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We continue to monitor various state actions for purposes of understanding tax and tax return responsibilities during the pandemic.
Due to COVID-19, the Internal Revenue Service announced extensions of deadlines to pay various taxes and file various tax returns, with such extensions generally being through July 15, 2020. Those IRS extensions, followed in whole or in part by many states, were very helpful to taxpayers. While these IRS extensions have now expired, many states continue to adjust their tax and related requirements to address specific objectives such as raising revenues to assist with depleted governmental budgets, providing incentives to support business employers, and to assist taxpayers generally in dealing with the realities of COVID-19.
This special edition reviews certain updates by several states which may be important to taxpayers.
The Alabama Department of Revenue issued a Notice, dated on August 26, 2020, addressing a secondary supplemental privilege assessment to be imposed monthly for each bed in a nursing facility. According to the Notice, the Alabama Legislature passed, and the Governor signed, Act No. 2020-147, which imposes this supplemental privilege assessment at an annual rate of $327.48, or $27.29 a month, for each bed in such a facility. This amount will increase the total annual nursing facility rate from $4,429.32 to $4,756.80, or $396.40 per month per bed. This change was effective September 1, 2020. The Notice also states that the first tax return on which such changes will be applicable will be the nursing facility tax return for the month of September 2020, which is due on or before October 20, 2020. These returns are required to be filed and paid electronically using the My Alabama Taxes Filing System. According to the Notice, questions regarding this supplemental privilege assessment should be addressed to Ms. Nichelle Norris at the Alabama Department of Revenue, Sales and Use Tax Division, P.O. Box 327790, Montgomery, AL 36132-7790. More information can be found here.
On September 21, 2020, the District's Office of Tax and Revenue (OTR) issued an announcement reminding taxpayers, tax professionals and others, about tax changes that were enacted in the Fiscal Year 2021 Budget Support Emergency Amendment Act of 2020. According to this announcement, the new provisions impact real property, sales and use, motor vehicle fuel, corporate franchise, unincorporated business franchise, estate, individual income and other taxes. Unless otherwise noted, these changes take effect October 1, 2020. The OTR's announcement sets forth a brief summary of those tax changes. More information can be found here.
On September 18, 2020, Governor DeSantis signed House Bill 7095 which adopts the Internal Revenue Code for purposes of the Florida corporate income tax, adopting the Code in effect on January 1, 2020. Pursuant to House Bill 7095, references to the "Internal Revenue Code" mean the United State Internal Revenue Code of 1986, as amended and in effect on January 1, 2020, with certain exceptions. The law was effective September 18 and operates retroactively to January 1, 2020. More information can be found here.
For some years, Georgia has encouraged film production in that State by allowing a credit against Georgia income taxes of 20 percent of certain expenses incurred in film production within Georgia. If the production company could not use the credit, the credit could be sold to a Georgia taxpayer who could use the credit. This sale typically occurs at a discount from face value. Due to perceived abuses, the Georgia Legislature this year passed, and Governor Kemp signed on August 4, 2020, House Bill 1037, which will narrow the types of expenditures for which credits are available and limit the expenses to those incurred in Georgia. In addition, the Bill will require that all expenses for which a credit is available be audited. The audit requirement would be phased in starting in 2021. For 2021, the audit requirement will apply to projects for which the credit sought exceeds $2.5 million. The threshold is reduced to $1.25 million in 2022. The threshold drops to zero in 2023. The audit can be performed either by the Department of Revenue or by a certified public accountant who has met the requirements set by the Department. More information can be found here.
On September 24, 2020, Louisiana Governor Edwards signed Proclamation Number 129 JBE 2020, entitled COVID-19 Public Health Emergency/Additional Suspension - Louisiana Workforce Commission. The purposes of this Proclamation is to suspend the imposition of a solvency tax that would otherwise become effective when the balance of the Unemployment Trust Fund for the next four quarters would be less than $100 million. That solvency tax, if implemented, would assist in restoring the current balance of the Fund, which the Proclamation noted to be $49.4 million as of September 24, 2020. However, as also noted in the Proclamation, the solvency tax if triggered in September of 2020 would levy a significant tax increase on employers in April of 2021, before there can be a full recovery of the Louisiana economy from COVID-19. As a result, the Proclamation suspends the requirements of the Secretary of the Workforce Commission to report a balance of the Fund below $100 million for the next four quarters and to assess a solvency tax. The Proclamation states that these provisions are effective from September 24, 2020 to October 9, 2020, or as extended by any subsequent Proclamation, unless terminated sooner. More information can be found here.
The Maryland Office of the Comptroller issued a news release on September 17, 2020, reminding taxpayers that collection activities are on hold until after the COVID State of Emergency is lifted. According to the release, the COVID-19 State of Emergency Order issued by Governor Hogan is still in effect, and the Comptroller's Office has suspended collection activities but those activities will resume 30 days after the Order is lifted. Also according to this release, the Office of the Comptroller will mail notifications to certain tax filers of unpaid tax liabilities that were due on July 15, 2020, which was the extended deadline from the traditional April 15 tax due date. These mailings, which will provide the recipients with their account status, are being sent to taxpayers that have not paid the balances of certain taxes, including individual and corporate income, sales and use, and withholding taxes. As stated in the release, recipients of the notices are not required to take any action at this time; however, interest will continue to accrue on any unpaid balance from the time the tax was due, including the period of suspended collection activities, until the liability is paid, as well as a penalty of 10 percent on the total payment due. The release noted that taxpayers who pay the amount due upon receiving the notice can avoid future interest and penalties. The Comptroller was quoted in the release as stating that the Office is "sending these notices to urge those who owe taxes to call us now and work out a payment plan before more interest and penalties are charged. Our team will work with you to find a reasonable plan for your family circumstances or your business, but we must hear from you first." Taxpayers wishing to make payment or request a payment plan are asked to follow the instructions on the notice. More information can be found here.
The Mississippi Department of Revenue recently issued Notice 72-20-09, dated September 16, 2020, which addresses the application of the sales tax to food delivery service providers. As referenced in the Notice, the Mississippi Marketplace Facilitator Act of 2020 was enacted during this year's regular legislative session and became effective July 1, 2020. Pursuant to that new law, the Notice states that the sale of food made through a third-party delivery service is removed from the definition of a "retail sale" for sales tax purposes. Thus, the Mississippi sales tax will no longer be due on the sale of food through third-party delivery services which allow customers to order food to be delivered from a restaurant of the customer's choosing and to pay for the food through the delivery service's app or website. According to the Notice, the restaurant will charge the regular retail rate of tax and any applicable local taxes, and tips paid to the delivery drivers are not subject to the tax. The Notice further stated, however, that any food delivery service that maintains its own inventory of items for sale or performs a combination of third-party deliveries and direct sales of items to customers is required to register and collect and remit the sales tax on sales to its customers from its own inventory. The Notice states that registration applications can be completed online in the Taxpayer Access Point at www.dor.ms.gov. The Notice further states that sales tax also applies to delivery charges and any other charges added to the delivery service related to sales of items from their own inventory; however, tips that are not required but are paid at the discretion of the customer are not subject to the tax. More information can be found here.
The South Carolina Department of Revenue issued Information Letter # 20-24, dated August 26, 2020, effective from March 13 through December 31, 2020, expanding until December 31, 2020 the relief set forth by the Department in its Information Letter # 20-11. That Letter announced temporary relief regarding a business's establishment of nexus (both income and sales) solely because an employee is temporarily working in a different work location due to COVID-19. See our S.A.L.T. Select Developments, Supplement # 6 (June 2, 2020) here, for a summary of the previously announced temporary relief. That relief was effective from March 13 through September 30, 2020; however, Information Letter # 20-24 extends that relief through December 31, 2020. More information can be found here.
The Tennessee Department of Revenue recently issued Letter Ruling # 20-06, dated September 17, 2020, addressing whether a Tennessee net operating loss carryforward survives a certain merger transaction for purposes of this State's excise taxes. The excise tax is imposed at the rate of 6.5 percent on a taxpayer's net earnings; and Tennessee permits a taxpayer to deduct a net operating loss from its net earnings in the computation of the excise tax liability, with qualified net operating losses being available to be carried forward and deducted for up to 15 years. With certain exceptions, Tennessee requires each taxpayer to be considered as a separate entity; and, as a result, a loss carryforward may be taken only by the taxpayer that generated the loss carryforward - with one specific exception. That exception provides that if a taxpayer merges out of existence and into a successor taxpayer that has no income, expenses, assets, liabilities, equity or net worth, then the qualified Tennessee loss carryover of the predecessor taxpayer that merged out of existence shall be available for carryforward and deduction from the net earnings of the surviving successor. Under this recent Ruling, the Department was asked to address in essence whether two separate but related corporations, each having net operating loss carryforwards, could merge into a newly created corporate taxpayer under the foregoing exception. The Department ruled that this exception was not available to the entirety of such a transaction, but rather the first existing corporate entity to merge into the new corporate successor would result in the successor being allowed to utilize those loss carryforwards; but that the second merger of a previously existing corporate taxpayer into the newly created corporation would not satisfy the exception since at the time of the second merger the new corporation would have income, assets, expenses, liabilities, etc. as a result of the first merger. More information can be found here.
On September 1, 2020, the Texas Comptroller issued Publication 96-259 which addresses taxable services for sales and use tax purposes. Those taxable services, as set forth in Subsection (a) of Texas Code Section 151.0101, include 17 different broad categories of services, such as amusement services, data processing services, debt collection services, internet services, telecommunication services, and security services, among others. Under Subsection (b) of that Section, the Comptroller "shall have exclusive jurisdiction to interpret" those taxable services. In that regard, Publication 96-259 addresses each of those taxable services so as to provide taxpayers with examples and references to additional relevant information. More information can be found here.