COVID-19 – Federal and State Tax Updates

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Q – Filing of Federal Tax Returns: Must C corporation and individual U.S. federal income tax returns or extensions for the 2019 calendar year be filed by the April 15, 2020, due date?

A – Treasury Secretary Steven Mnuchin announced on March 17, 2020, that payments of certain taxes to the federal government during 2020 may be deferred for up to 90 days after the April 15, 2020, filing deadline for C corporations and individuals without interest or penalties. As indicated in Notice 2020-17, C corporation and individual U.S. federal income tax returns (or extensions) for the 2019 calendar year must be filed by their April 15, 2020, due date. Moreover, any other U.S. federal tax returns or information returns also must be filed by their due date (including any valid extensions). Taxpayers that are due an income tax refund are encouraged to file U.S. federal income tax returns (rather than extensions requests) by the due date to help accelerate refunds. Automatic extensions of time to file a U.S. federal income tax return continue to be available under existing laws and regulations. Please visit www.irs.gov for information regarding how to request such an extension of time to file returns.

Q – Deferring Federal Tax Payments: May C corporations or individuals defer both the payment of U.S. federal income taxes for calendar year 2019 and Q1 2020 estimated tax payments past April 15, 2020?

A – Yes. As specified in Notice 2020-17, (a) a consolidated group of corporations (as defined in Treas. Reg. § 1.1502-1) may defer the payment of up to $10 million in U.S. federal income taxes for 90 days with no interest or penalties, (b) each C corporation that does not join in the filing of a consolidated return also may defer the payment of up to $10 million in U.S. federal income taxes for 90 days with no interest or penalties, and (c) all other affected taxpayers, including individuals, may defer the payment of up to $1 million in U.S. federal income taxes for 90 days with no interest or penalties. This relief is available for U.S. federal income tax payments due on April 15, 2020, in respect of the 2019 taxable year as well as federal estimated income tax payments due on April 15, 2020, for a taxpayer’s 2020 taxable year.

Q – Filing of State Income Tax Returns: Do state income tax returns need to be filed by their due dates?

A – State tax return due date statutes generally fall into two categories: (1) same date as federal return is due (e.g., Alabama) and (2) fixed date (e.g., Arizona, 15th day following close of calendar or fiscal year). Therefore, absent specific authority, a state taxing authority may not modify such due date. Given the exigencies of this situation, many states are changing their due dates (e.g., pursuant to Executive Order N-25-20, California extended to June 15, 2020, the due date for individual income tax returns); you should check your specific state’s filing requirements, as some of these are changing as time passes. Many state taxing agencies have closed or limited in-person taxpayer services and are encouraging taxpayers to use electronic and online services to the extent possible. Taxpayers who are due income tax refunds are encouraged to file their state income tax returns (rather than extension requests) by the due date in order to accelerate refund payments. Automatic extensions of time to file income tax returns continue to be available under existing laws and regulations. Please check your state’s tax agency website for details regarding extension requests.

Q – State Income Tax Payments: May I defer the payment of individual or C corporation state income taxes?

A – The March 17, 2020 announcement by Treasury Secretary Steven Mnuchin to allow the deferral of payment of income taxes without interest or penalties applies only to U.S. federal income taxes. The payment requirements for state income taxes vary from state to state; changes are occurring daily. Some states have postponed payment due dates (e.g., South Carolina), and others intend to follow the federal lead (e.g., New Jersey). Please check your state’s taxation website for details about state income tax payment requirements.

Q – Congressional Action to Date: What has Congress done in response to the COVID-19 crisis so far that may be of interest to businesses?

A – In early March, Congress passed and the president signed H.R. 6074, the Coronavirus Preparedness and Response Supplemental Appropriations Act. That legislation provides for $8.3 billion in emergency funding for federal agencies to respond to the coronavirus threat. It includes $2 billion to the Biomedical Advanced Research and Development Authority (BARDA) for vaccine research, $1.3 billion for the Centers for Disease Control and Prevention (CDC), and $20 million for the Small Business Administration (SBA) Disaster Loans Program to help certain small businesses affected by the COVID-19 crisis. On March 14, 2020, the House passed H.R. 6201, the Families First Coronavirus Response Act. That legislation passed the Senate March 18, 2020, and provides for free diagnosis testing for COVID-19, strengthens unemployment benefit programs and certain food assistance programs, and expands paid leave in limited situations. The Senate has pledged not to leave town until it enacts additional relief legislation that the president is prepared to sign; the House also is working on a third relief bill.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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