Alabama Gov. Kay Ivey signed into law H.B. 217, which exempts from the state income tax overtime pay for hourly workers for hours that exceed 40 hours per week. The law is effective for tax years beginning after December 31, 2023 and that end before January 1, 2027.

Colorado Gov. Jared Polis signed into law H.B. 1272, which enhances credits for the purchase of electric vehicles (EVs) and reduces a tax credit for oil and gas producers. The law extends tax credits for the purchase or lease of EVs; creates tax credits for industrial facilities to implement greenhouse gas emissions reduction improvements, creates a temporary ownership tax rate reduction on a portion of the sale of electric medium- and heavy-duty trucks; and decreases temporarily the severance tax credit for oil and gas production.

Colorado Gov. Jared Polis signed into law S.B.196, which extends for an additional five years the income tax credit for expenses incurred by a qualified individual in retrofitting the individual's residence to increase its accessibility for persons with disabilities. The bill also extends the credit carry-forward period from five years to eight years.

Colorado Gov. Jared Polis signed into law H.B. 1189, which creates a state income tax credit for employers who make a monetary contribution to an employee for use by the employee in purchasing a primary residence. The amount of the credit allowed is 2.5% of an employer's contribution to an employee, but the credit is capped at $5,000 per employee per year and an employer cannot receive a credit of more than $375,000 for all contributions made in a year to employees.

Connecticut passed a two-year budget that will reduce personal income tax rates. Gov. Ned Lamont is expected to sign the bill, H.B. 6941, into law. The bill reduces income tax rates for families to 2 percent, down from 3 percent, on their first $20,000 in income and to 4.5 percent, down from 5 percent, on income of as much as $100,000, beginning in the 2024 tax year. For individual tax filers, the rates apply to their first $10,000 and $50,000 in income. The budget also increases the state’s earned income tax credit to 40 percent of the federal credit, from 30.5 percent. The budget also extends the 10 percent corporate business tax surcharge for three years. It also makes several changes to the state’s pass-through entity tax, including making it optional instead of mandatory and changing the calculation of the tax base.

Florida Gov. Ron DeSantis signed into law H.B. 7063, which reduces taxes on individuals and businesses. The law revises the tourist tax reimbursement, homestead exemptions, exemptions for religious and educational property, refunds of certain property taxes, discretionary sales surtaxes, taxes on certain loans, surtaxes found to be unconstitutional, exemptions from sales and use taxes, tax on rental and license fees, tax credits for certain systems and equipment, and Strong Families tax credits. 

Florida Gov. Ron DeSantis signed into law H.B. 5, which repeals several business tax credit programs. The bill repeals the entertainment industry tax credit; the qualified defense contractor and spaceflight business tax refund; the corporate income tax credit for spaceflight projects; tax refunds for qualified target industry businesses; the Quick Action Closing Fund; and the New Markets tax credit. The bill is effective July 1, 2023.

Florida announced a sales tax holiday for the 2023 summer. The tax holiday applies to specific outdoor-related items from May 29 to September 4. The tax exemption applies to the retail sale of admissions to music events, sporting events, cultural events, specified performances, movies, museums, state parks, and fitness facilities. It also applies to eligible boating and water activity supplies, camping supplies, fishing supplies, general outdoor supplies, residential pool supplies, children's athletic equipment, and children's toys. The sales tax holiday does not apply to rentals of any eligible items within a theme park, entertainment complex, public lodging establishment, or airport.

Georgia Gov. Brian Kemp signed into law S.B. 56, which updates Georgia’s rolling conformity to the IRC through the 2022 tax year the tax provisions in federal law enacted on or before January 1, 2023, with certain exceptions. The bill decouples Georgia from IRC Section 174 for tax years beginning after January 1, 2021. SB 56 also imposes a sales tax on the retail sale of digital goods, effective on January 1, 2024. 

Georgia Gov. Brian Kemp signed into law H.B. 162, which provides a one-time tax rebate of $250 for individual filers, $375 for heads of household, and $500 for married filed, so long as such individual income taxpayers who filed returns for both 2021 and 2022 taxable years.

Georgia Gov. Brian Kemp signed into law H.B. 412, which amends the state’s pass-through entity tax by removing the limitation on which partnerships may elect to be treated as a pass-through entity. The bill removes the limitation that only S corporations are qualified to make the election.

Hawaii Gov. Josh Green signed into law S.B. 1437, which implements a pass-through entity tax as a workaround to the $10,000 federal cap on deductions for state and local taxes. The law allowed partnerships and S corporations to elect to pay state income tax at the entity level and allows the individual pass-through entity owners to claim personal tax credits proportional to their share of the tax paid.

Hawaii Gov. Josh Green signed into law H.B. 1100, which confirms the state’s income and estate and generation-skipping transfer tax laws to the Internal Revenue Code as amended as of December 31, 2022.

Illinois Gov. J.B. Pritzker signed legislation, S.B. 1641, that eliminates penalties for some late payments and nonpayment of income tax. This legislation applies to returns due on or after January 1, 2024 and is intended to eliminate penalties that could have been triggered for certain amended state income tax returns resulting in liability due to a federal change required to be reported under pre-existing Illinois law.  

Indiana Gov. Eric Holcomb signed into law S.B. 419, which updates the state’s conformity date to the Internal Revenue Code to January 1, 2023. The state does not conform to IRC Section 174 for tax years beginning on or after January 1, 2022 but instead implements two changes to the calculation of adjusted gross income: (1) deducting an amount equal to the specified research or experimental expenditures charged to a capital account under IRC Section 174(a)(2)(A); and (2) adding the amount deducted under IRC Section 174(a)(2)(B) to the taxpayer’s adjusted gross income. The bill also provides clarification on the calculation of the net operating loss.

Iowa Gov. Kim Reynolds signed into law H.F. 352, which allows pass-through entities to pay income tax at the entity level at the maximum Iowa individual income tax rate. Individual pass-through entity owners then receive a refundable state tax credit for the amount paid. The law applies retroactively to January 1, 2022.

Louisiana Gov. John Bel Edwards signed into law S.B. 89, which requires the Department of Revenue to issue regulations to implement a net capital gains deduction for individual income tax.

Louisiana Gov. John Bel Edwards signed into law S.B. 69, which provides a four-year extension for the sunset date of a 30 percent research and development expenditure income and corporate franchise tax credit.

Maryland Gov. Wes Moore signed into law H.B. 707, which establishes the Taxpayer Advocate Division in the Office of the Comptroller to assist taxpayers and their representatives in resolving taxpayer problems and complaints and represent taxpayer interests.

Maryland Gov. Wes Moore signed into law H.B. 2, which allows union members to subtract certain union dues paid during the taxable year from their taxable income. The law applies to all taxable years beginning after December 31, 2022.

Maryland Gov. Wes Moore signed into law S.B. 452, which expands eligibility for the state’s film production tax credit to include documentaries and talk shows, reality shows, and game shows. The bill also increases the percentage of total direct costs that qualify for the tax credit and increases the credit’s annual aggregate amount of tax credit certificates for fiscal years 2024 through 2026.

Maryland Gov. Wes Moore signed into law H.B. 680, which increases the total amount of income tax credits for student debt that the Maryland Higher Education Commission may approve in a tax year. It also extends from two years to three years the time that an individual who claims the credit has to prove that they used the credit to repay the individual's student loan debt.

Maryland Gov. Wes Moore signed into law H.B. 179, which extends the period of time within which a person is required to file a Maryland estate tax return to allow a surviving spouse to take into account the deceased spousal unused exclusion amount. The law applies retroactively to any decedents dying on or after January 1, 2019. 

Maryland Gov. Wes Moore signed into law S.B. 240, which requires add-back to Maryland taxable income for the amount of certain tax credits claimed for taxes paid to another state by a pass-through entity. The changes apply to tax years beginning after December 31, 2022. 

The Michigan Department of Treasury announced that beginning for tax year 2023, the flow-through entity tax rate is reduced to 4.05 percent for all entities. 

Minnesota Gov. Tim Walz signed into law omnibus legislation that makes significant changes to the state’s tax code. For individuals, the legislation provides a one-time refundable tax credit of $260 for single filers and $520 for joint filers and $260 each for up to three dependents. It implements a child tax credit of $1,750 per dependent. It also reduces the itemized deductions for taxpayers with an adjusted gross income of more than $222,650 by the lesser of 3 percent of the excess of the taxpayer’s federal adjusted gross income over $220,650 but not over $304,970; plus 10 percent of the taxpayer's adjusted gross income over $304,970, and by 80 percent for those earning more than $1 million. For high earners, the law imposes a new 1 percent tax on the net investment income of individuals, estates, and trusts of more than $1 million. For corporate taxes, the bill also conforms Minnesota to the federal global intangible low-taxed income (GILTI) tax, but it does not allow for the IRC Section 250 deduction. The dividend received deductions have been reduced for corporations that are 20 percent or more owned to 50 percent (previously 80 percent) and from less than 20 percent owned to 40 percent (previously 70 percent) of dividends received beginning after December 31, 2022. The net operating loss has been reduced to 70 percent of taxable net income.

Montana Gov. Greg Gianforte signed into law S.B. 554, which enacts a pass-through entity tax as a workaround to the $10,000 federal limit on state and local tax deductions for individuals. The bill allows pass-through businesses to pay state income tax at the entity level and allows individuals a state tax credit for the tax paid by the pass-through entity. Additional guidance, including estimated payment information, has been issued by the state and updated on their website at Montana Pass-Through Entity Tax.

Montana Gov. Greg Gianforte signed into law S.B. 246, which revises the state’s water's-edge election law by eliminating the countries that are considered tax havens from the income and apportionment factors. A “water’s-edge” election allows corporations to exclude the earnings of foreign affiliates. Prior to this change, Montana required corporations to include the earnings of subsidiaries incorporated in countries identified as tax havens. The new law means that multinational corporations that pay Montana’s corporate income tax can ignore income earned by subsidiaries in these low-tax jurisdictions. The law applies to tax years beginning after December 31, 2022.

Nebraska Jim Pillen signed into law L.B. 727, an omnibus revenue bill that provides restaurants and grocery stores that donate food an income tax credit of 50 percent of the value of the donated food, up to $2,500. The law also provides a 14-cent-per-gallon credit for the sale of biodiesel.  

Montana Gov. Greg Gianforte signed into law H.B. 447, which implements an exception to withholding requirements for employers in the state less than 30 days. The withholding requirement does not apply to “key employees” with salaries greater than $500,000.

Nebraska Gov. Jim Pillen signed into law L.B. 754, which includes a child care tax credit, reduces individual and corporate income tax rates, provides for certain income tax deductions, and implements a SALT cap workaround. The bill reduces the tax brackets from four to three and reduces rates over four years to 2027. It reduces the top rate to 5.01 percent for tax years between January 1, 2014 and January 1, 2026; 4.55 percent for tax years between January 1, 2026 and January 1, 2027; and 3.99 percent for tax years after January 1, 2027. The law allows for retroactive elections for tax years beginning January 1, 2018 and before January 1, 2023. For tax years beginning on or after January 1, 2023, partnerships must make the election on or before the due date of the income tax return, including extensions.

New Jersey Gov. Phil Murphy signed into law A 3946, which allows cannabis businesses in New Jersey with less than $15 million of gross receipts to deduct business expenses and research and development expenses on state tax returns. The bill decouples the state from IRC Section 280E, which prohibits deductions and credits for businesses that sell federally defined controlled substances.

Nevada Gov. Joe Lombardo signed into law S.B. 29, which prohibits interest payments on a refund of any tax that was over-collected by the taxpayer and that the taxpayer is required to refund to the person from whom the tax was initially collected. The bill takes effect July 1, 2023.

North Dakota Gov. Doug Burgum signed into law H.B. 1158, which reduces taxes over the next two years. The law reduces the personal income tax rate through a three-bracket structure that exempts from taxes individual files with income of less than $44,724 ($74,750 for joint filers). Individual filers with an income between $44,725 and $225,975 ($74,750 to $275,100 for joint filers) are taxed at 1.95 percent. Individual filers with an income of $225,975 or more ($275,100 for joint filers) are taxed at 2.5 percent. The law also includes a property tax credit of up to $500 on a primary residence. 

Oklahoma Gov. Kevin Stitt signed into law H.B. 2459, which increases the maximum base incentive amount of the state’s film credit from 20 percent to 30 percent of qualifying project costs. The credit applies to film and television projects filmed in the state.

Oklahoma enacted H.B. 1039, which eliminated all franchise tax effective beginning in tax year 2024 for corporate and excise tax purposes. The bill became law without a signature on June 2, 2023. The emergency law becomes effective on July 1, 2023.

Oregon Gov. Tina Kotek signed into law S.B. 141, which updates Oregon's date of conformity to the federal code for state personal income tax and corporate excise and income tax purposes. It updates the provisions by one year to December 31, 2022.

The Oregon Tax Court ruled that Chevron improperly included its gross receipts from commodities hedging in its total sales calculation. In Chevron U.S.A. Inc. v. Dep’t of Revenue, Or. T.C., No. TC-MD 190031N, 5/17/23, the court ruled that the company owes additional corporate excise tax. The court ruled that trading commodities is not the company’s primary business and the company cannot include the receipts from those transactions in its sales factor to dilute its taxable business in Oregon.

Tennessee Gov. Bill Lee signed into law S.B. 275/H.B. 323, which implements a package of business tax changes. The bill switches the state’s method for calculating franchise and excise tax to a phase-in single sales factor apportionment, increases the filing threshold for state and local business tax to $100,000 from $10,000 in gross receipts, conforms with the federal bonus depreciation provisions of the 2017 tax law, and allows a $500,000 property exemption for franchise tax starting in tax year ending on or after December 31, 2024. 

Tennessee Gov. Bill Lee signed into law H.B. 323, which includes the following changes: conforms to federal bonus depreciation rules for all assets purchased after January 1, 2023, implements a new standard deduction from a taxpayer’s net earning subject to excise tax of $50,000 for tax years December 31, 2024, and updates apportionment to reflect the phase-in of the single factor apportionment formula beginning after December 31, 2023 and fully implemented by December 31, 2025.

Louisiana Gov. John Bel Edwards signed into law S.B. 5, which provides for alternatives for challenges to ad valorem tax assessments in lieu of payment under protest.