Advocacy for state disaster tax relief

Editor: Brian Myers, CPA

At present, there is a lack of uniformity in state–level tax relief provided in response to federally declared disasters, making it challenging for taxpayers operating in multiple states to navigate varying tax relief provisions. Currently, nine states (Alaska, Florida, Indiana, Massachusetts, New Jersey, North Carolina, North Dakota, Utah, and Wisconsin) have enacted legislation or issued binding regulations to automatically follow or allow an extension based on the federal disaster tax relief (or allow for an extension based on what the federal disaster relief offers generally for corporate income tax purposes). Alaska provides for one month after the federal extended disaster relief. Some other states offer some form of relief on an ad hoc basis, such as providing a request mechanism for relief. Many states are likely to eventually grant extensions due to disasters but do not have clear statutory relief or binding regulations to that effect. States approach disaster–related tax filing relief in a broadly inconsistent, uncertain, and nonuniform manner.

The remaining 41 states,¹ plus the District of Columbia and one local jurisdiction (New York City) do not make it clear that taxpayers can rely on binding state disaster tax relief, due to the absence of clear laws or regulations. Even if a state has the practice of offering or provides nonbinding guidance or policies that align with federal disaster tax relief, the lack of explicit statutory or binding regulatory clarity remains an issue.

The AICPA State and Local Tax Technical Resource Panel (SALT TRP) has recently developed, and the AICPA Tax Executive Committee approved, a position paper that may be helpful for state CPA societies interested in advocating with their state tax authorities to allow at least one month after a federal extended disaster tax relief due date before requiring state tax returns to be filed and payments to be made. This extra month should be automatic if there is a valid federal disaster tax relief extension. This treatment should also apply in cases of special extensions granted by the IRS for taxpayers (residents and nonresidents), records, or practitioners in disaster areas. It should cover all types of returns, including income tax, estate tax, gift tax, excise tax, and information returns.

Issue

Because of the lack of uniformity in state tax disaster relief provisions, it has become extremely burdensome for taxpayers doing business in multiple states to track the different disaster tax relief provisions across the states, given the varying treatment.

Background of the problem

The IRS often grants tax–return–filing and tax–payment extensions to taxpayers affected by major disasters. These extensions give taxpayers additional time beyond the original due date to file tax returns and pay taxes owed.² However, this relief is typically not automatically applied at the state level. As a result, affected taxpayers then must complete their federal returns by the original deadline (notwithstanding the relief provided by the IRS) in order to file state tax returns on time.

Traditional state concepts of conformity with the Internal Revenue Code generally do not apply to disaster relief for tax filings and payments. Most states require action from either the state taxing authority or the taxpayer before granting any disaster tax relief. These actions are often in the form of executive orders as required under state law, affirmative actions taken by the state tax authority, or relief requests submitted by disaster–affected taxpayers.³ States in a disaster area will often conform to federal disaster tax relief, but their relief may not occur until the required state action is taken. Additionally, relief may only apply to taxes for specific periods, such as specific quarters for income and franchise taxes or specific months for sales and use taxes. State guidance may also limit relief to a single tax type. All other state tax payments and filings are presumed unchanged unless they are covered in the respective disaster guidance.

Also critically important is that the original filings and payment due dates of non–disaster areas are presumed unchanged unless there is specific guidance. Taxpayers affected by disasters often have tax payment and filing obligations in multiple states. Such taxpayers cannot rely on the federal extended due date to extend state filings in states not within the federally declared disaster area. Absent specific state guidance, the original due dates apply for filings and payments, making it necessary to prepare draft federal returns to complete tax and information filings or payments for states both directly and not directly affected by the disaster.

Two recently enacted federal laws do, however, aid state–federal coordination of disaster–related tax relief in other ways. The Filing Relief for Natural Disasters Act (S. 132, H.R. 517) was introduced in the U.S. Senate bySen. Catherine Cortez Masto, D–Nev., and co–sponsored by Sens. Chris Van Hollen, D–Md.; Marsha Blackburn, R–Tenn.; John Hoeven, R–N.D.; and John Kennedy, R–La. It was introduced in the House by Rep. David Kustoff, R–Tenn., and co–sponsored by Rep. Judy Chu, D–Calif. On March 31, 2025, it unanimously passed the House, and on July 10, 2025, it passed the Senate by unanimous consent. The act was signed by President Donald Trump on July 24, 2025, and became Public Law 119–29.

The AICPA (and state CPA societies) supported⁴ this bipartisan legislation, which makes a state governor’s emergency declaration the trigger for federal tax relief and authorizes the IRS to postpone federal tax deadlines for taxpayers that are affected by a qualified state–declared disaster upon a declaration by the state’s governor. A press release by Chu on the bill’s introduction stated that it “would allow the governor of a state or territory to extend a federal tax filing deadline in the event of a state–declared emergency or disaster, which happens automatically for federally declared disasters. Extending this authority to states gives them the ability to provide relief independent of the federal government’s involvement in an emergency or natural disaster. The legislation would also expand the mandatory federal filing extension from 60 days to 120 days.” The act will now provide more certainty with respect to state disaster tax relief for states with statutes aligned to one month after the federal relief date.

In addition, the recently enacted H.R. 1, P.L. 119–21, commonly known as the One Big Beautiful Bill Act (OBBBA), permanently extends the casualty loss deduction limitation to losses incurred as a result of federally declared disasters (except to the extent of personal casualty gains) and expands the limitation to include state–declared disasters. The legislation extends the special rules for qualified disaster–related personal–casualty losses under the Taxpayer Certainty and Disaster Relief Act of 2020 (Division EE of the Consolidated Appropriations Act, 2021, P.L. 116–260).

Importance to CPAs

When there has been a disaster, state–enacted legislation or regulations providing for state disaster tax relief treatment are helpful for taxpayers and CPAs to assist in good, fair, and reliable tax administration with certainty.

CPAs assist clients with state tax return compliance and planning, including filing state tax returns when taxpayers, the practitioner, or records are in a declared disaster area. Having automatic state disaster tax relief one month after the federal tax relief deadline provides sufficient time for affected taxpayers and their CPAs to find the needed paperwork and perform the necessary state tax analysis to file a state tax return. Anything shorter is burdensome on affected taxpayers and practitioners.

By enacting legislation and issuing regulations providing an automatic one month after the federal disaster tax relief deadline, state taxing authorities can benefit from receiving an accurate and complete tax return from the taxpayers and their CPAs, promoting efficient use of state tax authority resources.

AICPA position/solution

Therefore, states should allow at least one month after the federal extended disaster tax relief due date before the state tax return must be filed and payments made, and the extra month for state purposes should be automatic if there is a valid disaster tax relief extension for federal purposes. This rule should also be applied in the case of special extensions given by the IRS for taxpayers (residents and nonresidents), records, or practitioners in disaster areas. It should apply for all types of returns, including income tax, estate tax, gift tax, excise tax, and information returns. An additional month after the federal due date is often needed to accurately file the state return, including making adjustments to calculate taxable income and correctly apportioning taxable income to a state.

AICPA resources

The AICPA continues to be available to assist state CPA societies interested in advocating with their state tax authorities to enact legislation or issue binding regulations to provide automatic state filing disaster relief of one additional month after the federal disaster relief deadline. Besides the position paper, the SALT TRP developed a State Disaster Tax Relief Guide that includes a state–by–state analysis and a map of disaster tax relief enacted and binding regulations. The AICPA also has various other disaster tax relief resources listed below. State CPA societies wanting more information can contact Eileen Sherr, director—Tax Policy & Advocacy, and Ning Yim, senior manager—Tax Policy & Advocacy.

• AICPA Offers Strong Support for Bipartisan, Bicameral Legislation Postponing Federal Tax Deadlines for State-Declared Disasters
• AICPA Advocacy Efforts and Milestones for Disaster Tax Relief
• Disaster Tax Relief Procedures and Processes
• Disaster Tax Relief FAQs and Latest Developments
• Disaster Tax Relief — Casualty Loss FAQ
• Disaster Relief Resource Center

Contributors

Brian Myers, CPA, is a partner at Crowe LLP in Indianapolis; 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; and Ning Yim, CPA, is a senior manager—Tax Policy & Advocacy with the AICPA. Myers is chair, Bell-Jacobs is a member, and Yim is staff liaison of the AICPA State and Local Taxation Technical Resource Panel. For more information about this column, contact thetaxadviser@aicpa.org.

Footnotes

¹ However, Alabama H.B. 379, enacted May 14, 2025, and effective Jan. 1, 2026, includes a provision exempting out-of-state workers from Alabama income tax while they are in the state responding to federally declared disasters, such as tornadoes and hurricanes. Their employers are likewise exempt from Alabama income tax withholding obligations during this period.

² See, e.g., IRS News Release IR-2023-189, providing tax filing and tax payment relief to California storm victims.

³ See this resource provided by the Council On State Taxation (COST) that details disaster relief provided by the individual states and by the IRS.

⁴ See also AICPA press releases “Taxpayer Victory — Natural Disasters Act to Deliver Rapid Relief and Certainty, Headed to President’s Desk for Signature” (July 11, 2025) and “AICPA Applauds Passage of Bipartisan Bills to Improve Tax Administration and Offer Relief to Taxpayers, Practitioners” (April 1, 2025); also AICPA letters “In Support of H.R. 1152, the Electronic Filing and Payment Fairness Act, H.R. 998, the Internal Revenue Service Math and Taxpayer Help Act, H.R. 517, the Filing Relief for Natural Disasters Act, and H.R. 1491, the Disaster Related Extension of Deadlines Act” (March 31, 2025); “Permanent, Consistent, and Clear Disaster Relief Tax Legislation” (March 3, 2025); and “S. 1815 / H.R. 3861, the Filing Relief for Natural Disasters Act” (June 9, 2023).