Two More U.S. States Conform to Revised Internal Revenue Code

Maine and South Carolina have conformed their state tax law to the Internal Revenue Code (Code) as amended by the Tax Cuts and Jobs Act (TCJA) of 2017. Neither acted to exclude the elimination of the deduction/exclusion for moving expenses from the legislation, so moving expenses will not be deductible or excludable in those states beginning in 2018, and continuing through 2025. 

Worldwide ERC® has closely monitored the activities of states as they reacted to the passage of tax reform. The most recent report on those activities was published 5 September 2018. Those referencing that article should note that although the text suggests that Mississippi does allow an exclusion, that state is not included in the list of those allowing the exclusion, which is the correct position. 

Maine enacted conformity legislation 12 September 2018, conforming its tax law generally to the Code as it was in effect on 23 March 2018. It did not adopt the $10,000 federal limitation on the deduction for state and local taxes, and it also created a personal exemption deduction in Maine to replace those lost in the TCJA. It also did not adopt several of the changes pertaining to corporate taxes. However, it will now conform to the federal denial of tax breaks for moving expenses. 

South Carolina conformed to the Code in legislation signed into law 3 October 2018. The law conforms to the Code as in effect on 9 February 2018. As in Maine, the legislation creates a state personal exemption deduction, and also decouples from a number of business tax provisions enacted by the TCJA. But South Carolina will now conform to federal law denying tax breaks for moving expenses. 

Consequently, as of 7 October 2018, only 12 states continue to permit an exclusion from income for moving expenses; Arizona, Arkansas (which recently confirmed that conclusion in Opinion 20180831 issued 25 September 2018), California, Hawaii, Iowa (for 2018 only; Iowa will conform to federal law beginning in 2019), Kentucky, Massachusetts, Minnesota, New Jersey, New York, Pennsylvania, and Virginia.

How This Impacts Mobility

Worldwide ERC® members who gross up for taxable moving expenses and wish to avoid gross up for amounts excluded from state income tax will need to alter their procedures to take account of these new additions to the roll of states denying an exclusion for 2018.

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