Lewis Roca Blog

As the COVID-19 pandemic continues, states are clarifying their position on certain tax relief provisions available to taxpayers. Additionally, taxpayers in the Southwest and nationwide should be aware that the July 15 extended filing deadline for 2019 corporate and personal income tax at the federal and state levels is rapidly approaching.
 
The following summarizes the latest news in the Southwest.
 
Arizona
Income Tax Returns: The Arizona Department of Revenue recently issued a reminder to taxpayers that the deadline to file and pay individual, corporate and fiduciary tax returns for the 2019 calendar tax year is July 15, 2020. The deadline was extended from April 15 due to COVID-19. Taxpayers filing state tax returns or submitting payments by July 15 will not be assessed late filing or late payment penalties and interest by the Department.
 
Sales Tax Relief: The Arizona Department of Revenue announced that it is working with taxpayers struggling to meet their transaction privilege tax obligations as a result of the COVID-19 pandemic on a case-by-case basis. The Department is assisting businesses in applying for late payment and late filing penalty abatement. To request penalty abatement, a taxpayer must submit Arizona Form 290 to the Department. The Department is prioritizing working with customers rather than taking enforcement actions when reasonable, as this approach is more beneficial to the taxpayer and efficiently serves state and municipal interests.
 
Electronic Signatures: Governor Doug Ducey signed Senate Bill 1021 on
June 5, 2020 requiring the Department of Revenue to accept electronic signatures as the functional equivalent of written signatures on documents submitted to the Department. Valid electronic signatures must meet all of the following criteria:

• ​be executed by a person with the intent to sign the document
• be attached to or logically associated with the information contained in the document being signed
• be capable of reliably identifying the person as the signer
• be linked to the document in a manner that would invalidate the electronic signature if the document was changed
• be linked to the document so as to preserve its integrity
• be compatible with standards and technology for electronic signatures generally used by commerce, industry, or state governments

California
Income Tax: The California Franchise Tax Board (FTB) issued tips and reminders for taxpayers leading up to the income tax filing deadlines. The release emphasized that the COVID-19 extension for 2019 returns and payments ends on July 15, 2020. Taxpayers have an automatic filing extension until October 15, 2020, however, all amounts due for 2019 must be paid by July 15.
 
CARES Act: The FTB recently issued guidance regarding the California tax treatment of the CARES Act stimulus payments. The guidance clarifies that the one-time federal economic impact payments, of up to $1,200 per taxpayer, are not subject to California income tax. Additionally, the emergency increase in unemployment compensation benefits, of up to $600 per week, are also not subject to California income tax. The guidance also specifies that modifications to net operating losses made by the CARES Act do not apply for California purposes. Finally, the federal early withdrawal penalty waivers for distributions from qualified retirement accounts under the CARES Act will apply for California purposes.
 
Statute of Limitations: The FTB announced that it will temporarily accept electronic signatures on statute of limitations waivers through December 31, 2020. Taxpayers can submit signed waivers to the FTB using one of the following methods:

• Fax with a handwritten signature
• E-mail with a handwritten signature from a verified email address
• Upload a scanned copy of the waiver with a handwritten signature to the taxpayer’s MyFTB account
• Upload a scanned copy of the waiver with a handwritten signature to cloud storage and provide FTB staff with the link to download the waiver
• Utilize a third-party service such as DocuSign

Colorado
Income Tax Filing Deadlines: Governor Jared Polis issued Executive Order D 2020 105 on June 15, which extends earlier Executive Orders D 2020 010, D 2020 040, and D 2020 069 through July 16. The earlier orders extended Colorado’s corporate and personal income tax filing deadlines to July 15, 2020 as a result of COVID-19 pandemic.

Business Personal Property; Mining Property; Oil & Gas Property: Governor Polis signed Executive Order D 2020 on May 30, extending earlier Executive Orders D 2020 022 and D 2020 055 through June 30. The earlier orders temporarily suspended certain filing deadlines relating to business personal property, mining property and oil and gas property.

Resources for Taxpayers and Businesses: The Colorado Office of Economic Development and International Trade launched an online portal with resources for taxpayers and businesses dealing with the economic fallout of the COVID-19 pandemic. Topics include loans, loan forgiveness for tax-exempt entities, deferrals for individual and corporate income, social security, self-employment taxes and economic impact payments.
On June 23, the Colorado Legislature enacted H.B. 1413 authorizing a loan program to assist the state’s economic recovery by leveraging private investment for loans to Colorado small businesses recovering from the COVID-19 crisis.

Nevada
Sales Tax: On June 15, the Nevada Department of Taxation issued guidance regarding the taxability of COVID-19 related surcharges, which are being used by businesses to recoup the cost of implementing COVID-19 safety measures and other increased expenses. The guidance advises business owners that a surcharge is considered a taxable service fee under Nevada Revised Statute § 372.025(2)(a) and should be included in the business’ gross receipts for sales tax purposes.
 
New Mexico
Payment Plans and Collections: The New Mexico Department of Taxation and Revenue announced new self-service payment plans and the extension of certain collections relief for taxpayers facing financial difficulties as a result of the COVID-19 pandemic. Taxpayers can now choose the size of their down payment towards a plan and the duration of the plan can extend up to 72 months. Eligible taxpayers will be automatically accepted. The modifications to collection and enforcement efforts, which were originally announced on March 30, have been extended as follows:

• New liens, seizures, injunctions and other severe collections actions are on hold through June 30
• Taxpayers on payment plans will be offered an additional deadline extension of 30 days, for a total of 90 days
• Taxpayers undergoing field or desk audits will be offered the opportunity to request an extension or a waiver giving them more time to produce records

Potential Gross Receipts and Property Tax Relief: On June 17, Governor Michelle Lujan Grisham announced plans to ask the New Mexico Legislature to approve legislation that will waive penalties and interest for small businesses and individuals who have been unable to make timely property tax and gross receipts tax payments due to the economic impact of the pandemic during its special session, which began June 25. The governor’s plan would invest a portion of the state’s multibillion-dollar Severance Tax Permanent Fund to support low interest, long-term loans to small businesses and municipalities impacted by the COVID-19 pandemic.
 
Texas
Sales Tax: The Texas Comptroller’s Office issued guidance on the taxability of COVID-19 related surcharges. The guidance makes clear that fees or surcharges charged by Texas businesses related to the COVID-19 pandemic are not governmental fees, but are rather charges that businesses have chosen to pass along to recoup the higher costs of goods and services provided to their customers. Under Tex. Tax Code § 151.007, if the underlying transaction is subject to sales tax, then these fees or surcharges are also taxable, even when separately stated or identified as a dollar-for-dollar reimbursable expense.
 
The Comptroller’s office also reiterated its commitment to work with taxpayers who are struggling to pay their sales and use tax obligations as a result of the pandemic. It requested that taxpayers file the sales tax returns that are due, make a good faith payment and contact the Enforcement Hotline at 800-252-8880 to learn about options for remaining in compliance.
 

For more information, please contact Pat Derdenger at pderdenger@lewisroca.com, Karen Lowell at klowell@lewisroca.com or visit www.LRRC.com.

This material has been prepared by Lewis Roca Rothgerber Christie LLP for informational purposes only and is not legal advice. Specific issues dealing with COVID-19 are fluid and this alert is intended to provide information as it is currently available. Readers should not act upon any information without seeking professional legal advice. Any communication you may have with a Lewis Roca Rothgerber Christie LLP attorney, through this announcement or otherwise, should not be understood by you to be attorney-client communication unless and until you and the firm agree to enter into an attorney-client relationship.