Even as tax professionals begin running the numbers on the tax impact of the 2004 American Jobs Creation Act, state revenue departments are doing their own sets of numbers to calculate exactly what the new changes to the federal tax code will mean to state revenues. In Alabama, for example, state officials are modeling what the changes will do to state balance sheets. If corporations pay less federal tax, officials in Alabama say, it will boost the state taxes they owe. However, it remains uncertain if that will offset some of the tax breaks that could reduce the tax bills for many businesses. The frantic calculations now being done could result in quick legislation in January that would have states opting out of some of the new provisions. This will only increase the tax headaches for many corporations as they have to do add-backs and separate calculations for state tax purposes in all the states where they do business. Also on the state tax side of things, the Jobs Act allows individuals to deduct sales taxes paid on their federal income tax return—welcome relief in states that don’t have an income tax.
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This story is from the CCH’s monthly Focus on Tax newsletter, which provides advise and guidance on federal and state tax issues for tax and accounting professionals.
Read this article from CCH’s Journal of Taxation of Financial Products.