This Week in State Tax

On November 24, 2025, Mayor Muriel Bowser signed the District of Columbia Fiscal Year 2026 Budget Support Congressional Review Emergency Act of 2025 (B26-0450). The Act, which took effect immediately and is effective for 90 days, implements a range of tax measures incorporated into the enacted FY 2026 budget. The primary provisions of interest to the business community are summarized below.

Sales and Use Tax: The Act repeals the previously scheduled increase in the general sales and use tax rate. The levy was scheduled to increase from 6 percent to 6.5 percent on October 1, 2025, but will remain at 6 percent through September 30, 2026. The rate is currently scheduled to rise to 7 percent effective October 1, 2026. In addition, the Act legalizes commercial bingo and imposes a 7.5 percent sales tax on gross receipts from charges to play.

Hotel and Transient Accommodations Tax: The additional 1 percent tax on gross receipts from transient accommodations is extended through September 30, 2027; it was previously set to expire March 31, 2027. Beginning October 1, 2025, revenue from the surtax will be redirected from Destination DC to various City funds, with specific allocations for economic development in FY 2026 and 2027.

Combined Reporting (FAS 109) Tax Deduction: The Act delays the deduction for increased net deferred tax liability (FAS 109 deduction) resulting from combined reporting. The deduction may now be claimed for the first seven tax years beginning after December 31, 2029 (i.e., starting with tax year 2030). The FAS 109 deduction is intended to mitigate the financial statement impact on publicly traded companies required to file combined reports in the District. It allows a deduction for any increase in a combined group’s net deferred tax liability that results from the adoption of combined reporting, spread over seven years, beginning with the 15th year of combined filing.

Ballpark Fee:  The Act renames the “Ballpark Fee” as the “Sports Facility Fee” and repeals its sunset provision. Previously, the fee was scheduled to sunset on September 30, 2039, or on earlier or later repayment of the ballpark bonds. The Sports Facility Fee will continue indefinitely, and after all principal and interest on the associated bonds have been paid, revenues from the fee will be redirected to the RFK Campus Infrastructure Fund.

For more information on FY 2026 Emergency Budget Support Act (B26-0450), contact Jeremy Jester or David Meyer. 

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New Hampshire recently began a tax amnesty program that runs from December 1, 2025 through February 15, 2026 as previously approved by the state legislature. As set forth in Technical Information Release, TIR 2025-006, the program is available to all taxpayers with outstanding tax liabilities for any taxes administered and collected by the Department of Revenue Administration (DRA), including but not limited to Business Enterprise, Business Profits, Meals & Rooms, Communications Services, and Real Estate Transfer taxes.

The program allows taxpayers to receive abatement of all penalties and fifty percent of the accrued interest on outstanding tax liabilities arising prior to June 30, 2025. Amnesty is available regardless of whether DRA has assessed the tax due or the taxpayer has appealed or intends to appeal an assessment. The right to appeal or to continue an existing appeal is not forfeited by participating in the program. To participate, the taxpayer must file any outstanding tax returns plus pay the associated tax liability and one half of the annual interest. No special form or application is necessary, and the DRA website provides an online interest calculator. Returns and payments (including interest) must be received by the DRA within the amnesty period, i.e., by February 15, 2026.

New Hampshire last offered a similar amnesty in 2015. Failure to participate in the amnesty program may be taken into consideration by DRA in addressing requests for penalty abatement in the future. For further information on the New Hampshire tax amnesty, please contact Jennifer Bates or Alexandria Lupo.

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As we approach the end of 2025, states continue to roll out guidance addressing questions raised by the passage of the One Big, Beautiful Bill Act (OB3).

Florida: The Department of Revenue recently issued a Tax Information Publication (TIP) reminding taxpayers that the Florida corporation income tax is tied to the Internal Revenue Code (IRC) “as amended and in effect on January 1, 2025.” As such, the tax does not incorporate the changes in OB3, but the TIP indicates the state legislature will have an opportunity to consider amendments when it convenes in January 2026. The TIP specifically notes that Florida law has a state-specific addback schedule for assets subject to depreciation under section 168(k) as well as qualified improvement property defined in IRC section 168(e). Contact Henry Parcinski with questions on TIP No. 25C01-01.

New Jersey: Guidance issued by the New Jersey Division of Taxation clarifies that, for purposes of deducting qualified New Jersey  research expenditures and research payments, taxpayers must continue using the timing rules laid out in state law, without regard to the different timing method that applies federally under IRC sections 174 and 174A as modified by OB3. A taxpayer with a timing difference must account for the difference on its New Jersey corporation business tax return. The Division also clarified that the federal renaming of GILTI and FDII (to NCTI and FDDEI, respectively) will not affect the treatment of those concepts under New Jersey law. Any reference to GILTI or FDII in New Jersey guidance or regulations will continue to apply to NCTI or FDDEI. Contact James Venere  or Andrew Eskola with questions about TB-114 or Federal Renaming for GILTI and FDII Under the One Big Beautiful Bill Act for Corporation Business Tax.

Tennessee: The Department of Revenue published guidance indicating that the Volunteer State is statutorily tied to the bonus depreciation regime under the Tax Cuts and Jobs Act (TCJA) and will therefore not conform to either the 100 percent bonus depreciation regime in IRC section 168(k) or the bonus depreciation for qualified production property provisions in IRC section 168(n) as laid out in OB3. Contact Taylor Sorrells with questions about Notice 25-36.

Texas: The Comptroller of Public Accounts announced its intention to conform with changes to “bonus depreciation” included in OB3. The announcement follows a “fresh legal review” that determined that the depreciation provision of the Texas franchise tax law is not tied to the general franchise tax IRC conformity date of January 1, 2007. The announcement speaks only in terms of conforming to “bonus depreciation” and does not identify specifically whether this determination applies only to qualified property under IRC section 168(k) or may apply to other types of property such as qualified production property under IRC section 168(n). This policy will apply beginning with the 2026 franchise tax report (i.e., reports that include activity from 2025) and cover qualifying fixed assets acquired after January 19, 2025. Contact Jeffrey Benson or Karey Barton with questions about Dec. 1, 2025 Tx. Comp. of Public Accounts Announcement.

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