On February 10, 2023, the IRS clarified that certain tax refund payments made in 2022 by 21 states were not income for federal tax purposes (IR-2023-23). Those who filed their 2022 federal income tax returns before February 10 should file an amended return if they included those payments in income (IR-2023-77). This means the state payments do not have to be reported as income by taxpayers in: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island. Alaska is in this group as well, but the determination applies only to the special supplemental Energy Relief Payment received. IR-2023-23 has a chart listing the eligible state payments. The same rule also applies to certain state refunds received in 2022 by taxpayers in Georgia, Massachusetts, South Carolina and Virginia.
A revenue ruling is the Commissioner’s “official interpretation of the interpretation of the law” and generally is binding on revenue agents and other IRS officials. Taxpayers generally may rely on published revenue rulings in determining the tax treatment of their own transactions that arise out of similar facts and circumstances.