Southwestern States COVID-19 Tax Relief Update: States Beginning to Provide Advice on Income Tax Conformity to Provisions in the CARES ACT

The following summarizes the latest news in the Southwest relating to state tax and the COVID-19 pandemic.

General

The extended deadline for filing federal and state income tax returns is Wednesday, July 15. See our earlier coverage here.

Arizona

The deadline for public comment on the Arizona Department of Revenue’s draft ruling and procedure for COVID-19 related abatement of late filing and late payment penalties is Monday, July 13. See our earlier coverage here.

California

The California Department of Tax and Fee Administration updated its COVID-19 FAQs to clarify that a separately-stated COVID-19 surcharge is generally subject to sales tax unless a specific exemption or exclusion applies. The surcharge is generally taxable whether it is a flat-fee or based on a percentage of the selling price.

Colorado

The Colorado Department of Revenue released a publication that addresses how recent retroactive federal tax provisions in the CARES Act interact with Colorado income taxation. The guidance addresses the following topics in the context of individuals, corporations, and estates and trusts:

• Treatment of net operating loss carryback provisions and deduction limitations;
   
• The business interest expense limitation and election to use 2019 adjusted taxable income in 2020;
   
• Excess loss limitations; and
   
• Qualified improvement property
   

The publication does not cover changes to the Colorado Revised Statutes made by House Bill 20-1420, passed by the Colorado General Assembly on June 19. At the time of publication of this alert, the bill is pending signature by Governor Jared Polis.

New Mexico

Tax Legislation Passed: On June 29, New Mexico Governor Michelle Lujan Grisham signed House Bill 6, which does the following:

• Conforms the state net operating loss deduction with the changes in the CARES Act;
   
• Exempts the receipts of certain health care providers relating to payments by the U.S. Department of Health and Human Services from gross receipts tax;
   
• Waives interest and penalties assessed during the period of extended due dates for certain individual, corporate, and trust income taxes, sales and use tax, property tax, and excise taxes.
   

Payment Plans and Collections: The New Mexico Department of Revenue announced that its COVID-19 related modified collection enforcement protocols would be extended to July 31, 2020. The modified procedures were previously due to end on June 30.