Key Takeaways
- Recruiting College Athletes with Tax
- States Continue to Pursue Digital Ad Tax
- Oregon Offers Agriculture Overtime Tax Credit
- Other SALT Updates
Welcome to this edition of our roundup of state tax developments. The State Tax News and Views is published biweekly. Consider the Eide Bailly State & Local Tax team for your state tax planning, compliance and incentive needs.
High Earning, Higher Stakes: Tax Challenges for High Earners
Arizona Cardinals Face Tough Questions From Judges in Tax Case - Perry Cooper, Bloomberg Tax ($):
Arizona’s National Football League team didn’t seem to convince three state court judges at oral arguments Tuesday that a stadium facilities fee it collects from ticket buyers can’t be taxed as part of its gross income.
The Cardinals collect a facility use fee on ticket purchases for home games at State Farm Stadium. The team remits the fees to the Arizona Sports and Tourism Authority, which uses the funds to repay bonds it issued to finance the stadium.
The Arizona Court of Appeals, Division One, panel seemed skeptical of the team’s argument that it merely acts as agent for the authority, which would mean the fees shouldn’t be included when calculating Arizona’s and the city of Glendale’s transaction privilege taxes.
The Cardinals collect a facility use fee on ticket purchases for home games at State Farm Stadium. The team remits the fees to the Arizona Sports and Tourism Authority, which uses the funds to repay bonds it issued to finance the stadium.
The Arizona Court of Appeals, Division One, panel seemed skeptical of the team’s argument that it merely acts as agent for the authority, which would mean the fees shouldn’t be included when calculating Arizona’s and the city of Glendale’s transaction privilege taxes.
Recruiting College Athletes With Tax - Amy Hodges, Tax Notes ($):
As college athletes become eligible to receive compensation, tax can play a role in their recruitment. But how creative will lawmakers be, and is offering tax breaks to college athletes a good idea?
[...]
Now that student-athletes can be paid, states can tax that compensation. But if states like Florida or Texas don’t tax income at all, why should a sports wunderkind choose to attend university — and play and earn — in a state with an income tax? Legislators are taking notice.
[...]
Now that student-athletes can be paid, states can tax that compensation. But if states like Florida or Texas don’t tax income at all, why should a sports wunderkind choose to attend university — and play and earn — in a state with an income tax? Legislators are taking notice.
Boston Says Celebrity Chef Moved Money To Skirt Tax Bills - Julie Manganis, Law360 ($):
The city of Boston is accusing celebrity chef Barbara Lynch of intentionally scheming to avoid paying nearly $1.7 million in property taxes by "siphoning off" corporate assets, asking a judge to pierce the corporate veil and hold her liable for the bill.
[...]
In the filing, the city says bank records and ledgers produced in discovery have revealed "vast commingling of funds among the corporate defendants," involving "millions of dollars of transfers" between separately incorporated restaurants and the Barbara Lynch Collective.
[...]
As a result, the city says, any corporate formalities that might shield her are meaningless and should be disregarded by the court.
[...]
In the filing, the city says bank records and ledgers produced in discovery have revealed "vast commingling of funds among the corporate defendants," involving "millions of dollars of transfers" between separately incorporated restaurants and the Barbara Lynch Collective.
[...]
As a result, the city says, any corporate formalities that might shield her are meaningless and should be disregarded by the court.
Navigating Tax in the Digital Ad World
Massachusetts Adopts Amended Reg on P.L. 86-272 Guidance - Emily Hollingsworth, Tax Notes ($):
Some internet activities may not be protected under P.L. 86-272 and could be subject to the Massachusetts corporate excise tax, according to newly adopted corporate nexus reg amendments.
Changes to 830 CMR 63.39.1, adopted by the Massachusetts Department of Revenue October 10, incorporate aspects of the Multistate Tax Commission's revised guidance interpreting how P.L. 86-272's protections apply to internet business activities. The federal law bards a state from imposing net income tax on an out-of-state business if its only business activity in the state is soliciting orders of tangible personal property, and the orders are approved or rejected from a location outside the state and shipped from out of state.
The reg outlines corporate nexus for purposes of the state's 8 percent corporate excise tax, which is levied on net income. As amended, the reg specifies that the statutory standards set by P.L. 86-272 are not met when the in-state business activity conducted by or on behalf of a corporation includes activity that's not considered ancillary to the sonication of orders of tangible personal property.
Changes to 830 CMR 63.39.1, adopted by the Massachusetts Department of Revenue October 10, incorporate aspects of the Multistate Tax Commission's revised guidance interpreting how P.L. 86-272's protections apply to internet business activities. The federal law bards a state from imposing net income tax on an out-of-state business if its only business activity in the state is soliciting orders of tangible personal property, and the orders are approved or rejected from a location outside the state and shipped from out of state.
The reg outlines corporate nexus for purposes of the state's 8 percent corporate excise tax, which is levied on net income. As amended, the reg specifies that the statutory standards set by P.L. 86-272 are not met when the in-state business activity conducted by or on behalf of a corporation includes activity that's not considered ancillary to the sonication of orders of tangible personal property.
Mass. House Bill Seeks Digital Advertising Sales Tax - Sanjay Talwani, Law360 ($):
Massachusetts would impose a tax on gross sales of digital advertising services, with the revenue supporting public media and education efforts, under a bill pitched by a state representative to a legislative tax panel.
Under H.B. 3208, heard Monday by the state Joint Revenue Committee, Massachusetts would impose a tax of 6.25% on the gross sales of digital advertising in the state, with companies earning less than $2.5 million in state ad revenue being exempt.
Under H.B. 3208, heard Monday by the state Joint Revenue Committee, Massachusetts would impose a tax of 6.25% on the gross sales of digital advertising in the state, with companies earning less than $2.5 million in state ad revenue being exempt.
States' Digital Ad Tax Pursuits Continue Despite Pushback - Maria Koklanaris, Law360 ($):
State lawmakers show no signs of stopping to file bills seeking digital advertising taxes, efforts that are primed to continue even as the states that have adopted such measures are mired in litigation.
[...]
In Illinois, a 10% tax on digital advertising gross receipts, similar to the Maryland tax, nearly made it into the state budget this year. It took three amendments to have the tax stripped from the budget bill, which happened just before the bill passed. Rhode Island Gov. Daniel McKee, a Democrat, had proposed a 10% tax on digital advertising revenue when the state's budget was unveiled in January, but lawmakers stripped the tax a couple of weeks before passing the budget in June. And lawmakers have filed bills this year to tax digital advertising services in some way in states including Massachusetts, Minnesota, Michigan, Montana, New York and South Dakota.
[...]
In Illinois, a 10% tax on digital advertising gross receipts, similar to the Maryland tax, nearly made it into the state budget this year. It took three amendments to have the tax stripped from the budget bill, which happened just before the bill passed. Rhode Island Gov. Daniel McKee, a Democrat, had proposed a 10% tax on digital advertising revenue when the state's budget was unveiled in January, but lawmakers stripped the tax a couple of weeks before passing the budget in June. And lawmakers have filed bills this year to tax digital advertising services in some way in states including Massachusetts, Minnesota, Michigan, Montana, New York and South Dakota.
Credits and Incentives
Oregon Agricultural Employer Overtime Tax Credit - Melissa Menter, Eide Bailly:
Under Oregon law, agricultural employers are required to pay certain workers for overtime hours worked. To help offset this expense, the state is offering a refundable individual or corporate tax credit for a percentage of overtime wages paid. The credit began in 2023 and will run through 2028. Taxpayers must apply for the credit each year in January and will be notified of eligibility by June 1. If approved, taxpayers must claim their credit by filing a return by the October 15 extended deadline. Oregon's Agricultural Employer Overtime Tax Credit application period for tax year 2025 will open on January 1, 2026 and run through February 2, 2026.
Calif. Extends Sales and Use Tax Breaks For Energy, Transit - Zak Kostro, Law360 ($):
California extended by two years a state financing authority's power to provide sales and use tax exclusions for approved alternative energy and transportation projects under a bill signed by Democratic Gov. Gavin Newsom.
S.B. 86, which Newsom approved Wednesday, extends from Jan. 1, 2026, to Jan. 1, 2028, the state Alternative Energy and Advanced Transportation Financing Authority's ability to grant the tax exclusions for qualifying projects, according to a bill digest and state Senate analysis.
Eligible projects include those that promote California-based manufacturing and jobs, advanced manufacturing, greenhouse gas reduction or a reduction in air and water pollution or energy consumption, according to the digest.
S.B. 86, which Newsom approved Wednesday, extends from Jan. 1, 2026, to Jan. 1, 2028, the state Alternative Energy and Advanced Transportation Financing Authority's ability to grant the tax exclusions for qualifying projects, according to a bill digest and state Senate analysis.
Eligible projects include those that promote California-based manufacturing and jobs, advanced manufacturing, greenhouse gas reduction or a reduction in air and water pollution or energy consumption, according to the digest.
California Enacts Tax Exemption for Clean Energy Credit Sales - Kennedy Wahrmund, Tax Notes ($):
California will no longer tax proceeds from sales of federal renewable energy tax credits.
S.B. 302, sponsored by Sen. Steve Padilla (D), was signed by Gov. Gavin Newsom (D) on October 1.
[...]
To further mirror federal rules, the new statute prohibits purchasers of the credits from deducting the amount paid in consideration for the credit transfer.
S.B. 302, sponsored by Sen. Steve Padilla (D), was signed by Gov. Gavin Newsom (D) on October 1.
[...]
To further mirror federal rules, the new statute prohibits purchasers of the credits from deducting the amount paid in consideration for the credit transfer.
Ohio Tax Breaks Help Land $2.1 Billion in New Business Investments - Kennedy Wahrmund, Tax Notes ($):
Ohio Gov. Mike DeWine (R), alongside other state leaders, recently announced five business expansion projects totaling more than $2.1 billion in new investments that will be receiving state tax credits or other incentives.
The projects were approved by the Ohio Tax Credit Authority during its monthly meeting and are expected to create 218 new jobs, retain nearly 1,165 existing positions, and generate more than $14 million in new annual payroll, according to an October 8 release from DeWine’s office.
The projects were approved by the Ohio Tax Credit Authority during its monthly meeting and are expected to create 218 new jobs, retain nearly 1,165 existing positions, and generate more than $14 million in new annual payroll, according to an October 8 release from DeWine’s office.
Please reach out to Matt Carlson if you are considering expanding your business. It's never too early to think about tax credits!
Other SALT Updates: Legislative Changes and Court Decisions
California
California Updates IRC Conformity - Melissa Menter, Eide Bailly:
Beginning with the 2025 tax year, California will conform to the Internal Revenue Code as of January 1, 2025 (previously January 1, 2015) under SB 711. California maintains numerous exceptions to conformity with the Internal Revenue Code, including provisions related to deductions, credits, and disaster relief. Because California's January 1, 2025 conformity date predates the federal One Big Beautiful Bill Act enacted in July, 2025, California will not conform to any provisions included in that legislation.
Texas
Texas Court: Individual Liable for Entity's Unpaid Property Taxes - Cameron Browne, Tax Notes ($):
In an October 2 decision in Van Horne v. Central Appraisal District of Taylor County, the Texas Court of Appeals, Eleventh District, determined that Steve Van Horne's connection and association with the religious organization that owned the subject property made him liable for the entity's obligations.
[. . .]
The court of appeals found that the two properties were owned by the Foundation of Light, of which Van Horne was the managing director. The court further found that Van Horne had the discretion and authority to "purchase and sell real estate, and conduct any, and all business, on behalf of, and for this Free Religious Organization."
The appeals court held that because of Van Horne's connections and association with the Foundation of Light, he was liable of the entity's unpaid obligations, including the delinquent property taxes.
[. . .]
The court of appeals found that the two properties were owned by the Foundation of Light, of which Van Horne was the managing director. The court further found that Van Horne had the discretion and authority to "purchase and sell real estate, and conduct any, and all business, on behalf of, and for this Free Religious Organization."
The appeals court held that because of Van Horne's connections and association with the Foundation of Light, he was liable of the entity's unpaid obligations, including the delinquent property taxes.
Massachusetts
COST Decries Massachusetts Foreign-Source Income Tax Plan - Sanjay Talwani, Law360 ($)
A Massachusetts proposal supporters said would fight offshore corporate tax avoidance and raise $400 billion annually would violate the U.S. Constitution and place the state at odds with other jurisdictions, the Council on State Taxation told legislators Friday.
If enacted, H.B. 3110 and companion legislation S.B. 2033 would boost, from 5% to 50%, the amount of foreign-source income considered in corporate tax apportionment in Massachusetts. COST told the Joint Revenue Committee the plan would violate the foreign commerce clause of the Constitution. A lineup of supporters, meanwhile, said the change would close a tax loophole used by the world's wealthiest corporations and help raise funding to stave off potential cuts in education, healthcare and other critical government services.
If enacted, H.B. 3110 and companion legislation S.B. 2033 would boost, from 5% to 50%, the amount of foreign-source income considered in corporate tax apportionment in Massachusetts. COST told the Joint Revenue Committee the plan would violate the foreign commerce clause of the Constitution. A lineup of supporters, meanwhile, said the change would close a tax loophole used by the world's wealthiest corporations and help raise funding to stave off potential cuts in education, healthcare and other critical government services.
Michigan
Mich. Lawmakers OK Fed. Code Decoupling, New Pot Tax - Paul Williams, Law360 ($):
Michigan is slated to decouple from certain business-friendly provisions in this year's federal tax bill and impose a new excise tax on the wholesale price of cannabis under a budget plan approved by state lawmakers Friday.
The tax provisions in the state's fiscal year 2026 budget package, which the Legislature passed Friday morning, are projected to raise almost $900 million annually. Provisions include decoupling from recent federal tax changes, including the 100% bonus depreciation deduction, and imposing a 24% excise tax on wholesale sales of cannabis.
The tax provisions in the state's fiscal year 2026 budget package, which the Legislature passed Friday morning, are projected to raise almost $900 million annually. Provisions include decoupling from recent federal tax changes, including the 100% bonus depreciation deduction, and imposing a 24% excise tax on wholesale sales of cannabis.
Ohio
Whirlpool Loses $15.8M Ohio Bid Refund Over Temp Workers - Maria Koklanaris, Law360 ($):
Whirlpool purchased taxable employment services when it hired contractors from a staffing firm and the company owes $15.8 million in Ohio use tax, the state board of tax appeals ruled.
In an opinion Tuesday, the Ohio Board of Tax Appeals said the appliance retail giant's hiring of the contractors constituted taxable employment services because it didn't hire the contracted workers on a permanent basis. In addition, the workers were under Whirlpool's supervision and control, the board said.
In an opinion Tuesday, the Ohio Board of Tax Appeals said the appliance retail giant's hiring of the contractors constituted taxable employment services because it didn't hire the contracted workers on a permanent basis. In addition, the workers were under Whirlpool's supervision and control, the board said.
There's No Good Way to Pay for Property Tax Repeal - Jared Walczak, Tax Foundation:
The property tax will never win any popularity contests. Economists hold it in high regard, but, perhaps relatedly, economists are not terribly popular either. It’s one thing, however, to favor property tax repeal in the abstract: many Americans are clearly for that. But with which taxes should it be replaced, and how will the overall package of property tax replacement be received?
Some proponents of property tax elimination wish to postpone this conversation, advancing ballot measures that repeal property taxes and charge the legislature with working out minor details like how to replace the lion’s share of local tax revenue. The only responsible way to consider property tax abolition, however, is to grapple with the alternatives.
Some proponents of property tax elimination wish to postpone this conversation, advancing ballot measures that repeal property taxes and charge the legislature with working out minor details like how to replace the lion’s share of local tax revenue. The only responsible way to consider property tax abolition, however, is to grapple with the alternatives.
SEASONED WITH SALT
Tax Tips, Tricks and Opportunities
Pittsburgh "Jock Tax" Case Reminds us to Consider State Tax Refunds - John Gupta, Eide Bailly:
On September 25th, the Pennsylvania Supreme Court held that Pittsburgh’s 3% income tax imposed on non-resident athletes and entertainers was in violation of the Pennsylvania state constitution. In NHL Players Association v. Pittsburgh, the so-called non-resident “jock tax” was challenged by the players unions for the NHL, NFL and MLB. The 3% jock tax applied only to Pittsburgh non-residents and as such was found by the court to violate the Pennsylvania constitution’s uniformity clause. The uniformity clause prohibits unequal imposition of a tax to different classes of taxpayers and is a common protection in state constitutions. Since the tax has been held invalid, non-resident athletes and entertainers are entitled to refunds of jock tax they’ve previously paid.
NHL Players Association serves as a reminder that when there is a judicial decision favorable to a state taxpayer, there is usually a refund opportunity for similarly situated taxpayers. It is not at all uncommon for state courts to render state tax schemes or statutes in conflict with federal law or unconstitutional as they did in the NHL Players Association case. Furthermore, in the wake of the US Supreme Court decision Loper Bright, state court invalidation of Department of Revenue interpretations, regulations, and other guidance may become more frequent in the coming years. Taxpayers and their tax advisors should be on the lookout for taxpayer friendly state tax cases and consider whether they may be similarly situated enough to pursue a refund claim.
Of course, keeping track of complex multi-state tax laws and judicial decisions is no simple task. What’s more, state procedure for obtaining refunds is highly complex and taxing authorities are frequently non-cooperative. Eide Bailly’s SALT team can help! Our team consistently stays on top of state tax developments such as judicial decisions and understands what they mean for our clients. We can look at your state tax picture to identify opportunities and bring to bear our many years of collective experience navigating the procedural steps to secure your refund.
NHL Players Association serves as a reminder that when there is a judicial decision favorable to a state taxpayer, there is usually a refund opportunity for similarly situated taxpayers. It is not at all uncommon for state courts to render state tax schemes or statutes in conflict with federal law or unconstitutional as they did in the NHL Players Association case. Furthermore, in the wake of the US Supreme Court decision Loper Bright, state court invalidation of Department of Revenue interpretations, regulations, and other guidance may become more frequent in the coming years. Taxpayers and their tax advisors should be on the lookout for taxpayer friendly state tax cases and consider whether they may be similarly situated enough to pursue a refund claim.
Of course, keeping track of complex multi-state tax laws and judicial decisions is no simple task. What’s more, state procedure for obtaining refunds is highly complex and taxing authorities are frequently non-cooperative. Eide Bailly’s SALT team can help! Our team consistently stays on top of state tax developments such as judicial decisions and understands what they mean for our clients. We can look at your state tax picture to identify opportunities and bring to bear our many years of collective experience navigating the procedural steps to secure your refund.
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