This Week in State Tax

The Department of Finance (Department) recently distributed another round of notices requesting “verified reports” of unclaimed property, following similar mailings sent last year. As addressed in explanatory Frequently Asked Questions (FAQs) on the Department’s website, the verified report process is a one-year review of an unclaimed property holder’s most recent annual filing or non-filing, meaning companies that did not file a report may receive a notice. The notice indicates that the recipient must respond and provide:

• A verified report;
• A listing of legal entities included in the verified report; and
• Information related to the company’s unclaimed property policies and procedures, including a copy of such (if they exist)

The notice gives companies 30 days to respond to the correspondence. The FAQs clarify that requirement, explaining that companies must acknowledge receipt of the notice within 30 days and provide the requested information as soon as possible or within 180 days.

Failing to respond will cause the company to be referred to the Secretary of State Voluntary Disclosure Program or be subject to “other enforcement actions” allowed under the state unclaimed property law. If there is no response, the Department may move to an in-depth “Compliance Review” or full-blown examination. Such examinations typically include a 15-year look-back period. For more information on the unclaimed property requirements of The First State, please contact Will King.

The Department of Revenue (Department) recently issued a letter ruling regarding whether the repair of traffic cameras performed within the state of Tennessee and subsequently shipped back to customers outside Tennessee were subject to sales and use tax.  Prior to July 1, 2024, repairs of tangible personal property performed in Tennessee were subject to Tennessee sales tax unless a specific exemption applied.  The taxpayer inquired whether it qualified for an exemption for repairs of machinery and equipment necessary for building and improving roadways when the services were performed in Tennessee and the equipment was subsequently shipped out of state. The Department determined that the taxpayer did not qualify for the exemption because the cameras, while enhancing the roads by regulating the flow of traffic through intersections based on travel density, were not necessary for building or improving roads. Thus, for transactions occurring prior to July 1, 2024, the repairs were subject to tax when performed in Tennessee.

The Department reminded the taxpayer, however, that effective July 1, 2024, repairs to tangible personal property are no longer sourced to Tennessee for sales tax purposes if the repair is performed in in the state, but the property is subsequently shipped or delivered outside the state.  For more information about recent Tennessee sales tax law changes in the Tennessee Works Act, please contact Justin Stringfield. 

Property tax relief continues to be a high priority in many states. The Nebraska legislature adjourned last week after a 17-day special session in which it managed to pass a substantially slimmed-down measure compared to the Governor’s opening offer. Colorado legislators will convene this week to consider additional relief aimed at deflating prospects for certain ballot initiatives.

When Nebraska Governor Jim Pillen called the special session, he sought a 40-50 percent reduction in local property taxes statewide. Local revenue costs would have been offset by increased state funding financed by expanding the sales tax base to many personal, professional, and computer services and adopting an advertising services tax, among other measures. The legislature proved unable to agree on how to pay for property tax reductions of that magnitude and adjourned after passing what has been termed an “absolute minimum” package of stricter property tax caps on local governments. The $185 million in relief will be financed by state budget cuts, transfers of funds, and cash reserves. The bill (LB 34) was signed by Gov. Pillen on August 21, but most observers expect the property tax debate to be revisited when the Unicameral returns in January.

In Colorado, Governor Jared Polis has called a special session to begin on August 26. The Governor is proposing to provide some $270 million in additional property tax relief for 2025 to augment a relief package that was enacted during the regular legislative session in May. The driving force behind the new push is to provide additional property tax relief and secure agreement from backers of two property tax-related ballot proposals to withdraw the measures from the November ballot. Proposition 108 would reduce assessment rates for all properties and require the State to hold local governments harmless from revenue losses; Initiative 50 proposes a 4 percent annual cap on property tax revenue growth without voter approval. The ballot proposals would have a significant impact on state and local finances, according to some analyses. For updates on Colorado, stay tuned to TWIST.