Coronavirus Aid, Relief, and Economic Security (“CARES”) Act
Employers can defer payroll payments and get an employee retention credit–
For employer payroll tax payments that would otherwise be due before January 1, 2021, 50% of such payments are now due December 31, 2021, with the remainder due December 31, 2022.
Employers severely impacted by COVID-19 (either subject to a shut-down order or incurring a 50% decline in gross receipts) are eligible for a refundable payroll tax credit of 50% of wages paid to certain employees, with limitations.
Return of NOL Carrybacks, Increased Deduction for Interest
Net Operating Loss deduction limitations imposed by the Tax Cuts and Jobs Act (TCJA) are lifted by the new legislation.
Corporate taxpayers may carryback Net Operating Losses (NOLs) arising in 2018-2020 for up to five years (under the TCJA, no carrybacks were allowed); and for 2020 and years prior, corporations and pass-throughs may fully offset their income using NOLs (the TCJA imposed an 80% cap).
Additionally, for 2019-2020, taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (which was 30% limit under the TCJA). Taxpayers may also elect to use their 2019 adjusted taxable income for determining their 2020 interest deduction.
Other tax changes
The act also accelerates the use of corporate alternative minimum tax credits, makes Qualified Improvement Property generally eligible for 15-year cost-recovery and 100% bonus depreciation, raises the corporate charitable deduction limit to 25% of taxable income and provides that forgiveness of “Paycheck Protection Program” loans is not taxable income.