Multistate: States and Localities Continue to Respond to COVID-19 Tax Issues

Listen to a brief overview of state tax developments this week, including a Multistate legislative update.

Detailed Multistate Development

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It’s been another week, and state taxing authorities continue to respond to COVID-19. Although every state, with the exception of Nevada, has issued guidance of some sort on extensions of time to file returns and pay certain taxes, states continue to refine and/or expand their guidance. In addition, a number of states have now issued FAQs addressing ancillary questions, such as whether the extension of time to file and pay extends to fiscal-year filers and first and second quarter extension payments.

In addition, last week Maryland, New York and Pennsylvania addressed issues associated with obtaining so-called “wet signatures” during the pandemic. In Maryland, Tax Alert 04-20 provides that the Comptroller will follow IRS guidance regarding digital signatures for limited documents related to the determination and collection of liabilities. The Comptroller’s office will also allow employees to send and accept documents via secure email. Any taxpayer can request that a secure email be sent by a Comptroller employee. Alternatively, the Comptroller will accept password protected attachments using certain programs.

In an Important Notice (N-20-3), the New York Department of Taxation and Finance announced that it is temporarily authorized to accept digital signatures in place of handwritten signatures on documents related to the determination or collection of tax liability. Through May 9, 2020, the Department will allow taxpayers and their representative(s) holding a valid power of attorney to digitally sign numerous types of documents outlined in the Notice. Notably, the Department cannot accept a digitally signed power of attorney.  The Notice provides additional information on transmitting digitally-signed documents to the Department.

In Pennsylvania, the Department of Revenue is temporarily waiving the requirement for corporate officers to physically sign and date certain returns with a wet signature. This waiver applies to tax returns that cannot be submitted to the Department electronically, such as the Gross Premiums Tax and Mutual Thrift Institutions Tax. This waiver will remain in place during the emergency disaster declaration period.  In place of the corporate officer’s signature, the person preparing the return should write “COVID-19” on the signature line.

Another issues that certain states have addressed is whether nexus will be established or Public Law 86-272 protection will be lost due to a company having employees temporarily working at home due to the COVID-19 outbreak. In Notice 2020-05, the District of Columbia Office of Tax and Revenue stated that it will not seek to impose corporation franchise tax or unincorporated business franchise tax nexus solely on the basis of employees or property used to allow employees to work from home (e.g., computers, computer equipment, or similar property) being temporarily located in the District during the period of the declared public emergency. In a FAQ, the Minnesota Department of Revenue likewise announced it will not seek to establish nexus for any business tax solely because an employee is temporarily working from home due to the COVID-19 pandemic. 

In a sign of the severity of the impact of COVID-19 on government finances, the Independent Budget Office of New York City released a new revenue estimate for FY 2020-2022. FY 2020 (ending June 30) receipts are expected to come in some $3 billion or 4.7 percent below the prior estimated made in January 2020. For FY 2021, sales tax are expected to be lower by 36 percent ($3 billion) and hotel occupancy taxes lower by a whopping 82 percent ($530 million). Overall, FY 2021 receipts are expected to fall by over 10 percent from the January estimate and FY 2022 revenues are expected to be 6.6 percent below what was estimated in January 2020.

Finally, Assembly Bill 1038, which was signed into law in Wisconsin on April 15, 2020, addresses various issues stemming from COVID-19.  In addition to conforming to certain of the personal income tax changes in the CARES Act, Wisconsin conforms to the business tax provision in the CARES Act that fixed a glitch in the Tax Cuts and Jobs Act by shortening the recovery period for qualified improvement property. This change is retroactive to when the change was effective for federal tax purposes. It should be noted that Wisconsin previously decoupled from 100 percent bonus depreciation. Assembly Bill 1038 also authorizes the Secretary of Revenue to waive, for any person who fails to remit general fund taxes or transportation fund taxes and fees by their due date, the interest and penalties that accrue during the period covered by the COVID-19 public health emergency if the due date falls within that period and the secretary determines that the person's failure is due to the effects of the COVID-19 pandemic. To read about the recent state and local tax guidance on extensions in response to COVID-19, please click here and bookmark KPMG TaxNewsFlash-United States to stay current as more guidance is regularly released. 

To read about recent state and local tax guidance on extensions in response to COVID-19, please click here and bookmark KPMG TaxNewsFlash-United States to stay current as more guidance is regularly released.

This Week's Developments

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Sarah McGahan

Sarah McGahan

Managing Director, State & Local Tax, KPMG US