Detailed Multistate Development
As the country moves forward with re-opening, state and local governments continue to address tax matters stemming from COVID-19. In Washington D.C., Mayor Bowser signed a second emergency bill, which among other things, decouples the District from the NOL changes in the federal CARES Act. Specifically, Section 207 of the bill provides that for tax years beginning after December 31, 2017, corporations, unincorporated businesses, or financial institutions will be allowed an 80 percent deduction for apportioned District of Columbia net operating loss carryover to be deducted from the net income after apportionment. In the District, emergency bills often implement changes while permanent legislation is pending Congressional review.
In Massachusetts, the Department of Revenue issued a draft Technical Information Release (TIR) addressing the Commonwealth’s conformity to the federal CARES Act. Because Massachusetts does not conform to IRC section 172 for computing taxable income, the suspension of the 80 percent NOL limitation has no impact on Massachusetts corporate taxpayers. Further, Massachusetts does not allow NOL deductions for personal income tax purposes. With regard to the changes made to IRC section 163(j) under the CARES Act, Massachusetts conforms to those changes for personal and corporate excise tax purposes. The retroactive amendment made with respect to the depreciable life of “qualified improvement property” applies in Massachusetts to QIP placed in service after December 31, 2017. However, Massachusetts decouples from bonus depreciation, thus the deduction for QIP must be calculated without regard to IRC section 168(k). The TIR also addresses loan forgiveness under the Paycheck Protection Program (PPP). Because Massachusetts generally follows the Code as amended and in effect on January 1, 2005 for personal income tax purposes, any forgiven amount would be includable in gross income, and there would be no disallowance of deductions attributable to the payment of expenses covered by loan proceeds. Conversely, for corporate excise taxpayers, the forgiven amount would be excluded from gross income, and any deduction disallowed by the IRS would also disallowed by Massachusetts. Finally, Massachusetts does not conform to the provisions modifying the limitations on charitable contributions for individual income tax purposes, but would conform for purposes of the corporate excise tax.
In other news, Arizona Senate Bill 1021, now awaiting signature by the governor, would require the Arizona Department of Revenue to accept a return, statement or other document that is electronically signed. To be valid, the electronic signature must meet certain requirements including, but not limited to: execution by a person intending to sign the document, the signature must be attached to the relevant document, and the signature must be capable of reliable identification and authentication. The Department is to prescribe the type of electronic signature required and the manner and format in which the electronic signature must be affixed to the electronic record. 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
This Week's Developments