March 24th Morning State Tax Update

March 24, 2020

On March 19 we launched a tracker providing a repository of information related to state fiscal policy responses to COVID-19. We are updating the tracker frequently and will be using the Tax Foundation blog to summarize new developments and provide analysis of relevant trends as they emerge.

State Legislative Session Changes

Many states have adjusted their legislative sessions in compliance with federal social distancing guidelines encouraging people to limit groups to 10 or fewer:

  • Three states—Idaho, Maine, and Maryland—have adjourned for the year earlier than originally planned due to COVID-19 (although the possibility of a special session later this year exists in Maine and Maryland).
  • Alaska, Arizona, and South Dakota are nearing the final stages of negotiations on must-pass legislation and plan to adjourn imminently.
  • Fourteen states with legislative sessions not scheduled to adjourn until May or later have suspended their sessions. Some have suspended their sessions indefinitely, and others have set a target return date. These states are Colorado, Connecticut, Delaware, Louisiana, Minnesota, Mississippi, Missouri, New Hampshire, New York, North Carolina, Oklahoma, Rhode Island, South Carolina, and Vermont.

Income Tax Filing and Payment Deadline Changes

On March 20 the federal government moved Tax Day from April 15 to July 15, giving individuals and businesses more time to file and pay their federal income taxes. However, if states do not move their own filing and payment deadlines, they will negate much of the benefit of the federal extension because most of the relevant information used to file state income taxes is drawn from federal Form 1040.

As of March 23, at least 16 states and the District of Columbia have announced extensions of their own income tax payment and/or filing deadlines. Twelve states have moved their filing and payment deadlines to July 15 (Alabama, California, Connecticut, Indiana, Kansas, Maryland, Nebraska, New Mexico, New York, North Carolina, North Dakota, and Wisconsin), along with the District of Columbia. (Among these states, several now automatically conform with the IRS, so in the event the federal deadline is further extended, the state deadline will extend by default.)

Iowa’s deadline, normally April 30, has been moved to July 31, and Virginia, with a normal deadline of May 1, has extended this year’s payment (but not filing) deadline to June 1. The other state that has moved only its payment deadline, but not its filing deadline, is Oklahoma. South Carolina has extended its payment and filing deadline to June 1.  

To prevent taxpayer confusion and to give taxpayers the full benefit of the federal extension, all states should consider shifting their individual income tax payment and filing deadlines to match the new federal deadline to the extent they can. The extended deadline avoids the need for individuals to track down receipts or visit a tax preparer’s office during a period of social distancing and provides a buffer for individuals and families experiencing unexpected layoffs, reduced hours, illness, or other economic distress. It can also help businesses maintain liquidity in the face of unprecedented circumstances, especially those businesses that are being forced to temporarily shutter their doors or cut back their operations.

Offering income tax payment extensions will help ease the immediate financial burden for those expecting to owe income tax payments, but policymakers should also prioritize extending filing deadlines wherever possible, as this will help ease administrative burdens for millions of individuals, businesses, and tax preparers during these challenging times.

Using the Tracker

Our tracker also includes news and updates, compiled over the past few days, on state budgets, COVID-19 responses, and more. This is the first update in our series of blog posts highlighting new developments (which will also be incorporated into the tracker). Please check back regularly for new information and consider subscribing to our free email newsletter to receive weekly updates sent directly to your inbox.

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