Inclusion in Gross Income of State Payments

Notice 2023-56: Federal Income Tax Consequences of Certain State Payments

Provides rules the IRS will apply in determining the federal income tax consequences of refunds of state or local taxes and certain other payments made by state and local governments to individuals. Notice discusses general rule of Glenshaw Glass Co. regarding accession to wealth and notes exceptions to the rule including for certain refunds of previously paid state taxes, certain payments subject to the general welfare exclusion, and certain disaster relief payments (including certain payments made in connection with the COVID-19 pandemic).

The Notice is available here: https://www.irs.gov/pub/irs-drop/n-23-56.pdf