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Daily Tax Report: State

Governors Ask Trump for $500 Billion in Federal Support (4)

April 16, 2020, 3:54 PM; Updated: April 16, 2020, 10:50 PM

A group of governors is calling on the federal government to provide far more financial support than is currently on offer, while seven Midwestern governors are forming a pact to address reopening their economies after the pandemic is contained. Oklahoma will decide next week whether to tap more emergency funds. Utah lawmakers are taking up tax relief, and Georgia and Chicago are extending more deadlines. Here’s the latest on shifting state tax guidelines, deadlines, and policy to deal with the coronavirus pandemic. For Wednesday’s coverage click here. Here’s a state-by-state roadmap.

Three governors are calling on President Donald Trump to support the states during the crisis with a $500 billion stabilization fund, pointing to collective revenue losses in their states of more than $13 billion.

Governors Gretchen Whitmer of Michigan, Tom Wolf of Pennsylvania and Tony Evers of Wisconsin said the $71 billion in funding for state and local units of government in the federal virus relief package (Public Law 116-136) doesn’t match “the crushing economic impact” the virus is imposing across the country. In their letter, dated Wednesday but released Thursday by Evers, the governors called on the White House to work with Congress to quickly provide funds to avert massive budgetary shortfalls.

The governors, all Democrats, said initial estimates suggest revenue losses this year of $3 billion for Michigan and $2 billion for Wisconsin. Pennsylvania is expecting a budget deficit of as much as $5 billion for the coming year.

The trio expressed their support for previous pleas from the National Governors Association for a new relief measure featuring $500 billion for state stabilization grants, and “additional support” for local units of government affected by the public health crisis.

Midwestern Governors in Reopening Pact

Seven Midwestern states will follow the plans outlined by governors on the East and West Coasts, forming a regional pact to determine the best strategy for loosening public safety restrictions and reopening the economy.

Governors J.B. Pritzker of Illinois, Gretchen Whitmer of Michigan, Mike DeWine of Ohio, Tony Evers of Wisconsin, Tim Walz of Minnesota, Eric Holcomb of Indiana, and Andy Beshear of Kentucky said Thursday they would coordinate on a Midwest strategy for economic resurgence. With the exceptions of DeWine and Holcomb, the other governors are Democrats.

State shelter-in-place policies and additional restrictions on business are having a brutal impact on state tax collections. The governors are anxious to reopen their economies, but only after the health risks from the coronavirus are sufficiently contained.

“We recognize that our economies are all reliant on each other, and we must work together to safely reopen them so hardworking people can get back to work and businesses can get back on their feet,” the governors said in a joint statement.

Oklahoma Body Will Address Revenue Failure

Oklahoma’s Board of Equalization, the body tasked with officially declaring a revenue failure, will meet April 20, setting up the possibility that the state will release additional reserves to plug its budget hole.

The Secretary of State reported Thursday that the board will meet Monday afternoon via videoconference. The announcement follows a petition by Oklahoma lawmakers asking the Supreme Court to compel the state agency, which is chaired by Gov. Kevin Stitt (R), to meet and declare a revenue failure.

The state is facing an estimated $460 million budget hole brought about by the combined impact of the health crisis and low oil prices.

Declaration of a revenue failure would allow Oklahoma to access an additional $302.3 million in funds appropriated through a budget stabilization bill (SB 199) passed by lawmakers during a special session held in part to head off state agency budget cuts for the 2020 fiscal year, which ends June 30. That bill became law April 13 without the governor’s signature.

Utah Lawmakers Take Up Tax Bill

A tax bill was on the agenda first thing Thursday morning as the Utah House convened in the legislature’s first-ever virtual session, addressing the state’s response to the pandemic.

The House approved a measure (H.B. 3003) 74-0 that would modify Utah’s deadline for filling individual and corporate income taxes to the new federal deadline of July 15, 2020. The bill also aligns the state’s extension time periods with those of the Internal Revenue Service, and changes the state’s due dates for estimated corporate income tax payments, said Rep. Robert Spendlove (R), chief House sponsor of the legislation.

“It also envisions potential future changes with federal deadlines and says the state will also adjust its deadlines for state taxpayers due to any unforeseen changes in federal deadlines,” Spendlove said. The bill also modifies due dates for deferred foreign income or repatriated income, and creates a subtraction from adjusted gross income for certain distributions from a qualified retirement plan, he said.

The bill will now be taken up by the Senate.

The Legislature considered a version of the bill before it adjourned its 2020 regular session, as scheduled, just as the states were beginning to contemplate shutting down certain business activity and issuing stay-at-home orders. The bill died March 12 after passing in the House, but before the Senate could act on it.

At the time, its fiscal note said the change in deadlines would result in a delay of about 15% of individual and corporate income tax final payments, shifting about $200 million from fiscal year 2020 to FY 2021.

The new fiscal note says pushing back the deadline will result in delayed income tax payments amounting to about $840 million.

Rhode Island Businesses Still on the Hook for April 20

Due dates for Rhode Island sales and use taxes haven’t changed, the state wants businesses and other sales-tax permit holders to remember.

The next deadline for filing and remitting the state’s sales and use taxes remains April 20 for amounts paid by customers in March and held in trust, the Taxation Division said Wednesday in a guidance notice (ADV 2020-16). The agency said that, while it recognizes the pandemic’s strain on taxpayers, “Rhode Island law prohibits taxpayers from using these trust fund taxes for their own purpose.” Penalty abatements for late payments are still available.

Georgia Pushes Back Deadlines

Georgia is extending more deadlines for tax returns and payments, following in the path of the federal government, the state announced Thursday.

Estimated income tax payments that would have been due June 15, 2020 will now be due July 15, the Georgia Department of Revenue said in the statement. The state had already extended the deadline for estimated income tax payments due April 15 to July 15.

The announcement also extended to July 15 the statute of limitations to file a refund claim for a past tax year that would have otherwise expired between April 15 and July 15, and gave the revenue department a 30-day extension on actions that would have been done between April 15 and July 15.

Pandemic Gives States a Chance to Adapt Philosophy

The pain the pandemic is inflicting on state revenue collection isn’t going away soon. Even as struggling states rush to fill financial holes with funding cuts and chunks of an initial $150 billion in federal aid, the crisis presents an opportunity for them to redefine their tax philosophies.

The Institute on Taxation and Economic Policy, in a policy brief Wednesday, outlined some tax code reforms to help states cope with shortfalls and safeguard for the future. Among the institute’s suggestions: personal and corporate income taxes for states heavily reliant on retail sales collections; increased taxation of digital transactions; decoupling from certain federal tax breaks for corporations.

Additionally, the brief says: “The devastating effect of Covid-19 on state and local budgets is exposing longstanding shortcomings in state and local tax structures, which are in many ways inadequate, inflexible, inequitable, outdated, and upside-down,” so the policy responses “should focus on addressing as many of the issues above as possible.”

The authors say states should “focus first on generating needed revenue through tax increases on households, businesses, and sectors of the economy that continue to have high incomes, profits, and activity even during these troubled times. For states facing catastrophic revenue declines, asking more of taxpayers with a clear ability to pay is far preferable to cutting state budgets, which would lead to mass layoffs, steep cuts in public services, and a downward spiral in the economy.”

Rural America’s Shrinking Tax Base


Tax base erosion from population losses could hurt the ability of rural counties across the U.S. to fight and recover from the pandemic, according to the Pew Charitable Trusts.

Urban areas have seen the worst Covid-19 impact so far, “but the problem is quickly spreading to less dense regions,” the foundation’s state fiscal health director, Jeff Chapman, said in an analysis released Thursday. Many hospitals and public health agencies in rural counties were already struggling before the pandemic took hold, he noted, and, partly as a result of shrinking populations, may lack the resources to respond.

New Census Bureau data show that two of every three U.S. rural counties have lost residents since 2010, even as overall population has grown in 46 states, the analysis found. “Population losses weaken a region’s fiscal and economic health, eroding its workforce and productivity as well as the tax revenue available to fund health care programs,” Chapman said. “With counties serving as critical providers of hospital and public health services, the decline in the rural tax base has probably weakened the nation’s ability to respond to the crisis in many large, less populated areas.”

He urged state and federal policymakers responding to the pandemic to “keep in mind the hurdles faced by local governments in rural areas.”

New York Agency Lays Out E-Signature Rules

New York state taxpayers and their representatives with power of attorney will be allowed to sign tax documents digitally through May 9, as long as they follow procedures laid out in guidance from the Department of Taxation and Finance.

The guidance notice (No. N-20-3) set the ground rules for an April 9 order by Gov. Andrew M. Cuomo (D) temporarily authorizing electronic signatures for tax documents. It specifies which documents are covered by the order, required verification steps, acceptable encrypted file types and means of transmission, and tips for safeguarding sensitive information in unencrypted emails. The agency, however, won’t accept a digitally signed power of attorney.

Chicago Extends Payment Deadlines

Chicago has pushed out payment deadlines for taxes owed under the amusement, bottled water, checkout bag, ground transportation, hotel accommodations, parking, and restaurant taxes.

The city said Wednesday that no interest would accrue on late payments through the new June 1 deadline for payments due in February, March, and April. It published an updated FAQ document describing the details of the extension.

—With assistance from John Herzfeld in New York City, Isabel Gottlieb in Washington, D.C., and Paul Stinson in Austin, Tex.

(Adds Oklahoma.)

To contact the reporters on this story: Sam McQuillan in Washington at smcquillan@bloomberglaw.com; Michael J. Bologna in Chicago at mbologna@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; David Jolly at djolly@bloombergtax.com

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