States continue to provide relief in response to the spread of the COVID-19 virus. This week, numerous states responded to the federal income tax filing extension, and we expect additional states to respond in the coming days. Some states are also offering relief for non-income business taxes, and much of the relief is limited to small- to mid-size businesses. Furthermore, COVID-19 is causing complications in property tax assessments, payments, and appeals.
In addition, numerous state courts are delaying proceedings or moving to conduct hearings remotely, which is impacting tax litigation.
Tax Filing/Payment Deadline Postponements
As discussed in our previous blog posts, some states announced income tax filing or payment relief even before the federal government acted. After the federal government acted, more states have announced income tax filing and payment relief.
On March 17, 2020, Steven Mnuchin, the U.S. Secretary of the Treasury, announced that individual and corporate income tax return payment deadlines will be extended from April 15, 2020 to July 15, 2020. On March 20, 2020, Steven Mnuchin announced that individual and corporate income tax return filing deadlines will also be extended to July 15, 2020. Therefore, individuals and corporations will have an additional three months to file and pay their federal income taxes.
Numerous state and local jurisdictions have responded to the federal deadline extensions, often conforming to the July 15 deadlines (see key distinctions with federal income tax filing and payment deadlines in parentheses):
- Arkansas (Arkansas extended personal income tax filing and payment deadlines to July 15, but has not announced a corporate income tax filing or payment extension at this time)
- Colorado (Colorado has announced that April 15 payment deadlines are extended to July 15, but has not announced a filing deadline extension at this time)
- Connecticut (Connecticut has extended personal income tax filing and payment deadlines to July 15. Connecticut has not conformed to the federal corporate income tax filing or payment extension at this time, but has provided at least a 30 day extension for business, corporate, and pass-through entities)
- District of Columbia
- Hawaii (Hawaii extended its standard April 20 income tax filing and payment deadlines to July 20)
- Indiana (Indiana extended its April 15 deadlines to July 15 and its May 15 deadlines to August 17)
- Iowa (Iowa extended its April 15 deadlines to July 31, rather than July 15)
- Kentucky (Kentucky extended its personal income tax filing and payment deadlines to July 15 and waived penalties, but late payment interest will still accrue from April 15. Kentucky has not announced a corporate income tax filing or payment extension at this time.)
- Louisiana (April 15 and May 15 deadlines extended to July 15)
- Minnesota (Minnesota extended personal income tax filing and payment deadlines to July 15, but has not announced a corporate income tax filing or payment extension at this time)
- Montana (Montana extended filing and payment deadlines for individual income tax payers to July 15, but has not announced a corporate income tax filing or payment extension at this time)
- New Mexico
- New York (state budget director announced conformity to federal deadline extensions during a Friday, March 20 press conference; formal guidance pending)
- North Carolina
- North Dakota
- Pennsylvania (Pennsylvania extended personal income tax filing and payment deadlines to July 15, but has not announced a corporate income tax filing or payment extension at this time) and Philadelphia (for the Business Income and Receipts Tax and the Net Profits Tax)
- Rhode Island
- South Carolina
We expect additional states to respond to the federal income tax deadline extensions in the coming days.
Extending payment deadlines from April to July will trigger significant budget issues/pressure for many states with fiscal year ends by delaying tax revenue from the current fiscal year to the next. Perhaps in light of these pressures, at least one state has announced that it is not conforming to the federal income tax deadline extensions at this time. The West Virginia State Tax Department issued an announcement that at this time, West Virginia personal income taxes and corporate income taxes are still due April 15, 2020.
In addition to the income tax filing and payment extensions, states continue to announce relief for certain non-income tax deadlines, such as sales, excise, and/or withholding tax deadlines. However, the relief is often limited to small- to mid-size businesses, such as monthly filers or businesses that do not exceed a particular revenue threshold (e.g., Alabama, Illinois, Louisiana, Massachusetts, Michigan).
Property Tax Administrative Issues
COVID-19 is also causing complications in property tax assessments, payments, and appeals. Specifically, some governments are uncertain about how to address incomplete appraisal cycles and anticipated appeals, while others seek to provide economic relief through property tax payment extensions.
For example, in Texas, most appraisal districts have finished or are near finishing their property tax assessments, but formal appeals to the appraisal review boards (“ARBs”) will likely be limited due to COVID-19 exposure concerns. Public hearings for appeals will require ARB members to participate in in-person meetings, risking exposure. As of March 23, 2020, county appraisal district offices were closed to the public in response to COVID-19. Remote hearings would be one way to mitigate COVID-19 risks, but it is uncertain if or when alternative hearing procedures will be implemented. Chief appraisers have also approached the Governor about using his emergency powers to freeze property valuations at 2019 levels, which could limit the need for appeals, but there has been no indication that the governor will do so. Furthermore, even if the governor decided to freeze property valuations, local jurisdictions could always compensate for the potential revenue loss by increasing future property tax rates.
Some jurisdictions are extending property tax appeal or payment deadlines. For example, the District of Columbia has extended the deadline to appeal property tax assessments for all property owners to April 30, 2020. The District of Columbia also extended the first property tax payment period for hotels and motels through June 30 (pursuant to the COVID-19 Response Emergency Amendment Act of 2020, which provides relief to hotels and motels).
Numerous state judiciaries are continuing to announce delays and remote hearing options in response to the spread of COVID-19. Some of the recent developments include:
On March 19, 2020, Governor Ned Lamont suspended all non-critical court operations and associated statutory requirements until further notice. Specifically, the Order suspends: (i) all statutory location or venue requirements, (ii) time requirements, statutes of limitation, or other limitations or deadlines relating to service of process, court proceedings or court filings, and (iii) all time requirements and deadlines related to the Supreme, Appellate, and Superior courts or their judicial offices to issue notices, hold court, hear matters, and/or render decisions.
The Florida Supreme Court has canceled oral arguments in April and advised anyone who needs to file legal documents to use emergency procedures.
Effective March 18, 2020, Massachusetts courts are closed to the public except for emergency matters at until at least April 6. Most other matters will be heard remotely by videoconference or telephone.
As of March 18, 2020, New Jersey has suspended all in-person Superior Court and Tax Court proceedings except for limited emergency matters and certain ongoing trials. New Jersey will handle as many matters as possible remotely, either by telephone or video conference. New Jersey has not suspended or tolled statutory requirements and deadlines. However, court offices also are closed for in-person submissions. All filings may be submitted electronically or by mail or dropped off at a designated drop-box.
On March 20, 2020, Governor Andrew Cuomo issued Executive Order 202.8, which temporarily suspends all court operations through April 19, 2020. In accordance with the directive of the Chief Judge of the State to limit court operations to essential matters during the pendency of COVID-19, any specific time limit prescribed by the procedural laws of the state are tolled from March 20, 2020 until April 19, 2020.
The Supreme Court of Pennsylvania issued a “Statewide Judicial Emergency” Order, instructing all court to close, except for essential services. As of March 20, 2020, all Pennsylvania courts, including the individual Court of Common Pleas and the Superior and Commonwealth Courts, are generally closed to the public until April, 3, 2020. Any legal papers or pleadings which are required to be filed between March 19, 2020 and April 3, 2020 shall be deemed to have been timely filed if they are filed by April 6, 2020, or on a later date as permitted by the appellate or local court in question.
On March 18, 2020, the Texas Supreme Court issued an order prohibiting all judges from conducting non-essential proceedings in person. The order permits all judges in the state at their discretion to modify or suspend deadlines and procedures, and allows anyone involved in any proceeding to participate remotely. Additionally, the order permits judges to extend the statute of limitations in any civil case for a period ending no later than 30 days after the Governor’s State of Disaster has been lifted.
Numerous other state judiciaries have made comparable announcements in recent days.
It is important to highlight that some of the notices and orders issued by state supreme courts are optional and may be implemented in the lower courts on an ad hoc basis. There may be differences court to court, even within the same state. If you or your business have a pending action in state court, we suggest contacting the court directly to determine how it is handling deadlines, court hearings and proceedings. Additionally, we expect to see delays due to the many state employees working from home with limited system access.