Early in the pandemic, I reported on the widespread newly created remote workforces resulting from stay-at-home orders issued by the governors of most states. In many cases, neither the employer nor the workers were prepared to take this journey.
Fears were rampant among employers that workplace productivity would diminish, quality of work would be impacted, technology would not support remote workers, culture would be compromised, employee recruiting and retention would be harmed, and customer goodwill would be tarnished. On top of that, many employers worried that employee fatigue (mental and physical) would accompany the new workforce model.
Now that we are over two years into the pandemic, employers and employees alike are surprised to find that their fears, for the most part, were misplaced. In most cases, it is reported that the remote workforce model is working quite well.
- Employees generally like the remote workforce model;
- In a large number of cases, employees desire to remain remote post-pandemic;
- The lack of commuting to and from work reduces employee disruption, stress and household expenses (commuting costs, daycare, meals and clothes), and allows more time for family and leisure activities;
- Workplace politics are diminished;
- It creates flexibility as to where employees may live, resulting in housing costs reductions in some cases; and
- Employee absenteeism is diminished.
During the COVID-19 pandemic, the federal government enacted three major pieces of legislation to provide financial relief to individuals and families. The American Recovery Plan Act (“ARPA”), the most recent legislation, provides the third round of Economic Impact Payments (“EIPs”), also referred to as stimulus payments (and “recovery rebates” in the acts), to millions of Americans.
The Consolidated Appropriations Act, 2021
In a bipartisan effort, H.R. 133-116th Congress: Consolidated Appropriations Act, 2021 (the "Consolidated Appropriations Act, 2021") overwhelmingly passed both the House and the Senate on December 21, 2020. It is now on President Trump's desk awaiting his signature.
The Consolidated Appropriations Act, 2021, which spans almost 6,000 pages, once signed into law, will bring holiday cheer to many. The new law includes a huge variety of provisions aimed at assisting individuals and businesses during this time of need. One provision in particular is aimed at curing a wrong created by the Internal Revenue Service ("IRS") in Notice 2020-32.
In the wake of the coronavirus pandemic, companies in wide-ranging industries across the country have unprecedented numbers of employees working from remote locations. In a prior post, we discussed numerous issues that may arise from this new normal of teleworking, including tax, labor and employment, liability, and business registration implications.
In this post, we drill down a bit further with respect to employers’ state tax reporting and payment obligations that may result from having employees working remotely in states other than where the employers maintain physical offices. This is especially relevant in metropolitan areas that straddle multiple states, like here in Portland, Oregon.
When we thought times were bad enough with the COVID-19 pandemic and widespread social unrest in our country, the West Coast, including the Pacific Northwest, was struck with unprecedented wildfires and massive windstorms, taking lives, destroying property and rendering the air quality throughout the region unhealthy. On September 16 and 17, the Internal Revenue Service announced good news for many taxpayers residing in Oregon.
In News Release OR-2020-23 and News Release IR-2020-215, the IRS announced that, due to the wildfires and windstorms striking Oregon, the deadline for certain Oregonians to file returns and make tax payments will be extended to January 15, 2021.
More than six months into the coronavirus pandemic, and approximately four months since the IRS issued Notice 2020-32, it is looking increasingly likely that taxpayers will not be permitted to deduct business expenses funded with Paycheck Protection Program (“PPP”) loan proceeds that are ultimately forgiven. It is terribly late in the game not to have finality on the issue, especially with the third quarter 2020 estimated tax payments due on September 15 (next week).
As we previously discussed, PPP loans authorized by the CARES Act may be forgivable, in whole or in part, if taxpayers use the proceeds for qualifying expenses (namely, payroll, benefits, mortgage interest, rent, and utilities). Unlike other debt that is forgiven, PPP loan amounts forgiven pursuant to the CARES Act do not constitute cancellation of debt income.
During the first special session of 2020, the Oregon legislature passed House Bill 4212 (“HB 4212”). Governor Kate Brown (the “Governor”) signed HB 4212 into law on June 30, 2020.
HB 4212 extends the time periods that apply to court proceedings, including those in the Oregon Tax Court (“Tax Court”), to provide relief to litigants who may be impacted by the COVID-19 pandemic.
On July 21, 2020, the Chief Justice of the Oregon Supreme Court (the “Chief Justice”) issued Order No. 20-027 (the “Order”) to facilitate the implementation of HB 4212. In this post, we address the impact that HB 4212 and the Order may have on Tax Court cases.
Taxpayers with cases pending in either the magistrate or regular division of the Tax Court may be able to utilize these extended time periods. Additionally, taxpayers may still have the ability to initiate or continue Tax Court proceedings if they missed the time period for doing so originally, including appealing adverse determinations to the magistrate division, regular division, or even the Oregon Supreme Court.
As most people are aware, the 2019 income tax filing and payment deadlines for all taxpayers who file and pay their federal income taxes on April 15, 2020, were automatically extended until July 15, 2020. This relief is automatic and generally applies to all individual, trust and corporation tax returns. Additionally, this relief extends to estimated tax payments for tax year 2020 that were due on April 15, 2020.
People First Initiative
Additionally, the People First Initiative offered taxpayers who owed taxes some further relief. IRS Commissioner Chuck Rettig stated relative to the People First Initiative:
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act waives the requirement that taxpayers take required minimum distributions (“RMDs”) for 2020 from IRAs, 401(k) plans and other defined contribution plans. Taxpayers who already took 2020 RMDs may be able to return them to their retirement plans or IRAs and avoid paying income tax on the distributions. The timing, however, is critical.
Notice 2020-51, issued by the IRS last week, provides needed clarity about this provision of the CARES Act.
The Small Business Administration (“SBA”) continues its quest to provide guidance relative to the Paycheck Protection Program (“PPP”) enacted as part of the CARES Act and the Paycheck Protection Program Flexibility Act of 2020 (“PPPFA”) enacted by Congress to provide clarification and remove some of the rigidity surrounding the PPP.
The PPP legislation and much of the guidance PPP borrowers have received to date is fraught with complexity and inconsistency. The SBA is doing its best, as Paul McCartney and John Lennon expressed in their hit song We Can Work It Out, to help PPP borrowers get through these trying times:
Try to see it my way
Only time will tell if I am right or I am wrong
While you see it your way
There’s a chance that we might fall apart before too long
We can work it out
We can work it out
In that vein, the SBA recently issued interim final rules (“IFRs”) focused on PPP loan forgiveness. Additionally, last week the SBA published a revised PPP loan forgiveness application (“Form 3508”), and a new short-form forgiveness application (“Form 3508EZ”).
Larry J. Brant
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; and Beijing, China. Mr. Brant practices in the Portland office. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
Upcoming Speaking Engagements
- "The Road Between Subchapter C and Subchapter S – It May Be a Well-Traveled Two-Way Thoroughfare, But It Isn’t Free of Potholes," 2022 Oregon Tax InstitutePortland, OR, 6.2.22
- "Revisiting Choice of Entity in Light of Tax Changes on the Horizon," 2022 OSCPA Farming, Ranching & Agribusiness ConferenceBend, OR, 6.3.22
- "Oregon Real Estate Tax Update – A Review of Recent Income Tax Developments in Oregon Impacting Real Estate Investors," 2022 OSCPA Annual Real Estate Tax ConferencePortland, OR, 6.8.22
- "The Intersection of Code Section 1031 and Opportunity Zones," 2022 OSCPA Northwest Federal Tax Conference10.24.22