The package is massive (880 pages of text) and we have distilled some of the key areas (not all-inclusive) impacting small business and individuals :
Loans To Small Business That Convert to Grants/Forgiveness:
Perhaps one of the most pervasive pieces of the legislation involves the $349B in funds earmarked to lend to small businesses. Through its existing 7(a) program, the SBA would work through banking channels to provide loans to small businesses up to $10M.
These loans may be converted into grants (forgiven) as long as the borrower uses the funds to cover payroll, employee benefits, interest, rent utilities, etc. If a business cuts workers or reduces their pay, the amount forgivable would be reduced proportionately.
More detailed information regarding maximum loan calculations, tax nuances and other details within this provision in our piece on the SBA program, will be sent later today.
Businesses May Defer Payroll Taxes For the Remainder of the Year :
Employers are entitled to defer the employer portion of payroll taxes under the 'payroll tax deferral period' out to 2021 (50%) and 2022 (50%). 'Payroll tax deferral period' is defined as the period beginning on the date of enactment of this Act and ending before January 1, 2021.
Businesses May Carryback Today's Losses Against Prior Year Profits :
The previously removed Net Operating Loss carryback provision is now reinstated for companies incurring losses during 2020. The carryback rules are complex also involving the ability to use 2018/2019 losses. We will have more details on this in a separate piece.
Business Interest Expense Limitation:
The TCJA limited the amount of allowable deductions for business interest (regardless of the type of entity) for tax years beginning after 2017. The limitation is generally the amount of business interest income for the year plus 30 percent of the taxpayer's adjusted taxable income for the year. The limitation does not apply to taxpayers with average annual gross receipts for the prior three year below an inflation-adjusted amount of $26 million or less.
The bill increases the limitation amount to 50 percent of the taxpayer's adjusted taxable income for 2019 and 2020.
Employee Retention Credit:
The CARES Act would grant eligible employers a credit against employment taxes equal to 50 percent of qualified wages paid to employees who are not working due to the employer's full or partial cessation of business or a significant decline in gross receipts. The credit is available to be claimed on a quarterly basis, but the amount of wages, including health benefits, for which the credit can be claimed is limited to $10,000 in aggregate per employee for all quarters. The provision contains several requirements defining qualified wages, qualified employees, and qualified employers. The credit applies to wages paid after March 12, 2020, and before January 1, 2021.
Retailers/Restaurants Benefit From a Depreciation Fix to Leasehold Improvements:
Lawmakers now fix a previous drafting error that prevented restaurants and retailers from utilizing 15 year depreciation and bonus depreciation provisions.
The legislation would provide significant expansion of unemployment benefits increasing the duration by 13 weeks coupled with a four-month period of enhanced benefits which includes an additional $600 per week beyond what state unemployment programs pay. In total, unemployed workers may be eligible for unemployment benefits up to 39 weeks. The program now encompasses self-employed, subcontractors, freelancers, furloughed employees and "gig" workers such as Lyft and Uber drivers.
Retirement Withdrawal Leniency and Retirement Loan Expansion:
The legislation now eases rules on retirement withdrawals and loans. Those impacted by the crisis can access up to $100,000 of their retirement without the 10% penalty. The legislation also doubles the amount of 401(k) you can borrow against (now the lower of $100k or 100% of the account balance).
Required Minimum Distributions (age 70 ½ or age 72) from your retirement have been suspended for 2020.
One-Time Checks Out to Taxpayers:
A one-time check of $1,200 to Americans who make up to $75,000 of AGI (adjusted gross income). Married couples earning up to $150,000 of AGI receiving $2,400. An additional $500 per child will also be included. The payment would phase-out entirely once AGI is over $99,000 for single taxpayers and $198,000 for couples without children. Individuals with no or little tax liability would receive the same amount. White House officials indicated direct payments could happen as soon as April 6th.
$300 Above the Line Charity Deduction:
For 2020, those not itemizing their deductions and taking the standard deduction can still claim a $300 charitable deduction.
Student Loan Requirement Leniency:
The legislation would allow most taxpayers with federal student loans to suspend their monthly payments through September 30, 2020 without interest accruing. Employers would also be allowed to make contributions to their employees' student loan payments tax free to the recipient.