Menu
Get In Touch
Share

Legal Articles

COVID-19: Taxing Authorities Make Moves to Address COVID-19

March 30, 2020

Overview

As the effects of COVID-19 continue to spread, the area of tax law is certainly no exception.  A number of important tax updates were issued this past week by both federal, state, and local authorities. 

Federal Government

Income Tax Filing Deadlines Pushed Back
Earlier this month, the Internal Revenue Service (“IRS”) extended the tax payment and filing deadline from April 15, 2020, to July 15, 2020. Our recap on those announcements can be found here.

United States Tax Court
The United States Tax Court (the “Court”) remains closed and has actually extended its cancellation of sessions to include all sessions through July 3, 2020. This includes the Court’s Seattle, Washington, May 18, 2020, session. We will continue to follow the Court and post any updates to their schedule. For now, the Court has stated any unresolved cases from cancelled sessions will be scheduled for trial at a later date.

IRS Collection Practices
On March 25, 2020, the IRS issued Notice 2020-59. In that Notice, the IRS announced that it is temporarily adjusting its tax collection processes, and certain other administrative processes, including postponing certain payments related to Installment Agreements and Offers in Compromise and limiting certain enforced collection actions.

These temporary changes include:

  • Offers in Compromise (“OIC”):
    • The IRS will allow taxpayers until July 15 to provide requested additional information to support a pending OIC. In addition, the IRS will not close any pending OIC before July 15, 2020, without the taxpayer's consent.
    • Taxpayers have the option of suspending all payments on accepted OICs until July 15, 2020, although by law interest will continue to accrue on any unpaid balances.
    • The IRS will not default an OIC for those taxpayers who are delinquent in filing their tax return for tax year 2018. However, taxpayers should file any delinquent 2018 return (and their 2019 return) on or before July 15, 2020.
  • Collection Actions: Liens and levies (including any seizures of a personal residence) initiated by field revenue officers will be suspended during this period. However, the IRS warns that Revenue Officers will continue to pursue “high-income non-filers” and perform other similar activities “where warranted.”
  • Automated Liens and Levies: New automatic, systemic liens and levies will be suspended during this period.
  • Private Debt Collection Agencies: New delinquent accounts will not be forwarded by the IRS to private collection agencies during this period. 

Other Temporary Administrative Changes:

  • Passport Certifications to the State Department. The IRS will suspend new certifications to the Department of State for taxpayers who are "seriously delinquent" during this period. “Certification” prevents a taxpayer from receiving or renewing a passport. The IRS advises that such taxpayers are encouraged to submit a request for an Installment Agreement or, if applicable, an OIC during this period.
  • Field, Office, and Correspondence Audits. The IRS will generally not start new field, office, and correspondence examinations during this period.  In-person meetings regarding current field, office and correspondence examinations will be suspended. The IRS warns, however, that new audits may be commenced where it is deemed “necessary to protect the government’s interest in preserving the applicable statute of limitations.”
  • Appeals. Appeals Officers and Settlement Officers will continue to work their cases. Appeals is not currently holding in-person conferences with taxpayers, but conferences may be held over the telephone or by video conference.

State Government

Oregon
Certain Income Tax Filing Deadlines Pushed Back
On March 25, 2020, the Oregon Department of Revenue (“DOR”), at the direction of Governor Kate Brown, announced the extensions for Oregon personal and corporate taxpayers.  The DOR added information to its COVID-19 tax relief options webpage, including the addition of a copy of Revenue Director Order 2020-01 and of a set of “frequently asked questions.” The DOR’s guidance is summarized as follows:

For personal income taxpayers:

  • For tax year 2019, the return filing due date and the tax payment deadline has been extended from April 15, 2020, to July 15, 2020. If a taxpayer requests an extension to file the taxpayer’s return, the 6-month extension continues to extend the filing deadline only to October 15, 2020.
  • For tax year 2020, the estimated tax payments have not been extended. This is different from the federal approach, which was to push back the due date for 2020 Q1 estimated payments. Be careful not to miss your Oregon estimated payment obligations.

For corporate income/excise taxpayers:

  • For tax year 2019, the return filing due date and tax payment deadline has been extended from May 15, 2020, to July 15, 2020. Returns and payments due after May 15, 2020, have not been extended at this time.
  • For tax year 2020, the estimated tax payments have not been extended. This is different from the federal approach, which was to push back the due date for 2020 Q1 estimated payments. Be careful not to miss your Oregon estimated payment obligations.

Oregon CAT
Given the general uncertainty these days, many have been hoping Oregon would delay the implementation of the State’s corporate activity tax (“CAT”). On March 27, 2020, the DOR made it clear CAT implementation will press ahead, by sending out notices reminding taxpayers of their duty to register for the CAT. Although the DOR has not indicated whether the 2020 Q1 CAT payment deadline will be affected, the above discussion of income tax deadlines suggests taxpayers should not plan on the CAT estimated payment deadline being pushed back. 

Portland and Multnomah County
On March 27, 2020, the City of Portland Revenue Division (the “Revenue Division”) posted the following on its COVID-19 Revenue Division Program Relief webpage, located here:

  • Arts Tax: The Revenue Division automatically extended the Portland Arts Tax return filing and payment due date to July 15, 2020.
  • Portland Business License Tax and Multnomah County Business Income Tax: The Revenue Division automatically extended the Portland and Multnomah County business tax return filing and payment deadlines to July 15, 2020. For C corporations that have a May 15, 2020, deadline with the State of Oregon, those local deadlines are also extended to July 15, 2020. No additional extensions have been provided at this time. No penalties or interest will accrue until July 16, 2020, for any tax filing or payment extended pursuant to these changes. No extension was provided for estimated payment deadlines for 2020.
  • Delinquent Tax Collections: Although interest will continue to accrue, the Revenue Division will not default any payment plan through July 15, 2020, for failure to pay. The Revenue Division encouraged delinquent taxpayers to contact the Revenue Division to enter into payment plans.
  • Clean Energy Surcharge (“CES”): The Revenue Division is automatically extended the CES Schedule filing due on April 15, 2020 (or May 15, 2020, for C-Corporations) until July 15, 2020. No penalties or interest will accrue until July 16, 2020, for any tax filing or payment extended pursuant to these changes. No extension was provided for estimated payment deadlines for 2020.
  • City of Portland Liens: The Revenue Division will continue to issue lien statements. Taxpayers can apply for hardship deferral.
  • Transient Lodging Taxes: No extension was provided.

Washington
Governor Jay Inslee has immediately allowed for the use of electronic/remote notarization (with specific conditions authorized in Senate Bill 5641 (originally slated to go into effect Oct. 1, 2020)). For Washington residents, this should remove one of the larger hurdles in creating an estate plan right now.

Conclusion
We will continue to track federal, state, and local tax issues as events evolve in light of COVID-19. In the meantime, if you have any questions or comments about the Oregon CAT, or other state and federal tax issues, please do not hesitate to contact Dan EllerAlee Soleimanpour, or John Way.

Please visit Schwabe's COVID-19 resource page for additional information.


Prior Update from March 20, 2020

Federal, state, and local taxing authorities have been making moves to address COVID-19. Here is what we know:

Federal Government
Earlier this month, Treasury Secretary Steven Mnuchin (“Treasury Secretary”)  informed Congress about the potential economic effects pushing back the filing deadline could have on the broader U.S. economy in light of COVID-19. On March 17, 2020, the Treasury Secretary announced the Internal Revenue Service (“IRS”) will extend the tax payment deadline for individuals and many business from April 15, 2020, to July 15, 2020.  On March 18, 2020, the IRS issued Notice 2020-17, Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic (“Notice 2020-17”). The Notice extends the tax payment deadline for any person with a Federal income tax payment due from April 15, 2020, to July 15, 2020, interest and penalty free.  

  • Single individuals and married individuals filing a joint return can postpone up to $1,000,000 in federal income tax payments.
  • Corporate taxpayers, or consolidated groups as defined under Treasury Regulation section 1.1502-1, can postpone up to $10,000,000 in federal income tax payments.   

On March 20, 2020, the Treasury Secretary announced the deadline to file has also been extended from April 15, 2020, to July 15, 2020. As such, both the deadline to file and the deadline to pay taxes have been extended 90 days from April 15, 2020, to July 15, 2020. 

We will continue to monitor the IRS’s webpage on COVID-19 as well as the Treasury Department’s webpage on COVID-19, and update you as things change. If the federal government provides additional clarity or expands its relief measures, we will update you.

Finally, we should note the United States Tax Court (the “Court”) has closed its Washington D.C. building, will not accept hand-delivered petitions, and cancelled all sessions, including its calendared session in Seattle, WA, through the end of April. As of now, the Court’s Seattle, Washington, May 18, 2020, session has not been cancelled. We will continue to follow the Court and post any updates to their schedule. For now, the Court has stated any unresolved cases from cancelled sessions will be scheduled for trial at a later date. 

Oregon
On March 13, 2020, the Oregon Department of Revenue (“DOR”) announced tax relief options in light of the COVID-19 pandemic. The announcement addresses personal income tax, the Oregon corporate activity tax (“Oregon CAT”), and various other tax programs.

Personal Income Tax

  • The DOR stated it will follow the IRS’s filing and payment due dates for personal income tax. The effects of the Treasury Department’s recent announcement is a bit unclear as the announcement is tied to a specific dollar amount (i.e., individuals up to $1 million or businesses up to $10 million) whereas the DOR generally relies on the IRS’s filing and payment due dates without regard to a specific dollar amount. 
  • As of March 19, 2020, the DOR was still deciding whether to extend filing and payment due dates. We anticipate the DOR will make an announcement in the near future addressing the discrepancy and outlining how the Treasury Department’s recent announcement will affect its filing and payment dates. 
  • The extension of the federal filing and payment due dates for personal income tax, however, will not extend estimated payment due dates for Oregon. Fortunately, the DOR will not impose interest on an underpayment of estimated tax if the DOR determines that by reason of casualty, disaster, or other unusual circumstances the imposition of interest would be against equity and good conscious. 
  • The DOR has stated taxpayers may file extensions, but has cautioned an extension of filing is not an extension of payment due date. 
  • The DOR may waive penalties under certain circumstances; however, this also remains unclear.   

Oregon CAT

  • Initial quarterly payments for the CAT are due April 30, 2020; however, the DOR has indicated it will not assess underpayment penalties to taxpayers making a good faith effort to estimate their first quarter payments as they understand COVID-19 may impact taxpayers’ commercial activity.
  • The Oregon CAT education tour has been suspended due to concerns about the spread of COVID-19. Unfortunately, Dan did not attend the tour stop at Mt. Hood Community College, and had planned to attend the (now canceled) stop in Rock Creek. If the DOR provides an online version of the education tour, Dan plans to attend online.  

Other Departments

  • In its supervisory capacity for cities, counties, and other taxation districts relating to local budget law, the DOR reminds local authorities that they may request, in writing, that the assessor grant an extension of the July 15 deadline for certifying taxes.
  • Local governments must adopt their budgets by June 30; which cannot be extended. For alternative means of conducting a public meeting for purposes of gathering public input, please refer to the Oregon Department of Justice’s Public Meeting Law Manual. Any alternate means of conducting public hearings must provide for public comment in real time.

Finally, please note the DOR may extend any statutory period of limitation on any tax that it collects if the IRS takes such an action at the Federal level, or if a state-declared emergency impairs the DOR’s ability to take action required within the statute of limitations.  In such an event, the DOR will issue an order and file it with the Secretary of State. 

Washington
The Washington Department of Revenue (“WA DOR”) maintains a webpage devoted to the “2019 Novel Coronavirus Outbreak (COVID-19) Update” here. That website notes Governor Inslee declared a state of emergency on February 29, 2020, but does not provide any filing deadline relief. Instead, the website points taxpayers to guidance regarding how to file for an extension and how to request a late payment penalty waiver.

Conclusion
We will continue to track federal, state, and local tax issues as events evolve in light of COVID-19. In the meantime, if you have any questions or comments about the Oregon CAT, or other state and federal tax issues, please do not hesitate to contact Dan Eller, Alee Soleimanpour, or John Way.

Please visit Schwabe's COVID-19 resource page for additional information.

Professionals

Related Services

Related Industries

Written By

Share