Yesterday afternoon, the Senate introduced bill S.3548 as another round of coronavirus relief. Among the various areas of change, this bill includes several new tax provisions as well as technical corrections to modify portions of the 2018 Tax Cuts and Jobs Act. Some of the tax change highlights include the following:
Tax Deadline
- Moves deadline for 2019 tax year from April 15th 2020 to July 15th 2020
Business Tax Changes
- Moves deadline for Q1, Q2, and Q3 C corporation estimates to October 15th 2020
- Delays payment of 50% of 2020 payroll taxes until December 31, 2021 and the other 50% to December 31, 2022
- Modifies net operating loss rules including carryback provisions
- Expands interest expense limitation allowance to 50% of adjusted taxable income (ATI) and allows taxpayers to use 2019 ATI for 2020
- Gives qualified improvement property a 15-year life, thereby allowing bonus depreciation on non-structural internal improvements
Individual Tax Changes
- Moves deadline for Q1, Q2, and Q3 individual estimates to October 15th 2020
- Introduces $300 charitable cash contribution above-the-line deduction for taxpayers taking standard deduction
- Moves effective date of the excess business loss limitation to 2021
- Early retirement withdrawals
- 10% penalty waived for coronavirus-related distributions up to $100,000.
- Distributions may be repaid within a 3-year period
- Distributions taxable over 3-year period with option to include entire amount in year of distribution
- May take $50,000 loan from qualified employer plan with additional 1-year delay for repayment
Rebate Program
- Provides a credit against 2020 tax year equal to lesser of net income tax liability or $1,200 (or $2,400 for MFJ).
- Requirements based on individual’s 2018 tax return information
- Based on 2019 return if taxpayer has not filed 2018 return
- Paid as an advanced refund ‘as rapidly as possible’
- Minimum rebate of $600 (or $1,200 MFJ) for those that do not phase out
- Additional $500 per qualifying child defined under the child tax credit rules
- Taxpayer must have (1) qualifying income (earned income, social security, certain service-related pensions) of at least $2,500, or (2) net income tax liability greater than zero with gross income greater than the standard deduction
- Phases out between $75k - $99k (or between $150k to $198k MFJ) by 5% for each dollar the taxpayer’s AGI exceeds $75k (or $150k MFJ)
- Not available for nonresident alien individuals, dependents, estates or trusts
Bill S.3548 provides some of the most significant tax changes since 2018’s tax reform legislation. We will continue to monitor these proposed changes as the bill moves through the drafting and voting procedures.
