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Daily Tax Report: State

Tumbling Fuel Tax Revenue May Wreck Illinois Rebuilding Plan (2)

May 6, 2020, 6:09 PMUpdated: May 6, 2020, 11:23 PM

A precipitous decline in fuel tax receipts is endangering Illinois’s infrastructure rebuilding plans, a think tank warns. California is offering relief on property tax, and Mississippi has decided to align its tax deadlines with the Internal Revenue Service’s extended due dates. Here’s the latest on shifting state tax guidelines, deadlines, and policy to deal with the coronavirus pandemic. For Tuesday’s coverage click here. Here’s a state-by-state roadmap.

Illinois stands to lose up to $560 million in motor fuel tax revenue this year due to the pandemic, potentially setting back progress on major transportation projects.

The Illinois Economic Policy Institute issued a report Wednesday describing the pandemic’s potential impact on transportation funding. The study found Illinois passenger vehicle travel has declined 46% and truck travel dropped 23%. While the outlook for travel patterns remains uncertain, the study estimated tax losses of between $300 million and $560 million for 2020.

The revenue loss comes at a delicate time for Illinois, which launched the $45 billion Rebuild Illinois infrastructure program last year, funded in part by a doubling of the gas tax. On July 1, 2019 the rate doubled to 38 cents per gallon from 19 cents. The report raised questions about the state’s ability to fund its Rebuild Illinois objectives.

The Institute called for federal transportation support to “help ensure quality jobs are not lost, the state’s transportation systems will be properly maintained, and vital transportation projects will not face delays and cancellations.”

California Property Tax Relief

California residential and small business property owners have until May 2021 to pay property tax that was due April 10 without facing a 10% late penalty if they can show they were unable to pay due to the coronavirus crisis under an executive order from Gov. Gavin Newsom (D).

Newsom’s order for property tax penalty relief comes two weeks after the California State Association of Counties asked him to step in and set a statewide policy on relieving penalties for late payments. Some, but not all, tax collectors have said they will waive late penalties for property owners affected by the pandemic.

“Many people are just struggling to make ends meet and those property tax bills are so large for people,” Newsom said during his daily briefing. “We wanted to provide this clarity.”

His order applies to a 10% penalty and other fees apply to payments received after April 10—the deadline for the second property tax installment for the fiscal year July 1, 2019, to June 30, 2020.

The order suspends the penalty provisions for late and delinquent property tax payments until May 6, 2021; relief may also apply to the next property tax installment due Dec. 10, 2020.

Owners who live in a home or operate a small business on their property must file a claim demonstrating economic hardship from the pandemic.

Several county tax collectors told Bloomberg Tax in April they had collected between 93% and 97% of what was owed, but that they had seen an uptick in the number of people asking for relief from late penalties due to the pandemic.

Mississippi Conforms to IRS Deadlines

Mississippi is reversing course, pushing back its deadline for income tax returns and payments until July 15—something state officials had previously said was impossible for budgetary reasons.

“The fact that the state deadline and the federal deadline were on different days complicated it for Mississippians,” Gov. Tate Reeves (R) said Wednesday in a press briefing. “My personal view is that Mississippians across this state have enough complications that they’re dealing with right now. We will figure it out, working with the Legislature, on how to deal with the revenue for the current fiscal year and the next fiscal year.”

The Mississippi Department of Revenue announced the change Wednesday on Twitter, saying the extension applies to individual income tax returns and corporate income, franchise tax, and fiduciary income tax returns.

The usual deadline is April 15. When the state previously extended the due date for income tax returns until May 15, Mississippi could not match the federal government’s revised July 15 deadline because the state’s fiscal year ends June 30.

Pushing the state deadlines to July 15 would have an impact of about $550 million on the state budget, shifting those receipts into the next fiscal year, the department said on March 26. Reeves said Wednesday that the state’s rainy day fund contains an equivalent sum that could be made available, if necessary.

Reeves also said he was worried about a second wave of “economic calamity” in the fall, along with a second wave of coronavirus infections.

Texas Distributing Fewer Proceeds of Sales Tax


Texas’s top finance official said Wednesday that local governments would see 5% less in local sales tax allocations sent their way in May relative to what they got last year, the latest sign that the pandemic is hurting state revenue.

Comptroller Glenn Hegar said in a release that his office would be distributing a combined $824 million in allocations to cities, transit systems, counties and special purposed taxing districts.

Cities will see a total of $532 million in sales tax distributions in the month, down 5% from last year. Transit systems and counties will receive 8% and 2.8% less, respectively. Special purpose taxing districts, meaning local governments, will receive 3% more than they did a year ago, according to the state.

The new figures only partially reflect the economic disruption of earlier pandemic-control measures, because they weren’t in place across the state until late March, Hegar’s office said. It advised that June’s allocations “will show steeper declines” compared to a year ago.

New York Taxes Apply, Even to Angels

The thousands of out-of-state “angel” healthcare workers who have gone to help New York through the pandemic can expect to pay state taxes on their earnings.

Asked about the workers Tuesday at a press conference, Gov. Andrew Cuomo (D) said their tax status depended on whether New York received aid from the federal government.

“We’re not in a position to provide any more subsidies right now, because we have a $13 billion deficit,” Cuomo said at his daily virus briefing. “So there’s a lot of good things I would like to do, and if we get federal funding, we can do. But it would be irresponsible for me to sit here looking at a $13 billion deficit and say I’m going to spend more money, when I can’t even pay the essential services.”

New York Counties Call for Federal Help

Counties in New York are upping their call for a federally funded reopening, after revenue drops surpassed projections.

The New York State Association of Counties said Wednesday in a report that the pandemic would lead to a decline of as much as $3.6 billion in local revenue and state aid for the counties over the next year.

“The picture is much darker than we previously thought,” NYSAC Executive Director Stephen J. Acquario wrote. “Counties are going to be leading the reopening and these numbers make it abundantly clear that we will need significant help from the state and federal government to accomplish that mission.”

Declines in revenue that require economic activity like sales and hotel occupancy taxes due to non-essential business closures, and higher strain on local budgets responding to the public health emergency were key to the unprecedented losses, the association warned.

NYC Budget Woes Worsen

New York City’s Independent Budget Office said the city has just two months to close a projected $544 million budget gap for the current fiscal year, after the pandemic disrupted revenue expectations.

Ronnie Lowenstein, the office director, made the remarks at a Wednesday hearing of the New York City Council Committee on Finance on the city’s budget for 2021 and its financial plan through 2024. She said the city also faces an $830 million budget shortfall for the upcoming fiscal year, that will grow to nearly $6 billion in 2022, and will have lost 475,000 jobs from the final quarter of calendar year 2019 through calendar year 2020.

Lowenstein said the Covid-19 pandemic has outdated her office’s testimony from two months ago that tax revenue growth would be steady, though not especially strong. “Our just completed economic forecast and projections for tax revenue and spending under the contours of the Mayor’s Executive Budget tell a far grimmer story for the city,” she said.

She said that even as demands on the city budget grow amid the crisis, tax collections would likely total about $61.5 billion this fiscal year, up just 0.2% from 2019 and collections will likely fall next year by about $2 billion from 2020, a year-over-year decline of 3.2%.

The city comptroller, Scott Stringer, when asked Tuesday about the need for tax increases at a virtual press conference, said there was a need for “honest conversations with every sector.” He added: “Right now, the first thing we have to do to determine our future is to see what we get from the federal government. I cannot overemphasize that’s where the game has to be played right now.”

Federal Relief Not Subject to Oregon’s CAT

Certain federal aid to businesses under the latest virus relief law, known as the CARES Act (Public Law 116-136), is not commercial activity under Oregon statute and will not be subject to the state’s new Corporate Activity Tax, the Oregon Department of Revenue said Wednesday.

Exempted assistance programs include forgiven Paycheck Protection Program (PPP) loans, Economic Injury Disaster Loan (EIDL) emergency advances, and Small Business Administration (SBA) loan subsidies, the department noted in a release.

The CAT is levied at a rate of 0.57% of taxable Oregon commercial activity. The first quarterly payment under the tax passed in 2019 was due April 30.

—With assistance from Paul Stinson in Austin, Texas; Laura Mahoney in Sacramento; Aysha Bagchi and Sam McQuillan in Washington, D.C.; and Paul Shukovsky in Seattle.

(Adds California property tax from paragraph 6 and Texas tax distribution items from paragraph 19.)

To contact the reporters on this story: Michael J. Bologna in Chicago at mbologna@bloomberglaw.com; Keshia Clukey in Albany, N.Y. at kclukey@bloomberglaw.com; Jennifer Kay in Miami at jkay@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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