In 2018 thus far, the main focus of the tax world has been Pub. L. No. 115-97, the 2017 tax act (officially, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”). State and local tax (SALT) practitioners and taxpayers have been left wondering if, when, and what changes will be made on the state level. While the act has left some SALT changes mired in the unknown, one thing is for certain: some states have already made changes to their corporate income, franchise, and other tax rates effective for the 2018 tax year. State rate changes that corporations and pass-through entities should be aware of are as follows:
Alabama: reduced the maximum Alabama Business Privilege Tax imposed on real estate investment trusts from $500,000 to $15,000
Connecticut: lowered the additional surtax on corporate income from 20 percent to 10 percent
Delaware: raised the minimum franchise tax for taxpayers with par-value stock using the assumed par-value method of calculation from $350 to $400 and increased the rate for additional shares from $75 per 10,000 shares to $85 per 10,000 shares
District of Columbia: reduced the corporate income and unincorporated business tax rate from 9 percent to 8.25 percent
Georgia: amended the graduated scale for the net worth tax to decrease the minimum tax from $10 to $0 for corporations with net worth less than $100,000; and created a new bracket for corporations with net worth from $100,000 to $150,000, for which the minimum tax is now $125
Illinois: 7 percent corporate income tax rate that took effect July 1, 2017, is in effect for the whole year and all years going forward
Indiana: corporate income tax rate lowered from 6.25 percent to 6 percent before July 1, 2018, and from 6 percent to 5.75percent after June 30, 2018
Minnesota: changed the brackets and lowered the highest possible assessment from $9,970 to $9,960 for the minimum income tax for partnerships and entities taxed as partnerships
New Hampshire: for tax years ending on or after Dec. 31, 2018, lowered the Business Profits Tax rate from 8.2 percent to 7.9 percent and the Business Entity Tax rate from 0.72 percent to 0.675 percent
New Mexico: reduced the tax rate for the highest bracket from 6.2 percent to 5.9 percent
New York: lowered the business capital tax rate from 0.1 percent to 0.075 percent
Tennessee: reduced the dividend and interest income tax rate from 4 percent to 3 percent
In addition, Nebraska Gov. Pete Ricketts (R) is continuing to push efforts to bring tax reform to his constituents, an effort that began last year with the announcement of L.B. 461, known as the 2017 Nebraska Taxpayer Reform Act. On Jan. 18, Ricketts proposed the latest version of tax reform for the state, which includes a reduction in the corporate income tax rate from 7.81 percent to 6.69 percent, with the goal of making Nebraska competitive and more attractive to businesses looking for new locations.
As the effects of the 2017 tax act trickle down to the state level and the states look for ways to compensate for its provisions, taxpayers may want to be on the lookout for more changes, including changes similar to the mid-year rate increase implemented by Illinois in 2017.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Which states are most likely to change their corporate income or other tax rate mid-year in 2018?
For more information on the impact of Pub. L. No. 115-97, examine Bloomberg Tax’s Tax Reform Roadmap, showing detailed comparisons between pre-reform law and the impending changes, with pertinent cites attached.
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