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Some States Auto-Match IRS Tax Delay; Others in Flux (2)

March 20, 2020, 4:12 PMUpdated: March 20, 2020, 10:30 PM

Some states are following the IRS to extend tax filing deadlines but others still need legislative action. Colorado, for one, aims to be more expansive than the IRS in meeting taxpayer needs. Here’s the latest on shifting state tax guidelines, deadlines, and policy to deal with the new coronavirus pandemic. For Thursday’s coverage click here.

A number of states on Friday followed the IRS’s lead on tax deadlines. Treasury Secretary Steven Mnuchin said Friday that the Internal Revenue Service was extending the deadline for filing federal income taxes to July 15, matching the tax-payment extension it already had announced as part of the effort to cope with disruptions caused by the coronavirus pandemic.

The filing deadlines of states like Utah are tied by statute to the IRS’s. John Valentine, chair of the Utah State Tax Commission, told Bloomberg Tax that means Utah automatically followed the IRS on Friday.

Many states—including Vermont and Alabama—have linked their filing dates with the IRS and are expected to follow shortly with their own announcements. New Jersey has passed the necessary legislation, which only needs the governor’s signature.

But other states will require administrative or even legislative action to change the date, something that could prove a tall order given that state houses are currently shuttered because of the Covid-19 contagion.

California Property Tax Limbo


Some county tax collectors in California say they will waive penalties and fees for late property tax payments due April 10, but only state officials can change the due date.

The state’s Franchise Tax Board has already used its authority to extend deadlines for income tax payments and filings to July 15. The board doesn’t oversee property tax and can’t adjust the April 10 deadline.

State Controller Betty T. Yee (D), who chairs the tax board, said she is getting inquiries about changing the due date but her hands are tied. Her office is instructing taxpayers to contact their county treasurer-tax collectors for relief.

State law requires owners to pay annual property tax in two installments due Dec. 10 and April 10. A 10% penalty and other fees apply to payments received after that. (For example: Here is a sample of the fees and penalties that apply to late payments for Riverside County.)

Gov. Gavin Newsom’s (D) office didn’t respond immediately to a request for comment. The governor hasn’t said publicly whether he is considering a change to the April payment deadline.

So counties are taking matters into their own hands, saying they will grant relief to taxpayers who ask for it and can demonstrate they were affected by the pandemic. County tax collector offices are closed and aren’t taking payments in person.

“We have no authority to extend the April 10 deadline, as outlined by state law,” Los Angeles County Treasurer and Tax Collector Keith Knox said in a message posted to the office’s website. “However, beginning on April 11, the day after property taxes are due, people unable to pay on time for reasons related to Covid-19 may submit a request for penalty cancellation online. The department has set up a special team to process these requests for those who demonstrate they were affected by the outbreak.”

The San Mateo and San Francisco County tax collectors issued similar notices saying they would waive interest and penalties for people who make a request.

Alameda County posted a notice emphasizing the April 10 deadline that doesn’t mention coronavirus. San Diego County provides information on its website about how to pay due to its office closure but doesn’t mention relief from penalties and interest.

County officials should offer clear guidance before April 10 about offering broad relief from penalties, Assemblyman Phil Ting (D), former San Francisco Assessor, told Bloomberg Tax. As it stands now, property owners have to take the chance that tax collectors will reject their request and impose penalties later.

“I’m encouraging collectors to do a broader, blanket relief,” he said.

Tax collectors are hesitant to pursue a delay in the April 10 deadline because it would allow banks that hold tax payments through impound accounts on property mortgages to keep that money longer, Ting said.

Alabama Hospitality Sector Relief

Alabama suspended late payment penalties for hotels and similar businesses that are unable to pay their lodging or transient occupancy taxes on time for the months of February, March, and April, the state’s revenue department announced Friday.

The businesses are still required to file monthly returns, but can delay payment without penalty until June 1.

The state is already offering similar tax relief for small companies with less than $62,500 of monthly revenue and food-service operations. These businesses can pay sales tax liabilities for February, March, and April until June 1 without a late payment penalty.

Colorado Goes Further

Colorado Gov. Jared Polis (D) on Friday issued a tax extension to July 15 that he said was more expansive than the IRS’s.

He said his order goes further because it places “no conditions and no caps on the amount of tax that can be deferred over the 90-day period.” It covers “all filers, without penalty and without interest.” Additionally, he said, estimated tax payments due on or after April 15 also can be filed later, he said.

“This is a critical step to help businesses and families keep money in their pockets” during the pandemic, Polis said at a briefing Friday. “We have 2.5 million taxpayers in the state of Colorado, and we hope this gives them one less thing to worry about.”

New York, Arizona Following IRS

New York will follow the IRS in waiving penalties and interest for late tax returns and payments filed by July 15, Robert F. Mujica, the state budget director, said Friday at a news conference with Gov. Andrew M. Cuomo (D).

The state will also waive penalties and interest on sales tax collections due Friday from businesses, Mujica said. The sales tax deadline will stand, but penalties and interest won’t be charged.

The sales tax action was welcomed by state Sen. James Skoufis (D), who led a group of 31 lawmakers pressing for it, as well as Greg Biryla, state director of the National Federation of Independent Business. “Small businesses need flexibility in the immediate term and will need structural support and reform throughout this crisis to survive and eventually thrive,” Biryla said in a statement.

Revenue delays stemming from the payments deadline extension further complicate the state budget outlook, as the clock continues to tick toward the April 1 due date for legislative action on the $178 billion plan that Cuomo proposed in January.

The change in the filing deadline could delay the state’s cash flow by $7 billion to $8 billion, “which means we get no money between April and June-July,” Cuomo said. “The only way I sleep at night on that one is, look, it’s not just this state, it’s every state.”

The Citizens Budget Commission, a private watchdog group, has recommended that the legislature pass only a bare-bones budget to put off numerous contentious issues. State Comptroller Thomas DiNapoli (D) said Tuesday that the Covid-19 outbreak could blow a $7 billion revenue hole in the state budget.

But Mujica, speaking Thursday, warned that the revenue loss could well exceed $7 billion.

Arizona will also move its income tax filing deadline to July 15, Gov. Doug Ducey (R) announced Friday. Taxpayers who file by then will not face penalties or interest, a news release said.

New York Senate GOP Calls for Tax Measures

The Republican minority conference of the New York State Senate Friday called for tax relief measures to help businesses and workers.

The recommended steps, part of a broad action plan, included: accelerating a phase-in of tax rate cuts set in 2016; providing a tax credit for 25% of employer costs for paid time off for people who can’t work; extending monthly sales tax payments by 90 days; eliminating penalties for late business and property taxes; and expanding tax credits available to small businesses.

A group of 31 Democratic state senators and state Comptroller Thomas DiNapoli (D) have also called on Cuomo to suspend the latest sales tax collection due date. They got part of what they sought when Cuomo and budget director Mujica announced Friday that the state would waive interest and penalties on late sales tax collection payments.

New Mexico Moves In-Line


New Mexico will extend income tax deadlines consistent with the IRS move, the Taxation and Revenue Department said Friday.

Taxpayers will have until July 15 for personal income taxes and corporate income taxes, the department said in a news release. Taxpayers won’t face penalties, but unpaid balances will accrue interest, it said.

“These actions represent one piece of our overall efforts to support our businesses and families during this emergency,” Gov. Michelle Lujan Grisham (D) said in a statement.

Employer-paid withholding taxes from employee wages that are due each month from March through June will now be due July 25, the news release said. Interest will accrue but Lujan Grisham “expressed support for waiving or refunding any interest owed by taxpayers taking advantage of the extensions announced today,” the release said.

The department is adding extra staff to speed up income tax refunds.

Kentucky Senate Budget

Kentucky Gov. Andy Beshear (D) said Friday that the state would adopt the IRS’s revised deadlines, moving income tax returns and payments deadline from April 15 to July 15.

He spoke a day after the Kentucky Senate built triggers into its budget bill to protect against declines in tax revenue caused by the economic disruption created by the Covid-19 crisis.

The Senate late Thursday passed a bill (H.B. 352) on a 24-7 vote, setting up conference committee battles over teacher compensation, rainy day fund amounts, and pension overhauls.

The budget would pump $525 million into the state’s rainy day fund, compared with the House’s $392 million appropriation. The bill would also withhold $10 per pupil in state education spending unless the state hits revenue targets.

Likewise, the Senate bill would give teachers a 1% raise in the first year of the 2021-2022 budget period, like the House version, but unlike the House’s guarantee of another 1% raise in the second year the Senate would only provide the salary bump if the state is hitting revenue forecasts.

The caution is necessary, “because, frankly we do not know, nor do the experts, exactly where we will end up,” Sen. Christian McDaniel (R), the Senate’s top budget architect, said during floor debate.

The largest fight may be over a conditional $500 million the Senate bill would send to the Kentucky Teachers Retirement fund on the chance that the legislature enacts changes to end defined-contribution benefits for new hires. If that doesn’t happen, the cash would go to the country’s worst-funded fund, the state’s system for non-emergency workers.

That last change would be a hard fiscal pill for the state to swallow in the near term if new hires don’t contribute to the plan, but would eliminate the state’s unfunded liability in the teachers pension plan years down the road, freeing up revenue for other programs. This change is opposed by Democrats, including Gov. Andy Beshear (D).

The budget bills will head to conference committee where the differences will get hashed out.

Iowa Suspends Property Tax Collection

Gov. Kim Reynolds (R) on Friday issued a supplemental state public health emergency declaration, which will provide several forms of regulatory relief across the state.

The declaration temporarily suspends collections of property taxes, as well as penalties and interest. Reynolds also suspended some evictions under the Iowa Uniform Residential Landlord and Tenant Act.

—With assistance from Laura Mahoney in Sacramento, John Herzfeld in New York City, Keshia Clukey in Albany, N.Y., Alex Ebert in Columbus, Ohio, Brenna Goth in Phoenix, Adrianne Appel in Boston, and Chris Marr in Atlanta.

(Adds California property tax, Alabama lodging tax. )

To contact the reporters on this story: Tripp Baltz in Denver at abaltz@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