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Tax Treatment of Certain State Payments Clarified, Notice 2023-56; IR-2023-158

The IRS has provided guidance on the income tax treatment of payments made by states in 2023 and later years. In IRS News Release 2023-23, February 10, 2023, the IRS clarified the federal tax status of special payments made by 21 states in 2022 that were mainly related to the COVID-19 pandemic, with varying terms in the types of payments, payment amounts, and eligibility rules.

State Tax Refunds

The exclusion of state income tax refunds is largely dependent on whether an individual itemized deductions and deducted the amount of state income tax paid. A state income tax refund will be excluded from an individual’s gross income if the person claimed the standard deduction for the tax year in which the state income tax was paid. On the other hand, an individual who itemized deductions and deducted the amount of state income tax paid will include a state income tax refund to the extent that the individual received a federal income tax benefit from the prior federal income tax deduction.

A similar rule applies to state property tax refunds.

2022 Payments Covered by IR-2023-23

IR-2023-23 described some 2022 programs that intended to make payments in early 2023. To the extent an individual could exclude such a payment received in 2022 pursuant to the news release, an individual may exclude a state payment received in 2023 under a 2022 program from federal income tax.

General Welfare Payments

Payments that are made under a state program for the promotion of the general welfare are not includible in federal income tax. To be excluded as a payment for the general welfare, the payment must: (1) be made from a governmental fund; (2) be for the promotion of the general welfare, meaning based on individual or family need; and (3) not represent compensation for services.

Comments Requested

The IRS requests comments on the application of these rules and on specific aspects of state payment programs or additional situations where federal guidance would be helpful. Comments should be submitted on or before October 16, 2023. Comments may be mailed to the IRS or submitted electronically via the Federal eRulemaking Portal at https://www.regulations.gov.

IRS Offers Cybersecurity Tips, IR-2023-200

The IRS and Security Summit partners reminded taxpayers to remain vigilant against potential cybersecurity threats. As the National Cybersecurity Awareness Month is […]

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IRS Offers Cybersecurity Tips, IR-2023-200

IRS Cautions Against Charity Scams Amid Global Crisis, IR-2023-196

The IRS has issued a warning to taxpayers, advising them to be cautious of fraudulent solicitors who pretend to represent genuine charities. These […]

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IRS Cautions Against Charity Scams Amid Global Crisis, IR-2023-196

Energy Credit Online Tool Now Available to Sellers, IR-2023-202

The IRS has announced that enrollment to the IRS Energy Credit Online tool is now open to the sellers of clean vehicles. The Energy Credits tool is available free of cost and will […]

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Energy Credit Online Tool Now Available to Sellers, IR-2023-202

IRS Urges Taxpayers to Review Withholding, IR-2023-205

The IRS has urged taxpayers to promptly review their tax withholding to avoid surprises, whether in the form of significant refunds or balances due when filing taxes next […]

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IRS Urges Taxpayers to Review Withholding, IR-2023-205

Low and Moderate Income Taxpayers Can Save More through Saver’s Credit in 2024, IR-2023-222

The IRS has reminded low and moderate income taxpayers that they can save more for their retirement now through Saver’s Credit. This credit is available to taxpayers who are 18 years […]

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Low and Moderate Income Taxpayers Can Save More through Saver’s Credit in 2024, IR-2023-222

IRS Reminds IRA Owners of Tax-Free Charitable Transfer Option, IR-2023-215

The IRS has reminded individual retirement arrangement (IRA) owners, aged 70½ or older, of tax-free charitable transfers permitting senior citizens to contribute up to $100,000 annually to eligible charities […]

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IRS Reminds IRA Owners of Tax-Free Charitable Transfer Option, IR-2023-215

FL - Change in Collier County local communications services tax rates announced

Effective January 1, 2024, the Florida local communications services tax (CST) rates in Collier County are as follows: 2.1% in […]

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FL - Change in Collier County local communications services tax rates announced

FL - Guidance on credit for human milk fortifier manufacturing equipment issued

Florida issued guidance regarding a corporate income tax credit for manufacturing equipment purchased for the production of human breast milk […]

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FL - Guidance on credit for human milk fortifier manufacturing equipment issued

FL - Guidance on internship tax credit program issued

Florida issued guidance regarding the student internship credit program for corporate income taxpayers. The program has been renamed as the […]

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FL - Guidance on internship tax credit program issued

Applicable Terminal Charge and SIFL Rates for Determining Value of Noncommercial Flights on Employer-Provided Aircraft Issued, Rev. Rul. 2023-19

The IRS has released the applicable terminal charge and the Standard Industry Fare Level (SIFL) mileage rate for determining the value of noncommercial flights on employer-provided aircraft in effect for the second half of 2023 for […]

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Applicable Terminal Charge and SIFL Rates for Determining Value of Noncommercial Flights on Employer-Provided Aircraft Issued, Rev. Rul. 2023-19