This Week in State Tax

Governor Ivey recently signed into law Senate Bill 221, which excludes fees charged by a merchant to offset credit or debit card transaction fees from the sales and use tax base. Effective September 1, 2026, sellers and merchants that recover credit or debit card processing costs by charging customers a fee for an electronic payment transaction must exclude those fees from the taxable base. Under prior law, such fees were included in the base for calculating sales or use tax due. For any questions regarding this change or other Alabama matters, please reach out to Scott Jackson.

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The Idaho Supreme Court recently held that a 2021 income tax rate cut applies to all tax years starting in 2001, allowing a taxpayer with a fiscal year ending September 30, 2021, to use the reduced rate for the entirety of its 2021 fiscal year corporate income tax filing. Prior to the 2021 amendment, Idaho law provided “[f]or taxable years commencing on and after January 1, 2001, a tax is hereby imposed on the Idaho taxable income of a corporation, … which has income attributable to this state. The tax shall be equal to six and nine hundred twenty-five thousandths percent (6.925%) of Idaho taxable income.” The 2021 amendment revised only the rate portion of the law, leaving the remainder unchanged. The amendment included an emergency clause making it effective “retroactively to January 1, 2021.”

On its originally filed 2021 return, the taxpayer applied a blended rate and sought a refund. The blend rate was based on the pre-amendment rate for the portion of the tax year falling in 2020 and the amended rate for the portion falling in 2021. The Revenue Operations Division of the State Tax Commission denied the refund and applied the pre-amendment 2020 rate for the entire 2021 fiscal year. The Commission agreed, finding that Idaho law did not support the use of a blended rate and the amended statute carried an effective date of January 1, 2021. On appeal, a district court judge found in favor of the taxpayer, noting that the new rate applied to “taxable year 2001, and each taxable year thereafter.” Thus, the taxpayer was subject to the amended tax rate for the entirety of its 2021 fiscal year. The Tax Commission appealed.

The state supreme court first held that the plain language of the statute supported only one interpretation: “the 6.5% rate [i.e., amended tax rate] applied to any tax year starting on or after January 1, 2001.” The fact that parties argued for three possible interpretations of the statute was unpersuasive as the statute itself was unambiguous. Further, examining the emergency clause in the enacted legislation, the court reasoned that this language merely specifies when the amended statute became legally operative; it does not “limit the application of the statute to tax years commencing on and after the effective date, nor does the effective date provision purport to redefine the tax years to which the rate replies.” The court acknowledged that Tax Commission’s argument that its interpretation “cannot be what the [l]egislature meant when it amended the statute in 2021,” but held that it was not the role of the court to rewrite an unambiguous statute, even in the face of potential absurdity.

The Tax Commission also argued that subsequent amendments to the relevant statute in 2022 and 2025, which included removing the “commencing on or after January 1, 2001” language and adding distinct subsections for each tax rate with corresponding applicability dates were curative amendments that clarified the legislature’s intention and should be applied retroactively. The court rejected this as the 2022 and 2025 amendments did not provide for retroactive application to January 1, 2021 or earlier.

Contact Chris Hoge with questions about WAFD, Inc. v. Idaho State Tax Commission.

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Governor Mills recently signed LD 2178 into law. As enacted, the measure replaces the Maine Board of Tax Appeals with an Independent Office of Tax Appeals within the Department of Administrative and Financial Services, effective January 1, 2027. The Office will be headed by a Chief Hearing Officer, appointed by the Commissioner of Administrative and Financial Services, but it is established and will operate independently from the State Tax Assessor and other Revenue Services Bureau personnel, and no ex parte communications may be had with the parties before it or other employees of the Bureau. The bill also codifies procedures for filing petitions for reconsideration of assessments, conducting prehearing conferences and hearings, issuing subpoenas, taking testimony, accepting evidence under relaxed evidentiary rules, and issuing written decisions containing findings of fact and conclusions of law. A taxpayer may be represented by an attorney, public accountant, or any other person, and matters will be heard de novo. The burden will be on the taxpayer to prove by a preponderance of the evidence that the Assessor erred in applying the relevant law. Final decisions of the Office may be appealed to the Superior Court within 60 days for a de novo review.

Additionally, in what has become the ‘hot button’ issue of the year in several states, two bills regarding incentives for the construction and operation of data centers in Maine recently crossed the desk of Governor Mills. She signed one and vetoed the other. LD 713, which was signed into law, removes data centers beginning operations (as defined) on or after August 1, 2026, from eligibility for certain existing tax incentive programs, including personal property tax relief under the Business Equipment Tax Exemption and income tax credits for capital investment and employment under the Dirigo Business Incentives Program. The bill also requires preparation of a report for the legislature on future incentives for the sector by November 2026. LD 307, which was vetoed by Governor Mills and not overridden by the legislature, would have imposed a temporary moratorium on the construction of large data centers.

Please contact Ryanne Tannenbaum and Jon Benson with questions about LD 2178, LD 713, and LD 307.

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The Nebraska Unicameral recently enacted LB 1096, which modifies the limitations on access to certain state economic development incentives that were imposed in 2025 on what was termed a “foreign adversarial company.” As enacted in 2025, a “foreign adversarial company” was defined as an entity (a) organized under the laws of a foreign adversary (defined as China, Cuba, Iran, North Korea, and the Venezuelan Maduro regime); (b) with its principal place of business in a foreign adversary; (c) owned or controlled by the government of a foreign adversary; or (d) owning, or owned by, a company qualified under one of the other three criteria The last clause was interpreted to mean a company that owned, or was owned by, a subsidiary or affiliate in a foreign adversary country as well as having a subsidiary that owned an affiliate in such a jurisdiction was disqualified from access to a host of Nebraska incentives. [For additional details, see our TWIST of December 8, 2025.] LB 1096 narrows the definition of a foreign adversary company in a manner intended to limit the impact on domestic U.S. companies having a subsidiary or affiliate operating in one of the identified countries. 

Under LB 1096, the definition of foreign adversarial company is revised to retain clauses (a) – (c) above, but to modify clause (d) to include only a company that is a “direct or indirect subsidiary” of any company described in clauses (a) – (c), thus potentially narrowing the impact on U.S. entities that may have an affiliate operating in a foreign adversary country. Foreign adversarial companies under the revised definition still remain ineligible to receive benefits under many Nebraska incentive programs. Additional amendments in LB 1096 provide that a company that is not a foreign adversarial company can use the benefits of the Nebraska incentive programs only against the income taxes of the members of the same group of companies that are not foreign adversarial companies. The tax liability attributable to members of the unitary group that are foreign adversarial companies must be determined using the apportionment formula used to calculate the tax due.

Please contact Kara Hernandez, Derek Love, and Alex Karscig with questions about Legislative Bill 1096.

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