State & Local Tax Impacts of COVID-19 for California – 2021

Thoughtware Alert Published: May 03, 2021 | Updated: May 03, 2021

Information current as of March 22, 2021.

COVID-19 has changed life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor or visit our COVID-19 Resource Center for current information as needed.

Information Specific to California

  • California won’t 1) treat an out-of-state corporation whose only connection to California is the presence of an employee who’s currently teleworking in California due to the governor’s stay-at-home order as being actively engaged in a transaction for financial or pecuniary gain or profit; and 2) include the compensation attributable to an employee who’s currently teleworking due to the stay-at-home order in the minimum payroll threshold. 
    • California Franchise Tax Board (FTB), COVID-19 FAQs; December 31, 2020.
  • California legislation established the Rental Assistance Program for providing COVID-19 relief. The law includes a provision specifying that the assistance wouldn’t be deemed to be income for the personal income tax law or used to determine the eligibility of an eligible household or member for any state or local program financed wholly or in part by state funds.
    • California S.B. 91, effective January 29, 2021.
  • California announced that sales and use and excise tax returns due between December 15, 2020, and April 30, 2021, are extended for all except large taxpayers due to the COVID-19 pandemic. Specifically, taxpayers reporting less than $1 million in tax on a return originally due during the time frame will receive an automatic extension, and interest and penalties won’t accrue on return amounts due if taxpayers pay taxes and file returns within three months of the original due date.
    • California Department of Tax & Fee Administration, COVID-19 State of Emergency Notice; February 1, 2021.
  • California updated tax guidance for COVID-19 relief. The FTB is no longer waiving the fee for walk-through revivor requests it processes remotely. The $600 payments individuals receive from the federal government under the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 and the increase of $300 per week that individuals receive in unemployment compensation under that act aren’t subject to California income tax.
    • California FTB, COVID-19 FAQs; February 8, 2021.
  • The California FTB stated it was temporarily suspending collection activities under its Interagency Intercept Collection Program in keeping with a March 2020 executive order from Gov. Gavin Newsom directing tax agencies to offer COVID-19 relief. The FTB is authorized to use tax refunds, lottery winnings, and unclaimed property to offset debts due to other state and local government entities. Therefore, California won’t use state income tax refunds to offset overdue state debts such as parking citations, tolls, fines, and tuition through July 31, 2021.
    • California FTB Announcement; February 22, 2021.
  • California legislation establishes the California Small Business COVID-19 Relief Grant Program for corporate income and individual income tax purposes. The law includes these measures: 1) requiring the California Office of Small Business Advocate to provide grants to qualified small businesses; 2) setting procedures to recapture grant amounts if the office determines the grantee fails to meet the criteria of a qualified small business; 3) repealing provisions related to the program on January 1, 2024; 4) excluding from gross income specific grant allocations for taxable years beginning on and after January 1, 2020, and before January 1, 2030; and 5) authorizing the FTB to adopt regulations necessary and appropriate to implement the exclusions and include in audits grants excluded from gross income.
    • California S.B. 87, effective February 23, 2021.
  • California released additional information on the provision of Golden State Stimulus payments to qualified recipients, i.e., California residents generally earning less than $75,000. California will provide a one-time payment of $600 or $1,200 to those who qualify. The stimulus payments are not taxable for California income tax purposes. No action is required to receive the stimulus payment for eligible recipients. However, to receive the stimulus payment, taxpayers should file a 2020 return by October 15, 2021. Stimulus payments generally won’t be subject to offset for debts owed to the FTB or other government agencies; withholding orders; or wage garnishment.
    • California FTB, Public Service Bulletin 2021-08; February 24, 2021.
  • California will extend the California income tax filing and payment deadline for individuals to May 17, 2021. This is consistent with the federal extension announced by the IRS. The extension doesn’t apply to estimated tax payments due on April 15, 2021.
    • California FTB, News Release; March 17, 2021.

For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.

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