TWIST - August 31, 2020

Welcome to TWIST for the week of August 31, featuring Sarah McGahan from the Washington National Tax State and Local Tax practice

The first development we are covering today is an appeals court decision from Ohio addressing whether a City of Cincinnati income tax ordinance, which sets forth the requirements for filing a consolidated income tax return, was preempted by an Ohio statute addressing the same. The court concluded that the local ordinance that limited inclusion in the group to only affiliates that were conducting business in Cincinnati was preempted by a state law that required Cincinnati to accept a consolidated return that included all group members filing a consolidated federal tax return. 

In other news, the District of Columbia Fiscal Year 2021 Emergency Budget Support Act has been enacted. As an emergency bill, the Act became effective immediately and will remain in effect for a period of 90 days- until November 16, 2020. The Council has taken initial steps to enact a permanent Fiscal Year 2021 Budget Support Act. Tax related changes in the Emergency Act include, but are not limited to, delaying the deduction put in place several years ago to offset the financial statement impact of the District moving to combined reporting and limiting the tax benefits of investing in certain Opportunity Zone Funds to local funds certified by the Mayor of the District.

The North Carolina Department of Revenue recently issued FAQs on its ongoing initiative to expedite the resolution of corporate intercompany pricing issues. The initiative began August 1 and, importantly, by September 15, 2020, taxpayers must agree in writing to participate in the initiative by completing and emailing the Election to Participate form to the Department.  Among other things, the FAQs confirm that taxpayers cannot come forward anonymously, but must be identified to participate in the initiative.

This past week, there were additional state responses to tax issues and questions arising from COVID-19 and the CARES Act. In New York State, legislation was signed that allows taxpayers that are filing returns or other “tax documents” electronically to sign the accompanying an E-file authorization form using an electronic signature. Many other states already allowed E-filing authorizations to be filed using a digital signature. This law change takes effect immediately. 

In other news, the South Carolina Department of Revenue extended the time period during which the presence of employees in the state working remotely will not create nexus for the employer or require a change in withholding through December 31, 2020.

Finally, the Minnesota Department of Revenue recently added two questions to its COVID-19 relief FAQs to address the tax treatment of small business grants and aid payments made by the state and local governments to struggling businesses. The answers note that under current federal law, it is likely that these amounts would be taxable income to the recipient.  As a reminder, we will be taking a break next week for the Labor Day holiday. Thank you for listening to TWIST and stay well.

To read about the recent state and local tax relief guidance, click here and bookmark KPMG TaxNewsFlash-United States to stay current as more guidance is regularly released.