TWIST - July 27, 2020

Summary of state tax developments in the Nevada, Washington State and Multistate responses to COVID-19 and the CARES Act.

Weekly TWIST Podcast Overview

This Week's Developments

Welcome to TWIST for the week of July 27.  This is Sarah McGahan from KPMG’s Washington National Tax state and local tax practice.

First up today we are going to cover two B&O tax developments from Washington State. In a recent determination, a hearing officer addressed whether the Department properly attributed various types of loan-related fees to Washington State when the loans at issue were secured by real property in the state.  The taxpayer argued certain of the fees, including document review fees and closing charges, were not “loan servicing fees,” but were undertaken for other lenders while creating the loan. As such, the taxpayer argued these fees represented receipts from other services that should be attributed outside Washington based on costs of performance. The Tax Review Officer disagreed. Although the term “loan service fees” was not defined in the law, the Officer determined that “loan service fee” was a term of art related to the industry of extending credit for the purpose of buying real property. To determine what was understood to be a loan servicing fee for the industry, the Officer looked at the business activities set forth by the Accounting Standards Board in ASC 860-50.  In the Officer’s view, these activities represented “loan services” within the industry and fees generated from those activities were considered loan service fees for Washington B&O purposes.

The Washington State Department of Revenue recently responded to the Lending Tree Court of Appeals decision. Recall, the court of appeals held that the benefit of Lending Tree’s online loan referral service was received at the location where the lenders (the taxpayer’s customers) received and utilized the information contained in a referral to generate a potential loan for a borrower.  As such, for B&O tax purposes, the taxpayer’s receipts were attributed to the lender’s location.  The Department’s recently-issued statement provides that the court’s opinion “does not suggest that Washington must always attribute receipts to a customer’s business location, nor does the case represent a new legal framework.” In the Department’s view, if a taxpayer provides marketing or advertising services to a customer engaging in selling goods or services, the customer’s most directly related activity is “selling” and that activity occurs in the customer’s market, and receipts will be attributed to that location.

After a short special session of the Nevada legislature to address an estimated $1.2 billion shortfall, legislation was signed into law on July 20, 2020 that authorizes a tax amnesty program. Specifically, Senate Bill 3 requires the Department of Taxation to conduct a tax amnesty program for a period of not more than 90 days ending no later than June 30, 2021. A person or business that has not paid a tax, fee, or assessment required to be paid to the Department will be relieved of all the monetary penalties and interest imposed with regard to the unpaid tax, fee, or assessment if the taxpayer requests relief from the Department in the manner required and pays the tax, fee or assessment in full.

 Finally, more states issued guidance on COVID-19 and the CARES Act. North Carolina issued an important notice addressing the state’s conformity to various aspects of the CARES Act. The Indiana Department of Revenue updated its FAQs to address remote work requirements associated with the COVID-19 pandemic and whether and how they will affect a company’s nexus footprint or P.L. 86-272 protection. Finally, On July 21, 2020, the Massachusetts Department of Revenue issued a revised Technical Information Release and emergency and proposed regulations addressing the Massachusetts source income of non-residents telecommuting during the COVID-19 pandemic.

Thank you for listening and stay well. 

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Featured Speaker

Sarah McGahan

Sarah McGahan

Managing Director, State & Local Tax, KPMG US