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Highlights from the Stimulus Package – CARES Act

Posted by Emily Taibl on Mar 27, 2020 8:42:36 PM

March 27, 2020

Signing the BillPresident Trump signed the CARES (Coronavirus Aid, Relief and Economic Stimulus) Act, a $2.2 trillion stimulus package this afternoon. This Act is a massive bill, the majority of which does not have tax impacts.

Here are some key highlights:

Supporting Businesses:

  • Net Operating Losses- Previously, NOLs could only be carried forward, not backward, and could shield up to 80% of taxable income. With the CARES Act, NOLs generated in 2018, 2019, and 2020 can be carried back, up to 5 years, and can shield 100% of taxable income in tax years before 2021.
  • Qualified Improvement Property- A technical correction was added to the Tax Cuts and Jobs Act allowing for a 15-year recovery period for Qualified Improvement Property (QIP), which is now eligible for bonus depreciation.
  • Business interest deduction limitations have temporarily been made more favorable by increasing the limitation from 30% to 50% of adjusted taxable income for 2019 and 2020.
  • Payroll Tax Expense Deferment- Businesses can defer payment of their 2020 employer payroll taxes, with half the payment now due 12/31/2021 and the other half due 12/31/2022.
  • Employee Sick and Family Leave payments- Certain employers must provide their employees with paid sick leave and expanded family medical leave for specified reasons related to COVID-19. See a more detailed breakdown here.
  • Small Business Loans- The maximum loan amount for Small Business loans is increased to $10 million through the end of 2020. Loans can be used for payroll support, paid sick and medical leave for employees, insurance premiums, and overhead costs.
    • There are some provisions for loan forgiveness for amounts spent by the borrower during an eight-week period after the origination date of the loan for expenses such as payroll, rent, utilities and mortgages. Limitations apply.
  • Refundable Payroll Tax Credit- Certain employers are eligible for a refundable payroll tax credit in the amount of 50% of wages paid to employees from February 15 to June 30. Conditions include:
    • Operations fully or partially suspended due to COVID-19; OR
    • Gross receipts declined by more than 50% for the quarter, year-over-year
  • Charitable Contributions- Corporations' charitable deduction limitation is increased from 10% to 25% of taxable income.
  • Employee Retention Credit- This credit grants eligible employers a credit against employment taxes equal to 50% of qualified wages paid to employees after March 12, 2020 and before January 1, 2021 who are not working due to the employer’s full or partial cessation of business or a significant decline in gross receipts. Limited to $10,000 in aggregate per employee.

Assisting Individuals:

  • Expanded Unemployment benefits
    • The Pandemic Unemployment Assistance (PUA) program extends unemployment benefits ($600 per week for up to 4 months) to those not typically eligible, including self-employed workers, independent contractors, and those with limited work history, who are unable to work due to the outbreak.
    • In addition, the traditional time frame for unemployment benefits is extended by 13 weeks (through end of 2020).
  • Stimulus Payments- All U.S. residents whose AGI is $75K or less will receive direct cash payments of $1,200. For married couples, the payment is $2,400 with an income threshold of $150K. There will be additional payments of $500 per child.
  • COVID-19 Testing- All testing for COVID-19 is covered in full by private health insurance companies.
  • Student Loans- Federal student loan payments (interest and principal) are deferred for 6 months (through September 30, 2020) without penalty.
  • Charitable deductions expanded- Individuals will be allowed a $300 above-the-line tax deduction to incentivize individuals who do not itemize their taxes to receive a financial benefit from some of their charitable contributions.
  • Required Minimum Distributions- There is a temporary elimination of required minimum distributions for individuals who are 72 or older.
  • Early Retirement Plan distributions- The 10% early distribution penalty (for withdrawals of up to $100K for COVID-19 related purposes) is waived from qualified retirement accounts.

We are continuing to closely monitor this ever-changing situation, and are here to answer your questions. Contact us below, or visit our COVID-19 Resource Page for breaking news, updates and helpful links.

Topics: Tax, News, COVID-19

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