State filing one month after federal: AICPA resources for state CPA societies

Editor: Mo Bell-Jacobs, J.D.

Along with other tax policy and advocacy organizations, the AICPA has been developing and providing resources to state CPA societies interested in encouraging states and their tax authorities to make state business income tax returns due one month after the applicable federal return due date.¹ Currently, many states’ due dates coincide with the federal due dates, which does not allow taxpayers and practitioners sufficient time to prepare state returns. Other organizations collaborating in this effort include the Council On State Taxation (COST), Tax Executives Institute (TEI), the Federation of Tax Administrators (FTA) and various state CPA societies. This column outlines the problem, surveys states’ recent law changes and relief provisions, and provides resources that state CPA societies and others can use for continuing advocacy.

Background/problem

Approximately half of all states still require business entities (C corporations, partnerships, and S corporations) to file income tax and information returns on the same date as the federal return. In these states, taxpayers and practitioners may not have adequate time after filing their federal return to prepare the state returns. This extra time often is needed to accurately file the state return by making adjustments to calculate taxable income and correctly apportion that taxable income to one or more states. Federal and state law changes, along with the COVID-19 pandemic (including issues arising from many practitioners and employees working remotely), have made gathering state tax information more difficult and time-consuming.

Proposed solution by the AICPA, COST, and TEI

The organizations recommend that states allow at least one month after the federal due date before requiring the state return to be filed and that the extra month for state purposes should be provided automatically if there is a valid extension for federal purposes.

Recent progress

The 11 states listed in the table “Recent State Changes,” below, changed their return filing due dates in recent years.

See the map “One Month State Filing After Federal Filing of Corporate Income Tax Returns,” below, for states having an original and/or extended corporate return due date at least one month after that of the federal return.

States that currently do not provide at least one month after the federal filing due date

A list of states whose extended due dates are less than one month after the federal due date is below (see the table “States With Due Dates Needing Change,” below). An interpretation of current law may be that some states are restricted from extending the due date because their statute does not allow discretion and the statute would need to be updated. Some state laws allow discretion on due dates, but the state tax authorities would need to change rules or regulations to allow additional time to file returns.

• Corporations: Nineteen states remain with extended due dates that are less than one month after the federal due date (Oct. 15 for calendar-year taxpayers).
  • Of those 19 states, nine (Delaware, Georgia, Iowa,² Massachusetts, Mississippi, New York, North Carolina, Rhode Island, and West Virginia) have some amount of discretion to change due dates (i.e., the state director, secretary, or commissioner can change the due date as a matter of policy without a specific time limit), although of those, four (Georgia, Iowa, New York, and North Carolina) require changes to state regulations.
  • Ten states or jurisdictions (District of Columbia, Florida, Hawaii, Idaho, Maine, Missouri, Nebraska, New Mexico, South Carolina, and Utah) have no or limited discretion, generally meaning that a statutory change is required.
• Partnerships: Twenty-five states remain with extended due dates that are less than one month after the federal due date (Sept. 15 for calendar-year taxpayers).
  • Of those 25 states, 10 (Connecticut, Delaware, Georgia, Massachusetts, Mississippi, Montana, New Jersey, New York, North Carolina, and North Dakota) have some amount of discretion to change due dates (i.e., the state director, secretary, or commissioner can change the due date as a matter of policy), although of those, three (Georgia, Montana, and New Jersey) require changes to state regulations.
  • Fifteen states (Alabama, Arizona, Florida, Maine, Minnesota, Nebraska, New Mexico, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Utah, West Virginia, and Wisconsin) have no or limited discretion, generally meaning that a statutory change is required.

AICPA resources

The AICPA State and Local Tax Technical Resource Panel (SALT TRP) has developed various resources to assist state CPA societies interested in this issue and a possible legislative solution. Specifically, the AICPA SALT TRP has developed the bullet points below on why states should enact legislation to have tax and information returns and extensions due one month after the federal due date and extension:

• Many federal business returns are not completed until the filing deadline (due to the complexity of the international and federal tax law), which often creates an insufficient amount of time for the state returns to be completed.
• Extending the state due date one month after the federal due date would allow for more complete and accurate state returns because state law often requires the use of federal return information to begin the state return calculations, such as state adjustments, modifications, allocation, and apportionment.
• Allowing for the additional onemonth extension would benefit the state department of revenue and would be less burdensome on the department because taxpayers avoid the need to file state returns using estimates and then later amend the returns.
• Changing the filing deadline should not affect the tax payment deadline and, therefore, should not affect state revenue.
• More than 20 states already allow for a filing deadline of at least one month after the federal due date for corporations.

The legislation would ensure that the state has:

• Return due dates at least one month after the federal tax return due date;
• Return due dates automatically extended with the granting of a federal extension; and
• An automatic state extension that only requires attaching a copy of the federal extension with the state return.

Additional resources

The AICPA also offers the following resources to state CPA societies and others interested in advocating for these changes:

• AICPA-suggested model legislative language provided below for a state additional month after the federal filing deadline. Note that it is written broadly to apply to all taxpayers, including individuals, and to apply to both original and extended due dates. Thus, it can be included in all portions of a state’s statute related to filing deadlines where needed for tax-payers other than estates and trusts (i.e., for corporations, S corporations, partnerships, individuals, and tax-exempt entities). A second version is also provided below for estates and trusts. However, should a state decide to pursue more narrow legislation that applies only to business returns or only to the extended due date, the AICPA will still welcome and support the change.
• One-pager on additional month state filing after federal filing.
• Chart of examples and links to sample states’ legislative and administrative language.

Model legislative language

A. For tax years beginning on or after January 1, 202x, calendar year and fiscal year [taxpayer] returns shall be due no later than the 15th day of the month after the due date established under the Federal Internal Revenue Code, including any applicable extensions granted by the Internal Revenue Service.

B. No penalty due to late filing shall be incurred by a taxpayer granted a federal extension if its state return is filed no later than the 15th day of the month after the period of time specified in the Federal extension. The [taxpayer] does not need to apply to the [revenue director] for an extension of time within which to file the taxpayer’s state return.

Include the below language in a state statute related to estates and trusts filing deadlines:

A. For tax years beginning on or after January 1, 202x, calendar year estate and trust and fiscal year trust income tax returns shall be due no later than the 15th day of the month after the due date established under the Federal Internal Revenue Code, and the last day of the month after the federal extended due date for any applicable extensions granted by the Internal Revenue Service.

B. No penalty due to late filing shall be incurred by an estate or trust taxpayer granted a federal extension if its state return is filed no later than the last day of the month after the period of time specified in the Federal extension. The estate or trust does not need to apply to the [revenue director] for an extension of time within which to file the taxpayer’s state return.

Efforts on penalty relief for extended state tax return filing

Over the past few years, in addition to the AICPA resources on a legislative solution, the AICPA has also worked with the other state tax organizations and state CPA societies to provide resources for a short-term approach of suggesting that the state tax authorities provide guidance for current-year one-month penalty relief for extended state tax return filing. This proposal would provide an additional month only for filing extended state tax returns. This guidance would not affect the tax payment deadline and, therefore, would not affect state revenue.

The states that are most likely affected are those with extended due dates for:

• Partnerships and S corporations — prior to Oct. 15;
• Estates and trusts income tax (fiduciaries) — prior to Oct. 30;
• Individuals and corporations — prior to Nov. 15; and
• Tax-exempt entities — prior to Dec. 15.

There are summary charts of states’ responses on this issue over the past few years.

Contributors

Eileen Reichenberg Sherr, CPA, CGMA, MT, is director—AICPA Tax Policy & Advocacy. Mo Bell-Jacobs, J.D., is senior manager of State and Local Tax, Washington National Tax, at RSM US LLP in the Washington, D.C., area. Bell-Jacobs is chair of, and Sherr is AICPA staff liaison to, the AICPA State and Local Tax Technical Resource Panel. For more information about this column, contact thetaxadviser@aicpa.org.

Footnotes

¹See Farooki and Nicely, “Five State Tax Policy Changes That Would Modernize Laws and Ease Administration and Compliance,” Bloomberg Tax: Tax Management Memorandum 64 8 (April 10, 2023). See also Rutherford, Carroll-Williams, Rose, and Robertson, “State Corporate Income Tax Due Dates — Disruption and Realignment,” 108 Tax Notes State (April 17, 2023).

²Statutes do not address due dates, but a six-month extension is specified in regulations (Iowa Admin. Code r. 701-39.2(4)).