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With Tax Deadlines Extended, States Offer Relief on Fines and Fees

Posted on Apr. 2, 2020

State and local governments have extended their tax return deadlines in response to the COVID-19 pandemic, but a growing number have also recognized the need to extend deadlines for fines and fees.

As the pandemic continues to accelerate and a recession looms, governments have been working to ease the financial stress on businesses and individuals through tax relief, unemployment expansion, and social safety net programs.

According to the Fines and Fees Justice Center (FFJC), a national reform-focused advocacy group, the federal government understands that people are struggling. The recently passed federal Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136), or stimulus Phase 3 as it’s been called, includes stimulus checks of up to $1,200 for individuals and $500 for each qualifying child, and state and local governments are prohibited from garnishing the checks for tax debts, student debts, or outstanding fines and fees.

“We think every state and local government should do exactly what President Trump ordered the IRS to do,” Lisa Foster, co-director of FFJC, told Tax Notes. “We are in an economic crisis, and people need every penny they have to take care of themselves and their families.”

When the federal government extended the tax return filing deadline to July 15, over 40 states also moved back their filing deadlines to provide much-needed cash flow to businesses hurting from a decline in sales.

The FFJC has been tracking state and local actions to the COVID-19 pandemic and has seen some positive policy developments.

Maine’s court systems have vacated warrants for unpaid fines, restitution, court-appointed counsel fees, and other failure-to-appear warrants. The courts also extended the due dates on several fines to May 4 and later. The city of Chicago has delayed referral of parking, red light, and speed camera tickets to collection firms and won’t place payment plans in default or charge interest until April 30.

However, the FFJC is particularly concerned over driver's license suspensions for nonpayment and is asking states to stop new suspensions and reinstate prior suspensions from fines and fees.

According to Foster, “43 states suspend your driver's license if you owe fines and fees, and in addition to that being bad policy at any time, it’s particularly bad now. People need their cars to maintain social distancing, which is hard to do on public transit. People need their cars to get groceries or take someone to the hospital if they contract COVID-19.”

The center said it is encouraged by some movement from state courts, governors, and elected officials.

The FFJC is also wary of upcoming state budget gaps. Since the 2008 recession, cash-strapped governments have increasingly turned to user fees to fund their criminal justice systems and general budgets, according to research from the Brennan Center for Justice.

“Every state, except North Dakota, the District of Columbia, and I think Hawaii, have increased the amount or the number of fees as a result of the recession,” Foster said. “When you get a recession, a bunch of legislators see they’ve raised fees in the justice system for justice purposes. Let’s do that for other purposes. That’s how you get a system like California, where 18 different state programs are funded by fees imposed on traffic tickets.”

Research from the Institute for Justice, titled "The Price of Taxation by Citation," found that these emergency revenue raisers often stay in place even after a fiscal crisis has passed.

Choices are often more limited for smaller towns, which have fewer avenues to raise revenue to provide services during an economic downturn. An August 2019 special report in Governing magazine found that fines and forfeitures exceeded 10 percent of general fund revenues for nearly 600 jurisdictions.

“This issue really became known as a result of Ferguson, Missouri [whose budget was funded in large part by fines and fees]. We’re hopeful that we’ve made enough progress over the past five years and changed collection practices,” Foster said. “We’re hopeful we’ve raised the issue in enough places that legislators will resist the temptation to do it again.”

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