Welcome to the March issue of the Mize State and Local Tax (SALT) Newsletter! This month we’re covering three topics that apply to more than one state:

State Tax Conformity Updates

Periodically, states update their tax laws to conform to federal laws. This is always done as of a certain date in order to clarify which provisions apply to that state and which ones don’t. This month, two states have updated their conformity:

Idaho income tax laws conform to the Internal Revenue Code (IRC) as amended and in effect on January 1, 2024, except for unemployment compensation (IRC Section 85), which is applied as of January 1, 2020.

West Virginia conformity includes all amendments made to federal laws after December 31, 2022 but prior to January 1, 2024 for personal income tax laws. No IRC amendment made on or after January 1, 2024 will be considered.

Taxability of Rebates

State tax coffers have been extra healthy over the past couple of years, and many states have laws that require excess revenues to be distributed back to taxpayers. But are those rebates taxable? Here are recent rulings for two states:

Minnesota

In 2023, the Minnesota Department of Revenue issued tax rebate payments to qualifying taxpayers, reported on Forms 1099-MISC. Taxpayers who received a Form 1099-MISC but did not receive a rebate should contact the Department.

This rebate is not taxable for Minnesota state tax purposes, but is federally taxable. Taxpayers who received a rebate but did not cash the check are still responsible for reporting the amount as taxable income for their federal return.

In mid-February, the Department of Revenue announced they will be reissuing over 128,000 rebate checks that were uncashed and subsequently expired after their November and December issuance dates. These checks are expected to be mailed by mid-March.

More information is available from the Minnesota Department of Revenue website.

Montana

The Montana Department of Revenue has issued a notice that property tax rebates received in 2023 (as well as those rebates expected to be issued in August 2024) are not subject to state income tax.

Sales Tax on Groceries

Fewer and fewer states currently tax groceries, and this month Oklahoma joined the majority of states that exempt food and groceries from state sales taxes.

Governor Kevin Stitt has signed a bill in late February that will eliminate the state’s 4.5% sales tax on groceries. The measure will take effect 90 days after the legislature adjourns and is anticipated to become effective in late August 2024.

Local sales taxes on groceries can still apply, but cities and counties are prohibited from increasing taxes on food and food ingredients until July 1, 2025.

Prepared foods are not tax-exempt, nor are alcoholic beverages, dietary supplements, marijuana or related products, and tobacco products. 

For more about State and Local Tax visit MizeCPAs.com