Almost all of the states with income taxes have now aligned their filing dates with those of the IRS. The Multistate Tax Commission, meanwhile, wants to ensure that states hear corporate taxpayers’ concerns for relief. Here’s the latest on shifting state tax guidelines, deadlines, and policy to deal with the new coronavirus pandemic. For Thursday’s coverage click here. Here’s a state-by-state roadmap.
The results have been streaming in daily, and it’s nearly unanimous. Almost every state with a personal income tax has extended filing and payment due dates in the wake of the Internal Revenue Service’s March 20 announcement that it was moving its deadlines to July 15 from April 15.
Michigan late Friday afternoon followed suit as Gov. Gretchen Whitmer (D) signed an executive order extending state and city income tax deadlines. Of the 42 states with an income tax, 39 had acted as of Friday to give taxpayers more time in response to the pandemic, with action pending in three more.
Legislative developments Friday also put Massachusetts and Pennsylvania firmly into the extended due-dates column, and Kentucky acted to provide a statutory basis for a grace period set administratively earlier in the week. Bills are awaiting signature in Ohio and New Jersey.
“Clearly most states have made the decision to align with the federal government or go beyond the July 15 standard, and more states are moving in that direction,” said Jared Walczak, director of state tax policy at the Tax Foundation. He predicted every state would either conform to the new federal deadline or make some other accommodation for taxpayers.
Three states—Idaho (June 15), Mississippi (May 15), and Virginia (June 1)—have chosen filing dates shy of the July 15 federal deadline.
“Some states have expressed a legitimate concern about the timing associated with pushing some revenue into the next fiscal year,” Walczak said. “Of course, due to withholding throughout the year, they are collecting most of that revenue. That said, April tends to be a significant revenue month for states.”
New York Gov. Andrew M. Cuomo (D) on Saturday announced the income tax filing deadline would be extended to July 15. He issued an executive order extending the state tax commissioner’s existing power to disregard a taxpayer’s tax liabilities in an emergency, from the statutory 90 days to 100 days.
New York’s tax agency didn’t have official guidance posted immediately. The original plan to follow the federal due dates was announced in just a brief mention at a March 20 press conference, when Cuomo said, “The deadline is the federal deadline.”
Both Cuomo and New Jersey Treasurer Elizabeth Maher Mouio have warned of the impact of the extensions on cash flow in the upcoming fiscal year. The New York extension basically “means we get no money between April and June-July,” Cuomo said, adding: “The only way I sleep at night on that one is, look, it’s not just this state, it’s every state.”
In New Jersey, the legislature acted March 19 to match the federal due dates, but Gov. Phil Murphy (D) hasn’t signed the bill. “We’ll overwhelmingly almost certainly move it,” he said at a March 26 press conference. “We’re just trying to figure out where to land on that.”
In Ohio, Gov. Mike DeWine (R) signaled March 25 that he’ll sign an extension bill approved by the legislature.
“We truly are in uncharted territory here,” said Steve Wlodychak, a state and local tax principal at EY. “State taxing authorities are under enormous stress, and state executives are focused on the crucial public health matters that have to come first. But over the past week, it has been incredible to me how quickly states identified these stresses on businesses and are rising to the occasion to help taxpayers waive this unprecedented experience in American history.”
Multistate Tax Commission Sharing Corporate Taxpayer Concerns
The Multistate Tax Commission, which works on behalf of states and taxpayers to facilitate state tax law administration, has forwarded a pair of taxpayer pleas for regulatory relief to state revenue agencies in response to the new coronavirus pandemic.
The law firm McDermott, Will & Emery LLP, which represents a large stable of corporate taxpayers, and the Tax Executives Institute, an association of business tax practitioners, requested relief Thursday from several state and local tax compliance duties during the public health crisis.
MTC executive director Greg Matson told Bloomberg Tax he shared the two letters with state tax administrators without endorsing or commenting on their recommendations. Matson said the commission would do “anything we can do to get information out to our state tax folks about the types of situations business taxpayers are facing.”
Practitioners at McDermott said taxpayers are confronting many “new and unexpected” challenges as they cope with the Covid-19 crisis, and requested greater flexibility in the coming months.
“We acknowledge that state governments must continue to collect the taxes owed them, but we hope that tax authorities will recognize that many tax administration requirements are ancillary or even counterproductive to that end in our new environment,” McDermott tax attorneys Stephen Kranz, Alysse McLoughlin, and Joseph Bishop-Henchman wrote.
The McDermott letter specifically requested postponement of tax filing and payment deadlines, waivers from hard copy and notarized document requirements, and suspensions of interest and assessments during periods of mandated business closure.
TEI’s international president, Katrina Welch, requested very similar forms of tax relief in letters addressed to Matson and Gale Garriott, executive director of the Federation of Tax Administrators. Welch stressed state conformity with new IRS deadlines, which were shifted to July 15 from April 15, and a need for states and localities to go 30 days beyond the new date to ease pressure on filers. Many states have already made changes, but others are still weighing legislative or administrative actions.
Ohio Governor Signs Tax Delay, Federal Conformity Law
Gov. Mike DeWine (R) on Friday signed House Bill 197 which will allow the state to delay its income tax filing date to July 15 from April 15 and will align state laws with various portions of the federal Internal Revenue Code.
Ohio has static conformity with the federal tax code, which means it must conform to the code as of a specific date instead of adopting rolling changes as they occur. The state is expected to lose roughly $13 million in revenue as it updates its laws to conform with the federal code as written on Jan. 1, 2020.
Arizona Reducing Customer-Facing Services
The Arizona Department of Revenue said Friday that it would limit in-person services as of March 30.
The temporary change applies to customer lobbies in Phoenix, Mesa, and Tucson. People who want in-person help or need to make cash or credit card payments must make an appointment via phone or email before arriving.
The Department of Revenue said its employees remain available for questions via email, telephone, and live chat, and suggested that taxpayers switch to online and phone services.
Georgia Tax-Cut Plans Likely on Ice
A Georgia income tax cut that passed the state House earlier this month is unlikely to become law given the expected state revenue impacts of the pandemic, House Speaker David Ralston (R) said Friday.
The House passed H.B. 949 on March 10, sending the bill to the Senate for consideration. It was meant to be the second step of a two-part income tax cut, lowering and flattening the state’s individual income tax rate at 5.375%. The state currently has graduated income tax rates that top out at 5.75%.
The state legislative session is suspended, but lawmakers are likely to face tough budget decisions when it resumes, Ralston said Friday in a Georgia Public Broadcasting radio interview.
“You’re going to see a really down-to-earth, bare-bones kind of budget,” he said. The proposed tax cut as well as an across-the-board teacher pay raise “are both probably going to have to come out now,” he added.
Massachusetts Changes Tax Day to Match IRS
Massachusetts will extend its 2019 state income tax filing deadline to July 15 from April 15, aligning with the Internal Revenue Service, Gov. Charlie Baker (R) and legislative leaders announced Friday.
Lawmakers will draft legislation to finance the extension and to manage the deferral of revenue that the state had been expecting. The state will repay the funds after July 1, 2020, the start of the new fiscal year.
The extension will “provide additional flexibility to filers during this crisis,” Baker said in a statement. The state had been one of only a few holdouts in not moving deadlines.
The Massachusetts Fiscal Alliance had pushed state leaders to make the change.
“If State House leaders do not start to act, the next phase of this economic depression will not just be high rates of unemployment, but inflation, and shortage of supplies,” Paul Craney, spokesperson for Massachusetts Fiscal Alliance, warned March 25 in a letter to Baker.
Pennsylvania Links with Federal Deadline
Pennsylvania Gov. Tom Wolf (D) signed legislation on Friday giving individual income taxpayers until July 15 to file their returns.
Wolf signed H.B. 1232, which brings Pennsylvania into conformity with the new filing deadlines established by the IRS on March 21. The new law also extends the deadlines for declarations of estimated personal income tax, payments of estimated personal income tax, and the filing of informational returns by S corporations, partnerships, estates, and trusts.
In addition, the law authorizes Pennsylvania’s Department of Community and Economic Development to coordinate with local units of government to extend filing and payment deadlines for the local earned income tax.
Finally, the bill frees up $50 million for the state’s response to the pandemic. Wolf said the funds “allow Pennsylvania to get more beds, ventilators, and other personal protective equipment that our health care system needs for a surge in patients.”
Kentucky Legislators Back Extension, Covid-19 Measures
The Kentucky House and Senate have unanimously approved a hastily-created Covid-19 response bill that would allow moving tax deadlines, expanding the state’s unemployment benefits to independent contractors, and providing immunity to some health care workers in an effort to bolster the state’s response to the virus’s impact.
The bill (S.B.150), with its original health care cost transparency language stripped, would let the Kentucky Department of Revenue waive late-filing and payment penalties for state income tax returns. That allows the state to go forward with its plan to delay income tax filing and payment deadlines to July 15, in keeping with the IRS.
The bill also greatly expands the state’s unemployment insurance program, allowing self-employed and independent contractors to apply for benefits—something Gov. Andy Beshear (D) said the agency would do to help the laid-off workers who have overwhelmed the state’s online benefits portal. The bill also provides some statutory immunity to health care providers who provide treatment “in good faith” during the current health emergency, potentially shielding them from later claims.
Beshear was expected to sign the bill as early as Friday.
Connecticut Suspends Plastic Bag Tax
Connecticut Gov. Ned Lamont (D) issued an order (Executive Order No. 7N) to suspend a 10-cent tax on single-use plastic bags, as retailers switch to using them and paper bags in an effort to slow the contagion.
The order also prohibits employers at any grocery or retail business from requiring checkout workers to place items in customers’ reusable bags. The order doesn’t ban the use of reusable bags, but says customers must bag their own groceries if they use one, the order states.
Lamont issued the order Thursday after grocery workers expressed concern about their risk of Covid-19 transmission by handling reusable bags, according to the order. The workers are “making a critical contribution” by keeping food available to the public and the state wants to respect their concerns, the order said.
The 10-cent tax has been in place since August for many retailers in the state, as a step toward banning plastic bags altogether by 2021 and reducing waste. Shoppers were encouraged to supply their own reusable bags.
—With assistance from Alex Ebert in Columbus, Ohio, Brenna Goth in Phoenix, and Chris Marr in Atlanta.
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