Preparing and filing your business tax returns can be daunting, especially when there are so many laws at both the state and federal levels. Additionally, it seems there are changes to these laws every year, making it difficult for anyone to stay on top of the latest updates.
Looking ahead, here are some of the biggest changes in state business tax laws that will affect how you file your 2014 tax return this April. Please note that many of these changes adhere to a state’s respective fiscal year, which may differ from the calendar year, meaning some of these may apply to your 2015 tax returns as well, which will be filed in 2016. For further clarity about which policies may affect your business, consult your local tax professional or your state’s taxing authority.
- Created corporate income tax credit for any investment of $300 million or more in renewable-energy facilities.
- Began phasing down corporate income tax rate, down to 6.5% from 6.968%.
- Adjusted calculation of corporate sales factor for businesses with multiple locations.
- Created an income tax credit for a business rehabilitating an historic structure.
- Increased the annual franchise tax assessed on partnerships, limited partnerships, limited liability companies and corporations that file on the authorized shares method.
District of Columbia
- Switched to a single-weighted sales apportionment factor for corporate taxes.
- Decreased business income tax rate to 9.4%, down from 9.975%.
- Extended the interactive entertainment production tax credit for one more year.
- Introduced a tax reimbursement incentive that will provide a 30% corporate income tax credit to businesses that expand, including sales and payroll taxes.
- Expanded the sales tax exemption on products or parts used in aircraft repair and maintenance.
- Personal income tax rate drops slightly, from 3.4% to 3.3%.
- Two forms have been eliminated: Form IL-1023-C and Form IL-1000. Existing Forms IL-516-I and IL-516-B have been rewritten to account for their function.
- The $100,000 limitation on the net-loss deduction has expired for tax years ending on or after December 31, 2014.
- Even if you file using an extended due date, you can still apply an overpayment toward your estimated tax obligations.
- Personal income tax rate drops from 5% to 3.75%.
- Increased the cap on the new markets tax credit from $5 million to $10 million.
- Form 500CR must be filed online. Not all tax software supports Form 500CR, so be sure to check that your chosen software does. Additionally, Forms 500 and 510 must also be filed online to claim business income tax credit or Sustainable Communities tax credit.
- Two new tax credits are available: Qualified Vehicle (Class F Tractor) tax credit and Cybersecurity Investment Incentive tax credit.
- The Electric Vehicle Recharging Equipment tax credit expired on July 1, 2014; only EV recharging equipment bought before this date can be claimed on your 2014 tax return.
- Personal income tax rate drops from 5.2% to 5.15%
- Repealed sales tax on business purchases of storage, warehousing services, equipment and repair labor.
- Added a credit for companies that are relocating a national or regional headquarters to the state.
- Instated a corporate income tax credit for renovating historically significant property.
- Reduced corporate income tax rate to 7.3%, down from 7.6%.
- Extended the tax credit for high-wage jobs, and increased the requirements for claiming it.
- Cut the corporate income tax for manufacturers in New York, reducing their tax rate from 5.9% to zero.
- Reduced tax rate for non-manufacturing businesses from 7.1% to 6.5%.
- Eliminated franchise tax on water and sewage companies.
- Repealed franchise tax on electric power, and replaced it with sales and use tax.
- Corporate income tax rate was lowered from 6.9% to 6%.
- Individual income rate decreases from 5.8% to 5.75%
- The net economic loss calculation was replaced with the net loss provisions, which more closely resembles the federal government’s net operating loss calculation.
- Eliminated the franchise tax.
- Decreased the corporate income tax rate to 7%, down from 9%.
- Combined tax reporting for C corporations.
- Instated new affiliate nexus requirements as it relates to sales tax.
- Eliminated the strategic research and development tax credit on investments or expenditures made on or after January 1, 2014.
- Increased the number of years losses can be carried forward from 15 to 20, and introduced a carry-back period of two years.
- Created a sales tax exemption for the purchase of certain radio or television stations.
For more details regarding changes to the income tax laws in your state, consult your state government’s Department of Revenue.