Tax News Brief: 2025 Second Quarter

Welcome to Weaver’s specialty tax services newsletter. Each quarter we cover the top issues across our Specialty Tax Services practice, including state and local taxes (SALT), fixed assets, transaction tax advisory, tax provisions, tax credits, international taxes and motor fuel taxes.

©2025

State & Local Taxes

Sales & Use Tax | Severance Tax | Income Tax

Sales & Use Tax

• Beginning April 2025, Virginia will implement Form ST-1 to replace Forms ST-9, ST-8, ST-7 and ST-6, consolidating multiple sales tax returns into a single form. While the filing process remains largely the same, taxpayers should expect changes to the form’s layout and field order based on the electronic filing method used.
• Michigan expanded its sales and use tax exemption to include equipment used in “enterprise data centers,” which took effect in April 2025. The amendments also extend the exemption for qualified data centers through 2050.
• The Texas Comptroller amended the data processing services rule to clarify taxability when bundled with other services. The rule also defines related nontaxable services and allows marketplace providers to offer data processing services.
• Colorado clarified that fees for using electric vehicle charging stations are generally not subject to sales tax, as one-time sales of electricity do not constitute “electric service.” Charging station operators must still pay sales tax on electricity they purchase.
• Louisiana repealed the sales and use tax exclusion for crane and equipment rentals with an operator, but such transactions may still be treated as nontaxable services if the essence of the transaction is service-based, per existing administrative guidance.
• The Texas Supreme Court ruled that a private corporation operating correctional facilities under contract with government agencies is not exempt from sales and use tax as a government instrumentality.

Severance Tax

• Texas lawmakers have proposed a severance tax exemption for oil and gas produced from certain restimulated wells, offering a 36-month exemption or until qualifying restimulation costs are recovered, up to $750,000.
• Colorado imposes a severance tax on oil and gas extraction to compensate for resource depletion and fund state programs. Oil and gas operators must withhold 1% of gross income for royalty owners, provide withholding statements by March 1, and file quarterly payments and annual returns by April 15, with a possible six-month extension.

Income Tax

• The One Big Beautiful Bill includes an expansion of P.L. 86-272 protections to cover business activities that facilitate solicitation, even if those activities have independent value beyond solicitation.
• Arkansas adopted a $250,000 bright-line nexus threshold and will shift to market-based sourcing for services and intangibles beginning January 1, 2026. Certain industries may elect to use cost-of-performance sourcing through 2035.
• The California Office of Tax Appeals ruled that income from nonqualified stock options and restricted stock units is California source income when tied to services performed in the state, even if recognized after the taxpayer becomes a nonresident.
• Kansas adopted single sales factor apportionment and market-based sourcing for sales of services and intangible property, effective for tax years beginning on or after January 1, 2027.
• Beginning December 31, 2025, the Montana threshold for mandatory electronic payment will decrease from $500,000 to $50,000.
• Tennessee will fully transition to single sales factor apportionment for tax years ending on or after December 31, 2025, making it the standard method beginning with the 2026 tax year.
• The Texas Comptroller clarified that depreciable property expenses allowed under IRC Section 174 do not qualify as supply expenses for the state’s research and development credit, aligning with the federal exclusion under IRC Section 41(b)(2)(C).
• Virginia extended the elective pass-through entity tax through tax years ending in 2026.

Fixed Asset/Cost Segregation

• The House-passed One Big Beautiful Bill (OBBB) includes a five-year extension of 100% bonus depreciation for qualified property placed in service after January 19, 2025, and introduces a new deduction for certain nonresidential real property used in qualified production activities.

International Taxes

• Executives are urged to integrate tariffs into strategic planning as rising tariffs increasingly affect global supply chains and tax liabilities.
• The Israel Tax Authority issued draft guidance addressing compensation for local R&D centers and the treatment of post-acquisition IP sales. The circular, released for public comment in February 2025, aims to reduce double taxation and clarify transfer pricing expectations for multinational enterprises (MNEs) operating in Israel.
• Malaysia’s Inland Revenue Board released updated transfer pricing guidelines effective for 2023 and later, introducing new documentation thresholds, penalty structures and a simplified approach for low value-adding services.
• A recent White House memorandum directs federal agencies to assess whether foreign countries impose discriminatory taxes on U.S. businesses, potentially triggering IRC § 891. If invoked, the provision would double U.S. tax rates on affected foreign citizens and corporations, retroactive to the start of the tax year.
• A federal court in California ruled that a taxpayer reasonably relied on her CPA to meet filing obligations after her husband’s death, despite a missed trust return. The decision challenges the long-standing Boyle precedent and may support penalty relief for taxpayers relying on professional advice in complex tax matters.
• The European Court of Justice ruled that Malta’s “golden passport” program allowing citizenship by investment violates EU law and must end.
• The proposed Taxpayer Assistance and Service Act includes several international tax administration changes, such as consolidating the Report of Foreign Bank and Financial Accounts (FBAR) and Foreign Account Tax Compliance Act (FATCA) reporting to reduce taxpayer burden.

Tax Credits & Incentives

• The House-passed One Big Beautiful Bill proposes new IRC Section 174A, allowing businesses to immediately deduct or amortize domestic R&E expenditures for tax years beginning after December 31, 2024.

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