Tax has remained in focus at all government levels over the past several years. This article includes state and local tax updates to be aware of in Missouri, Kansas, Illinois, and Tennessee, some of which may present refund opportunities depending upon your location and operations.

City of St. Louis Tax Update

A recent court decision upheld that the City of St. Louis will refund remote workers who paid earnings and payroll tax, despite living outside of the city in which their company is located. In response, the city provided a refund application process HERE for those impacted. Relevant Forms W-2 and employer verification of days worked outside the City are required as part of the filing.

Refund applications will be accepted through September 30, 2024, for remote workers for the years 2020, 2021, and 2022. Refunds for 2023 tax are available through April 15, 2025

Missouri Tax Update

On May 9, 2024, HB 1912 passed the House and is now awaiting the Governor's signature. This legislation introduces significant amendments to Missouri's existing pass-through entity tax, also known as the SALT Parity Act. Key changes include:

• Members of an electing business entity now have the option to opt-out of the pass-through entity tax. Opt-out members’ allocable income is subtracted from the taxed income, provided they opt out by year end or during tax filing. They must also agree to file and pay estimated tax on their Missouri earnings from the pass-through entity.
• The calculation method for pass-through entity income has been revised. Previously, a deduction was permitted in line with the Federal Section 199A qualified business income deduction. The bill replaces this approach with Missouri's flat 20 percent state business income deduction.

Kansas Tax Update

Senate Bill 410 was signed into law by Governor Kelly on April 24, 2024, offering clarity and codification to certain provisions concerning Kansas' corporate, individual, and pass-through entity taxes. Highlights that may result in refund claims include:

• Retroactive changes regarding state-level subtractions of the business income expense limitation under IRC Section 163(j), net operating losses carried back at the Federal level, and the Employee Retention Credit (ERC).
• Pass-through entity tax has historically been calculated based on the apportioned share of nonresident income. The legislation confirms entities' ability to choose between calculating the tax on either the full income amount or the apportioned income of Kansas residents.
• Excess income tax credits, net operating losses, or other modifications can now be carried forward from a pass-through entity tax return to a subsequent year, applicable to both electing pass-through entities and their members in the absence of an election.

In addition, on June 20, 2024, a second Kansas tax reduction bill was enacted after a special session. Senate Bill 1 provides bipartisan legislation that aims to “provide tax cuts without threatening the state’s long-term fiscal health.” Key provisions beginning in tax year 2024 include:

• Change in tax rates and brackets for individuals: from three brackets to two, with a top rate of 5.58 percent (down from 5.7 percent).
• Increased personal and dependent exemption amounts.
• Increased standard deduction amounts.
• Repealed state tax on Social Security benefits.
• Increased household and dependent care tax credit.
• Increased the residential property amount exempted from the statewide school finance levy.

Illinois Tax Update

Illinois Governor Pritzker enacted multiple tax changes as part of a 2025 budget bill, signed June 7, 2024. Income tax highlights include a 3-year extension of the corporate limitation on net operating losses, with an increased threshold from $100,000 to $500,000. Modifications to existing business and individual tax credits and enactment of several new tax credits, such as the child tax credit, are also included. Sales and use taxes are impacted for leases, remote sellers, and vendors who receive a discount rate on retail sales.

Additionally, beginning July 1, 2024, Illinois gaming will be significantly modified. The privilege tax on a master sports wagering licensee’s annual adjusted gross sports wagering receipts (“AGSWR”) will increase. A new progressive tax rate ranging from 20 to 40 percent, depending on AGSWR, will replace the existing 15 percent rate. Video gaming will also see an additional 1 percent tax imposed on net terminal income.

Tennessee Tax Update

Tennessee recently enacted a bill that could create potential franchise tax refund opportunities.

Previously, Tennessee franchise tax was calculated on the greater of either apportioned net worth or the amount of tangible personal property within the state of Tennessee. New law removes the tangible personal property measure and calls for franchise tax to only be calculated on apportioned net worth. As a result, the Department of Revenue has been authorized to issue refunds to eligible taxpayers.

This change applies to returns filed on or after January 1, 2021, for a tax period that ended on or after March 31, 2020 (2020 – 2023 tax years). Amended returns and refund claims must be filed by November 30, 2024.

Please reach out to your RubinBrown representative with questions or concerns.

 

Published: 07/03/2024

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