In response to the significant destruction caused by Hurricane Harvey in Southeastern Texas and Southwestern Louisiana, government entities throughout the US are providing various tax relief to affected individuals and businesses. Such relief includes extending tax filing deadlines, providing exemptions or suspensions from tax, and waiving certain regulatory requirements. To date, the IRS, Texas, Alabama, California, Florida, Georgia, Kansas, Maryland, Mississippi, New Mexico and Pennsylvania are among the jurisdictions providing some form of relief to those affected by Hurricane Harvey. Additional states are expected to provide filing relief to taxpayers affected by Hurricane Harvey as well. Taxpayers should note that, in some situations, they must specifically request the relief available.

Federal relief

The IRS is granting extensions on due dates for returns and relief from penalties for affected individuals and business taxpayers, including payroll returns. In certain parts of Texas, Hurricane Harvey victims have until January 31, 2018, to file certain individual and business tax returns and make certain tax payments. This includes an additional filing extension for taxpayers with valid extensions that would have expired on October 16, 2017, and businesses with extensions that would have expired on September 15, 2017. For additional information, including specific deadlines, see Tax Alert 2017-1385. The IRS also announced that, due to shortages caused by Hurricane Harvey, it will not impose a penalty for dyed diesel fuel sold for or used on the highway in affected Texas counties. See Tax Alert 2017-1397.

In addition, the IRS is providing relief from certain verification procedures governing loans and hardship distributions from qualified retirement plans for victims in covered Texas counties. See Tax Alert 2017-1405. Further, employer qualified disaster relief payments to Hurricane Harvey victims, made directly to employees or through charitable organizations, can be excluded from gross income and are not subject to federal income tax withholding or employment tax. See Tax Alerts 2017-1392 and 2017-1398. Federal law provides for disaster unemployment assistance for certain displaced employees and self-employed individuals as a result of the U.S. Federal Emergency Management Agency's (FEMA) major disaster declaration for Texas related to Hurricane Harvey. The deadline to apply is September 27, 2017. See the Texas Workforce Commission frequently asked questions and Tax Alert 2017-1386. Lastly, the IRS announced that leave-based donations paid by employers to Section 170(c) charities are exempt from wages subject to federal income tax, federal income tax withholding, Social Security, Medicare and unemployment insurance and are not reported on Form W-2 in boxes 1, 3 or 5. See Tax Alert 2017-1421.

Texas relief

The Texas Comptroller of Public Accounts (Comptroller) Glenn Hegar announced¹ that taxpayers in declared disaster areas² affected by Hurricane Harvey can delay filing and paying state taxes during their recovery from storm-related losses. Businesses located in the Major Disaster Designation area can call the Comptroller and request an extension of up to 90 days for certain monthly and quarterly state taxes. To request a tax filing extension or to get more information, call the Comptroller at 800-252-5555, or visit the Comptroller's website to see frequently asked questions.

Additionally, the following recovery-related expenses are exempt from Texas sales tax: (1) separately stated labor costs to repair storm-damaged, nonresidential property, including office buildings and stores (Texas does not impose sales tax on labor for residential repairs); and (2) services used to restore storm-damaged tangible personal property (e.g., dry cleaning of clothing and draperies, rug and carpet cleaning, and residential or nonresidential appliance repairs).³ Governor Greg Abbott also suspended hotel and motel occupancy tax on a statewide basis for the victims of Hurricane Harvey or personnel participating in relief operations for 14 days, beginning August 23, 2017 and ending September 6, 2017.⁴

Texas also is following the lead of the IRS and the Environmental Protection Agency (EPA), which have temporarily lifted restrictions on using dyed diesel fuel on roads and highways. Federal penalty relief is available in specific counties if: (1) the fuel is used between August 25, 2017 and September 15, 2017; and (2) the highway vehicle operator in which the fuel is used pays the federal tax of 24.4 cents per gallon.⁵ Texas is lifting the state's restrictions on the taxable sale and use of dyed diesel fuel in specific counties and, thus, it will not impose or collect the state motor fuel tax on dyed diesel fuel used on-highway for the same dates outlined by the IRS and EPA, when used exclusively for hurricane relief.⁶ Further, the Governor has temporarily waived the International Fuel Tax Agreement (IFTA), suspending requirements that trucking firms track and pay tax on the amount of fuel they use in Texas when they deliver relief supplies and fuel into Texas.⁷

Lastly, certain out-of-state businesses that enter Texas to perform disaster- or emergency-related work to repair or restore critical infrastructure during a disaster response period in a declared disaster area will not be required to collect and remit Texas sales and use tax on sales of taxable items in Texas, or on purchases of taxable items that are sold or transferred to customers during the disaster response. In these circumstances, Texas will not consider the out-of-state entity to be engaged in business in Texas. The state will not require the out-of-state business to register with the Texas Secretary of State, or file or pay state or local taxes, including franchise tax, when the business is performing disaster- or emergency-related work during a disaster response period. Further, the entity will not owe use tax on equipment brought into Texas and used only by the entity to perform disaster- or emergency-related work to repair or restore damaged critical infrastructure during the disaster response period, and the equipment is removed from the state after the disaster response period. Such entities, however, will owe sales tax on purchases of taxable items for its own use.⁸

Louisiana relief

An emergency declaration also has been made for Louisiana,⁹ but no other announcements have been made yet regarding tax relief for Louisiana. See the Governor's web site. The Governor, however, has issued an executive order suspending certain unemployment insurance requirements related to Hurricane Harvey.¹⁰

Other states providing relief

States outside of the disaster area are starting to announce tax relief for those affected by Hurricane Harvey. Alabama, California, Florida, Mississippi and Pennsylvania are offering filing extensions that mirror the federal filing extensions.¹¹ States that are encouraging taxpayers to reach out to the revenue department for relief on a case-by-case basis so far include Florida, Georgia, Maryland and Minnesota.

California

In addition, the California Department of Tax and Fee Administration (which administers California's sales and use tax and other special taxes and fees) is permitting affected taxpayers to request extensions to file returns and to request relief from penalties and interest.¹² Taxpayers can request copies of records lost due to Hurricane Harvey damage, and deadlines are extended for filings that were delayed by disruptions with US mail and private mail and freight companies. Relief is available by calling 800.400.7115 or by making a request online.

Kansas

Kansas is offering a measure of regulatory relief. Governor Sam Brownback signed an executive order lifting regulations on commercial motor carriers traveling through Kansas on their way to aid in Hurricane Harvey recovery efforts.¹³ These include the suspension of licensing, certification, and permitting rules and regulations; suspension of registration and fuel tax permits; and the waiver of fees for over dimension/overweight permits.

Maryland

In Maryland, the Comptroller has: (1) issued a temporary waiver of IFTA requirements and Motor Fuel returns for companies affected by the storm; (2) granted a fuel waiver concerning conventional and reformulated gasoline to protect the supply of Maryland gasoline; and (3) named a point person to assist taxpayers and businesses affected by Hurricane Harvey with other tax filings. The Comptroller anticipates other affected tax types to include withholding, sales and use, individual non-resident, corporate, admission and amusement, and alcohol and tobacco tax, and will address hurricane-related taxpayer issues with these taxes on a case-by-case basis.¹⁴

New Mexico

The New Mexico Land Commissioner recently announced that the state would offer a grace period to Houston-based oil and gas lessees that pay royalties and interest on oil, gas, and carbon dioxide extracted from New Mexico State Trust Lands.¹⁵ Oil and gas lessees are usually required to file royalty returns on the 25th of each month. Because of the hurricane, payments due on September 25 are extended until October 25.

Alabama and Georgia

Lastly, Alabama and Georgia have temporarily suspended the IFTA and International Registration Plan requirements for motor vehicles traveling through their respective states as part of disaster relief efforts.¹⁶

Implications

As the recovery process from Hurricane Harvey continues, it is anticipated that other states will offer relief to affected individuals and businesses. States that do not announce general relief may provide relief on a case-by-case basis.

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ENDNOTES

¹ Tex. Comp. of Pub. Accts., Release: Comptroller Glenn Hegar Postpones Tax Deadline in Counties Affected by Hurricane Damage, Announces Closures of Some Agency Offices (Aug. 25, 2017).

² Texas counties listed by the U.S. Federal Emergency Management Agency (FEMA) under its Major Disaster Designation as of September 5, 2017 for Hurricane Harvey are: Aransas, Austin, Bastrop, Bee, Brazoria, Calhoun, Chambers, Colorado, DeWitt, Fayette, Fort Bend, Galveston, Goliad, Hardin, Harris, Jackson, Jasper, Jefferson, Karnes, Kleberg, Lavaca, Liberty, Matagorda, Montgomery, Newton, Nueces, Orange, Polk, Refugio, Sabine, San Jacinto, San Patricio, Tyler, Victoria, Walker, Waller, and Wharton.

³ Tex. Comp. of Pub. Accts., Release: Comptroller Glenn Hegar Postpones Tax Deadline in Counties Affected by Hurricane Damage, Announces Closures of Some Agency Offices (Aug. 25, 2017).

⁴ Tex. Ofc. of the Gov., Proclamation issued suspending hotel and motel taxes during Hurricane Harvey (Aug. 25, 2017). See also, Tex. Ofc. of the Gov., Release: Governor Abbott Suspends Hotel Occupancy Tax (Aug. 25, 2017).

⁵ Tex. Comp. of Pub. Accts., Declared Natural Disasters and Emergencies Tax Help.

⁶ The Texas Governor and Comptroller are lifting the state's restrictions on the taxable sale and use of dyed diesel fuel in Aransas, Atascosa, Austin, Bastrop, Bee, Bexar, Brazoria, Brazos, Burleson, Caldwell, Calhoun, Cameron, Chambers, Colorado, Comal, DeWitt, Fayette, Fort Bend, Galveston, Goliad, Gonzales, Grimes, Guadalupe, Hardin, Harris, Jackson, Jasper, Jefferson, Jim Wells, Karnes, Kerr, Kleberg, Lavaca, Lee, Leon, Liberty, Live Oak, Madison, Matagorda, Montgomery, Newton, Nueces, Polk, Refugio, San Jacinto, San Patricio, Tyler, Victoria, Walker, Waller, Washington, Wharton, Willacy and Wilson counties.

⁷ Tex. Ofc. of the Gov., Press Release: Governor Abbott Eases Restrictions on Truckers Bringing Fuel and Supplies into the State (Aug. 31, 2017).

⁸ Tex. Comp. of Pub. Accts., Declared Natural Disasters and Emergencies Tax Help (see Tex. Admin. Code tit. 34, Section 3.583 (franchise tax rule) and Tex. Admin. Code tit. 34, Section 3.286 (sales tax rule).

⁹ Louisiana Gov. John Bel Edwards requested assistance for the following parishes: Beauregard, Calcasieu, Cameron, Jefferson Davis, and Vermillion.

¹⁰ La. Ofc. of the Gov., Exec. Order No. JBE 17-21: Suspension of Certain Unemployment Insurance Laws (Aug. 31, 2017).

¹¹ Ala. Dept. of Rev., Release: ADOR Providing Tax Relief to Texas Flood Victims (Aug. 29, 2017); Laura Mahoney, "California Tax Agencies Offer Hurricane Harvey Relief," Daily Tax Report: State, Bloomberg BNA (Sept. 5, 2017); Fla. Dept. of Rev., Current Topics: Hurricane Harvey Tax Relief (Sept. 5, 2017); Nushin Huq, "Harvey Victims Get Tax Relief in Some States," Daily Tax Report: State, Bloomberg BNA (Aug. 30, 2017); Pa. Dept. of Rev., Release: Hurricane Harvey — Additional Extension of Time to File.

¹² Laura Mahoney, "California Tax Agencies Offer Hurricane Harvey Relief," Daily Tax Report: State, Bloomberg BNA (Sept. 5, 2017).

¹³ Kans. Ofc. of the Gov., Exec. Order 17-03 for a Regional Emergency (Aug. 30, 2017).

¹⁴ Comp. of Md., Release: Comptroller Offers Tax Relief and Assistance to Hurricane Harvey Victims (Aug. 31, 2017).

¹⁵ N.M. State Land Comr., Release: State Land Commissioner Offers Payment Extension to Houston-based Oil and Gas Lessees (Aug. 30, 2017).

¹⁶ Ala. Rev. Comr., Exec. Order: Temporary Suspension of IRP and IFTA Requirements for Vehicles Engaged in Disaster Relief Efforts (Aug. 31, 2017); Ga. Rev. Comr., Press Release: Department of Revenue to Waive IRP/IFTA Requirements Due to Hurricane Harvey (Sept. 4, 2017).