CARES Act Update: Proposed Changes Pending Senate Vote (S. 3548)
As of March 23, 2020, S.3548, the Coronavirus Aid, Relief, and Economic Security Act, or more commonly known as the CARES Act, has gone through a series of revisions and is awaiting a final vote in the Senate. Proposed changes to the CARES Act (not yet passed at this time) include:
The new version of the bill modifies loss limitations for non-corporate taxpayers, including rules governing excess farm losses. Limitations on excess business losses are delayed until 2021.
$350 billion allocated for Small Business Interruption Loans, which are meant to help small businesses (fewer than 500 employees) impacted by the pandemic and economic turndown make payroll and cover other expenses. Small businesses may take out loans up to $10 million and cover employees making up to $100,000 per year; loans taken for this purpose if the business does not lay off its employees (forgiveness is scaled down as layoffs rise). In order to be eligible for a loan, a firm must maintain an average monthly number of employees during the covered period that is no less than the number it had before the crisis began.
Firms that have laid off employees may qualify for forgiveness if employees are rehired by April 1, 2020.
Awaiting guidance for businesses required to be shuttered past April 1, 2020.
The proposed provision allowing corporations to delay making quarterly estimated payments has been eliminated.
Employer-side Social Security payroll tax payments may be delayed until January 1, 2021, with 50 percent owed on Dec. 31, 2021 and the other half owed on Dec. 31, 2022. The Social Security Trust Fund will be backfilled by general revenue in the interim period.
Firms may take net operating losses (NOLs) earned in 2018, 2019, or 2020 and carry back those losses five years. The NOL limit of 80 percent of taxable income is also suspended, so firms may use NOLs they have to fully offset their taxable income. The bill also modifies loss limitations for non-corporate taxpayers, including rules governing excess farm losses. Limitations on excess business losses are delayed until 2021.
Firms with tax credit carryforwards and previous alternative minimum tax (AMT) liability can claim larger refundable tax credits than they otherwise could.
The net interest deduction limitation, which currently limits businesses’ ability to deduct interest paid on their tax returns to 30 percent of earnings before interest, tax, depreciation, and amortization (EBITDA), has been expanded to 50 percent of EBITDA for 2019 and 2020. This will help businesses increase liquidity if they have debt or must take on more debt during the crisis.
Technical corrections to the depreciation treatment of qualified improvement property (QIP).
The technical correction for downward attribution of stock ownership, which affected foreign subsidiaries of U.S. firms to excessive tax and reporting requirements, has been eliminated
Aviation excise taxes on kerosene are suspended until January 1, 2021.
The bill would provide a $1,200 refundable tax credit for individuals ($2,400 for joint taxpayers). Unlike the previous version of the bill, the credit has no minimum qualifying income requirements and no phase-in. The rebate phases out at $75,000 for singles, $112,500 for heads of household, and $150,000 for joint taxpayers at 5 percent per dollar of qualified income, or $50 per $1,000 earned. It phases out entirely at $99,000 for single taxpayers and $198,000 for joint taxpayers. Additionally, taxpayers with children will receive a flat $500 for each child. households. This credit is one-time, but policymakers might consider additional rebates if the downturn is prolonged.
Creates a $300 above-the-line charitable contribution for filers taking the standard deduction and expands the limit on charitable contributions for itemizers.
The revised version of the bill waives the required minimum distribution rules for certain retirement plans in the calendar year 2020.
Waives the 10 percent early withdrawal penalty on retirement account distributions for taxpayers facing virus-related economic challenges. Withdrawn amounts are taxable over three years, but taxpayers can re-contribute the withdrawn funds into their retirement accounts for three years without affecting retirement account caps. The bill also waives the required minimum distribution rules for certain retirement plans in the calendar year 2020.
Health provisions to address the coronavirus crisis, including provisions addressing supply shortages, coverage of diagnostic testing for the virus, support for health care providers, improving telehealth service access and flexibility, encouragement for the creation of drugs to treat the virus, and support for educational institutions.