Indiana School Scholarship Credit

As Indiana begins a new fiscal year on July 1, they have again opened up donations for the School Scholarship Tax Credit. These credits are available to individuals and corporations that make donations to qualified Scholarship-Granting Organizations, or SGO. The credit is 50% of the donation amount and is taken against the individual or corporate Indiana tax liability.

Although there is no limit to how much one can get as a credit, the total program cannot award more than $8.5 million in credits each fiscal year. As of July 20, 2015 there is $8,136,444 of credits still available. The SGO must be approved by the Department of Education. A list of these schools can be found at www.doe.in.gov. Most non-public schools in Indiana are already a qualified SGO.

Wisconsin Budget Bill Includes Numerous Tax Law Changes

The biennial Wisconsin budget bill, signed on July 12th, makes numerous personal income and corporation franchise and income tax changes. Here is an overview of notable changes:

• Standard Deduction: The legislation increases the standard deduction for married filers.
• Educators’ Classroom Expenses: The legislation conforms Wisconsin to the federal deduction for teachers’ purchases of school supplies, beginning to tax year 2015.
• ABLE Accounts: The legislation provides for ABLE (Achieving a Better Life Experience) accounts. Amounts deposited into ABLE accounts are not subject to Wisconsin personal income tax.
• Business Development Tax Credit: The legislation sunsets the economic development tax credit and the jobs tax credit and creates a business development tax credit for taxable years beginning after December 31, 2015. (The new credit amount is based on certain wages, training costs, and real and personal property investments.)
• Manufacturing and Agriculture Credit: The legislation reduces the manufacturing and agriculture credit percentage for tax year 2015. However, the percentage is allowed to increase in 2016.
• Job Creation Deduction: The legislation repeals the job creation deduction, beginning with tax year 2015.
• Alternative Minimum Tax: Beginning with tax year 2017, the legislation conforms the Wisconsin alternative minimum tax to the federal treatment of exemption amounts and phase-out provisions.
• Sales and Use Tax Definitions: The legislation modifies definitions relating to retailers doing business in Wisconsin.

Texas Franchise Tax Rate Reduced

On June 15th, 2015, Texas permanently reduced the state’s franchise tax by 25% for reports originally due on or after January 1, 2016. Accordingly, the franchise tax rate will be .375% of taxable margin for entities engaged in retail or wholesale trades and the rate will be .75% of taxable margin for all other taxable entities.

Also for reports due on or after January 1, 2016, taxpayers with less than $10 million in gross revenues may elect the EZ Computation multiplying apportioned Texas revenue by .575%. Taxpayers with less than $20 million in gross revenues may also elect the EZ Computation multiplying apportioned Texas revenue by a slightly lower rate of .331%.

Ohio 2016-2017 Budget Bill Changes

On June 30, 2015, Ohio Governor John R. Kasish signed the fiscal years 2016-2017 budget bill. For tax years beginning in 2015, a taxpayer may deduct from business income the lesser of 75% of Ohio Small business income for small businesses earning under $250,000. For Tax years beginning in 2016 and thereafter, the tax is eliminated for businesses earning $250,000 or less. For businesses above the income level, a flat tax rate of 3% is applied.

This bill also clarified the definition of substantial nexus, noting that registration with the secretary of state or registration with any state agency to transact business, in and of itself, no longer establishes substantial nexus.

Nevada Enacted New Commerce Tax Effective July 1st

Nevada enacted a new Commerce tax that is based on gross revenue assigned to Nevada. (The definition of Nevada gross revenue includes all sales of tangible products shipped to a buyer in Nevada, services performed for Nevada entities, and gross rents from real property if property is located in Nevada.)

Important information regarding this new tax includes:

• Begins July 1st, 2015.
• Tax applies to all Nevada gross revenue exceeding 4 million.
• Applied on a fiscal year basis beginning July 1st and ending June 30th.
• Annual tax returns are due August 15th.
• Rates range from .051% to .331% depending on industry in which entity is primarily engaged.
• Very limited subtractions available in calculating taxable receipts. (No cost of goods sold deduction available.)

Clients with significant Nevada source income need to be made aware of this new law and be able to track Nevada gross receipts beginning July 1st.

Recent Tennessee Tax Law Changes

Tennessee recently passed the Revenue Modernization Act which attempts to make out-of-state businesses “pay their fair share of taxes” and help Tennessee-based businesses. This legislation will impact anyone who is doing business with Tennessee. Notable changes include:

1. The creation of a “bright-line presence” test effective January 1, 2016.  Out-of-state taxpayers will be subject to Tennessee’s franchise and excise tax if they meet any of the following tests:
   1. The taxpayer’s receipts in Tennessee exceed either $500,000 or 25% of taxpayers
      total receipts everywhere;
   2. The average value of the taxpayer’s real and tangible property owned or rented exceeds $50,000 or 25% of taxpayer’s total real and tangible property;
   3. The taxpayer paid compensation in Tennessee exceeds more than $50,000 or 25% of the total compensation paid by the taxpayer.
2. The weight of the sales tax factor is increased to 60% beginning July 1, 2016.
3. Receipts from sales of services are to be sourced to Tennessee to the extent that the service is delivered to a location in Tennessee (market-based sourcing), regardless of where the service is performed, effective January 1, 2016.
4. “Click-through” nexus was enacted as of July 1, 2015, establishing a presumption of sales and use tax nexus when remote online retailers pay one or more persons located in Tennessee for referring customers to them whether through a website link or other means.  When gross sales from such referrals exceed $10,000 over a 12-month period, the online retailer will be required to collect and remit sales and use tax from its Tennessee customers.

Please contact any member of our SALT team should you wish to discuss how these changes will affect your situation.