The net operating loss (NOL) carryforward period has also increased with the start of the new year. As of January 1, the corporate income tax rate has been reduced from 6.5 to 6.2 percent and is scheduled to drop to 5.9 percent in 2022. In 2019, Arkansas adopted the third phase of a series of tax reforms, and those reforms continue to phase in in 2021. 2021 State Corporate Income Tax Changes Arkansas In addition to the major tax changes mentioned here, many states will see automatic increases in their unemployment insurance (UI) tax rates in 2021 due to significant trust fund drawdown in 2020 amid the pandemic, and several states have enacted conformity legislation to reflect changes in the federal tax code that were made by the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was enacted in March 2020. Among the handful of tax changes that were adopted in 2020, many were adopted directly by voters on their November 2020 ballots. As such, most of the tax changes highlighted in this paper are the result of laws that were adopted prior to 2020 but that have January 2021 effective dates. Twenty-six states and the District of Columbia had notable tax changes take effect on January 1, 2021.īecause most states’ legislative sessions were cut short in 2020 due to the COVID-19 pandemic, fewer tax changes were adopted in 2020 than in a typical year. California, Colorado, and New Jersey had significant retroactive tax changes take effect in 2020 that are worth being aware of as the new year begins.Īlthough some state tax changes take effect at the beginning of the fiscal year-for many states in July-most are implemented at the beginning of the calendar year. North Carolina took legislative action to prevent an automatic rate reduction to its motor fuel tax at the beginning of the year.Arizona, Montana, and New Jersey newly legalized recreational marijuana and set up a preliminary tax structure for when legal in-state sales begin.Colorado and Oregon increased their cigarette taxes Colorado, Georgia, and Oregon created new taxes on vapor products.Connecticut began the phaseout of its capital stock tax Illinois and Mississippi are continuing their phaseout processes and New York’s capital stock tax has been completely repealed.Connecticut, Vermont, and the District of Columbia will see adjustments to their estate tax exemptions and/or rates this year.Arizona and Illinois made changes to their economic nexus laws governing sales and use tax collection requirements for remote sellers.The Hall Tax, which previously taxed interest and dividend income but not wage income, has been completely phased out. Tennessee joins seven other states that do not levy any individual income tax.
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