Article

State and Local Tax-Related Election Results

by Alex Thacher
December 02, 2020

While uncertainty remains for federal tax legislation, with control of the U.S. Senate hinging on a January runoff election in Georgia, various tax-related ballot measures were approved in states such as California, Oregon, Colorado and Washington.

Below is a list of state and local taxation-related measures passed by voters in November:

California Proposition 19: Has two distinct parts. The first allows homeowners who are 55 or older or those who have lost their home in a natural disaster to transfer their tax assessment to a new home. The new home's tax value will be added to the current tax assessment if the new home is more expensive. The second part of the measure eliminates the ability to pass a home in certain intrafamily transfers without reassessing the home value. Prop 19 takes effect April 1, 2021, and February 16, 2021, for part 1 and 2 respectively.

California Proposition 22: Classifies app-based rideshare and delivery drivers as independent contractors rather than employees. Prop 22 did not have a section specifying effective and operating dates, however, the Secretary of State is expected to issue the Statement of Vote on December 12 as part of Section 10, Article II of the state constitution. Therefore, Prop 22 should take effect on December 17.

San Francisco Proposition F: Amends the city's business and tax regulation code by the following: repealing payroll tax in 2021; including temporary tax relief for restaurants, retail, manufacturing businesses, hotels and arts organizations on their first $25 million in gross receipts; increasing the threshold for a small-business exemption from the gross receipts tax to $2 million; modifying the gross receipts tax rates for large taxpayers, increasing tax rates when fully phased in between 40% to 80%; and reducing the annual Business Registration Fee for businesses with $1 million or less in San Francisco gross receipts. These tax changes begin phasing in on January 1, 2021.

San Francisco Proposition I: Amends the San Francisco Business and Tax Regulations Code to increase the Real Property Transfer Tax rate from 2.75% to 5.5% on transfers of properties with a consideration or value of at least $10 million and less than $25 million and from 3% to 6% on transfers of properties with a consideration or value of at least $25 million. The tax increase becomes effective January 1, 2021.

San Francisco Proposition L: Imposes an additional tax on annual gross revenues of companies based on the compensation ratio of the pay of the highest-paid executive to the business's median employee pay. The tax becomes effective January 1, 2022.

San Francisco Proposition J: Repeals a $320 annual parcel tax approved by voters in 2018 and replaces it with an annual parcel tax of $288 under the Fair Wages for Educators Parcel Tax Ordinance beginning July 1, 2021.

Colorado Amendment B: Repeals the Gallagher Amendment, a constitutional mandate that required a residential to non-residential property tax base ratio of 45% to 55%. Amendment B also repeals the fixed assessment rate for non-residential property. The amendment takes effect on January 1, 2021. Colorado Amendment EE: Increases the state's cigarette and tobacco taxes and creates a new tax on nicotine products, including vaping products, effective January 1, 2021.

Colorado Proposition 116: Reduces the tax rate applied on all individuals, estates, trusts and corporations from 4.63% to 4.55%, effective for tax years beginning on or after January 1, 2020.

Denver Measure 2A: Part of Denver’s efforts to cut greenhouse gas emissions in the city, the measure increases the city's sales tax rate by 0.25%, effective January 1, 2021.

Denver Measure 2B: Levies an additional 0.25% sales tax, generating an estimated $40 million per year to fund housing and homeless services, thereby increasing the total sales tax rate from 8.31% to 8.56%, effective January 1 ,2021.

Seattle Proposition 1: Replaces the current car license fee and 0.1% local sales tax with a 0.15% sales tax for transportation funding. The 0.15% tax takes effect April 1, 2021, and expires on April 1, 2027.

Oregon Measure 108: Increases the cigarette tax rate from $1.33 to $3.33 per pack, taxes e-cigarettes at 65% of the wholesale price and establishes a tax on nicotine inhalant delivery systems, such as e-cigarettes and vaping products. The measure is effective January 1, 2021.

Multnomah County, OR Measure 26-214: Establishes a tuition-free preschool program and funds the program by imposing a new tax of 1.5% on taxable income over $125,000 (single) and $200,000 (joint) as of January 1, 2021, increasing to a 2.3% tax in 2026, plus an additional 1.5% tax on taxable income over $250,000 (single) and $400,000 (joint).

Arizona Proposition 207: Legalizes sales of recreational marijuana and imposes a 16% excise tax on those sales. Revenue from the tax will fund public programs such as community colleges, infrastructure, public safety and public health initiatives. The Arizona Department of Health Services may start licensing recreational marijuana dispensaries as early as January 2021, and retail licenses could be approved as soon as February 2021.

New Jersey: Public Question 1 legalizes and imposes a 6.625% sales tax on sales of recreational marijuana, effective January 1, 2021.

Montana I-190: Legalizes and imposes a 20% tax on sales of nonmedical marijuana. Regulators could begin accepting license applications for marijuana retailers as of January 1 ,2020.

South Dakota: Constitutional Amendment A legalizes and imposes a 15% tax on marijuana sales, effective April 1, 2022.

Insights

With the looming uncertainty over who will control Congress, the outcome of federal and state elections may have a material impact on state and local taxation. It may be prudent to evaluate how these approved ballot measures will affect your business and what you can do to prepare for a tax policy shift. Our team is closely monitoring the updates and will keep you posted.

If you have any additional questions, contact our experts.


December 02, 2020

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Author
Alex Thacher - Partner, Tax - San Jose, CA | Armanino
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