DC, Pa. Won't Count Teleworkers For Nexus Amid Outbreak

By James Nani
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Law360 (April 1, 2020, 8:39 PM EDT) -- Tax officials from District of Columbia and Pennsylvania are not considering telecommuting employees as creating a nexus, they said at a Wednesday coronavirus-themed webinar with other state officials, though jurisdictions diverged on whether they're delaying some estimated tax payments.

Tax officials from D.C, Illinois, Oregon, Pennsylvania and Texas offered updates on how agencies are responding to the novel coronavirus pandemic during a webinar hosted by Reed Smith LLP.

Emerging from the talk were various deadlines for taxes from one jurisdiction to another, despite many states and the federal government pushing back corporate and personal income tax filing dates. But some consensus emerged from the agencies that, at least during times of emergencies like that caused by the virus, employees being forced to work from home didn't create a tax nexus.

Keith J. Richardson, deputy chief financial officer for the District of Columbia Office of Tax and Revenue, said during the webinar that deadlines for individual and business taxpayers to file their estimated tax payments for the 2020 tax year hasn't changed. The first quarterly payments are due April 15 and the second quarter payments are due June 15, Richardson said.

"It's one thing we have not changed at all in regard to taxpayers," Richardson said.

As far as potential corporate nexus created by employees having to work in the district because of restrictions caused by the pandemic, Richardson said the district didn't think that should be an issue.

"We don't believe this will create any nexus for companies because we know they're not in a district at this time as well," Richardson said. "So we're very open and will work with you all."

Richardson also said taxpayers have to live in the district for more than 183 days in a year to be a statutory resident.

In Oregon, for corporate income and excise tax purposes, nexus is determined using an economic nexus standard, according to Deanna Mack of the Oregon Department of Revenue.

"We're going to look at all the facts and circumstances of the business to determine whether they have nexus here and I'm sure that, when we get to that point, we will be evaluating the COVID-19 impacts," Mack said.

For personal income taxes, Mack said if a nonresident is doing disaster or emergency related work in Oregon, the income is not taxable as either a business or as an individual.

"So if you're here in Oregon, specifically to do emergency related work, that does not create nexus," Mack said.

But when it comes to Oregon's new corporate activities tax, Mack said deadline relief hasn't been granted. But she said businesses should document their assumptions in determining estimated payments and said no one would see penalties until after the first return is filed in April 2021.

"That deadline has not been extended, despite a lot of pushback from the business community to do so," Mack said. "So what we're telling folks is that, again, it is an estimate. And I know that they're looking at a new tax program. So if they make a good faith effort at making their first estimated payment timely, we have the ability to waive [the] penalty for underpayment on the back end."

Some experts have said the patchwork of different deadlines from states and and localities could cause headaches for individuals and corporations when it comes to compliance. According to data from the National Taxpayers Union Foundation, a tax research nonprofit, many states, including California, Kansas and Georgia have delayed estimated payments in response to COVID-19.

Like Washington D.C., Illinois is also not extending any of the deadlines for estimated payments that are due on April 15 and June 15, said Brian E. Fliflet, acting general counsel of the Illinois Department of Revenue. But he said the department is considering providing an additional option for how taxpayers can compute the required installment that will be due.

"We have not made a final determination on that yet," Fliflet said. "But we hope to be posting another information bulletin to our website later today or tomorrow with with regard to alternate ways of computing the estimated payments."

In Pennsylvania, the state has extended its filing deadline until July 15 and penalties and interest have been waived as well through July 15, said Thomas J. Gohsler, chief counsel of the Pennsylvania Department of Revenue. But unlike other states, that extension is going to apply to estimated payments for the first and second quarters of 2020, said Thomas J. Gohsler, chief counsel of the Pennsylvania Department of Revenue.

In terms of filing deadlines, the department was anticipating additional guidance on pass-throughs that would be released likely on Wednesday or Thursday, Gohsler said. And while assessments and notices for business and individuals are still being created, if those notices require a response by a specific date, Gohsler said those dates will be temporarily suspended until the department's offices are reopened.

Gohsler also touched on federal stimulus payments that the federal government plans to issue, saying the department has concluded that would not be subject to personal income tax.

But Pennsylvania was taking a similar approach to other states when it came to nexus and employees having to work remotely for taxes such as employer withholding and personal income tax, Gohsler said.

"At this point, we are not taking into consideration for purposes of nexus those individuals that are required to telework due to COVID," Gohsler said.

In Texas, Karey Barton, associate deputy comptroller for tax at the Texas Comptroller's Office, said within the next day or so, an official announcement would come out from the office regarding an extension of the May 15 franchise tax payments that are due in the state.

"We will be pushing those out to July 15 for folks to file a return to make payment or make payment and file an extension," Barton said.

Nonetheless, Barton said other taxes, such as the state's sales taxes, have not been delayed, and those tax payment due dates remain in place for monthly and quarterly filers.

"We are working with taxpayers who are running into some financial situations," Barton said. "We are asking that they file their returns, make good faith payments on their returns and then reach out to our enforcement folks."

--Additional reporting by Amy Lee Rosen. Editing by Neil Cohen.

For a reprint of this article, please contact reprints@law360.com.

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