Miscellaneous Business Tax Provisions in the CARES Act
While most of the recent media coverage has been focused on the Economic Impact Payments for individuals and the SBA loan programs newly available, the CARES Act also includes several miscellaneous tax benefits for business. A summary of the additional tax provisions affecting businesses is outlined below.
- If you took a Paycheck Protection Program Loan and it is forgiven, the forgiven amount will not be included in gross income, and thus no tax will be due on the cancelled debt.
- Employee Retention Credit available for employers. For more information regarding various payroll tax credits available, please click here.
- Employers are also eligible to defer payment of the employer portion of certain payroll taxes (social security only, and not Medicare) until December 31, 2021, with respect to 50% of the deferred amount, and December 31, 2022, with respect to the remaining 50% of the deferred amount.
- Net operating losses from 2018, 2019, and 2020 may be carried back 5 years. For tax years 2020 and earlier, the 80% of taxable income loss limitation has been suspended, allowing an NOL to offset 100% of taxable income. In addition, for tax years 2021 and forward, the 80% limitation is also suspended with respect to losses arising prior to 2018.
- For non-corporate taxpayers, “excess business losses” arising in 2018, 2019, and 2020 will also be deductible without limitation.
- The AMT credit limitations have been removed, allowing corporations to claim 100% of AMT credits in 2019 as fully refundable.
- The business interest deduction limitation pursuant to IRC Section 163(j) has generally been increased from 30% of EBITDA to 50% of EBITDA for tax years 2019 and 2020, but special rules are applicable to partnerships for tax year 2019. Taxpayers may also elect to use 2019’s EBITDA for calculating the limitation for tax year 2020.
- Excise taxes on alcohol used to make hand sanitizer have been suspended for tax year 2020.
- Excise taxes on aviation, including on the air transportation of persons, property, and kerosene used in aviation have been suspended for tax year 2020.
The information contained in this alert is provided for informational purposes only. It should not be construed as business, legal, accounting, tax, financial, investment or other advice on any matter and should not be relied upon for such.
The information in this alert may not reflect the most current developments as the subject matter is extremely fluid and may change daily. The content and interpretation of the issues addressed herein is subject to revision. Trenam Law disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this document to the fullest extent permitted by law. Do not act or refrain from acting upon the information contained in this document without seeking professional or other advice.