COVID‐19 Update
Right now, your highest priority is the health of those you love and yourself. But if you have time to read about some non‐medical but important matters related to the health crisis, here is a summary of IRS action already taken and federal tax legislation already enacted to ease tax compliance burdens and economic pain caused by COVID‐19 (commonly referred to as Coronavirus).
Filing and payment deadlines deferred. After briefly offering more limited relief, the IRS almost immediately pivoted to a policy that provides the following to all taxpayers‐meaning all individuals, trusts, estates, partnerships, associations, companies or corporations regardless of whether or how much they are affected by COVID‐19:
For a taxpayer with a Federal income tax return or a Federal income tax payment due on April 15, 2020, the due date for filing and paying is automatically postponed to July 15, 2020, regardless of the size of the payment owed.
The taxpayer doesn't have to file Form 4868 (automatic extensions for individuals) or Form 7004 (certain other automatic extensions) to get the extension.
The relief is for (A) Federal income tax payments (including tax payments on self‐employment income) and Federal income tax returns due on April 15, 2020 for the person's 2019 tax year, and (B) Federal estimated income tax payments (including tax payments on self‐employment income) due on April 15, 2020 for the person's 2020 tax year. 4. No extension is provided for the payment or deposit of any other type of Federal tax (e.g. estate or gift taxes) or the filing of any Federal information return. 5. As a result of the return filing and tax payment postponement from April 15, 2020, to July 15, 2020, that period is disregarded in the calculation of any interest, penalty, or addition to tax for failure to file the postponed income tax returns or pay the postponed income taxes. Interest, penalties and additions to tax will begin to accrue again on July 16, 2020.
Favorable treatment for COVID‐19 payments from Health Savings Accounts. Health savings accounts (HSAs) have both advantages and disadvantages relative to Flexible Spending Accounts when paying for health expenses with untaxed dollars. One disadvantage is that a qualifying HSA may not reimburse an account beneficiary for medical expenses until those expenses exceed the required deductible levels. But IRS has announced that payments from an HSA that are made to test for or treat COVID‐19 don't affect the status of the account as an HSA (and don't cause a tax for the account holder) even if the HSA deductible hasn't been met. Vaccinations continue to be treated as preventative measures that can be paid for without regard to the deductible amount.
Tax credits and a tax exemption to lessen burden of COVID‐19 business mandates. On March 18, President Trump signed into law the Families First Coronavirus Response Act (the Act, PL 116‐127), which eased the compliance burden on businesses. The Act includes the four tax credits and one tax exemption discussed below.
...Payroll tax credit for required paid sick leave (the payroll sick leave credit). The Emergency Paid Sick Leave Act (EPSLA) division of the Act generally requires private employers with fewer than 500 employees to provide 80 hours of paid sick time to employees who are unable to work for virus‐related reasons (with an administrative exemption for less‐than‐50‐employee businesses that the leave mandate puts in jeopardy). The pay is up to $511 per day with a $5,110 overall limit for an employee directly affected by the virus and up to $200 per day with a $2,000 overall limit for an employee that is a caregiver.
The tax credit corresponding with the EPSLA mandate is a credit against the employer's 6.2% portion of the Social Security (OASDI) payroll tax (or against the Railroad Retirement tax). The credit amount generally tracks the $511/$5,110 and $200/$2,000 per‐employee limits described above. The credit can be increased by (1) the amount of certain expenses in connection with a qualified health plan if the expenses are excludible from employee income and (2) the employer's share of the payroll Medicare hospital tax imposed on any payments required under the EPSLA. Credit amounts earned in excess of the employer's 6.2% Social Security (OASDI) tax (or in excess of the Railroad Retirement tax) are refundable. The credit is electable and includes provisions that prevent double tax benefits (for example, using the same wages to get the benefit of the credit and of the current law employer credit for paid family and medical leave). The credit applies to wages paid in a period (1) beginning on a date determined by IRS that is no later than April 2, 2020 and (2) ending on December 31, 2020.
...Income tax sick leave credit for the self‐employed (self‐employed sick leave credit). The Act provides a refundable income tax credit (including against the taxes on self‐employment income and net investment income) for sick leave to a self‐employed person by treating the self‐employed person both as an employer and an employee for credit purposes. Thus, with some limits, the self‐employed person is eligible for a sick leave credit to the extent that an employer would earn the payroll sick leave credit if the self‐employed person were an employee.
Accordingly, the self‐employed person can receive an income tax credit with a maximum value of $5,110 or $2,000 per the payroll sick leave credit. However, those amounts are decreased to the extent that the self‐employed person has insufficient self‐employment income determined under a formula or to the extent that the self‐employed person has received paid sick leave from an employer under the Act. The credit applies to a period (1) beginning on a date determined by the IRS that is no later than April 2, 2020 and (2) ending on December 31, 2020.
...Payroll tax credit for required paid family leave (the payroll family leave credit). The Emergency Family and Medical Leave Expansion Act (EFMLEA) division of the Act requires employers with fewer than 500 employees to provide both paid and unpaid leave (with an administrative exemption for less‐than‐50‐employee businesses that the leave mandate puts in jeopardy). The leave generally is available when an employee must take off to care for the employee's child under age 18 because of a COVID‐19 emergency declared by a federal, state, or local authority that either (1) closes a school or childcare place or (2) makes a childcare provider unavailable. Generally, the first 10 days of leave can be unpaid and then paid leave is required, pegged to the employee's pay rate and pay hours. However, the paid leave can't exceed $200 per day and $10,000 in the aggregate per employee.
The tax credit corresponding with the EFMLEA mandate is a credit against the employer's 6.2% portion of the Social Security (OASDI) payroll tax (or against the Railroad Retirement tax). The credit generally tracks the $200/$10,000 per employee limits described above. The other important rules for the credit, including its effective period, are the same as those described above for the payroll sick leave credit.
...Income tax family leave credit for the self‐employed (self‐employed family leave credit). The Act provides to the self‐employed a refundable income tax credit (including against the taxes on self‐employment income and net investment income) for family leave similar to the self‐employed sick leave credit discussed above. Thus, a self‐employed person is treated as both an employer and an employee for purposes of the credit and is eligible for the credit to the extent that an employer would earn the payroll family leave credit if the self‐employed person were an employee.
Accordingly, the self‐employed person can receive an income tax credit with a maximum value of $10,000 as per the payroll family leave credit. However, under rules similar to those for the self‐employed sick leave credit, that amount is decreased to the extent that the self‐employed person has insufficient self‐employment income determined under a formula or to the extent that the self‐employed person has received paid family leave from an employer under the Act. The credit applies to a period (1) beginning on a date determined by IRS that is no later than April 2, 2020 and (2) ending on December 31, 2020.
...Exemption for employer's portion of any Social Security (OASDI) payroll tax or railroad retirement tax arising from required payments. Wages paid as required sick leave payments because of EPSLA or as required family leave payments under EFMLEA aren't considered wages for purposes of the employer's 6.2% portion of the Social Security (OASDI) payroll tax or for purposes of the Railroad Retirement tax.
Individual recovery rebate/credit
New law. Credit allowed for 2020. Under the CARES Act, an eligible individual is allowed an income tax credit for 2020 equal to the sum of: (1) $1,200 ($2,400 for eligible individuals filing a joint return)plus (2) $500 for each qualifying child of the taxpayer (as defined under Code Sec. 24(c) for purposes of the child tax credit). (Code Sec. 6428(a), as added by Act Sec. 2201(a)) The credit is refundable. (Code Sec. 6428(b), as added by Act Sec. 2201(a))
Observation. For purposes of the child tax credit, the term "qualifying child" means a qualifying child of the taxpayer, as defined for purposes of the dependency exemption by Code Sec. 152(c), who hasn't attained age 17.
Observation. Individuals who have no income, as well as those whose income comes entirely from non‐taxable means‐tested benefit programs such as SSI benefits, are eligible for the credit and the advance rebate. (CARES Section‐by‐Section Summary, p. 10).
Eligibility for credit. For purposes of the credit, an "eligible individual" is any individual other than a nonresident alien or an individual for whom a Code Sec. 151 dependency deduction is allowable to another taxpayer for the tax year. Estates and trusts aren't eligible for the credit. (Code Sec. 6428(d), as added by Act Sec. 2201(a))
Observation. Children who are (or can be) claimed as dependents by their parents aren't eligible individuals, even if they have enough income to have to file a return. It makes no difference if the parent chooses not to claim the child as a dependent, because the dependency deduction is still "allowable" to the parent.
Observation. An individual who wasn't an eligible individual for 2019 may become one for 2020, e.g., where the individual was a dependent for 2019 but not for 2020. IRS won't send an advance rebate to such an individual, because advance rebates are generally based on information on the 2019 return (see below). However, the individual will be able to claim the credit when filing the 2020 return.
Phaseout of credit. The amount of the credit is reduced (but not below zero) by 5% of the taxpayer's adjusted gross income (AGI) in excess of: (1) $150,000 for a joint return, (2) $112,500 for a head of household, and (3) $75,000 for all other taxpayers. (Code Sec. 6428(c), as added by Act Sec. 2201(a))
Observation. Under these rules, the credit is completely phased‐out for a single filer with AGI exceeding $99,000 and for joint filers with no children with AGI exceeding $198,000. For a head of household with one child, the credit is completely phased out when AGI exceeds $146,500. (CARES Section‐by‐Section Summary, p. 10)
Advance rebate of credit during 2020. Each individual who was an eligible individual for 2019 is treated as having made an income tax payment for 2019 equal to the advance refund amount for 2019. The "advance refund amount" is the amount that would have been allowed as a credit for 2019 had the credit provision been in effect for 2019.
IRS will refund or credit any resulting overpayment as rapidly as possible. No interest will be paid on the overpayment. If an individual hasn't yet filed a 2019 income tax return, IRS will determine the amount of the rebate using information from the taxpayer's 2018 return. If no 2018 return has been filed, IRS will use information from the individual's 2019 Form SSA‐1099, Social Security Benefit Statement, or Form RRB‐1099, Social Security Equivalent Benefit Statement.
Observation. In other words, even though the credit is technically for 2020, the law treats it as an overpayment for 2019 that IRS will rebate as soon as possible during 2020.
Observation. Most eligible individuals won't have to take any action to receive an advance rebate from IRS. This includes many low‐income individuals who file a tax return to claim the refundable earned income credit and child tax credit. (CARES Section‐by‐Section Summary, p. 10)
IRS may make the rebate electronically to any account to which the payee authorized, on or after Jan. 1, 2018, the delivery of a refund of federal taxes or of a federal payment.
No later than 15 days after distributing a rebate payment, IRS must mail a notice to the taxpayer's last known address indicating how the payment was made, the amount of the payment, and a phone number for reporting any failure to receive the payment to IRS.
No advance rebate will be made or allowed after Dec. 31, 2020. (Code Sec. 6428(f), as added by Act Sec. 2201(a))
Advance rebate reduces credit allowed for 2020. The amount of credit that is allowable for 2020 must be reduced (but not below zero) by the aggregate advance rebates made or allowed to the taxpayer during 2020.
Observation. If the taxpayer received an advance rebate during 2020 that was less than the credit to which the taxpayer is entitled for 2020, the taxpayer will be able to claim the balance of the credit when filing the 2020 return. If, on the other hand, the advance rebate received was greater than the credit to which the taxpayer is entitled, the taxpayer won't have to pay back the excess. That is because the 2020 credit can't be reduced below zero.
If an advance rebate was made or allowed for a joint return, half of the rebate is treated as having been made or allowed to each spouse who filed the joint return.
Observation. Thus, if taxpayers filed a joint return for 2019 and received an advance rebate, but were divorced or filed separate returns for 2020, each individual will take into account half of the advance rebate when reducing the credit allowed for 2020.
Identification number requirement. No credit will be allowed to an eligible individual who doesn't include the individual's valid identification number on the tax return for the tax year.
On a joint return, the valid identification number of the individual's spouse must be included. But this requirement doesn't apply if at least one spouse was a member of the U.S. Armed Forces at any time during the tax year and at least one spouse's valid identification number is included on the joint return.
If a qualifying child is taken into account in figuring the credit, the child's valid identification number must also be included on the return.
A "valid identification number" means a social security number, as defined in Code Sec. 24(h)(7). For a qualifying child who is adopted or placed for adoption, the child's adoption taxpayer identification number is a valid identification number.
Observation. Under Code Sec. 24(h)(7), a "social security number" must be issued by the Social Security Administration to a U.S. citizen or to an alien who is eligible to be employed in the U.S. Also, the number must have been issued by the due date of the return.
An omission of a correct valid identification number is treated as a mathematical or clerical error that can be summarily assessed without using the deficiency procedures. (Code Sec. 6428(g), as added by Act Sec. 2201(a))
Regulations. IRS is to prescribe regs and other guidance as necessary to carry out the purposes of the credit provision, including appropriate measures to avoid allowing a taxpayer to receive multiple credits or rebates. (Code Sec. 6428(h), as added by Act Sec. 2201(a))
No 10% additional tax for coronavirus‐related retirement plan distributions
Background. A distribution from a qualified retirement plan is subject to a 10% additional tax unless the distribution meets an exception under Code Sec. 72(t).
New law. The CARES Act provides that the Code Sec. 72(t) 10% additional tax does not apply to any coronavirus‐related distribution, up to $100,000. (Act Sec. 2202(a)(1))
A coronavirus‐related distribution is any distribution (subject to dollar limits discussed below), made on or after January 1, 2020, and before December 31, 2020, from an eligible retirement plan (defined in Code Sec. 402(c)(8)(B)), made to a qualified individual. (Act Sec. 2202(a)(4)(A))
A qualified individual is an individual (1) who is diagnosed with the virus SARS‐CoV‐2 or with coronavirus disease 2019 (COVID‐19) by a test approved by the Centers for Disease Control and Prevention (CDC), (2) whose spouse or dependent (as defined in Code Sec. 152) is diagnosed with such virus or disease by such a test, or (3) who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury. (Act Sec. 2202(a)(4)(A)(ii))
The administrator of an eligible retirement plan may rely on an employee's certification that the employee satisfies the conditions of (3) above in determining whether any distribution is a coronavirus‐related distribution. (Act Sec. 2202(a)(4)(B))
Limit on distribution. The aggregate amount of distributions received by an individual which may be treated as coronavirus‐related distributions for any tax year cannot not exceed $100,000. (Act Sec. 2202(a)(2)(A))
If a distribution to an individual would (without regard to the $100,000 limit in Act Sec. 2202(a)(2)(A)) be a coronavirus‐related distribution, a plan is not treated as violating the Code merely because the plan treats such distribution as a coronavirus‐related distribution, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer) to such individual exceeds $100,000. (Act Sec. 2202(a)(2)(B))
For this purpose, the term ''controlled group'' means any group treated as a single employer under Code Sec. 414(b), Code Sec. 414(c), Code Sec. 414(m), or Code Sec. 414(o). (Act Sec. 2202(a)(2)(C)) Distribution can be contributed back to retirement plan. Any individual who receives a coronavirus‐related distribution may, at any time during the 3‐year period beginning on the day after the date on which such distribution was received, make one or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under Code Sec. 402(c), Code Sec. 403(a)(4), Code Sec. 403(b)(8), Code Sec. 408(d)(3), or Code Sec. 457(e)(16), as the case may be. (Act Sec. 2202(a)(3)(A))
If a contribution is made pursuant to Act Sec. 2202(a)(3)(A) with respect to a coronavirus‐related distribution from an eligible retirement plan other than an individual retirement plan, then the taxpayer is, to the extent of the amount of the contribution, treated as having received the coronavirus‐related distribution in an eligible rollover distribution (as defined in Code Sec. 402(c)(4)) and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution. (Act Sec. 2202(a)(3)(B))
If a contribution is made pursuant to Act Sec. 2202(a)(3)(A) with respect to a coronavirus‐related distribution from an individual retirement plan, then, to the extent of the amount of the contribution, the coronavirus‐related distribution is treated as a distribution described in Code Sec. 408(d)(3) and as having been transferred to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution. (Act Sec. 2202(a)(3)(C))
Distribution can be included in income over three years. In the case of any coronavirus‐related distribution, unless the taxpayer elects not to, any amount required to be included in gross income for such tax year will be so included ratably over the 3‐taxyear period beginning with such tax year. (Act Sec. 2202(a)(5)(A))
For this purpose, rules similar to the rules of Code Sec. 408A(d)(3)(E) apply. (Act Sec. 2202(a)(5)(B)) For purposes of Code Sec. 401(a)(31), Code Sec. 402(f), and Code Sec. 3405, coronavirus‐related distributions are not treated as eligible rollover distributions. (Act Sec. 2202(a)(6)(A))
Also, a coronavirus‐related distribution is treated as meeting the requirements of Code Sec. 401(k)(2)(B)(i), Code Sec. 403(b)(7)(A)(i), Code Sec. 403(b)(11), Code Sec. 457(d)(1)(A), and 5 USC 8433(h)(1). (Act Sec. 2202(a)(6)(B))
Loans from qualified plans. The CARES Act provides flexibility for loans from certain retirement plans for coronavirus‐related relief. (Act Sec. 2202(b))
Effective date. Act Sec. 2202 applies to distributions made on or after January 1, 2020, and before December 31, 2020. (Act Sec. 2202(a)(4)(A))
RMD requirement waived for 2020
Background. In general, Code Sec. 401(a)(9) requires a retirement plan or IRA owner to take required minimum distributions (RMDs) annually once the owner reaches age 72.
New law. The CARES Act provides that the RMD requirements do not apply for calendar year 2020 to: (I) a defined contribution plan described in Code Sec. 403(a) or Code Sec. 403(b); (II) a defined contribution plan which is an eligible deferred compensation plan described in Code Sec. 457(b) but only if such plan is maintained by an employer described in Code Sec. 457(e)(1)(A); or (III) an individual retirement plan. (Code Sec. 401(a)(9)(I)(i), as amended by Act Sec. 2203(a))
The RMD requirements also do not apply to any distribution which is required to be made in calendar year 2020 by reason of:
(I)a required beginning date occurring in calendar year 2020, and (II) such distribution not having been made before January 1, 2020. (Code Sec. 401(a)(9)(I)(ii), as amended by Act Sec. 2203(a))
For purposes of the Code Sec. 401(a)(9) RMD rules: (I) the required beginning date with respect to any individual is determined without regard to the temporary RMD waiver rules of Code Sec. 401(a)(9)(I) for purposes of applying the RMD rules for calendar years after 2020; and (II) if the 5‐year rule of Code Sec. 401(a)(9)(B)(ii) applies (in general requiring a retirement plan to distribute its assets within five years of the death of the employee), the 5‐year period is determined without regard to calendar year 2020. (Code Sec. 401(a)(9)(I)(iii),as amended by Act Sec. 2203(a))
Eligible rollover distributions. If all or any portion of a distribution during 2020 is treated as an eligible rollover distribution but would not be so treated if the minimum distribution requirements under Code Sec. 401(a)(9) had applied during 2020, such distribution is not be treated as an eligible rollover distribution for purposes of Code Sec. 401(a)(31), Code Sec. 3405(c), or Code Sec. 402(f). (Code Sec. 402(c)(4), as amended by Act Sec. 2203(b))
Effective date. The amendments made by Act Sec. 2203 apply for calendar years beginning after December 31, 2019. (Act Sec. 2203(c)(1))
If Act Sec. 2203(c)(2) applies to any pension plan or contract amendment (see below), such pension plan or contract does not fail to be treated as being operated in accordance with the terms of the plan during the period beginning on the date of enactment of the Act and ending on December 31, 2020, solely because the plan operates in accordance with the temporary RMD suspension rules of Act Sec. 2203. In addition, except as provided by the Secretary of the Treasury, such plan or contract does not fail to meet the requirements of Code Sec. 411(d)(6) (Sec. 204(g) of the Employee Retirement Income Security Act of 1974) by reason of such amendment. (Act Sec. 2203(c)(2)(A))
Act Sec. 2203(c)(2) applies to any amendment to any pension plan or annuity contract which: (I) is made pursuant to the amendments made by Act Sec. 2203; and (II) is made on or before the last day of the first plan year beginning on or after January 1, 2022. (Act Sec. 2203(c)(2)(B)(i)) In the case of a governmental plan, clause (II) is applied by substituting''2024'' for ''2022''. (Act Sec. 2203(c)(2)(B)(i))
Act Sec. 2203(c)(2) does not apply to any amendment unless during the period beginning on the date of enactment of the Act and ending on December 31, 2020, the plan or contract is operated as if such plan or contract amendment were in effect. (Act Sec. 2203(c)(2)(B)(ii))
$300 above‐the‐line charitable deduction
Background. Adjusted gross income is gross income less certain deductions. (Code Sec. 62(a))
New law. The CARES Act adds a deduction to the calculation of gross income, in the case of tax years beginning in 2020, for the amount (not to exceed $300) of qualified charitable contributions made by an eligible individual during the tax year. (Code Sec. 62(a)(22), as amended by Act Sec. 2204(a))
For this purpose, the term "eligible individual" means any individual who does not elect to itemize deductions. (Code Sec. 62(f)(1), as amended by Act Sec. 2204(b))
The term "qualified charitable contribution" means a charitable contribution (as defined in Code Sec. 170(c)): (A) which is made in cash; (B) for which a deduction is allowable under Code Sec. 170 (determined without regard Code Sec. 170(b)); (C) which is made to an organization described in Code Sec. 170(b)(1)(A), and not to an organization described in Code Sec. 509(a)(3); and (D) which is not for the establishment of anew, or maintenance of an existing, donor advised fund (as defined in Code Sec. 4966(d)(2)). In addition, a qualified charitable contribution does not include any amount which is treated as a charitable contribution made in such tax year by reason of Code Sec. 170(b)(1)(G)(ii) or Code Sec. 170(d)(1). (Code Sec. 62(f)(2), as amended by Act Sec. 2204(b))
Effective date. The amendments made by Act Sec. 2204 apply to tax years beginning after Dec. 31, 2019. (Act Sec. 2204(c))
Modification of limitations on individual cash charitable contributions during 2020
Background. Individuals are allowed a deduction for cash contributions to certain charitable organizations (such as churches, educational organizations, hospitals, and medical research organizations) up to 60% of their contribution base (generally, adjusted gross income (AGI)). (Code Sec. 170(b)(1)(G)(i)) If the aggregate amount of an individual's cash contributions to these charities for the year exceeds 60% of the individual's contribution base, then the excess is carried forward and is treated as a deductible charitable contribution in each of the five succeeding tax years. (Code Sec. 170(b)(1)(G)(ii))
New law. The CARES Act provides that (except as stated below) qualified contributions are disregarded in applying the 60% limit on cash contributions of individuals and the Code Sec. 170(d)(1) rules on carryovers of excess contributions. (Act Sec. 2205(a)(1))
Qualified contributions are allowed as a deduction only to the extent that the aggregate of those contributions does not exceed the excess of the individual's contribution base over the amount of all other charitable contributions allowed as deductions for the contribution year. (Act Sec. 2205(a)(2)(A)(i))
Qualified contributions are charitable contributions if‐‐‐
They are paid in cash during calendar year 2020 to an organization described in Code Sec. 170(b)(1)(A) (i.e., 501(c)(3) and certain other charitable organizations); and
The taxpayer has elected to apply this provision with respect to the contribution. (Act Sec. 2205(a)(3)(A))
However, contributions to a Code Sec. 509(a)(3) supporting organization or a donor advised fund are not qualified contributions. (Act Sec. 2205(a)(3)(B))
In the case of a partnership or S corporation, the election in item (2) above is made separately by each partner or shareholder. (Act Sec. 2205(a)(3)(C))
If the aggregate amount of qualified contributions exceeds the limitation in Act Sec. 2205(a)(2)(A)(i), the excess is added to the individual's carryover amount described in Code Sec. 170(b)(1)(G)(ii).(Act Sec. 2205(a)(2)(A)(ii))
Effective date. The amendments made by Act Sec. 2205(a) apply to tax years beginning after Dec. 31, 2019. (Act Sec. 2205(c))
Modification of limitations on corporate cash charitable contributions during 2020
Background. A corporation's charitable deduction cannot exceed 10% of its taxable income, as computed with certain modifications. (Code Sec. 170(b)(2)(A)) If a corporation's charitable contributions for a year exceed the 10% limitation, the excess is carried over and deducted for each of the five succeeding years in order of time, to the extent the sum of carryovers and contributions for each of those years does not exceed 10% of taxable income. (Code Sec. 170(d)(2)(A))
New law. The CARES Act provides that (except as stated below) qualified contributions (see above) are disregarded in applying the 10% limit on charitable contributions of corporations and the Code Sec. 170(d)(1) rules on carryovers of excess contributions. (Act Sec. 2205(a)(1))
Qualified contributions are allowed as a deduction only to the extent that the aggregate of those contributions does not exceed the excess of 25% of the corporation's taxable income (as computed under Code Sec. 170(b)(2)) over the amount of all other charitable contributions allowed to the corporation as deductions for the contribution year. (Act Sec. 2205(a)(2)(B)(i))
If the aggregate amount of qualified contributions exceeds the limitation in the previous paragraph, the excess is taken into account under the Code Sec. 170(d)(2) carryover rule, subject to its limitations. (Act Sec. 2205(a)(2)(B)(ii))
Effective date. The amendments made by Act Sec. 2205(a) apply to tax years beginning after Dec. 31, 2019. (Act Sec. 2205(c))
Increase in limits on contributions of food inventory
Background. A donation of food inventory to a charitable organization that will use it for the care of the ill, the needy, or infants is deductible in an amount up to basis plus half the gain that would be realized on the sale of the food (not to exceed twice the basis). In the case of a C corporation, the deduction cannot exceed 15% of the corporation's income. In the case of a taxpayer other than a C corporation, the deduction cannot exceed 15% of aggregate net income of the taxpayer for that tax year from all trades or businesses from which those contributions were made, computed without regard to the taxpayer's charitable deductions for the year. (Code Sec. 170(e)(3)(C))
New Law. In the case of any charitable contribution of food during 2020 to which Code Sec. 170(e)(3)(C) applies, the taxable income limits are 25% rather than 15%. (Act Sec. 2205(b))
Effective date. The amendments made by Act Sec. 2205(b) apply to tax years beginning after Dec. 31, 2019. (Act Sec. 2205(c))
Business tax provisions in Senate‐passed third coronavirus relief package
Senate‐passed version of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, H.R. 748)
Summary of CARES Act Unemployment Insurance and Tax Provisions
By a unanimous vote on March 25, the Senate passed a third coronavirus relief package, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, H.R. 748, the Act).
Employee retention credit for employers
New law. This provision provides a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID‐19 crisis. (Act Sec. 2301(a))
Eligible employers. The credit is available to employers, including non‐profits, whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel, or group meetings. The credit is also provided to employers who have experienced a greater than 50% reduction in quarterly receipts, measured on a year‐over‐year basis. (Act Sec. 2301(c)(2))
The credit is not available to employers receiving Small Business Interruption Loans under Sec. 1102 of the Act. (Act Sec. 2301(j))
Wages paid to which employees? For employers who had an average number of full‐time employees in 2019 of 100 or fewer, all employee wages are eligible, regardless of whether the employee is furloughed. For employers who had a larger average number of full‐time employees in 2019, only the wages of employees who are furloughed or face reduced hours as a result of their employers' closure or reduced gross receipts are eligible for the credit. (Act Sec. 2301(c)(3)(A))
No credit is available with respect to an employee for any period for which the employer is allowed a Work Opportunity Credit (Code Sec. 21) with respect to the employee. (Act Sec. 2301(h)(1))
Wages. The term "wages" includes health benefits and is capped at the first $10,000 in wages paid by the employer to an eligible employee. ((Act Sec. 2301(c)(3)(C); Act Sec. 2301(b)(1))
Wages do not include amounts taken into account for purposes of the payroll credits, for required paid sick leave or required paid family leave in the Families First Coronavirus Act (part of P.L. 116‐127) (Act Sec. 2301(c)(3)(A)), nor for wages taken into account for the Code Sec. 45S employer credit for paid family and medical leave. (Act Sec. 2301(h)(2))
Other. IRS is granted authority to advance payments to eligible employers (Act Sec. 2301(l)(1)) and to waive applicable penalties for employers who do not deposit applicable payroll taxes in anticipation of receiving the credit. (Act Sec. 2301(k))
Effective date. The credit applies to wages paid after March 12, 2020 and before Jan. 1, 2021. (Act Sec. 2301(m))
Delay of payment of employer payroll taxes
Background. Employers are required to withhold social security taxes (Code Sec. 3111(a)) and tax under the Railroad Retirement Tax Act (RRTA) from wages paid to employees. (Code Sec. 3211(a) and Code Sec. 3221(a)). Self‐employed individuals are subject to self‐employment (SECA) tax. (Code Sec. 1401(a))
New law. The CARES Act allows taxpayers to defer paying the employer portion of certain payroll taxes through the end of 2020. Thus, notwithstanding any other provision of law, the payment for "applicable employment taxes" for the "payroll tax deferral period" won't be due before the "applicable date." (Act Sec. 2302(a)(1))
For purposes of the above rules, the term ''applicable employment taxes'' means: (A) the taxes imposed under Code Sec. 3111(a) (social security taxes), (B) so much of the taxes imposed under Code Sec. 3211(a) as are attributable to the rate in effect under Code Sec. 3111(a), and (C) so much of the taxes imposed under Code Sec. 3221(a) as are attributable to the rate in effect under Code Sec. 3111(a) (RRTA taxes). (Act Sec. 2302(d)(1))
The term ''payroll tax deferral period'' means the period beginning on the date of enactment of the Act and ending before Jan. 1, 2021. (Act Sec. 2302(d)(2))
The term ''applicable date'' means: (A) Dec. 31, 2021, with respect to 50% of the amounts to which Act Sec. 2302(a) (employment taxes) and Act Sec. 2302(b) (self‐employment tax), as the case may be, apply, and (B) Dec. 31, 2022, with respect to the remaining 50% of those amounts. (Act Sec. 2302(d)(3))
Notwithstanding Code Sec. 6302 (which authorizes IRS to set deadlines for tax deposits), an employer will be treated as having timely made all deposits of applicable employment taxes required (without regard to Act Sec. 2302) to be made during the payroll tax deferral period if all such deposits are made not later than the applicable date. (Act Sec. 2302(a)(2))
The above rules won't apply to any taxpayer which has had indebtedness forgiven under Act Sec. 1106 with respect to a loan under Small Business Act Sec. 7(a)(36), as added by Act Sec. 1102, or indebtedness forgiven under Act Sec. 1109. (Act Sec. 2302(a)(3))
Notwithstanding any other provision of law, the payment for 50% of the taxes imposed under Code Sec. 1401(a) (self‐employment taxes) for the payroll tax deferral period won't be due before the applicable date. (Act Sec. 2302(b)(1))
For purposes of applying Code Sec. 6654 (requiring individuals to make estimated tax payments) to any tax year which includes any part of the payroll tax deferral period, 50% of the self‐employment taxes imposed under Code Sec. 1401(a) for the payroll tax deferral period won't be treated as taxes to which Code Sec. 6654 applies. (Act Sec. 2302(b)(2))
For purposes of Code Sec. 3504 (imposing third party liability for withholding tax), in the case of any person designated under that section (and any regulations or other guidance issued by IRS with respect to that section) to perform acts otherwise required to be performed by an employer, if an employer directs that person to defer payment of any applicable employment taxes during the payroll tax deferral period under Act Sec. 2302, the employer will be solely liable for the payment of the applicable employment taxes before the applicable date for any wages paid by that that person on behalf of that employer during that period. (Act Sec. 2302(c)(1))
For purposes of Code Sec. 3511 (which requires certified professional employer organizations (CPEOs) to be treated as employers for employment tax withholding purposes), in the case of a CPEO (as defined in Code Sec. 7705(a)) that has entered into a service contract described in Code Sec. 7705(e)(2) with a customer, if that customer directs that CPEO to defer payment of any applicable employment taxes during the payroll tax deferral period under this section, the customer will, notwithstanding Code Sec. 3511(a) and Code Sec. 3511(c), be solely liable for the payment of those applicable employment taxes before the applicable date for any wages paid by the CPEO to any worksite employee performing services for that customer during that period. (Act Sec. 2302(c)(2))
Effective date . The provisions of Act Sec. 2302 apply to the period beginning on the date of enactment of the Act. (Act Sec. 2302(d)(2))
Modification of limitation on losses for noncorporate taxpayers
Old law. Code Sec. 461(l)(1) disallows the deduction of excess business losses by noncorporate taxpayers for tax years beginning after Dec. 31, 2017 and ending before Jan. 1, 2026. Generally, Code Sec. 461(l)(3)(A) provides that an "excess business loss" is the excess of the (1) taxpayer's aggregate trade or business deductions for the tax year over (2) the sum of the taxpayer's aggregate trade or business gross income or gain plus $250,000 (as adjusted for inflation).
New law. The CARES Act temporarily modifies the loss limitation for noncorporate taxpayers so they can deduct excess business losses arising in 2018, 2019, and 2020. (Code Sec. 461(l)(1), as amended by Act Sec. 2304(a))
Effective date. The amendments made by Act Sec. 2304(a) apply to tax years beginning after Dec. 31, 2017. (Code Sec. 461(l)(1), as amended by Act Sec. 2304(a))
Deductibility of interest expense temporarily increased
Background. The Tax Cuts and Jobs Act of 2017 (P.L. 115‐97, the "TCJA") generally limited the amount of business interest allowed as a deduction to 30% of adjusted taxable income. (Code Sec. 163(j)(10))
New law. The CARES Act temporarily and retroactively increases the limitation on the deductibility of interest expense under Code Sec. 163(j)(1) from 30% to 50% for tax years beginning in 2019 and 2020. (Code Sec. 163(j)(10)(A)(i) as amended by Act Sec. 2306(a))
Special rules for partnerships. Under a special rule for partnerships, the increase in the limitation will not apply to partners in partnerships for 2019 (it applies only in 2020). (Code Sec. 163(j)(10)(A)(ii)(I) as amended by Act Sec. 2306(a)) For partners that don't elect out, any excess business interest of the partnership for any tax year beginning in 2019 that is allocated to the partner will be treated as follows (Code Sec. 163(j)(10)(A)(ii)(II) as amended by Act Sec. 2306(a)):
…50% of the excess business interest will be treated as paid or accrued by the partner in the partner's first tax year beginning in 2020 and isn't subject to any limits in 2020. (Code Sec. 163(j)(10)(A)(ii)(II)(aa) as amended by Act Sec. 2306(a))
…50% of the excess business interest will be subject to the limitations of paragraph 163(j)(4)(B)(ii) (relating to the usual treatment of excess business interest allocated to partners) in the same manner as any other excess business interest that is so allocated. (Code Sec. 163(j)(10)(A)(ii)(II)(bb) as amended by Act Sec. 2306(a)) In other words, it will remain suspended until the partnership allocates excess taxable income or excess interest income to the partner (or the partnership is no longer subject to Code Sec. 163(j)).
Election out of the increased limitation. Taxpayers may elect out of the increase, for any tax year, in the time and manner IRS prescribes. Once made, the election can be revoked only with IRS consent. For partnerships, the election must be made by the partnership and can be made only for tax years beginning in 2020. (Code Sec. 163(j)(10)(A)(iii) as amended by Act Sec. 2306(a))
Election to calculate 2020 interest limitation using 2019 adjusted taxable income. In addition, taxpayers can elect to calculate the interest limitation for their tax year beginning in 2020 using the adjusted taxable income for their last tax year beginning in 2019 as the relevant base. For partnerships, this election must be made by the partnership. (Code Sec. 163(j)(10)(B)(i) as amended by Act Sec. 2306(a))
If an election is made to calculate the interest limitation using 2019 adjusted taxable income for a tax year that is a short tax year, the adjusted taxable income for the taxpayer's last tax year beginning in 2019 which is substituted under the election will be equal to the amount which bears the same ratio to such adjusted taxable income as the number of months in the short taxable year bears to 12. (Code Sec. 163(j)(10)(B)(ii) as amended by Act Sec. 2306(a))
Effective date. The amendments made by Act Sec. 2306 apply to tax years beginning after Dec. 31, 2018. (Act Sec. 2306(b))
Bonus depreciation technical correction for qualified improvement property
Background. The Tax Cuts and Jobs Act of 2017 (P.L. 115‐97, the "TCJA") amended Code Sec. 168 to allow 100% additional first‐year depreciation deductions ("100% Bonus Depreciation") for certain qualified property. The TCJA eliminated pre‐existing definitions for (1) qualified leasehold improvement property, (2) qualified restaurant property, and (3) qualified retail improvement property. It replaced those definitions with one category called qualified improvement property ("QI Property"). A general 15‐year recovery period was intended to have been provided for QI Property. However, that specific recovery period failed to be reflected in the statutory text of the TCJA. Thus, under the TCJA, QI Property falls into the 39‐year recovery period for nonresidential rental property. That makes the QI Property category ineligible for 100% Bonus Depreciation.
New law. The CARES Act provides a technical correction to the TCJA, and specifically designates QI Property as 15‐year property for depreciation purposes. (Code Sec. 168(e)(3)(E)(vii), as amended by Act Sec. 2307(a)(1)(A)) This makes QI Property a category eligible for 100% Bonus Depreciation. QI property also is specifically assigned a 20‐year class life for the Alternative Depreciation System. (Code Sec. 168(g)(3)(B), as amended by Act Sec. 2307(a)(3)(B))
Effective date. The amendments made by Act Sec. 2307 are effective for property placed in service after Dec. 31, 2017. (Act Sec. 2307(b))
COVID‐19 Provisions by State
California
The California Employment Development Department (EDD) has announced that employers statewide directly affected by COVID‐19 may request up to a 60‐day extension of time from the EDD to file their state payroll reports and/or deposit payroll taxes without penalty or interest. A written request for an extension must be received within 60 days from the original delinquent date of the payment or return. (Emergency and Disaster Assistance for Employers, Statewide ‐ March 2020, California Employment Development Department, 03/01/2020.)
Governor Gavin Newsom issued on March 12, 2020, an executive order regarding California's response to the COVID‐19 pandemic. The executive order, which is effective immediately, orders, among other things, that: (1) to quickly provide relief from penalties and interest, the provisions of the Revenue and Taxation Code that apply to the taxes and fees administered by the California Department of Tax and Fee Administration (CDTFA), requiring the filing of a statement under penalty of perjury setting forth the facts for a claim for relief, are suspended for a period of 60 days after the date of the order for any individuals or businesses who are unable to file a timely return or make a timely payment as a result of complying with state or local public health officials imposition or recommendation of social distancing measures related to COVID‐19; and (2) the Franchise Tax Board (FTB), the State Board of Equalization (SBE), the CDTFA, and the Office of Tax Appeals (OTA) shall use their administrative powers where appropriate to provide those individuals and businesses impacted by complying with a state or local public health official's imposition or recommendation of social distancing measures related to COVID‐19 with the extensions for filing, payment, audits, billing, notices, assessments, claims for refund, and relief from subsequent penalties and interest. (Executive Order N‐25‐20, Executive Department, State of California, 03/12/2020.)
During the 60‐day window specified in Governor Newsom's executive order on the COVID‐19 pandemic (see previous paragraph), the CDTFA has posted on its website an alert in which it advises that it has been able to make it easier for such taxpayers and feepayers to request relief from the imposition of interest and penalties. They can go through the CDTFA's normal online process for requesting relief, they can send a letter (a link to the CDTFA's office locations and addresses is provided), or they can call the CDTFA's call center at 1 (800) 400‐7115. (Alert, California Department of Tax and Fee Administration, 03/12/2020.)
The CDTFA has done the following: (1) created a COVID‐19 state of emergency webpage; and (2) added COVID‐19 to the list of disasters for which state of emergency tax or fee relief is available. Regarding (1), on March 12, 2020, Governor Newsom issued an Executive Order in response to the COVID‐19 State of Emergency. Pursuant to this Executive Order, through May 11, 2020, the CDTFA has the authority to assist individuals and businesses impacted by complying with a state or local public health official's imposition or recommendation of social distancing measures related to COVID‐19. This assistance includes granting extensions for filing returns and making payments, relief from interest and penalties, and filing a claim for refund. Taxpayers may request assistance by contacting the CDTFA through its online services, by sending a letter, by email, or by phone. Regarding (2), the CDTFA's emergency tax or fee relief is available for business owners and feepayers directly affected by disasters declared as state of emergencies over the past three years, may include extension of tax return due dates, relief of penalty and interest, or replacement copies of records lost due to disasters. An extension of up to three months to file and pay taxes is available in 32 of the programs administered by the CDTFA (including sales and use tax, various fuel taxes, and cigarette and tobacco products taxes) for taxpayers directly affected by COVID‐19 who, as a result, cannot meet their filing and payment deadlines. Affected taxpayers may apply online for relief from penalties and interest and request online a filing extension. Business owners and fee payers who need to obtain copies of CDTFA tax records will be able to receive replacements free of charge. (COVID‐19 State of Emergency Webpage, California Department of Tax and Fee Administration, 03/13/2020; State of Emergency Tax Relief Webpage, California Department of Tax and Fee Administration, 03/13/2020.)
In response to COVID‐19, San Francisco Mayor London Breed has announced various measures to support small businesses, including a deferral of business taxes. In order to provide immediate cash‐flow assistance to small businesses, the mayor will be working with Treasurer Jose Cisneros to notify them that the next round of quarterly businesses taxes can be deferred. Businesses are required to pre‐pay their first quarter business taxes for the current tax year by April 30, 2020. This announcement will allow businesses to not pre‐pay, deferring payment due to February 2021. No interest payments, fees, or fines will accrue as a result of the deferral. This benefit will be offered to business with up to $10 million in gross receipts. (News Release, Office of the San Francisco Mayor, 03/11/2020.)
The FTB has announced updated tax relief for all California taxpayers due to COVID‐19. With the updated relief, the FTB is postponing until July 15, 2020, the filing and payment deadlines for all individuals and business entities for the following: (1) 2019 tax returns; (2) 2019 tax return payments; (3) 2020 first and second quarter estimate payments; (4) 2020 LLC taxes and fees; and (5) 2020 non‐wage withholding payments. To give taxpayers a deadline consistent with that of the Internal Revenue Service (IRS) without the federal dollar limitations, the FTB is following the federal relief described in Notice 2020‐17. The FTB is providing its updated relief to all California taxpayers, not just to those affected by COVID‐19. Taxpayers do not need to claim any special treatment or call the FTB to qualify for this relief. The updated relief supersedes the COVID‐19 relief the FTB announced last week pursuant to which it extended until June 15, 2020, the due dates for filing and paying California taxes for taxpayers affected by COVID‐19, with the qualification that those deadlines may be extended further if the IRS grants a longer relief period, which it has done. Also, in connection with the updated relief, the FTB has posted on its website a spreadsheet, COVID‐19 ‐ Extensions to file and pay ‐ 2019 Taxable year, that shows: (a) for calendar year filers and certain fiscal year filers, the COVID‐19 due date to file and pay, the original due date, and the extension due date for various return types, e.g., personal, partnership, LLC taxed as a partnership, LLC taxed as a corporation, estates and trusts, C corporations, S corporations, and exempt organizations; and (b) the 2020 estimated tax payment due dates for the following return types: personal, C corporations, S corporations, and exempt organizations. (California FTB News Release No. 03/18/2020, 03/18/2020; COVID‐19 ‐ Extensions to file and pay, 2019 taxable year, California Franchise Tax Board, 03/18/2020.)
Colorado
In response to the economic impact of COVID‐19 and to provide expedited relief from tax payment and penalties due, Governor Jared Polis signed an executive order, effective immediately and expiring April 19, 2020 unless extended, temporarily suspending the deadlines for state income tax payments (for tax year 2019) and estimated income tax payments (for tax year 2020). The income tax payment deadline for all Colorado taxpayers is extended from April 15, 2020 to July 15, 2020, without penalty or interest. The extension applies to any income tax payment, regardless of the amount. The state is also not imposing any caps on the amount of tax that can be deferred. In addition, the governor directs the executive director of the Colorado Department of Revenue (CDOR) to promulgate and issue emergency rules to extend the state estimated income tax payment deadline to July 15, 2020; so estimated payments due on and after April 15, 2020 but on or before June 15, 2020, may now be paid any time on or before July 15, 2020 without penalty. The governor directed CDOR to coordinate with local governments that choose to extend tax payment deadlines for property and sales and use taxes and to take any required actions to allow penalties to be waived. (Executive Order D 2020 010, Executive Department, State of Colorado, 03/20/2020; Website Post: Gov. Polis Announces State's Economic Response to COVID‐19, Colo. Dep't. Rev., 03/20/2020.)
Connecticut
The Connecticut Department of Revenue Services (DRS) is granting automatic extensions of Connecticut filing deadlines for certain annual tax returns due on or after March 15, 2020 in order to support businesses during the COVID‐19 outbreak effective immediately. The extensions impact the corporation business tax return, the pass‐through entity tax return and the unrelated business income tax return. Effective immediately, the filing deadlines for various annual tax returns due on or after March 15, 2020, and before June 1, 2020, are extended by at least 30 days. In addition, the payments associated with these returns are also extended to the corresponding due date in June. The filing date for the 2019 Forms CT‐1120 and CT‐1120CU Connecticut corporation business tax return is extended to June 15, 2020 and the payment deadline is extended to June 15, 2020. The filing date for the 2019 Form CT‐1065/CT‐1120 SI Connecticut pass‐through entity tax return is extended to April 15, 2020 and the payment deadline is extended to June 15, 2020. The filing date for the 2019 Form CT‐990T Connecticut unrelated business income tax return is extended to June 15, 2020, while the payment deadline is extended until June 15, 2020. (DRS Extends Filing Deadline for Certain Annual State Business Tax Returns, Conn. DRS, 03/16/2020.)
In addition, the filing and payment deadline for Connecticut personal income tax returns have been extended 90 days from April 15 to July 15, 2020. The extension also applies to Connecticut estimated income tax payments for the first and second quarters of 2020. This extension for Connecticut personal income tax return filing and payment aligns with the U.S. Treasury's announcement earlier Friday, where it indicated federal income tax filings and payments would be extended until July 15, 2020. Connecticut taxpayers who are owed a refund may still file with DRS. (CT Dept. of Revenue Services extends personal income tax filing and payments deadlines, 03/20/2020.)
District of Columbia
The D.C. Office of Tax and Revenue (OTR) has announced that the deadline for taxpayers to file and pay their 2019 District of Columbia individual and fiduciary income tax returns (D‐40, D‐41, and D‐40B), partnership tax returns (D‐65), and franchise tax returns (D‐20, D‐30) is extended to July 15, 2020. This means taxpayers will have an additional 90 days to file and pay from the original deadline of April 15, 2020. Taxpayers requiring additional information are advised to contact the OTR's Customer Service Center at (202) 727‐4TAX (4829). (Release, D.C. Office of Tax and Revenue, 03/23/2020.)
L. 2020, Act 23‐247, effective 03/17/2020 (expires 06/15/2020), enacts the "COVID‐19 Response Emergency Amendment Act of 2020." The emergency legislation, enacted to address the COVID‐19 pandemic, provides that the Chief Financial Officer (CFO) may waive penalties and abate interest for failure to timely pay sales and use tax for periods ending on February 29, 2020 or March 31, 2020, provided that all taxes for such periods are paid in full on or before July 20, 2020. The waiver does not apply to hotels or motels that are permitted to defer property tax under another provision of the emergency legislation. Under this provision of the emergency legislation, for property that is commercially improved and occupied and is a hotel or motel, the CFO may waive penalties and abate interest for the first installment of real property tax for the 2020 tax year (due on or before March 31) provided the property owner pays the installment by June 20, 2020. The D.C. Office of Tax and Revenue must issue guidance on the definition of a hotel or motel for this purpose. The legislation is made applicable as of March 11, 2020.
On March 17, 2020, the District of Columbia enacted the "COVID‐19 Response Emergency Amendment Act of 2020" (the Act) which expanded the authority of the D.C. Office of Tax and Revenue (OTR) to abate interest and waive penalties for failure to timely pay sales and use tax due for periods ending on February 29, 2020 and March 31, 2020, provided certain conditions are met. Consequently, the OTR will automatically waive interest and penalties that would ordinarily be assessed for failure to timely pay sales and use tax due for the periods ending on February 29, 2020 and March 31, 2020. All vendors who are required to file sales and use tax returns on either a monthly or a quarterly basis are eligible for this relief, except for hotels and motels permitted to defer real property taxes under the Act. Any hotel or motel vendor registered with OTR with the NAICS code 72111, 721110, 72112 or 721120 is ineligible for this relief. Monthly filers must file a Form FR‐800M as usual through MyTax.DC.gov on or before March 20, 2020 for the period ending February 29, 2020 and on or before April 20, 2020 for the period ending March 31, 2020. Quarterly filers must file a Form FR‐800Q as usual through MyTax.DC.gov on or before April 20, 2020 for the period ending March 31, 2020. All eligible vendors must pay in full all sales and use taxes due for periods ending on February 29, 2020 and March 31, 2020 on or before July 20, 2020. Failure to pay in full by July 20, 2020 will result in interest and penalties accruing from the original payment due dates. (Release, D.C. Office of Tax and Revenue, 03/20/2020.)
In order to assist with the economic impact of the COVID‐19 pandemic, the D.C. Office of Tax and Revenue (OTR) has announced that the deadline for property owners who wish to appeal their Tax Year 2021 real property tax assessment has been extended to April 30, 2020 from April 1, 2020. District property owners who believe their proposed Tax Year 2021 assessment does not reflect the market value of their property can complete and submit their appeal form online at otr.cfo.dc.gov/node/384012. The OTR has also extended the due date to file the Income and Expense Report from April 15, 2020 to April 30, 2020. All filers must submit their TY 2021 Income and Expense report electronically at taxpayerservicecenter.com/income/. (Release, D.C. Office of Tax and Revenue.)
Maryland
Due to the COVID‐19 pandemic and associated restrictions on activity, the federal government extended the deadline for filing 2019 federal income tax returns and submitting 2019 federal income tax payments by 90 days to July 15, 2020. Maryland individual, corporate, pass‐through entity, and fiduciary taxpayers are afforded the same relief at the Maryland level. Unlike the federal extension, which included only those taxpayers who owed under a certain amount of tax, the Maryland extension applies to all taxpayers. Interest and penalty will be assessed on any unpaid tax from July 15, 2020 until the date the tax is paid. Fiscal year filers with tax years ending January 1, 2020 through March 31, 2020 are also eligible for the extension for filing returns and payment, as well as March quarterly estimated payments of 2020 taxes. The extension is automatic and does not require the filing or requesting of the extension to take advantage of the extended deadline. Individual taxpayers who are paying by check or money order should submit their payment, along with Maryland Form PV, by July 15, 2020. (Maryland Tax Alert 03‐20, Maryland Comptroller's Office, 03/23/2020.)
The Comptroller's Office will not send out lien warning notices, issue liens, attach bank accounts, hold up the renewal of any license including Maryland driver's licenses, or offset vendor payments for Maryland taxes. Taxpayers receiving notices from the Comptroller's Office during the current COVID‐19 crisis should contact the telephone number or email address on the notice for additional information. Further, taxpayers who are currently on a payment plan for delinquent business and/or income taxes and are unable to make those payments due to the COVID‐19 crisis should contact the office at the following to discuss delaying payments: (1) business taxpayers: cdcollectionbizz@marylandtaxes.gov; and (2) individual income tax taxpayers: COV19@marylandtaxes.gov. The cessation of collection efforts is effective immediately and will continue until 30 days after the lifting of the state of emergency by the governor. (Maryland Tax Alert 03‐20, Maryland Comptroller's Office, 03/23/2020.)
The comptroller has extended to June 1, 2020, the filing and/or payment of returns for collections in or gross receipts from February, March, and April 2020 for the following: sales and use taxes; withholding taxes; alcohol taxes; and cigarette and tobacco taxes. Also, the comptroller has determined that the penalty will be abated on admissions and amusement tax returns and payments for gross receipts from February, March, and April 2020, so long as the returns and payments are submitted by June 1, 2020. Motor carrier and motor fuel tax returns and payments otherwise due in March, April, or May 2020, may be submitted no later than June 1, 2020, without incurring penalty or interest. For all of these business taxes, separate returns reflecting each filing period should be filed rather than a combined return. Tire recycling reports and fees are submitted semi‐annually in January and July. Therefore, no change to the tire recycling reports and fees due date will be made at this time. Bay restoration fees due in March, April, and May 2020, may be paid no later than June 1, 2020, without incurring interest or penalties. (Maryland Tax Alert 03‐20, Maryland Comptroller's Office, 03/23/2020.)
Massachusetts
The Massachusetts Department of Revenue has adopted an emergency regulation amendment (adding section (7) to 830 CMR 62C.16.2, Sales and Use Tax Returns and Payments), that suspends return filing and payment remittance obligations for certain vendors during the COVID‐19 state of emergency. Specifically, the sales and use tax filing and payment schedule for vendors, whose cumulative sales and use tax liability in the 12‐month period ending February 29, 2020 is less than $150,000, will be as follows: Returns and payments due during the period beginning March 20, 2020 and ending May 31, 2020, inclusive, will be suspended. All such returns and payments will be due on June 20, 2020. The suspension does not apply to marijuana retailers, marketplace facilitators or vendors selling motor vehicles who have to continue to file returns and make payments.
The Department has adopted an emergency regulation amendment (adding new subsection (11)(g) to 830 CMR 64G.1.1, Room Occupancy Excise) which suspends return filing and payment remittance obligations for certain operators during the COVID‐19 State of Emergency declared by the governor. Specifically, the filing and payment schedule for operators, whose cumulative liability in the 12‐month period ending February 29, 2020 is less than $150,000, will be as follows. Returns and payments due during the period beginning March 20, 2020 and ending May 31, 2020, inclusive, will be suspended. All such returns and payments, including any local option amount will be due on June 20, 2020. The suspension does not apply to intermediaries that must continue to file returns and make payments.
The Department will waive any late‐file or late‐pay penalties imposed under Mass. Gen. L. Ch. 62C § 33 for returns and payments due during the period March 20, 2020 through May 31, 2020, for the following: (1) vendors with meals tax return and payment obligations pursuant to G.L. c. 62C, § 16 that do not otherwise qualify for relief announced in Emergency Regulation 830 CMR 62C.16.2(7) promulgated by the Department on March 19, 2020 (see above); and (2) operators and intermediaries with room occupancy excise return and payment obligations that do not otherwise qualify for relief announced in Emergency Regulation 830 CMR 64G.1.1(11)(g) promulgated by the Department on March 19, 2020 (see above). Only penalties are being waived; statutory interest will continue to accrue. To be eligible for a penalty waiver, vendors, operators and intermediaries must file their returns and remit payments on or before June 20, 2020. The penalty waiver is limited to the taxpayers and tax periods outlined above. Applications for waiver of penalties for sales tax other than sales tax on meals, or other circumstances not covered above, will be handled on a case‐by‐case basis based on reasonable cause. (Massachusetts Technical Information Release No. 20‐2, 03/19/2020.)
New York
In a March 23, 2020 press conference, New York Governor Andrew Cuomo indicated that New York would be following the federal income tax extension permitting New York income tax returns and tax payments to be filed and made on or before July 15, 2020 instead of the April 15 statutory due date. The Department of Taxation and Finance will likely issue a notice in the coming days.
The Department has issued an Important Notice alerting sales tax filers that the Department is permitted to waive penalty and interest on late sales tax return filings and payments due to COVID‐19. Under specified circumstances, such as key employees who were treated or suspected of having COVID‐19, or because tax records were not available due to COVID‐19, affected filers must file and pay the tax due with 60 days of the due date to obtain the relief. The Department notes, however, that monthly sales tax filers, and participants in the Promptax program for sales and use tax or prepaid sales tax on fuel, are not eligible for the relief. The notice also provides information on how affected taxpayers can obtain the relief. (New York Special Tax Department Notice No. N‐20‐1, 03/01/2020.)
New York City:
In response to the COVID‐19 outbreak, the New York City Department of Finance (DOF) will allow a waiver of penalties for DOF‐administered business and excise taxes due between March 16, 2020, and April 25, 2020. Taxpayers may request to have the penalties waived on a late‐filed extension or return, or in a separate request. Taxpayers who file an extension or return or make a tax payment in accordance with these rules, will not be subject to any late filing, late payment, or underpayment penalties. However, while late filing and late payment penalties are waived, interest, where applicable, must be paid on all tax payments received after the original due date calculated from the original due date to the date of payment. All paper filings under this announcement should be marked "COVID‐19" on the top center of the first page. The same relief will be provided to adversely affected electronic filers. Taxpayers may also request an abatement by writing to: NYC Department of Finance, P.O. Box 5564, Binghamton, NY 13902‐5564. Finally, taxpayers may request a rebate on the DOF online portal or may email the DOF at Penalty_Abatements@finance.nyc.gov. (New York City Finance Memorandum No. 20‐2, 03/19/2020.)
In response to the impact of COVID‐19, the DOF has waived penalties for all New York City real property transfer tax returns due between March 15, 2020, and April 25, 2020. Taxpayers may request to have the penalties waived on a late‐filed return, or in a separate request. Taxpayers who file a return or make a tax payment in accordance with this finance memorandum will not be subject to any late filing, late payment, or underpayment penalties. However, while late filing and late payment penalties are waived, interest, where applicable, must be paid on all tax payments received after the original due date calculated from the original due date to the date of payment. Any taxpayer that receives a notice asserting a late filing, late payment or underpayment penalty for a return due during this period may submit an abatement request to the DOF and the penalty will be waived. Taxpayers may request an abatement by writing to NYC Department of Finance RPTT Billing Unit 66 John Street ‐ 13th Floor New York, NY 10038. Taxpayers may also send an email to RPTTPenaltyInterest@finance.nyc.gov. (New York City Finance Memorandum No. 20‐4, 03/20/2020.)
Virginia
The Virginia Department of Taxation issued a bulletin regarding income tax payment deadlines as a result of the COVID‐19 crisis. All income tax payments due between April 1, 2020 to June 1, 2020, can be submitted to the Department any time on or before June 1, 2020. The Department will automatically waive late payment penalties as long as full payment is received by June 1, 2020. If the full amount is not paid by June 1, 2020, the penalty waiver will not apply, and late payment penalties will accrue from the original date that the payment was due. Interest will continue to accrue from the original date of the payment, so those who are able to pay are encouraged to do so. The following taxes are eligible for the payment extension and penalty waiver: individual, corporate, fiduciary income taxes, and any estimated income tax payments during this period. The waiver does not provide a filing extension and all returns are due by their relevant due dates. Virginia does provide an automatic filing extension to all taxpayers for up to six months (seven months for certain corporations), and no application is required to apply the extension. (Virginia Tax Bulletin 20‐4, Va. Dept. of Tax'n., 03/20/2020.)
The Department issued a bulletin with important information for those affected by the COVID‐19 crisis. The Department will consider requests from sales tax dealers for an extension on filing and paying the February 2020 sales tax return, which is due on March 20, 2020. If a request is granted, then the filing and payment will be April 20, 2020, with a waiver of penalties. However, even with an extension, interest will accrue. Dealers should request a waiver using the Department's secure email system or by writing to the following address: Virginia Tax, Office of Customer Services, P.O. Box 1115, Richmond, VA 23218‐1115. (Virginia Tax Bulletin 20‐3, Va. Dept. of Tax'n., 03/19/2020.)