Multistate: States and localities continue to respond to COVID-19

As we move forward with re-opening certain parts of the country, state and local governments continue to provide extensions of time to file and pay certain taxes, or respond in other ways to help taxpayers. For example, this past week legislation (Senate Bill 704) was enacted in North Carolina that allows the Secretary of Revenue to waive interest on deferrals of certain income tax payments. Mississippi, which had extended individual and corporate income tax return and payment due dates to May 15, 2020, further extended the due dates to July 15, 2020, consistent with most other states.

At least one additional state issued guidance on the tax treatment of certain federal payments. The Oregon Department of Revenue announced that certain types of federal assistance provided to businesses under the CARES Act will not be considered commercial activity and will not be subject to the Corporate Activity Tax (CAT). The exempt assistance includes forgiven Paycheck Protection Program loans, Economic Injury Disaster Loan advances, and Small Business Administration loan subsidies.  

In North Carolina, recently-signed Senate Bill 704 makes certain favorable changes to the state’s unemployment insurance laws and also adopts a new unemployment tax credit for employers. The amount of the credit is equal to the amount of contributions payable on the quarterly unemployment tax report filed by the employer on or before April 30, 2020. If an employer remitted the contributions payable with the report due on or before April 30, 2020, the credit will be applied to the contributions payable on the next quarterly report due on or before July 31, 2020. An employer must file the report to receive the credit. If the amount of the credit exceeds the amount of contributions due on the report, the excess credit amount is considered an overpayment and will be refunded to the employer.

Finally, a few states refined their guidance on issues associated with telecommuting employees due to various work from home directives. The Maryland Comptroller revised an earlier Tax Alert that addresses employer withholding requirements for teleworking employees during the COVID-19 emergency.  Similarly, the Philadelphia Department of Revenue issued revised wage tax policy guidance for non-resident employees and reiterated that non-resident employees who work for Philadelphia-based employers are not subject to wage tax during the time they are required to work outside of Philadelphia, including working from home. Finally, the New Jersey Division of Taxation, in a FAQ, announced it will temporarily waive the sales and use tax nexus standard that is generally met if an out-of-state seller has an employee working in New Jersey. Thus, as long as the out-of-state seller did not maintain any physical presence other than employees working from home in New Jersey and is below the state’s economic thresholds the Division will not consider the out-of-state seller to have sales tax nexus purposes during this time period.

States continue to assess the impact of the COVID-19 emergency on state revenues. Two larger states weighed in this week. The California Department of Finance released a revised revenue forecast that showed for the remainder of FY 2020 through June 30 state general fund revenues are expected to drop by $9.7 billion from the January forecast. Measured against that same forecast, FY 2021 receipts for individual income tax, corporate income tax and sales tax are each expected to decline by about one-quarter. Total receipts are expected to drop by 21 percent or $32.2 billion. In Minnesota, the Gopher State fiscal fortunes are expected to decline by 2.6 percent in FY 2020 and by 12.2 percent in FY 2021 according to a May estimate compared to the enacted budget in February 2020.

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.