Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)
Paycheck Protection Program Loan - payback may be waived
This loan converts to a grant for a portion of the loan amount that is used to retain employees and keep your business open. The loan amount will vary, but will be forgiven if 2.5 months worth of payroll wages and certain overhead paid during pandemic is stable. In certain situation and industries, this loan will not have to be repaid upon receipt of a forgiveness request. More details in loan section below.
Summary of Changes for Businesses
Payroll Tax Credit
Employers are eligible for a 50 percent refundable payroll tax credit on wages paid up to $10,000 during the crisis. It would be available to employers whose businesses were disrupted due to virus-related shutdowns and firms experiencing a decrease in gross receipts of 50 percent or more when compared to the same quarter last year. The credit is available for employees retained but not currently working due to the crisis for firms with more than 100 employees, and for all employee wages for firms with 100 or fewer employees.
Qualified Improvement Property
Businesses will be able to immediately write off costs associated with improving facilities instead of having to depreciate those improvements over the 39 -year life of the building. This corrects the error in the Tax Cuts and Jobs Act and increases a business' access to cash flow by allowing them to amend a prior year return, while incentivizing investment.
Modifications for Net Operating Losses (NOLs)
The provision relaxes limitations on a company’s use of losses from prior years. NOLs are currently subject to a taxable income limitation, and they cannot be carried back to reduce income in a prior tax year. This provision provides that a loss from 2018, 2019, or 2020 can be carried back five years.
This also temporarily removes the taxable income limitation to allow an NOL to fully offset income.
Delay of Payment of Employer Payroll Taxes
Employers can defer payment of the employer share of the Social Security tax
The deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
Additional Tax Relief
The tax filing deadline will be extended from April 15 to July 15th 2020. Businesses and individuals can postpone estimated tax payments due from the date of enactment until October 15, 2020 with no cap on the amount of payment postponed.
Modifications to Tax Law
Modification of limitation on losses for taxpayers other than corporations.
Modification of credit for prior year minimum tax liability of corporations.
Modification of limitation on business interest.
Families First Coronavirus Response Act (Act)
Payroll Tax Credit toward Paid Sick Leave
Under guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.
The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.
If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.