The dust is beginning to settle from the 2018 midterm elections. Though the nation has been focused this week on the federal House and Senate races, several state ballot measures have significant state and local tax implications.
- Arizona. Proposition 126 amends the Arizona Constitution to ban Arizona and its localities from imposing new taxes or increasing tax rates on services. The ban includes sales and use taxes, transaction privilege tax, excise tax or any other transaction-based tax, fee, stamp requirement or assessment related to services performed in the state. The ban does not repeal or nullify a tax in effect on December 31, 2018.
- Florida. Floridians passed two constitutional amendments, both of which required a 60% supermajority vote for approval.
- Amendment 5 requires two-thirds majority approval by both chambers of the Florida State Legislature to “impose, authorize, or raise” a new or existing state tax or fee. The two-thirds majority does not apply to any tax or fee imposed or authorized by a county, municipality, school board or special district. However, the Amendment does not apply to corporate income tax legislation, which requires a three-fifths majority vote.
- Amendment 6 provides that judges in state court and hearing officers in an administrative hearing may not defer to an administrative agency’s interpretation of a statute or rule, and courts “must interpret such statute or rule de novo.”
Eversheds Sutherland Observation: State tax departments’ tax determinations and interpretations of statutes and regulations are often presumed correct due to the Chevron doctrine. As such, courts often defer to state taxing agency regulations putting an additional burden on taxpayers. Amendment 6 ensures that deference will no longer be given to the Florida Department of Revenue’s interpretation of tax law.
- Portland, Oregon. The Portland Clean Energy Community Benefits Initiative 2018, Measure 26-201, imposes a 1% gross receipts tax on “large retailers,” which are businesses subject to the Portland Business License Tax with annual national gross revenue from retail sales exceeding $1 billion and annual Portland gross revenue from retail sales of $500,000 or more. The Measure excludes manufacturers or other businesses not engaged in retail sales in Portland, utilities operating within Portland, cooperatives and credit unions. The Measure is similar to Measure 97 that voters defeated two years ago, which proposed a minimum tax on C corporations with more than $25 million Oregon sales of $30,001 plus 2.5% of the amount of sales above $25 million.
- San Francisco, California. Proposition C imposes an additional 0.175% to 0.69% tax on revenue generated in the city for companies’ San Francisco gross receipts exceeding $50 million. There are seven different rate categories depending on the type of business activity. For companies subject to the city’s payroll tax, the Proposition imposes an additional 1.5% tax on payroll expense.
- Mountain View, California. Measure P imposes a “head tax” ranging from $75 per employee for businesses with between 51 and 500 employees to $150 per employee for businesses with more than 5,000 employees. Other nearby cities, such as Cupertino, San Jose, Redwood City and Sunnyvale, have considered a similar head tax. Mountain View’s head tax is similar to Seattle, Washington’s head tax, which was passed on May 14, 2018, and subsequently repealed on June 12, 2018.
- Oregon. Measure 104 would have required a three-fifths supermajority vote to pass any bill that would increase revenue, by establishing a broad definition of “raising revenue” in the State Constitution.
- Washington. Initiative 1631 would have imposed a carbon emission fee on “large emitters” at the rate of $15 per metric ton of carbon effective January 1, 2020. The Initiative would have created a first in the nation carbon fee.