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As CCH’s Tim Bjur has reported, the Massachusetts Department of Revenue certified that revenue growth has met the final threshold needed to lower the personal income tax rate from 5.20% to 5.15% beginning January 1, 2015. Under Massachusetts law, the state’s personal income tax rate for Part B income (which consists of income such as wages, pensions, business income, rents) is reduced by .05% if the inflation-adjusted growth in baseline taxes in the fiscal year ending June 30 of the previous year exceeds 2.5% and the inflation-adjusted change in baseline taxes for each consecutive three-month period between August and December of the previous year is greater than zero. The rate cannot drop below the minimum rate of 5%.

As CCH’s Lisa Tracey has reported, the Oklahoma Supreme Court has held that S.B. 1246, which reduces the top personal income tax rate beginning in 2016, is not unconstitutional (see Fent v. Fallin, Oklahoma Supreme Court, No. 112867, December 2, 2014). The petitioner argued that S.B. 1246 was a "raising revenue" bill subject to popular vote/super-majority approvals set forth in Art. 5, Sec. 33, of the Oklahoma Constitution. The respondent argued that any bill that lowers income taxes is not raising revenue, thus not falling within the confines of Sec. 33. According to the court, the obvious meaning of raising revenue in the context of Sec. 33 is to increase revenue.

 

NOTE: S.B. 1246 maintains the top marginal personal income tax rate at 5.25% through the 2015 tax year and reduces the top rate to 5% beginning with the 2016 tax year and to 4.85% for subsequent years, contingent upon certain revenue growth. If the total general revenue fund proposed estimate for fiscal year 2016 is greater than the total general revenue fund proposed estimate for fiscal year 2014, then the rate would be reduced to 5% for the 2016 tax year. If the tax cut is not implemented, then the State Board of Equalization must repeat the comparison for subsequent tax years until the trigger is met. Following the implementation of the 5% tax rate, there is a second trigger to reduce the income tax rate to 4.85%.

As CCH writers recently reported, voters in 15 states had their say on a variety of tax proposals that appeared on the November 4 ballot. Measures to legalize and tax nonmedical marijuana were approved in Alaska and Oregon. In Georgia, voters approved a proposed constitutional amendment to limit income taxes, and in Tennessee voters approved a proposed constitutional amendment to prohibit taxation upon payroll or earned personal income. An initiative to impose a margin tax on businesses was rejected by Nevada voters. Property tax exemption proposals related to veterans and their spouses gained approval in several states.

 

Unofficial results of the ballot measures follow.

 

 

Income Tax Proposals

 

 

Georgia: Voters approved a proposed constitutional amendment to prohibit raising the rate of state income taxes above the rate that is in effect on January 1, 2015 (6%). S.R. 415

 

 

Illinois: An advisory question submitted to voters asking whether the state constitution should be amended to require that each school district receive additional revenue from an additional 3% tax on income greater than $1 million passed. Advisory Question (H.B. 3816, Laws 2014)

 

 

Nevada: Voters rejected an initiative to impose a 2% margin tax, effective January 1, 2015, on businesses having annual revenue of more than $1 million. Question 3

 

 

Tennessee: Voters approved a proposed constitutional amendment to prohibit taxation upon payroll or earned personal income. S.J.R. 1

 

 

Property Tax Exemption Proposals

 

 

Georgia: Voters approved a ballot measure that allows property owned by the University System of Georgia and operated by providers of student housing and other facilities to remain exempt from property taxation. The exemption is effective January 1, 2015, and applies to all tax years beginning on or after that date. Referendum 1

 

 

Louisiana: Voters rejected a proposed constitutional amendment excluding owners who are permanently totally disabled from the requirement that they annually certify to the assessor the amount of their adjusted gross income in order to receive the Special Assessment Level on their residences for property tax purposes. Amendment 9

 

 

Oklahoma: Voters approved a proposed constitutional amendment that would allow a qualified, 100% disabled U.S. military veteran, or his or her surviving spouse, who acquires a new homestead property to obtain a specified ad valorem property tax exemption for that new property for the same year during which an exemption was claimed for a previously held homestead property. State Question 770

 

 

Oklahoma: Voters approved a proposed constitutional amendment that would provide an ad valorem property tax exemption for the full fair cash value of a homestead belonging to an un-remarried surviving spouse of a member of the U.S. armed forces who was federally determined to have died while in the line of duty and would also allow that surviving spouse to acquire a new homestead property with a specified exemption for the same year during which an exemption was claimed for a previously held homestead property. State Question 771

 

 

Virginia: Voters approved an amendment to the state constitution that allows the state to exempt from taxation the real property of the surviving spouse of any member of the armed forces of the United States who was killed in action, where the surviving spouse occupies the real property as his or her principal place of residence and has not remarried. Legislatively-referred Constitutional Amendment

 

 

West Virginia: Voters approved a proposed amendment to the Constitution of West Virginia that would exempt from property tax certain properties owned by nonprofit youth organizations and that are built at a cost of at least $100 million, whether or not the property is used for the nonprofit youth organization’s charitable or nonprofit purpose to help raise funds for the benefit of the organization. Amendment 1

 

 

Property Tax Increase Proposals

 

 

Louisiana: Voters approved a proposed constitutional amendment authorizing the governing authority of Orleans Parish to increase the annual millage rate levied for fire and police protection, to require that the revenue from the fire and police millages be used for fire and police protection service enhancements, and to require that any increase be approved by the
voters of Orleans Parish. Amendment 6

 

 

Miscellaneous Property Tax Proposals

 

 

Louisiana: Voters approved a proposed constitutional amendment providing for an 18-month redemption period in any parish other than Orleans for vacant property sold at tax sale that is blighted or abandoned. Amendment 10

 

 

Louisiana: Voters rejected a proposed constitutional amendment allowing an authorized agent of a tax collector to assist in the tax sale process, including the sale of property for delinquent taxes and that the fee charged by the authorized agent be included within the costs that the collector can recover in the tax sale. Amendment 3

 

 

Marijuana Legalization Proposals

 

 

Alaska: Alaska voters approved an initiative to tax and regulate the production, sale, and use of marijuana. In addition to legalizing the use of marijuana for persons over the age of 21, the measure imposes a $50-per-ounce (or proportionate) excise tax on the sale or transfer of marijuana from a cultivation facility to a retail store or marijuana product manufacturing facility. The measure requires the marijuana cultivation facility to pay the tax and send monthly statements to the Department of Revenue. The department is authorized to exempt or establish a lower tax rate for certain parts of the marijuana plant. Ballot Measure 2

 

 

Oregon: Voters approved a measure to license, regulate, and tax marijuana. The measure grants regulatory authority to the Oregon Liquor Control Commission and provides that marijuana flowers, leaves, and immature plants should be taxed at different rates with "homegrown marijuana" excluded from regulation and tax. Measure 91

 

 

Motor Fuel Tax Proposals

 

 

Massachusetts: Voters approved a measure repealing a 2013 gas tax indexing law that linked gas tax increases to inflation. Question 1

 

 

Sales Tax Proposals

 

 

North Dakota: Voters approved an amendment to the state constitution that prohibits mortgage and sales taxes from being imposed on the mortgage or transfer of real property. Measure 2

 

 

Severance Tax Proposals

 

 

Nevada: Voters in Nevada rejected a measure to remove the cap on the taxation of minerals and other requirements and restrictions relating to the taxation of mines, mining claims, and minerals and the distribution of money collected from the tax. Question No. 2

 

 

Other Proposals

 

 

California: A ballot measure that would increase the amount of potential savings in the state rainy day fund from 5% to 10% of the general fund passed. Proposition 2 (Ch. 1 (ACA 1b), Laws 2014

 

 

Louisiana: Voters rejected a proposed constitutional amendment providing that legislation relative to tax rebates, tax incentives, and tax abatements may not be introduced or considered by the Legislature in a regular session held in an even-numbered year. Amendment 14

 

 

Utah: A ballot measure that would eliminate a provision limiting membership on the State Tax Commission to no more than two members of the same political party did not pass. Amendment A (S.J.R., Laws 2013)

 

 

Washington: In a nonbinding advisory vote, voters advised retention of legislation (S.B. 6505) that eliminated agricultural excise tax preferences for various aspects of the marijuana industry. Advisory Vote No. 8

 

 

Washington: In a nonbinding advisory vote, voters advised retention of legislation (H.B. 1287) imposing leasehold excise tax on certain leasehold interests in tribal property. Advisory Vote No. 9

Apportionment Issues Answered! One of the most complex issues in administering state corporate income taxes is how to distribute the income of multistate corporations among the states in which they operate. The new CCH Apportionment Suite offers compliance-focused resources to help professionals conquer this problem area. Learn more and download your complimentary resources – a white paper on "State Apportionment of Business Income" plus our State Tax Review – at http://www.cchgroup.com/apportionment.

According to Columbus Business First, the Ohio Department of Medicaid is reviewing the application of state sales and use taxes to premiums received by Medicaid managed care organizations (MCOs) in light of a federal regulatory memo calling the practice into question. The state uses the tax revenue to obtain additional federal Medicaid matching funds, and increases the per-member monthly (capitation) payments to the plans in order to hold the MCOs harmless.

 

The July 25, 2014 memo from the Centers for Medicare and Medicaid Services states that amendments made in the Deficit Reduction Act of 2005 (DRA) terminated states’ ability to tax only Medicaid MCOs. The memo explains that "taxing a subset of health care services or providers at the same rate as a statewide sales tax, for example, does not result in equal treatment if the tax is applied specifically to a subset of health care services or providers (such as Medicaid MCOs), since the providers or users of those health care services are being treated differently than others who are not within the specified universe."

 

It remains unclear how other states imposing similar health care-related taxes on Medicaid MCOs will respond. In May, 2014, the Inspector General of the Department of Health and Human Services concluded that Pennsylvania’s gross receipts tax on Medicaid MCOs was impermissible for purposes of Medicaid funding. However, Michigan reinstated its use tax on Medicaid MCOs effective retroactive to April 1, 2014.

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