The Coronavirus Aid, Relief, and Economic Security (CARES) Act, H.R. 748, which passed the Senate by a 96-0 vote late on Wednesday, contains a host of tax measures as part of a $2 trillion aid package designed to help the economy as it suffers from the effects of the coronavirus pandemic. While the focus of the legislation is not tax, a large number of tax provisions are included in the action.<\/p>\n\n\n\n
Recovery rebates<\/strong> Payroll tax credit refunds<\/strong> Employee retention credit<\/strong> Retirement plans<\/strong> The bill temporarily suspends the required\nminimum distribution rules in Sec. 401 for 2020.<\/p>\n\n\n\n The bill delays 2020 minimum required\ncontributions for single-employer plans until 2021.<\/p>\n\n\n\n Charitable deductions<\/strong> Payroll tax delay<\/strong> Net operating losses<\/strong> Excess loss limitations<\/strong> Corporate alternative minimum tax (AMT)<\/strong> Interest limitation<\/strong> Qualified improvement property<\/strong> Aviation taxes<\/strong> Health plans<\/strong> Over-the-counter menstrual care products are\nadded to the list of items that can be reimbursed out of a health savings\naccount, Archer medical savings account, or health reimbursement arrangement.<\/p>\n\n\n\n
\nThe bill provides for payments to taxpayers \u2014 “recovery rebates” \u2014\nwhich are being treated as advance refunds of a 2020 tax credit. Under this\nprovision, individuals will receive a tax credit of $1,200 ($2,400 for joint\nfilers) plus $500 for each qualifying child. The credit is phased out for\ntaxpayers with adjusted gross income (AGI) above $150,000 (for joint filers),\n$112,500 (for heads of household), and $75,000 for other individuals. The\ncredit is not available to nonresident aliens, individuals who can be claimed as\na dependent by another taxpayer, and estates and trusts. Taxpayers will reduce\nthe amount of the credit available on their 2020 tax return by the amount of\nthe advance refund payment they receive.<\/p>\n\n\n\n
\nThe bill provides for advance refunding of the payroll tax credits enacted last\nweek in the Families First Coronavirus Response Act, P.L. 116-127. The credit\nfor required paid sick leave and the credit for required paid family leave can\nbe refunded in advance using forms and instructions the IRS will provide. The\nIRS is instructed to waive any penalties for failure to deposit payroll taxes\nunder Sec. 3111(a) or 3221(a) if the failure was due to an anticipated payroll\ntax credit.<\/p>\n\n\n\n
\nThe bill creates an employee retention credit for employers that close due to\nthe coronavirus pandemic. Eligible employers are allowed a credit against\nemployment taxes equal to 50% of qualified wages (up to $10,000 in wages) for\neach employee. Eligible employers are employers who were carrying on a trade or\nbusiness during 2020 and for which the operation of that business is fully or\npartially suspended due to orders from an appropriate governmental authority\nlimiting commerce, travel, or group meetings due to the COVID-19 outbreak. Employers\nthat have gross receipts that are less than 50% of their gross receipts for the\nsame quarter in the prior year are also eligible, until their gross receipts\nexceed 80% of their gross receipts for the same calendar quarter in the prior\nyear. For employers with more than 100 employees, wages eligible for the credit\nare wages that the employer pays employees who are not providing services due\nto the suspension of the business or a drop in gross receipts. For employers\nwith 100 or fewer employees, all wages paid qualify for the credit.<\/p>\n\n\n\n
\nTaxpayers can take up to $100,000 in coronavirus-related distributions from\nretirement plans without being subject to the Sec. 72(t) 10% additional tax for\nearly distributions. Eligible distributions can be taken up to Dec. 31, 2020.\nCoronavirus-related distributions may be repaid within three years. For these\npurposes, an eligible taxpayer is one who has been diagnosed with SARS-CoV-2\nvirus or COVID-19 disease or whose spouse or dependent has been diagnosed with\nSARS-CoV-2 virus or COVID-19 disease or who experiences adverse financial\nconsequences from being quarantined, furloughed, or laid off, or who has had\nhis or her work hours reduced, or who is unable to work due to lack of child\ncare. Any resulting income inclusion can be taken over three years. The bill\nalso allows loans of up to $100,000 from qualified plans, and repayment can be\ndelayed.<\/p>\n\n\n\n
\nThe bill creates an above-the-line charitable deduction for 2020 (not to exceed\n$300). The bill also modifies the AGI limitations on charitable contributions\nfor 2020, to 100% of AGI for individuals and 25% of taxable income for\ncorporations. The bill also increases the food contribution limits to 25%.<\/p>\n\n\n\n
\nThe bill delays payment of 50% of 2020 employer payroll taxes until Dec. 31,\n2021; the other 50% will be due Dec. 31, 2022. For self-employment taxes, 50%\nwill not be due until those same dates.<\/p>\n\n\n\n
\nThe bill temporarily repeals the 80% income limitation for net operating loss\ndeductions for years beginning before 2021. For losses arising in 2018, 2019,\nand 2020, a five-year carryback is allowed (taxpayers can elect to forgo the\ncarryback).<\/p>\n\n\n\n
\nThe bill repeals the Sec. 461(l) excess loss limitation. Sec. 461(l) was added\nto the Code by the law known as the Tax Cuts and Jobs Act, P.L. 115-97, and it\ndisallows excess business losses of noncorporate taxpayers if the amount of the\nloss exceeds $250,000 ($500,000 for married taxpayers filing jointly).<\/p>\n\n\n\n
\nThe bill modifies the AMT credit for corporations to make it a refundable\ncredit for 2018 tax years.<\/p>\n\n\n\n
\nFor tax years beginning in 2019 and 2020, Sec. 163(j) is amended to increase\nthe adjusted taxable income percentage from 30% to 50%. Also, taxpayers can\nelect to use 2019 income in place of 2020 for the computation.<\/p>\n\n\n\n
\nThe bill also makes technical corrections regarding qualified improvement\nproperty under Sec. 168 by making it 15-year property.<\/p>\n\n\n\n
\nVarious aviation excise taxes are suspended until 2021.<\/p>\n\n\n\n
\nThe rules for high-deductible health plans (HDHPs) are amended to allow them to\ncover telehealth and other remote care services without charging a deductible.<\/p>\n\n\n\n