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Taxes, Like Temperatures, Going Up: California COVID-19 Budget “Revenue Solutions”

Yesterday Governor Gavin Newsom turned to a familiar gambit from California’s playbook to help tackle the budgetary hole wrought by COVID-19. In January, the Governor proposed his budget for the 2020-2021 fiscal year, which projected a $5.6 billion surplus. Indeed, revenues through March are reported as having run $1.35 billion above projections. But, as the Governor says in his May Revision to his January Budget, “[t]he COVID-19 pandemic and the resulting recession has changed the fiscal landscape significantly.” Without the various changes proposed by the May Revision, which includes the “revenue solutions” described below, the Governor’s Budget projects a $54 billion deficit. The May Revision proposes two significant changes to business taxation. The Governor proposes suspending net operating losses for 2020, 2021, and 2022 for medium and large businesses. The Governor also proposes limiting business incentive tax credits from offsetting more than $5...

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Governor Newsom Signs Executive Order Providing Last Minute Property Tax Relief

On Tuesday we authored a blog post commending San Francisco County Assessor Carmen Chu for moving the deadline for businesses to file their Business Property Statements (Form 571-L) to June 1 of this year. We noted that California statutory authority provides that if the property tax filing deadline falls on a date when the county assessor’s office is closed for the entire day, a property statement that is mailed and postmarked on the next business day is deemed to have been timely filed. We further explained, however, that despite the fact that most, if not all, county assessor offices across the state are closed due to COVID-19, most assessors have been reluctant to provide relief to the taxpayers struggling to meet the May 7 deadline. Consequently, we urged county assessors to follow the example set by the San Francisco County assessor and to likewise extend the business property tax deadline. In April, we also authored a blog post encouraging the State...

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Last Minute Relief for Filers of Business Property Statements

Once again, San Francisco has shown leadership in addressing property tax relief during the COVID-19 pandemic. On Monday, May 4, 2020, the San Francisco County Assessor announced that she was moving the deadline for businesses to file their Business Property Statements (Form 571-L) to June 1 of this year, due to physical office closure of the San Francisco Office of Assessor-Recorder. Normally, under state law, a 10 percent penalty automatically attaches when a taxpayer’s business property statement is filed after May 7. But, if May 7 falls on a Saturday, Sunday or legal holiday, then a property statement that is mailed and postmarked on the next business day is deemed to have been timely filed. Under the applicable statue, legal holidays include days when the county’s offices are closed for the entire day. As a practical matter, most, if not all, county assessor offices across the state are closed. Yet, most assessors have been reluctant to go on the record...

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State Tax Incentives, Clawbacks and COVID-19

Through various state and local tax incentives, many businesses have committed to grow their employee count or make substantial capital expenditures. Not surprisingly, companies may fall short on delivering those objectives in the short run. Long-terms plans may also need to change drastically. Companies should carefully consider the terms of their agreements with states to identify whether: Employment targets will be met; Investment targets will be met; and Clawbacks or other damages are a possibility. If clawbacks are possible, force majeure provisions in incentives agreements should provide protection. When agreements do not specifically contain a force majeure provision, businesses and governments should work together to renegotiate or amend those agreements in a way that protects local business’ long-term viability in a region.

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DC and New Jersey Join Mississippi in Disregarding Coronavirus-Caused Remote Work for Tax Purposes

As part of our open letter to state tax administrators urging relief of undue tax administration burdens in light of COVID-19, we urged the disregarding of remote work for tax purposes. The public health necessity for businesses to close central operations and direct employees to work from home should not be used as an “opportunity” to create nexus for affected businesses. Mississippi’s Department of Revenue responded to us very quickly, agreeing with us on that point: “Mississippi will not use any changes in the employees temporary work locations due to the pandemic to impose nexus or alter apportionment of income for any business while temporary telework requirements are in place.” New Jersey’s Division of Taxation also quickly issued a similar statement: “In the event that employees are working from home solely as a result of closures due to the coronavirus outbreak and/or the employer’s social distancing policy, no threshold will be considered to have...

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Iowa Responds to McDermott’s Call to Drop Unnecessary or Dangerous Tax Administration Requirements

In late March, we wrote an open letter to state tax administrators requesting that they take steps to relieve undue tax administration burdens in the wake of the COVID-19 situation. We gave five suggestions, including postponing deadlines for tax filing and payment, waiving requirements to use hard-copy documents or checks, suspending accrual of interest on assessments during mandatory closures, directing revenue agencies to resolve outstanding controversies, and disregarding remote work for tax purposes. Kraig Paulsen, Director of Iowa’s Department of Revenue, quickly responded, clarifying actions they have already taken and are now taking: Extending filing and payment deadlines for income, franchise, and moneys and credits taxes to July 31, 2020 Suspending imposition of penalty and interest for property tax payments through April 30 Creating an application for taxpayers to request deferral of sales tax and income tax withholding filings and payments,...

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What Can You Do About Your California Property Tax Payment – COVID -19’s Impact on California Property Tax Deadlines and Planning Considerations

In the wake of the COVID-19 pandemic, certain California taxing officials have acted swiftly to provide state taxpayers with some much needed relief. On March 13, for example, the Franchise Tax Board (FTB) extended the corporate and personal income filing and payment tax deadlines to June 15, and then again on March 18, FTB further postponed the deadlines to July 15. The California Department of Tax and Fee Administration (CDTFA) and the California Office of Tax Appeals (OTA) also has acted to implement measures aimed at supporting taxpayers amid the COVID-19 outbreak. The Office of Tax Appeals granted an automatic 60-calendar-day extension of the deadline for appeals that have a briefing or other deadline that falls between March 1, 2020 and May 18, 2020. In addition, CDTFA published a statement on its website indicating that sales tax relief including return and payment extensions and penalty and interest waivers may be available to taxpayers upon request....

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The Nexus Implications of Teleworking

Over the past several weeks, state and local governments have issued a slew of “stay-in-place” or “shelter-in-place” orders mandating the closure of all “nonessential businesses” and requiring all persons to self-isolate. For most companies, this means that most, if not all, of their employees are required to work remotely. While telework has become a great way for businesses to protect their employees from the Coronavirus (COVID-19), it may also be exposing the businesses to taxation in states where they may not otherwise have sufficient nexus. This is because employees may be working remotely from states where a business does not otherwise have a presence. Under the traditional nexus rules, the employees’ work in these states would likely be sufficient to create nexus such that the states can tax the business. This seems unfair given that the federal, state and local governments are strongly encouraging individuals not to travel and to work remotely....

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Tax Commissioners: Please Drop Unnecessary or Dangerous Tax Administration Requirements

This week we wrote a letter to state tax administrators, sharing five key suggestions for relieving undue tax administration burdens in the wake of this difficult COVID-19 situation. As explained, “at a time when many people are working from home and should not or cannot go to post offices or banks, a business-as-usual attitude for tax administration would be inexcusable.” The five suggestions: Postpone deadlines for tax filing and payment. The federal government and many states have already taken this needed step. When many Americans, including business tax professionals and tax administrators and their staffs, are fearing for their own health and unable, prohibited or unadvised to leave their own house, this is not the time for pulling records and preparing tax filings. Waive requirements to file hard copy, notarized, and/or wet-signature documents. Waive requirements to mail documents by certified mail. Allow automated-clearing-house (ACH) electronic...

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COVID-19 State Tax Relief for Illinois | Quarterly Estimated State Income Tax Payments Still Due 4/15/20

Illinois has announced the following tax-related relief measures related to COVID-19. Taxpayers who file quarterly estimated returns should note that unlike the federal government, Illinois has not extended the April 15, 2020 due date for first quarter estimated tax payments. I. Extension of Filing and Payment Deadlines for Illinois Income Tax Returns The 2019 income tax filing and payment deadlines for all taxpayers who file and pay their Illinois income taxes on April 15, 2020, have been automatically extended until July 15, 2020. This relief applies to all individual returns, trusts and corporations. The relief is automatic; taxpayers do not need to file any additional forms or call the Illinois Department of Revenue (IDOR) to qualify. For additional details, click here for the guidance issued by IDOR on March 25, 2020. Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. Even though the deadline has been...

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