Updated March 23, 2020
On March 19, 2020, a bill was introduced in the Senate, known as the “Coronavirus Aid, Relief, and Economic Security Act” or “CARES Act,” to further assist in the ongoing COVD-19 crisis. In addition to safety/health provisions and Small Business Administration loans, there are also various tax relief measures introduced by the bill.
While this bill is currently being debated and revised, with Democrats seeking to add more relief for individuals and to set more definition around areas of the bill designed to assist corporations, we have summarized key components of the Senate bill to offer an understanding of the ideas being pursued in Congress. We will monitor the progress of this legislation and will provide updates as the new law takes shape.
Individual Tax Relief
The Senate bill extends individual tax filing and payments to July 15, 2020. The bill also postpones all 2020 estimated tax payments until October 15, 2020, with no caveats related to the amount due. This removes the $1M limit for individual tax filers most recently announced by the IRS.
Highlights of Business Tax Relief
The bill as submitted offers several types of relief to businesses, including:
- Deferral of payment of employer payroll taxes for the rest of the year, with payback over two years
- Corporate estimated tax payments are deferred
- Acceleration of corporate AMT credit refunds
- Interest expense limitation enacted by the Tax Cuts and Jobs Act (TCJA) increased from the current 30% limitation to 50% for 2019 and 2020
- Net operating loss (“NOL”) changes — five year NOL carryback period for 2018, 2019 or 2020 losses, temporary removal of 80% NOL limitation and modification of pass-through loss limitations
- Delays excess business loss limitations until 2021
- TCJA technical corrections regarding qualified improvement property (QIP) and Section 965 overpayment refunds
- “Recovery checks” of up to $1,200 per individual taxpayer (subject to income level phase outs based on 2018 income tax filings), including additional funds for children
- Penalty exemptions and income deferral for “coronavirus-related” distributions from retirement plans, with optional 3-year payback period
- Increased 401(k) loan limits to $100,000 (from $50,000)
- Partial above-the-line deduction for charitable contributions
- SBA loan provisions and certain loan forgiveness provisions associated with employee retention
- Modification of limitations on charitable contributions (for individuals and corporations)
- Certain amendments to the Sick Leave Credits enacted by HR 6201
The tax landscape is more fluid than ever, and Frazier & Deeter will work to continue to provide insight during this unprecedented period of uncertainty.
The text of the original Senate bill is available here: https://www.congress.gov/116/bills/s3548/BILLS-116s3548is.pdf.