COVID-19 Pandemic: Assorted U.S. Corporate and Business Tax Relief Provisions

With the spread of the global COVID-19 pandemic to the U.S., and the resulting impact it has had on the U.S. economy, the U.S. Congress has responded by passing numerous tax law changes to assist small businesses and individuals. Although there are many changes that have been enacted, the following is a general summary of some of the more salient ones potentially impacting our clients.

• Extension of due date for filing returns and paying taxes due April 15, 2020
  • Payments and returns are automatically extended to July 15, 2020.  No form is required.

• Paid sick leave and FMLA Leave
  • Employers are eligible for payroll tax credits in connection with providing paid leave from April 1, 2020 to December 31, 2020.

• Employee Retention Credit for Employers Subject to COVID-19 Closures
  • A trade or businesses is eligible if it is partially or fully suspended during the calendar quarter due to government orders and it has a 50% decrease in gross receipts for the same calendar quarter.
  • Employers receive a refundable quarterly payroll credit equal to 50% of qualified wages to employees. Up to $10K of wages per employee is taken into account.  Excess credits are refundable.

• Delay of Employer Payroll Taxes
  • Employers and self-employed can delay employer portion of payroll taxes through the end of 2020. 50% of the delayed taxes are payable at the end of 2021 and the remaining is due the end of 2022.

• Early Withdrawal from Retirement Plans
  • Coronavirus related early distributions from retirement plans are not subject to the normally applicable 10% excise tax. 
  • Distributions must be made during the 2020 calendar year to a person or his family members who are diagnosed with COVID-19, or who suffer financial hardships due to quarantine.
  • Distributions may not exceed $100K.  Other nuances apply.

• Modification of U.S. tax net operating loss (“NOL”) Rules
  • NOLs arising in taxable years ending after December 31, 2017 and before January 1, 2021 can be carried back to each of the five preceding taxable years of such NOLs.
  • The NOL rules are also amended to remove the restriction that NOLs can offset no more than 80% of taxable income.  This applies to NOLs incurred for tax years beginning after December 31, 2017 and before December 31, 2017.

• IRS Temporary Procedure – Electronic Signatures and Sending of Documents
  • From March 27, 2020 until July 15, 2020, the IRS will allow IRS employees to: (1) accept scanned or photographed images of signatures and digital signatures on certain documents; and (2) accept documents via email and to transmit documents to taxpayers using secured messaging systems.
  • This is a stark break from traditional procedures of getting original signatures and sending documents via traditional mail or fax.

• There are numerous changes to various U.S. tax provisions impacting businesses.  The rule changes can be nuanced in certain circumstances, but include changes to:
  • The NOL limitation rules under Code section 382
  • The new business interest limitation rules under Code section 163(j)
  • The corporate charitable giving deduction under Code section 62
  • Procedures for getting quick refunds for corporations overpaying on their estimated taxes under Code section 6411.

If you require more detailed information on any of the above tax law changes, please feel free to reach out to Eric Trumbull.