Texas made changes to the state tax rules because of COVID-19

Federal taxes are not the only tax liabilities impacted by COVID-19.  Various state and local taxing jurisdictions are also grappling with how to balance the desire to help taxpayers navigate these difficult times with their need for tax revenue to continue offering the services and resources critical to citizens. While the federal government can spend more money than they take in, state governments do not have that luxury.  Consequently, the tax relief being offered varies greatly by jurisdiction and by tax type.  This blog post addresses how the State of Texas has responded to this crisis and what taxpayers can expect going forward.  Many of the items discussed below are also discussed at the Comptroller’s website, where there is a dedicated COVID-19 resources page.

Franchise Tax

For non-EFT filers (those with previous tax liabilities less than $10,000), the due date for franchise tax reports has been extended from May 15th to July 15th.  A taxpayer can extend their due date until January 15th, 2021 by making the standard extension payment by July 15th (90% of current liability or 100% of prior year’s liability). 

EFT filers that make an extension payment by July 15th can extend their due date only until August 15th.  At that date, EFT filers can request a second extension until January 15th, 2021 by paying its full liability.    

Taxpayers can continue to file their reports and access their account online as they normally could.

Sales Tax

Texas offered taxpayers short-term payment agreements and a waiver of penalties and interest with respect to March sales tax reports (due April 20th).  To obtain these benefits, taxpayers were required to make a good faith partial payment and contact the Enforcement Division.  For car dealerships, the Comptroller is providing a temporary extension up to 90 days to title and register motor vehicles.

As of now, the Comptroller is offering no relief for April or later sales tax reports. 

Property Tax

Local appraisal districts administer property tax, so any potential relief varies by locality.  For all appraisal districts, rendition statements typically due April 15th are now due May 15th, and all Freeport Exemption applications are now due June 15th.  With respect to the protest process, for example, the Dallas Central Appraisal District has posted a notice on their website that the appraisal notice and protest process is under review and “the timetable has not yet been determined.  Once appraisal notices are released, the protest deadline will be 30 days from that date for everyone, regardless of whether a notice was mailed to you.”

Of most interest to taxpayers is whether there is any monetary relief for property taxes.  Property values are determined as of January 1 of the taxable year, so any subsequent loss of value would not impact the valuation of any property.  While some appraisal districts have discussed freezing 2020 values at 2019 amounts, that is not certain to happen.  Property tax protests will likely be done remotely, and it is unclear how appraisal districts will be able to staff their appraisal boards to hear these cases.

One other potential source of property tax relief is recently-enacted Section 11.35 of the Tax Code, which provides a temporary tax exemption for qualified property damaged by a disaster, as declared by the governor.  This provision was in reaction to Hurricane Harvey and provides an exemption of varying amounts as determined by a certain formula that originated from the FEMA Damage Assessment Manual.  The Texas attorney general recently issued Opinion KP-0299 stating that a court would likely conclude that the legislature intended to limit the temporary tax exemption to apply to property physically harmed as a result of a declared disaster.  Therefore, “purely economic, non-physical damage to property caused by the COVID-19 disaster is not eligible for the temporary tax exemption provided by section 11.35 of the Tax Code.”  It is important to note that the attorney general’s opinion is not binding on courts.  While appraisal districts will likely deny the exemption, and such denials will likely be upheld by appraisal review boards, it is unclear how a court will react until there is any actual litigation. 

Audits

If you are currently undergoing a Texas tax audit, auditors are continuing business as usual while the auditors are working remotely (all field offices are closed).  Taxpayers who are unable to access documentation due to COVID-19 are being granted the chance to wait until they are physically able to obtain such documentation.  For taxpayers with completed audits, the typical 60-day window to protest the results is temporarily suspended, although the comptroller is still accepting such protests during this time.  No interest is accruing during this temporary suspension, and taxpayers will be notified about procedures to reestablish a deadline at a later date.  If you are currently making payments under a payment plan, various case-by-case relief is available.

Topics: SALT

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