19 March 2020 Tracking state and local taxing authority responses to the COVID-19 pandemic The COVID-19 pandemic has created significant uncertainty across all lines of business and government. As a result, many businesses and state and local agencies are executing contingency plans and considering the various ways governmental "stay in place" orders will impact their operations. (For brevity purposes, hereafter, unless specifically indicated, state agencies will refer equally to state and local agencies.) State tax authorities are also working to respond to the impact this public health crisis is having on their employees and taxpayers and how to address the possible inability of taxpayers to file, and administrators to process, tax returns — especially when filing and payment deadlines are imminent. State tax authorities, governors, and legislatures are grappling with these issues daily and are rapidly releasing new guidance. EY's Indirect Tax practice is working diligently to track and analyze the impact of these pronouncements on taxpayers. Many tax policy issues have arisen during the last few days that taxpayers should consider. An overview follows of some of those policy issues, along with a summary of state tax agency responses to the COVID-19 pandemic that EY has identified. We intend to monitor and report developments as we become aware of them. The state tax challenges for companies responding to the COVID-19 pandemic range from meeting upcoming tax return filing and payment deadlines, to scheduling audits and protest hearings, to routine tax-planning and compliance. Specifically, taxpayers should consider the following issues:
Because many more issues will emerge as governmental responses to the COVID-19 pandemic unfolds, taxpayers should quickly begin the process of identifying and addressing practical issues of state tax compliance to prepare if taxpayers or state tax authorities must shutter operations. The following summarizes state tax authority responses to the unprecedented widespread mandatory and voluntary shutdowns of both governments and private sector businesses brought about by efforts to combat the spread of COVID-19 as of March 19, 2020. If a state is not listed below, we strongly urge you to check the state tax authority's website because guidance may have been issued after the release of this Tax Alert. We plan to issue updated Alerts as soon as important new information becomes available. If the IRS extends filing deadlines for federal income tax returns, the Alabama Department of Revenue (AL DOR) has stated it will "mirror these return filing extensions as appropriate and enter corresponding taxpayer relief orders." The AL DOR also will consider on a case-by-case basis "other assistance" for businesses and individuals unable to timely file their tax returns. Additional information will be posted on the AL DOR's COVID-19 Updates webpage. (On March 18, 2020, in Notice 2020-17, Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic, the IRS formally postponed income tax payments normally due April 15, 2020, until July 15, 2020, up to certain limits. It did not, however, postpone the date for filing income tax returns.) For motor vehicles traveling through Alabama for the purpose of interstate emergency relief efforts, the AL DOR is temporarily suspending the requirements associated with the International Registration Plan (IRP) and International Fuel Tax Agreement (IFTA), effective for 30 days (through April 15, 2020). For more information, see Ala. Dept. of Rev., Order of the Commissioner "Temporary Suspension of International Registration Plan (IRP) and International Fuel Tax Agreement (IFTA) Requirements" (March 16, 2020). The March 2020 deadline for motor vehicle registration (e.g., newly purchased/acquired vehicle registrations and renewals) and paying property taxes on vehicles is extended to April 15, 2020. Further, penalties associated with such registrations and property taxes will not apply until April 16, 2020. For more information, see Ala. Dept. of Rev., Order of the Commissioner "March 2020 Motor Vehicle Registrations and Property Tax Payments and Penalties Extension" (March 16, 2020). The AL DOR is waiving late payment penalties for any small retail business that had monthly retail sales during the prior calendar year averaging $62,500 or less and is unable to timely pay its February, March, and April 2020 state sales tax liabilities. Penalties will be waived through June 1, 2020. The California tax authorities have issued guidance in response to Governor Gavin Newsom's COVID-19 Executive Order (March 12, 2020), in which he ordered a 60-day delay of the deadlines for filing state tax returns for individuals and businesses unable to timely file due to the COVID-19 pandemic. On March 18, 2020, the California Franchise Tax Board (FTB) revised the filing and payment relief it announced on March 13, 2020. Under the new guidance, the filing and payment deadline for all individuals and business entities is July 15, 2020, similar to the IRS guidance described previously. The extensions apply to:
In FAQs posted to its website, the FTB explained that the extension applies to any business entity with a California return or payment due "between March 15 and July 15," including corporations, S corporations, LLCs, partnerships, and other entities with returns due during this period. The FTB noted that "[t]axpayers do not need to claim any special treatment or call FTB to qualify for this relief." The California Employment Development Department (EDD) announced that employers directly affected by the COVID-19 pandemic may request up to a 60-day extension of time to file their state payroll reports and/or deposit payroll taxes without penalty or interest. The EDD must receive a written request for extension within 60 days from the original delinquent date of the payment or return. The California Department of Tax and Fee Administration (CDTFA) said it is authorized under the Governor's COVID-19 Executive Order to assist individuals and businesses impacted by the COVID-19 pandemic through May 11, 2020. Assistance includes granting extensions for filing returns and making payments, relief from interest and penalties, and filing a refund claim. Taxpayers may request assistance by contacting the CDTFA. Relief requests can be made online or by mail. (See the CDTFA's website for more information on how to request such relief.) The California Office of Tax Appeals said that an automatic 60-calendar day extension of the deadline will be granted for appeals, with a scheduled briefing or other deadline falling from March 1, 2020 through May 18, 2020. San Francisco Mayor London N. Breed announced that small businesses (i.e., business with up to $10 million in gross receipts) impacted by the COVID-19 pandemic can defer the next round of quarterly businesses taxes from April 30, 2020 to February 2021. During the deferral, interest, fees, and fines will not accrue. In addition, San Francisco is delaying for three months the collection of the unified license bill. A further delay may be provided based on need. The Connecticut Department of Revenue Services (DRS) announced that it is extending filing and payment deadlines as follows:
Regarding individual income tax returns, DRS said that it will adjust due dates for filing and payment of state income taxes to align with any specific, actionable announcement from the IRS on due dates for filing and paying federal income taxes. (As previously noted, the IRS extended the payment deadline to July 15, 2020, but not the return filing deadline.) On March 17, 2020, Mayor Muriel Bowser signed into law the COVID-19 Response Emergency Amendment Act of 2020 (B23-0718), which permits the waiver of penalties and abatement of interest for late hotel property tax payments made by June 30, 2020, and permits the Office of Tax and Revenue to waive penalties and abate interest for generalsales tax payments due for periods ending on February 29 or March 31, 2020, if those liabilities are paid in full by July 20, 2020. In addition, the law waives the fee for failing to deliver the first biennial report2 for 2020 required by D.C. Code Section 29-102.11(c) by April 1, 2020, if the report is delivered to the Mayor for filing by June 1, 2020. Because this is an emergency measure, the provisions will be effective for 90 days, expiring on June 15, 2020. Further, on March 18, 2020, the District of Columbia Office of Tax and Revenue issued Tax Notice 2020-01, extending the deadline for the first half of property tax payments for hotels and motels until June 30, 2020. The Illinois Secretary of State's office announced it is providing a 30-day extension for filing and paying estate tax due "between March 16, 2020 and April 15, 2020." The extension, however, does not waive or abate statutory interest. The Indiana Department of Revenue said in a March 17, 2020 press release that it is continuing to "monitor the [IRS] regarding possible changes to filing and payment due dates, and is prepared to follow suit." (As previously noted, the IRS extended the payment deadline to July 15, 2020, but not the filing deadline.) The Iowa Department of Revenue (IA DOR) is extending to July 31, 2020, the filing and payment deadlines for income, franchise, and moneys and credits taxes that are due on or after March 19, 2020, and before July 31, 2020. The extension applies to the following:
The IA DOR also is extending the income tax withholding deposit due date for the period ending March 15, 2020 to April 10, 2020 (from March 25, 2020). The extension applies to Iowa residents or other taxpayers doing business in the state that remit income tax withholding on a semi-monthly basis. Late filing and underpayment penalties will not be imposed for qualifying taxpayers that comply with the new deadlines. The Louisiana Department of Revenue (LA DOR) is automatically extending the due date for the February 2020 sales tax return and payment from March 20, 2020 to May 20, 2020. The extension applies to the following taxes: general sales and use tax, direct marketer sales tax, automobile rental excise tax, hotel occupancy tax, Ernest N. Morial New Orleans Exhibition Hall authority food and beverage tax, and Ernest N. Morial New Orleans Exhibition Hall authority tour and service contractor taxes. A similar extension is provided for February 2020 excise tax returns and payments for Wine Shipped Direct to Consumers and Louisiana State and Parish and Municipal Beer Tax. The LA DOR will waive delinquency penalties and compromise interest provided that these returns and payments are received by May 20, 2020. In addition, effective March 16, 2020, the prescription of all tax assessments issued by the LA DOR is suspended until April 13, 2020. This suspension applies to (1) the time delay for a taxpayer's petition to appeal for redetermination of an assessment with the Louisiana Board of Tax Appeals and (2) for the time delays for appeals in Louisiana courts filed by the LA DOR and taxpayers. The LA DOR also is automatically granting an extension on any outstanding audit or litigation matter, and it will not issue formal assessments on audited accounts until at least April 13, 2020. On March 11, 2020, the Office of the Comptroller of Maryland (Comptroller) announced filing extensions for businesses and individuals. On March 18, 2020, the Comptroller further announced Maryland will follow IRS action to waive penalties and interest for late payment of individual and business taxes if payment is made by July 15, 2020 — applicable for both calendar-year taxpayers and taxpayers with a fiscal year ending January 1, 2020 through March 31, 2020. The Comptroller also said taxpayers that "take advantage of the federal extension to file their return, which is separate from the relief granted today to pay their taxes, will continue to be automatically granted an extension on their Maryland tax filings" without a need to file a separate Maryland extension request. Further, the Comptroller is extending to June 1, 2020, the due date for returns due in March, April, and May for businesses filing sales and use tax; withholding tax; admissions and amusement tax; alcohol, tobacco and motor fuel excise taxes; tire recycling fee returns; and bay restoration fee returns. Businesses filing and paying by the extended due date will receive a waiver of interest and penalties. On March 18, 2020, Governor Charlie Baker announced the postponement, for certain small businesses, of regular sales tax, meals tax, and room occupancy tax collections that would be due in March, April, and May until June 20, 2020. Qualifying taxpayers must have paid less than $150,000 in these taxes during the prior year. The Massachusetts Department of Revenue (MA DOR) has said that, if the IRS provides tax relief from federal filing obligations, it is prepared to follow the IRS in offering similar relief for taxpayers with Massachusetts tax filing obligations. Further, the MA DOR said it also may waive late filing penalties in certain circumstances. (As previously noted, the IRS extended the payment deadline to July 15, 2020, but not the return filing deadline.) The Michigan Department of Treasury is waiving penalties and interest for late payment of tax or late filing of sales, use, and withholding tax returns due March 20, 2020. The waiver is effective for a 30-day period. Thus, taxpayers have until April 20, 2020, to submit these returns without penalty or interest. This waiver is not available to taxpayers filing accelerated sales, use, or withholding returns. The Minnesota Department of Revenue (MN DOR) is granting a 30-day sales and use tax grace period for businesses identified in Minnesota Governor Executive Order 20-04, Providing for Temporary Closure of Bars, Restaurants, and Other Places of Public Accommodation (e.g., restaurants and bars and other places of public accommodation offering food, beverage, alcohol for on-premises consumption, theaters, museums, gyms, spas, amusement parks, and other recreational or entertainment facilities, among others). Such businesses should file returns by March 20, 2020, but will have until April 20, 2020, to pay the tax due. During this period, the MN DOR will not assess penalties or interest for monthly filers and only for the March 20, 2020 payment. After April 20, 2020, affected businesses can request additional relief for reasonable cause. On March 19, 2020, the New Jersey legislature passed A. 3841, a bill to extend time to file gross income tax or corporation business tax returns if the federal government extends the filing or payment due date for federal returns. The extension would coincide with the extended due date established by the IRS but would not be extended later than June 30, 2020. The bill next goes to Governor Phil Murphy for his consideration. (As previously noted, the IRS extended the payment deadline to July 15, 2020.) The North Carolina Department of Revenue (NC DOR) announced that it will provide a limited-time waiver of penalties:
Penalty waivers will be available for the failure to timely obtain a license, file a return, or pay a tax that is due from March 15, 2020 through March 31, 2020, if the license is obtained, the return or extension application is filed, or the tax is paid by April 15, 2020. The NC DOR noted state law prevents it from waiving interest. The Oregon Department of Revenue (OR DOR) said that the state is tied to IRS filing and payment due dates for personal income taxes. If the IRS extends the April 15 due date because of the COVID-19 pandemic, Oregon will automatically couple to the extended due dates for personal income tax filers, the OR DOR said. (As noted previously, the IRS extended the payment deadline to July 15, 2020, but not the return filing deadline.) The OR DOR may waive penalties under certain circumstances. Oregon does not extend estimated payment due dates for personal income tax, though Oregon law does not impose interest. Regarding the Oregon Corporate Activity Tax (CAT), first quarterly payments are due April 30, 2020. The OR DOR will not assess underpayment penalties to taxpayers making a good faith effort to estimate their first quarter payments. The Rhode Island Division of Taxation has established a website to disseminate its responses to the COVID-19 pandemic. The South Carolina Department of Revenue (SC DOR) announced that it is postponing various tax filing and payment deadlines starting April 1, 2020. Affected businesses and individuals will have until June 1, 2020, to file and pay taxes (including estimated payments) for returns due "between April 1, 2020 and June 1, 2020." This relief applies to the following taxpayers:
Taxpayers and businesses may be eligible for this relief for taxes administered by, or returns filed with, the SC DOR, including returns for income tax, sales and use tax, admissions tax, and motor fuel user fee. The Tennessee Department of Revenue has established a dedicated webpage to release information on its responses to the COVID-19 pandemic. The Texas Comptroller of Public Accounts (Comptroller) has not announced any statewide extensions for filing any Texas taxes, but various tax regulations authorize the Comptroller to provide extensions when the Texas Governor or the US president declares a location in Texas to be a disaster area. On March 13, 2020, Texas Governor Greg Abbott declared a state of disaster in all counties in Texas due to the COVID-19 pandemic. Further, the Comptroller said that it is not extending the March 20, 2020 due date for state and local sales tax, hotel taxes, mixed beverage gross receipts and sales taxes, motor vehicle rental tax, seller-financed motor vehicle sales tax and motor fuels tax collected in February, 2020. The Comptroller further announced it will examine each tax due date as the date approaches. The Utah State Tax Commission (Commission) announced that the state's individual income tax due date will remain the same as the federal due date; if the IRS changes the federal due date, the Utah deadline will also be extended. (As previously noted, the IRS extended the payment deadline to July 15, 2020, but not the filing deadline.) However, the Commission states that "[t]he due dates of Utah corporate and [pass-through] entities [are] set by state statute and will not be [affected] by IRS changes in the due dates for those returns without action by the legislature." The Vermont Department of Taxes has established a website to disseminate its responses to the COVID-19 pandemic, and states that it is "in discussions with the Governor's Office and Vermont Legislature about various upcoming due dates for personal and corporate income taxes, as well as certain business taxes." The Department hopes to provide guidance on any extensions of upcoming due dates by the end of day March 20, 2020. The Washington Department of Revenue (WA DOR) stated that it will work with businesses that cannot file or pay their taxes on time due to the COVID-19 pandemic and that the agency has "greater flexibility" following Governor Jay Inslee's declaration of a state of emergency, which he issued on February 29, 2020. For businesses impacted by COVID-19 pandemic response efforts, the WA DOR, upon request, will:
Mayor Jenny Durkan announced on March 10, 2020, that Seattle's Finance and Administration Services will offer deferred Business and Occupation (B&O) tax filing and payment options for certain businesses impacted by the COVID-19 pandemic. Eligible businesses include those that have annual taxable income of up to $5 million and currently pay city taxes on a quarterly basis. The release states that businesses will have until late 2020 to pay their city B&O taxes under this plan, but it does not provide specific dates. In addition, the announcement states that Seattle's Office of Economic Development is expanding its Small Business Stabilization Fund to support income-qualified microbusinesses and plans to provide direct technical assistance to local small businesses and nonprofits so they can immediately access the Small Business Administration's federal loan program once it becomes available. The Wisconsin Department of Revenue has established a dedicated webpage to release information on its responses to the COVID-19 pandemic. During this extremely challenging time, taxpayers should pay attention to state tax authority pronouncements that will impact both the current tax filing season and long-term filing and controversy positions. State governments also are joining with the federal government to provide support to taxpayers and their employees. We intend to monitor and report these developments as soon as they become available.
1 See EY Tax Alert 2020-0531. 2 D.C. Code Section 29-102.11 requires each domestic filing entity and limited liability partnership and registered foreign entity to deliver to the Mayor for filing a biennial report that includes certain information. Document ID: 2020-0610 | |||||||||||||||||||||||||
