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COVID-19 and State Courts — 7 Measures Affecting Tax Proceedings

Posted on May 4, 2020

Daniel H. Schlueter is a partner in the Washington office, Ted W. Friedman is counsel in the New York office, Annie E. Rothschild is an associate in the Sacramento office, and Jaime Lane is a paralegal specialist in the Washington office of Eversheds Sutherland (US) LLP.

In this article, the authors review how state tax tribunals and agencies are responding to the COVID-19 emergency, with a focus on procedural issues relevant to tax practitioners.

State tax tribunals and state tax agencies around the country are responding to the COVID-19 crisis in various ways.

Like the U.S. Tax Court, some tribunals have postponed all hearings and closed entirely, while others are continuing to operate and have embraced remote mechanisms to allow tax proceedings to proceed in the current environment.1 While the transition has undoubtedly been easier for those tribunals that already permitted remote proceedings in some capacity, many forums have updated their procedural rules or issued orders to allow some actions that traditionally had to be performed in-person — such as the swearing in of witnesses — to now be done electronically and remotely.

Likewise, some state tax agencies have recently released guidance addressing issues that are critical to tax proceedings, including powers of attorney (POAs), e-signatures, and remote notarizations, and how they have been affected by the COVID-19 crisis.

This article provides a survey of how state tax tribunals and tax agencies are operating and adapting during the COVID-19 outbreak, with an emphasis on procedural issues that are of particular concern to tax practitioners. This article seeks to provide practitioners with a list of issues to consider when proceeding with a state tax matter in the current climate.

Deadline Extensions

The Internal Revenue Service has extended the deadline for filing petitions with the U.S. Tax Court challenging federal tax deficiencies to July 15, 2020.2 States are taking varying approaches to tax tribunal filing deadlines, including those for filing tax protests, briefs, motions, and appeals.

California, for example, has adopted a deadline extension comparable to the federal extension. On March 30 the Franchise Tax Board issued Notice 2020-02, providing an extension until July 15 for taxpayers to file refund claims, protest proposed assessments, and file appeals of FTB determinations to the Office of Tax Appeals (OTA).3 In the notice, the FTB also granted itself an extension to issue assessments. If the deadline for any of the foregoing actions falls between March 12 and July 15, 2020, the action will be considered timely if completed by July 15.4

Also, the OTA extended some deadlines for appeals briefings.5 The OTA granted an automatic 60-calendar-day extension for appeals that have a briefing or other deadline that falls between March 1 and May 18, 2020.6 The extension applies to any OTA “deadline to submit briefing, additional briefing, supplemental briefing, requested documentation, perfected appeals, perfected petitions for rehearing, and petitions for rehearing originating from California Department of Tax and Fee Administration appeals.”7

Similarly, on March 27 the Indiana Supreme Court issued an order tolling deadlines for tax court filings due before April 22, 2020.8 The order tolled “[a]ll laws, rules, and procedures setting time limits for Tax Court filings, including but not limited to original tax appeals and responses thereto, briefs, motions and responses thereto, and petitions for rehearing.”9 The supreme court also tolled “any applicable laws, rules, and procedures setting time limits for speedy hearings, oral arguments, judgments, and other orders in matters before the Tax Court.”10 The supreme court later issued an order providing that if a party cannot meet deadlines because of the current public health emergency, it can move for an extension or for leave to file a document belatedly, and that relief “will be granted for good cause shown, notwithstanding any provision of the Appellate Rules imposing a more stringent standard.”11

In Massachusetts, the Appellate Tax Board (ATB) announced that it would be closed effective noon March 24 until further notice.12 Unlike tribunals in other states, the ATB has not extended filing deadlines. The ATB’s notice regarding its operations states that “[m]ail will be held for delivery until the ATB reopens,” and that taxpayers “may comply with statutory deadlines for filing petitions or notices of appeal by timely mailing a petition or notice of appeal to the ATB.”13 The notice also separately states that “[p]leadings, briefs, and other documents may be filed by mail or by email to the Clerk’s office.”14

The New Jersey Supreme Court has extended the statutory time frame for state tax appeals and property tax appeals.15 For state tax appeals, to the extent filing deadlines have not already passed, the deadlines to (1) file a complaint with the tax court, (2) file an answer in the tax court, and (3) file an administrative appeal are extended to the later of May 1, 2020, or 30 days after a determination by the governor that the state of emergency has ended.16

In New York, Gov. Andrew Cuomo (D) issued executive orders tolling deadlines “for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding” from March 20 until May 7.17 In response, the New York City Tax Appeals Tribunal has stated that in light of the executive orders, “the time limitations relating to the ‘commencement, filing, or service’ in connection with a New York City Tax Appeals Tribunal proceeding are, as of March 20, 2020, tolled until May 7, 2020.” In contrast, public guidance from the state Tax Appeals Tribunal and Division of Tax Appeals suggests that the executive orders are not applicable to its matters and that its statutes of limitations will not be tolled.18

In Pennsylvania, the DOR is allowing “additional time in certain cases for taxpayers who wish to appeal a tax assessment issued by the Department of Revenue or file a petition for a tax refund with the Board of Appeals.”19 The department announced that a “petition will be accepted as timely filed if it is filed by the later of the following” dates: (1) “30 days after the reopening of the Board of Appeals offices” or (2) the “original appeal deadline.”20 Original appeal deadlines that fell on a date before March 16 still apply.

Also, the Pennsylvania Board of Finance and Revenue announced that “[w]ritten requests by parties to accept late filed appeals [to the Board of Finance and Revenue from the Board of Appeals] due to disruptions caused by the public health emergency will be liberally granted,” and that “[r]equests for deadline extensions for responsive pleadings due to disruptions caused by the public health emergency will also be liberally granted.”21

Remote Online Notarizations

Notaries play an important role in tax proceedings in which, for example, sworn statements or affidavits are necessary. Traditionally, notaries had to be physically present with the witness or other signatory to verify the signatory’s identity — a requirement that would present obvious difficulties given the current crisis. Before the COVID-19 emergency, 23 states had adopted procedures for remote online notarization (RON), which allow a notary to notarize a document without being physically present with the person signing the document.22

Many of the states without existing RON laws have enacted emergency rules in light of COVID-19. For instance, on April 8 Maine Gov. Janet Mills (D) issued an executive order allowing RON using two-way audio-video technology.23 The executive order provides that “the enforcement of those provisions of Maine law that require the physical presence of the person whose oath is being taken . . . at the same location as the Notary Public or other person authorized to perform a notarial act . . . and any witness to the signing” are suspended, provided that specific conditions are met.24 The conditions include that the notary “must be physically within the state while performing the notarial act,” the signatory and the witness must attest to also being physically in the state, “the act of signing and initialing must be captured sufficiently up close on the two-way audio-video communication for the Notary to observe,” and “[a] recording of the two-way audio-video communication must be made and preserved by the Notary” for at least five years.25

Similarly, the governors of Illinois and New York also recently issued executive orders allowing RON because of the COVID-19 emergency.26 In Nebraska, Gov. Pete Ricketts (R) issued an executive order making the RON provisions of the Online Notary Public Act effective immediately, ahead of the statute’s original effective date of July 1, 2020.27

The U.S. Senate has also recently considered the issue of online notarization. S.B. 3533, the Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020, was introduced March 18. The bill would authorize all notaries in the United States to perform RON.28

E-Signatures

Some state tax tribunals and agencies have recently adjusted their rules regarding e-signatures to assist taxpayers and state employees working remotely. Even before the COVID-19 crisis, many states were moving away from original signatures. The current situation has only encouraged more rapid acceptance of taxpayers and litigants using e-signatures on a variety of documents.

For instance, the Oregon courts, including the tax court, recently adjusted rules to allow more expansive use of e-signatures, including for declarations.29 Previously, documents requiring a signature under penalty of perjury or the signature of a notary public needed a handwritten signature on a printed form of the document, which could then be scanned and electronically filed. Newly amended rules have relaxed that requirement for declarations and they may be signed using electronic signature software.30

In New York, Cuomo’s Executive Order 202.15 authorized the Department of Taxation and Finance to temporarily accept digital signatures in place of handwritten signatures on documents related to determination or collection of tax liability.31 Later, the department issued a notice explaining that, through May 9, it will allow taxpayers and their representatives holding valid POAs to digitally sign documents, including “waivers of statutes of limitations on assessment or collection, waivers of statutory notices of deficiency and consents to assessment, consents to audit changes and [Bureau of Conciliation and Mediation Services (BCMS)] conferee orders, statements of proposed audit changes, closing and other agreements between [the department] and taxpayers, petitions for advisory petitions and BCMS conferences, other requests for taxpayer relief, and audit method elections.” However, the temporary relaxation of the handwritten signature requirement does not apply to signatures on POAs.

POA Issues

While a number of states have relaxed original signature requirements for paper returns and other documents (as discussed above), several states have not extended the same flexibility to the execution of POAs. Consequently, taxpayers and their representatives may face difficulties in executing POAs.

For example, the FTB requires original signatures on POAs.32 Despite relaxing original signature requirements for paper returns and other documents in light of COVID-19, the FTB has not changed the requirement that taxpayers must sign POAs using an original signature.33 Similarly, as noted, the New York Department of Taxation and Finance has not changed its signature requirements for POAs, despite temporarily allowing electronic signatures for executing numerous other documents such as waivers on statutes of limitations and consents to audit changes.34

In Indiana, the DOR has announced that because of the COVID-19 outbreak, it will accept a federal POA to serve temporarily as the Indiana POA in some circumstances, including when the “tax/form type on the Federal POA matches or is similar to the Indiana tax/form for which the person seeks to represent the client.”35 The department has noted, however, that the representation must only be “for non-legal matters” and that “[a]ny temporary acceptance of the Federal POA would not extend to protests of assessments or refund denial matters.”36

In Massachusetts, the DOR announced that it would “work cooperatively with taxpayers to allow for electronic signatures on various administrative forms, including with respect to the signatures of taxpayers, their representatives, or Department employees.”37 The administrative forms for which the department will allow electronic signatures include Form M-2848, “Power of Attorney and Declaration of Representative.”38

Remote Depositions

Many states require that a witness’s sworn oath be administered by a court officer and that the officer personally record the testimony.39 Some states have interpreted that requirement to mean that the court reporter must be physically present with the witness to swear in the witness. In light of the COVID-19 crisis, some states are relaxing their rules to allow proceedings to continue remotely. Many of these jurisdictions have issued wide-ranging orders that suspend any rules or decisions that could be read to limit the remote administration of oaths.

Previously, Massachusetts required witnesses to be sworn in by a court officer who personally records the testimony.40 However, the Massachusetts Supreme Judicial Court issued a pandemic-related order temporarily altering the rules for depositions. The order provides that “an officer or other person before whom the deposition is to be taken is hereby authorized by the court to administer oaths and take testimony without being in the presence of the deponent, so long as the officer or other person before whom the deposition is to be taken can both see and hear the deponent via audio-video communication equipment or technology for purposes of positively identifying the deponent.”41

In Alabama, because of the state’s suspension of all in-person court proceedings, the state supreme court issued an order allowing the administration of witness oaths to take place remotely using audio-video technology.42 The order explicitly suspends all rules providing that witness oaths must be administered in-person or otherwise limit remote administration of witness oaths.

Also, the Mississippi Supreme Court issued Emergency Administrative Order-6, providing that “all persons qualified to administer an oath in the State of Mississippi may swear in a witness remotely by audio-video communication technology from a location within the State of Mississippi, provided they can positively identify the witness.”43 The order also suspends all rules that limit or prohibit the use of audio-video communications equipment to administer witness oaths remotely.

Video/Telephonic Proceedings

To continue operations during the COVID-19 outbreak, a number of courts and tax tribunals are permitting parties to appear via videoconference or telephonically, and are expanding their capabilities accordingly. For some forums, this is an unprecedented change. The U.S. Supreme Court, for example, will for the first time begin hearing some oral arguments by teleconference.44

The New Jersey Supreme Court has ordered that “court matters including hearings, conferences, and arguments, will be conducted by video or phone conferencing, and in-person appearances will be permitted only in emergency situations.”45 This order applies to all state courts, including the tax court.46 Similarly, the Utah State Tax Commission is now holding all proceedings via telephone conference only.47

On April 27 the Pennsylvania Commonwealth Court announced that in accordance with its commitment “to maintaining publicly accessible court proceedings,” it would hold its first livestream hearing April 28, and that it would be conducted via videoconference between parties and livestreamed on YouTube for media and the public.48

E-Filing vs. Paper Filing

While some jurisdictions permit or require e-filing, others still require paper filing in some circumstances. Paper filing is often necessary because many tax court litigants appear pro se. During the COVID-19 crisis, courts with existing e-file capabilities will likely be able to more easily continue their operations. Jurisdictions that did not allow e-filing may now have the impetus to modernize their rules.

As the Oregon Tax Court explained in an order issued on March 23, “[t]he outbreak of the COVID-19 virus has shown that electronic filing of documents significantly reduces the need for court personnel to be physically present to handle paper documents. The court strongly encourages all litigants, including those not represented by counsel, to use electronic filing whenever possible.”49

In Virginia, however, there is no statewide e-filing system. Virginia circuit courts (of which there are 122) hear tax cases because there is no specialized tax forum, and have the option to establish their own e-filing systems.50 While some circuit courts participate in the Virginia Judiciary E-Filing System, most do not. Some circuit courts still require paper filing in some instances. However, the Virginia Supreme Court issued an order in response to the COVID-19 emergency requiring attorneys to e-file, if available.51

Conclusion

For taxpayers who have pending state tax matters, it is worthwhile to review any procedural mechanisms that might be affected by the current crisis, including those addressed above.

Undoubtedly some tax tribunals — like some taxpayers — will have an easier time than others adjusting to the remote operations necessitated by COVID-19. However, a silver lining may be that some jurisdictions will modernize their rules, embrace technology, and incorporate more remote and electronic options to facilitate tax proceedings.

FOOTNOTES

1 On March 23 the U.S. Tax Court announced that it was closing in response to the COVID-19 crisis, and it canceled all trial sessions through June 30, 2020.

2 Internal Revenue Service, “Filing and Payment Deadlines Questions and Answers” (citing IRS Notice 2020-23). Normally, taxpayers have 90 days from the date of a notice of deficiency to file a petition in the Tax Court. However, under the relief provided in IRS Notice 2020-23, if the due date for a Tax Court petition “falls on or after April 1, 2020, and before July 15, 2020, that due date has been postponed to July 15, 2020.” Id. The relief provided in Notice 2020-23 is not limited to petitions filed with the Tax Court — it “includes the time for filing all petitions with the Tax Court, or for review of a decision rendered by the Tax Court, filing a claim for credit or refund of any tax, and bringing suit upon a claim for credit or refund of any tax.” IRS Notice 2020-23.

3 Cal. Franchise Tax Bd., FTB Notice 2020-02 (Mar. 30, 2020).

4 Id. For example, in cases in which an applicable statute of limitations to file a timely claim for refund expires during the period of March 12 through July 15, 2020, the FTB will consider the claim timely if filed on or before July 15, 2020. Id.

5 Cal. Office of Tax Appeals, OTA Legal Notice 2020-01 (Mar. 18, 2020).

6 Id.

7 Id.

8 Ind. Sup. Ct., Order, In the Matter of Administrative Rule 17 Emergency Relief for the Indiana Tax Court Relating to the 2019 Novel Coronavirus (COVID-19), No. 20S-CB-231 (Ind. Mar. 27, 2020).

9 Id.

10 Id.

11 Ind. Sup. Ct., Order, In the Matter of Administrative Rule 17 Emergency Relief for Indiana Trial Courts Relating to the 2019 Novel Coronavirus (COVID-19), Nos. 20S-CB-123 and 20S-CB-231 (Ind. Apr. 7, 2020).

13 Id.

14 Id.

16 N.J. Sup. Ct., Mar. 19, 2020, order, supra note 15.

17 N.Y. governor’s Executive Order 202.8 (Mar. 20, 2020); see also N.Y. governor’s Executive Order 202.14 (Apr. 7, 2020) (extending the tolling periods announced in Executive Order 202.8 to May 7, 2020).

18 N.Y. Div. of Tax Appeals website. See our detailed coverage of this issue at Michael Hilkin, Ted Friedman, and Open Weaver Banks, “SOL Situation: New York State, New York City Administrative Tax Tribunals Differ on Tolling Statutes of Limitations,” SALT Shaker, Apr. 17, 2020.

19 Pa. Dep’t of Revenue, “COVID-19 Information” (last updated Apr. 15, 2020); see also Pa. Dep’t of Revenue, “Board of Appeals Operations During COVID-19 Pandemic.”

20 “Board of Appeals Operations During COVID-19 Pandemic,” supra note 19.

22 The 23 states that enacted laws allowing remote online notarization before COVID-19 are Arizona, Florida, Idaho, Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Montana, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, and Wisconsin. Many of the state laws are based on a uniform statute published by the Uniform Law Commission — the Revised Uniform Law on Notarial Acts.

23 Me. governor’s Executive Order 37 FY 19/20 (Apr. 8, 2020).

24 Id.

25 Id.

26 See Ill. governor’s Executive Order No. 12 (Mar. 26, 2020); see also N.Y. governor’s Executive Order No. 202.7 (Mar. 19, 2020).

27 Neb. governor’s Executive Order No. 20-13 (Apr. 1, 2020).

28 See Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020, S. 3533, 116th Cong. (2020).

30 Id.

31 N.Y. Dep’t of Tax. and Fin., Notice N-20-3 (Apr. 2020).

32 FTB, “Submit a Power of Attorney” (last updated Apr. 8, 2020).

34 Notice N-20-3, supra note 31.

35 Ind. Dep’t of Revenue, “Coronavirus Information.”

36 Id.

37 Ma. Dep’t of Revenue, Directive 20-1: Acceptance of Electronic Signatures (Apr. 21, 2020).

38 Id.

39 See, e.g., N.J. Court Rule 4:14-3; and Ala. R. Civ. P. Rule 30(c).

40 Mass. R. Civ. P. Rule 30(c).

41 Mass. Sup. Jud. Ct., Order in re: COVID-19 (Coronavirus) Pandemic (Mar. 20. 2020) (emphasis added).

43 Miss. Sup. Ct., Emergency Order 6 (Mar. 20, 2020).

44 U.S. Sup. Ct., Press Release, Apr. 13, 2020.

47 Utah State Tax Commission, “Important Changes Related to COVID-19.”

49 Or. T.C., Order of Partial Closure (Mar. 23, 2020).

50 See Va. Circuit Court Clerks’ Manual — Civil.

END FOOTNOTES

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