital or capital stock. Taxpayers had been fighting to repeal this tax, but the tax was resurrected as part of the fiscal 2022 budget proposal. There are several ways to help reduce the franchise tax paid during mergers:

  • Merge vertically when possible: the taxpayer should lay out the merger as a vertical merger between a parent and a wholly-owned subsidiary in the merger plan.
  • Exclude highly capitalized entities when merging horizontally.
  • Pay attention to some types of non-statutory mergers since they may yield additional franchise tax liability.

Multiple States

P.L. 86-272

The Multistate Tax Commission (MTC) adopted revised guidance on P.L. 86-272 stating that if a customer can interact with the taxpayer via its website, such as using a chat feature, the taxpayer engages in non-solicitation activity in the customer’s state. MTC guidance is not law, but taxpayers should expect MTC member states to be influenced by MTC guidance. Revenue officials in Colorado, Illinois, Oregon and Utah are studying how to implement some or all of this guidance. The guidance also includes:

  • Two listings: In-state activities that are presently treated by the Supporting States as “Unprotected Activities” or “Protected Activities”.
  • A list of examples of activities conducted by a business operating a website and offering for-sale-only items of tangible personal property, unless otherwise indicated. In each case, customer orders are approved or rejected, and the products are shipped from a location outside of the customer’s state.

Some activities that defeat the shield of P.L. 86-272 immunity include:

  • The business places internet “cookies” onto the computers or other electronic devices of in-state customers.
  • The business remotely fixes or upgrades products previously purchased by its in-state customers by transmitting code or other electronic instructions to those products via the internet.
  • The business contracts with in-state customers to stream videos and music to electronic devices for a charge.

Finnigan Method

The MTC also adopted the “Finnigan Method” for combined reporting, which treats members of a business group as one taxpayer for combined reporting purposes. This model will act as an alternative to the “Joyce” approach, which treated each entity of a combined group individually for filing corporate income taxes.

Concerned these new provisions may impact your business’s state or local tax liability? Contact Doeren Mayhew’s dedicated state and local tax advisors today.