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Daily Tax Report: State

Mississippi and New Jersey Leading on Teleworker Taxes (2)

April 1, 2020, 2:55 PMUpdated: April 1, 2020, 11:10 PM

States may cut companies slack when it comes to teleworkers’ tax presence. Wisconsin’s governor proposed new tax relief, and Missouri, said it would cut spending to address a looming budget shortfall, and New Hampshire may waive property tax interest, and businesses can ask California’s tax department for extensions even though they aren’t covered by the governor’s relief order. Here’s the latest on shifting state tax guidelines, deadlines, and policy to deal with the new coronavirus pandemic. For our Tuesday coverage click here. Here’s a state-by-state roadmap.

In normal times, a corporation with even one employee working in a state may be required to file and pay taxes in that state.

With millions of Americans displaced from their workplaces by the crisis and working remotely, that could be a major problem without special dispensation. But if actions taken this week by New Jersey and Mississippi are representative, the explosion of telecommuting won’t bring an avalanche of new tax concerns.

Mississippi has said that it will not change withholding rules for businesses based on employees’ temporary teleworking location. “Mississippi residents are taxable on their total income, regardless of where they work,” according to the department’s recent guidance. “However, we will not impose any new withholding requirements on the employer.”

Additionally, the state will not use any changes in the employee’s temporary work locations due to the pandemic to impose nexus requirements on corporations.

New Jersey has issued similar guidance. “New Jersey sourcing rules dictate that income is sourced based on where the service or employment is performed based on a day’s method of allocation,” the state’s tax division said Tuesday. “However, during the temporary period of Covid-19 pandemic, wage income will continue to be sourced as determined by the employer in accordance with the employer’s jurisdiction.”

Tax practitioners in a KPMG webinar Wednesday said they hoped other states would get on board.

It helps companies that the two states “won’t use the presence of a newly remote worker as something that will change nexus considerations,” said Justin Hill, a KPMG partner, speaking in firm’s State and Local Tax Implications and Guidance on Covid-19 webinar. “We’re hoping other states will issue some guidance there.”

Wisconsin Offers Additional Relief

Wisconsin Gov. Tony Evers (D) on Wednesday released a legislative package responding to the Covid-19 emergency that included several initiatives designed to ease burdens on taxpayers.

Evers also called for a special session of the Wisconsin Legislature to address his emergency legislation.

The tax measures included a plan to expand the Earned Income Tax Credit for low-income families during the crisis. Homeowners would benefit from waiving interest and penalties on delinquent property taxes included in the 2020 tax roll. A second property tax measure would grant municipalities flexibility to implement multiple installments of three or more payments for 2020 property taxes.

“I’m calling on the Legislature to convene without any further delay to take up these proposals supporting our healthcare providers, essential workers, small businesses, and families across our state who need our help during this difficult time,” Evers said.

Missouri Cutting Spending

Missouri will cut $180 million from planned spending to help meet an anticipated $500 million budget shortfall for the current fiscal year, Gov. Mike Parson (R) said Wednesday.

The new coronavirus has already caused an economic slowdown, and the result may be a worse decline in state revenues than during the Great Recession, Parson said in his daily briefing on the public health emergency.

The cuts will affect the Department of Higher Education and Workforce Development, the Department of Transportation, the Office of Administration, the Department of Natural Resources, and the Department of Economic Development.

Missouri hopes to be able to use $315 million in federal funding to help with the shortfall, Parson said.

New Hampshire May Waive Property Tax Interest

New Hampshire Gov. Chris Sununu (R) is considering waiving interest on property taxes that aren’t paid on time due to the impact of the new coronavirus, he said Wednesday.

The state, which has no income or sales taxes, will likely face a revenue shortfall, Sununu said. Despite this, the governor said he was considering granting property tax waivers, as requested by municipal leaders.

According to a Federal Reserve Bank of Boston report, New Hampshire’s property tax rate of 5.6% ranks among the highest in the U.S. Property taxes provide about 60% of New Hampshire’s combined state and local tax revenue, and about 16% of total state revenue.

California Big Businesses Can Ask for Extensions

California Gov. Gavin Newsom’s (D) order to push the sales tax filing and payment deadline to July 31 for businesses that owe less than $1 million for the first quarter of 2020 leaves out about 1,600 large companies with tax bills above that threshold.

Those companies don’t fall under Newsom’s March 30 executive order for tax relief occasioned by the new coronavirus pandemic, but they can still ask the state Department of Tax and Fee Administration for an extension to file first-quarter returns and pay tax due April 30.

The companies make up only 0.05% of total taxpayers, department Director Nick Maduros told Bloomberg Tax. They can ask for an extension using the department’s usual methods: by phone, online, or regular mail, including submission of a statement under penalty of perjury about why they are requesting relief.

“Wherever possible, we’ll work to accommodate impacted taxpayers and maximize our voluntary tax compliance,” Maduros said.

Although the large businesses don’t benefit from the governor’s latest order that waives the requirement for smaller taxpayers to submit relief requests, they can benefit from a March 12 order from Newsom giving them until May 11 to file and pay if they file an extension request.

New Jersey Extending Fiscal Year, Too

New Jersey is making it official. Gov. Phil Murphy (D) and legislative leaders said Wednesday they have agreed to extend the tax deadline to July 15. And they are adding three months to the current fiscal year for state budget purposes in response to the pandemic.

The legislature acted March 19 to extend the tax due dates, but Murphy a week later indicated that he still hadn’t fully committed to signing it.

The agreement set in motion a plan to extend the state fiscal year to Sept. 30, from June 30. They’re committed to working together to enact needed legislation and supplemental appropriations, according to a joint statement.

The plan is part “the whole-of-government effort that is going into fighting COVID-19,” Murphy and the leaders said, adding that the extra three months will allow them “to focus fully on leading New Jersey out of this crisis, and to allow for a robust, comprehensive, and well-informed budget process later in the year.”

The tax extension “will allow many businesses to keep operations running” and “keep disposable income in the pockets of New Jersey’s workforce,” Michele Siekerka, president of the New Jersey Business and Industry Association, said in a statement.

It will also allow tax filers “some much-needed flexibility and time to assess their financial picture and future,” she said, and the fiscal-year change will give policymakers “more time to work on tax-related legislation that can provide relief during this crisis.”

Elise Young has the story here.

—With assistance from Tripp Baltz in Denver, Michael J. Bologna in Chicago, Chris Brown in St. Louis, Adrianne Appel in Boston, and John Herzfeld in New York City.

(Adds Wisconsin and telecommuting-tax item.)

To contact the reporters on this story: Laura Mahoney in Sacramento, Calif. at lmahoney@bloomberglaw.com; John Herzfeld in New York at jherzfeld@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com; David Jolly at djolly@bloombergtax.com

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