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TEI Requests Guidance from States Regarding Penalty Relief for State Corporate Tax Returns Filed by November 15, 2018.

In October 2018, TEI worked with the Council on State Taxation (COST) and AICPA to request that states issue guidance indicating they will waive late filing (but not late payment) penalties for state corporate tax returns due October 15 but filed by November 15,2018. TEI noted that late filing is preferable given the move of the federal filing deadline to October 15, the fact that the contacted state had not provided at least 30 days between the federal and state deadlines, and complexities the federal Tax Cuts and Jobs Act caused in the 2018 filing season. Following is a copy of the letter sent to the Illinois Department of Revenue.

We write to urge the Illinois Department of Revenue to issue guidance indicating it will automatically waive penalties for failure to file corporate tax returns due on October 15, 2018, if a taxpayer files such returns no later than November 15, 2018. The federal legislature changed the due date for filing extended federal corporate tax returns from September 15 to October 15 in 2016; however, your state has neither enacted legislation nor issued guidance similarly extending the time to file state corporate tax returns. Issuing the requested penalty waiver guidance will provide taxpayers additional time to prepare their state corporate tax returns and will alleviate the need for taxpayers to later file amended state corporate returns correcting errors.

About Tax Executives Institute

Tax Executives Institute (TEI) is the preeminent association of in-house tax professionals worldwide and was founded in 1944 to serve the professional needs of business tax professionals. Today, the organization has 57 chapters in Europe, North and South America, and Asia, creating a global network where members from all over the world share thoughts and ideas about issues relevant to in-house tax departments. Our nearly 7,000 members represent 2,800 companies in Europe, the United States, Canada, Asia, and Latin America.

TEI members are in-house tax practitioners (accountants, lawyers and other corporate and business employees) responsible for the tax affairs of their employers in an executive, administrative, or managerial capacity. TEI espouses organizational values and goals that include integrity, effectiveness, efficiency, and dedication to improving the tax system for the benefit of taxpayers and tax administrators.

Penalty Waiver Recommendation

The complexity of the federal tax law and the resulting reporting and compliance burdens rarely allow taxpayers to file their federal income tax returns until on or shortly before the extended federal due date. The complexities created by the Tax Cuts and Jobs Act exacerbated the difficulties of timely filing federal tax returns this year.

Many items composing federal taxable income--the starting point for determining state taxable income--must be modified for state tax purposes. Taxpayers need sufficient time to analyze and report the adjustments required to prepare their state income tax returns. When the deadline for filing federal and state tax returns is the same or compressed, many taxpayers will need to correct errors reported on their originally-filed state returns on amended state tax returns.

TEI issued a policy statement (attached) in 2015 advocating that the original and extended due dates for filing state income and franchise tax returns should be no earlier than 45 days following the applicable federal income tax return due date. TEI welcomes the opportunity to support your state in an effort to enact legislation extending the due date for state corporate tax returns on a go-forward basis, as the concurrent deadlines for filing federal and state tax returns are impracticable.

TEI's members have shared the numerous difficulties they have encountered when preparing this year's federal and state corporate tax returns. TEI thus recommends that the Illinois Department of Revenue issue guidance indicating it will waive late filing penalties for taxpayers whose federal corporate tax returns are statutorily due on October 15, 2018, but file their state corporate tax returns on or before November 15, 2018. Providing this brief extension to file the state corporate return, without extending the deadline to pay the associated state taxes due, will not only have little impact on your state's fiscal position but also will alleviate the complications and challenges that will be created if taxpayers file inaccurate original state returns and must file amended state returns to correct resulting errors.

TEI notes that other organizations, such as the Council on State Taxation and AICPA, have already filed letters supporting such a proposal. We welcome the opportunity to discuss the proposal with you further.

TEI's request is prepared under the aegis of TEI's State & Local Tax Committee, whose chair is Marji Gordon-Brown and whose legal staff liaison is Pilar Mata. If you have questions about our recommendations, please contact Ms. Mata at +1.202.464.8346 or
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Title Annotation:Tax Executives Institute
Publication:Tax Executive
Date:Jan 1, 2019
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