Multistate: More state responses to COVID-19 and the CARES Act

States continue to issue guidance on issues stemming from COVID-19, as well as state conformity to the CARES Act.  The Indiana Department of Revenue recently updated its FAQs to address remote work requirements associated with the COVID-19 pandemic. The Department will not use am employee’s relocation as the basis for establishing Indiana nexus or for exceeding the protections provided by P.L. 86-272 for the employer of a temporarily relocated employee. The protections provided under this guidance will extend for 14 days beyond the time during which: (1) there is an official work from home order issued by an applicable federal, state or local governmental unit, or (2) the employee is remote pursuant to the order of a physician in relation to the COVID-19 outbreak or due to an actual diagnosis of COVID-19. An employer may not assert that solely having a temporarily relocated employee in Indiana under the circumstances described above creates nexus for the business or exceeds the protections of P.L. 86-272 for the employer.

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. Pursuant to the regulation, until the earlier of December 31, 2020, or 90 days after the state of emergency in Massachusetts is lifted, all compensation received for services performed by a non-resident who, immediately prior to the Massachusetts COVID-19 state of emergency was an employee engaged in performing such services in Massachusetts, and who began performing services from a location outside Massachusetts due to a Pandemic-Related Circumstance, will continue to be treated as Massachusetts source income subject to Massachusetts personal income tax and personal income tax withholding. A resident employee who, immediately prior to the Massachusetts COVID-19 state of emergency was an employee engaged in performing services from a location outside of Massachusetts, and who began performing such services in Massachusetts due to a state’s COVID-19 state of emergency or other Pandemic-Related Circumstance, will be eligible for a credit for taxes paid to that other state, to the extent allowed under Massachusetts personal income tax laws. In addition, the employer of such an employee is not obligated to withhold Massachusetts income tax for the employee to the extent that the employer is required to withhold income tax with respect to the employee in such other state.

In North Carolina, the Department of Revenue issued an Important Notice addressing recent legislation updating the state’s conformity to the Internal Revenue Code to the Code as of May 1, 2020.  Although the state adopts Code subsequent to the enactment of the CARES Act, North Carolina decouples from numerous provisions in the CARES Act for individual income tax purposes and certain provisions for corporate income tax purposes. Notably, corporate taxpayers must add the amount of business interest expense deducted on the federal return in excess of the 30 percent of adjusted taxable income limitation. The recent state legislation also excludes the amount of a forgiven Paycheck Protection Program (PPP) loan from gross income for corporate and personal income tax purposes. Taxpayers must add the amount of any expenses deducted on their federal return that were paid using the proceeds of the PPP loan. Please stay tuned to TWIST for updates on state conformity to the CARES Act and other COVID-19 state tax issues.  

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.