Happy New Year!
With New Jersey’s recent adoption of an optional pass-through entity tax and recent proposals in Maryland and Virginia, the new year is starting out by continuing one of last year’s trends - states responding to the impact of the deductibility of state & local income taxes under federal tax reform. Over the past quarter, two states acted on the other recent trends - market-based sourcing and economic nexus. This newsletter will examine these developments and how they might affect the AWM industry.
With the responses to federal tax reform continuing to unfold, states have also focused on the other significant federal change that will impact their administrative procedures - the changes to the federal partnership audit regime. The federal audit changes are effective for tax years beginning on or after December 31, 2017, which means partnerships may soon be subject to federal audit under the new partnership audit regime. To date, the response by states to the federal audit regime has been sporadic. With the potential for federal audits to begin, the states must act, too. In this newsletter we examine the unique issues that may be faced by the AWM industry as states work to address this changing regime. To date, nine states (Arizona, California, Georgia, Hawaii, Maine, Ohio, Oregon, Rhode Island, and West Virginia) have passed some version of a partnership audit response bill, and several other states are considering some form of response.
I hope you enjoy the articles contained in this quarter’s newsletter. If you would like to discuss how these changes may affect your business, please reach out to me or a member of our SALT AWM practice.
Partner, State and Local Tax Financial Services Leader, PwC US