Multistate: More states respond to CARES Act and COVID-19

One of the ongoing concerns during the pandemic is how to get taxpayer signatures on tax returns and other paper-filed documents when all parties are working remotely. In New York State, legislation (S. 8832) 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 recently 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. In Information Letter #20-11, the Department announced that effective from March 13, 2020 through September 30, 2020 (the so-called COVID-19 relief period), an out-of-state business will not be subject to South Carolina’s withholding requirement due solely to the shift of employees working on the employer’s premises outside of South Carolina to teleworking from South Carolina. Accordingly, the wages of a South Carolina resident employee temporarily working remotely from South Carolina instead of their normal out-of-state business location are not subject to South Carolina withholding if the employer is withholding income taxes on behalf of another state. Further, the Department will not use changes in an employee’s temporary work location due solely to the remote work requirements arising from, or during, the COVID-19 relief period as a basis for establishing nexus or altering apportionment of income. Recently issued Information Letter #20-24 extends the COVID-19 relief period set forth in Information Letter #20-11 through December 31, 2020.

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 to the recipient. Recall, the Tax Cuts and Jobs Act amended IRC section 118 so that incentives and grants provided to corporations by governmental entities are included in taxable income. Please stay tuned to TWIST for additional COVID-19 state tax updates.

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.