Two Trillion Dollar Coronavirus Aid Deal Is A Touchdown

And the CARES Act will be the 2 point conversion! This is rescue package number three, addressing COVID-19. The President signed both an $8.3 billion in emergency aid and a sweeping package providing paid leave, free testing and additional aid for families affected by the pandemic into law. A nation in lockdown has just been handed the key to a more favorable financial future. The $2 Trillion infusion into the patient battling the “invisible enemy” is expected to yield $4 Trillion in economic activity.

The full details have yet to be released, but over the last 24 hours, the elements of the proposal have come into sharper focus. According to the New York Times the legislation should be enacted within days and “….is the biggest economic relief package in modern American history, dwarfing the $800 billion stimulus bill passed in 2008 during the financial crisis. The aim is to deliver critical financial support to businesses forced to shut their doors and relief to American families and hospitals reeling from the rapid spread of the disease and the resulting economic disruption.”

The plan will deliver direct payments to taxpayers, relief money to ailing states, provide jobless benefits, and send $500 billion to COVID-19 impacted businesses. The stimulus package provides assistance to encourage companies to keep employees on their payrolls even if their doors have closed temporarily, and promises aid to workers who are still employed but have had their hours and wages cut back. It is expected that there will be a significant expansion of unemployment insurance programs including a 13 week extension and enhanced benefits.

That $500 billion fund includes $425 billion for the Federal Reserve to leverage for loans in order to help distressed companies and $75 billion for industry-specific loans. Stricter oversight will be implemented and companies that accept money must halt any stock buybacks for the length of the government assistance, plus an additional year. $130 billion is earmarked for hospitals, in addition to $150 billion for state and local governments. The bill would ensure the Small Business Administration could serve as a guarantor for loans of up to $10 billion for small businesses to ensure they can maintain their payrolls and pay off their debts.

The CARES Act (Coronavirus Aid, Relief, and Economic Security Act) tax provisions within the stimulus package reflect the following:

Recovery rebates - The bill provides for payments to taxpayers — “recovery rebates” — which are being treated as advance refunds of a 2020 tax credit. Under this provision, individuals will receive a tax credit of $1,200 ($2,400 for joint filers) plus $500 for each qualifying child. The credit is phased out for taxpayers with adjusted gross income (AGI) above $150,000 (for joint filers), $112,500 (for heads of household), and $75,000 for other individuals. The credit is not available to nonresident aliens, individuals who can be claimed as a dependent by another taxpayer, and estates and trusts. Taxpayers will reduce the amount of the credit available on their 2020 tax return by the amount of the advance refund payment they receive.

Payroll tax credit refunds: The bill provides for advance refunding of the payroll tax credits enacted last week in the Families First Coronavirus Response Act, P.L. 116-127. The credit for required paid sick leave and the credit for required paid family leave can be refunded in advance using forms and instructions the IRS will provide. The IRS is instructed to waive any penalties for failure to deposit payroll taxes under Sec. 3111(a) or 3221(a) if the failure was due to an anticipated payroll tax credit.

Employee retention credit: The bill creates an employee retention credit for employers that close due to the coronavirus pandemic. Eligible employers are allowed a credit against employment taxes equal to 50% of qualified wages (up to $10,000 in wages) for each employee. Eligible employers are employers who were carrying on a trade or business during 2020 and for which the operation of that business is fully or partially suspended due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to the COVID-19 outbreak. Employers that have gross receipts that are less than 50% of their gross receipts for the same quarter in the prior year are also eligible, until their gross receipts exceed 80% of their gross receipts for the same calendar quarter in the prior year. For employers with more than 100 employees, wages eligible for the credit are wages that the employer pays employees who are not providing services due to the suspension of the business or a drop in gross receipts. For employers with 100 or fewer employees, all wages paid qualify for the credit.

Retirement plans: Taxpayers can take up to $100,000 in coronavirus-related distributions from retirement plans without being subject to the Sec. 72(t) 10% additional tax for early distributions. Eligible distributions can be taken up to Dec. 31, 2020. Coronavirus-related distributions may be repaid within three years. For these purposes, an eligible taxpayer is one who has been diagnosed with SARS-CoV-2 virus or COVID-19 disease or whose spouse or dependent has been diagnosed with SARS-CoV-2 virus or COVID-19 disease or who experiences adverse financial consequences from being quarantined, furloughed, or laid off, or who has had his or her work hours reduced, or who is unable to work due to lack of child care. Any resulting income inclusion can be taken over three years. The bill also allows loans of up to $100,000 from qualified plans, and repayment can be delayed.
**The bill temporarily suspends the required minimum distribution rules in Sec. 401 for 2020.
**The bill delays 2020 minimum required contributions for single-employer plans until 2021.

Charitable deductions: The bill creates an above-the-line charitable deduction for 2020 (not to exceed $300). The bill also modifies the AGI limitations on charitable contributions for 2020, to 100% of AGI for individuals and 25% of taxable income for corporations. The bill also increases the food contribution limits to 25%.

Payroll tax delay: The bill delays payment of 50% of 2020 employer payroll taxes until Dec. 31, 2021; the other 50% will be due Dec. 31, 2022. For self-employment taxes, 50% will not be due until those same dates.

Net operating losses: The bill temporarily repeals the 80% income limitation for net operating loss deductions for years beginning before 2021. For losses arising in 2018, 2019, and 2020, a five-year carryback is allowed (taxpayers can elect to forgo the carryback).

Excess loss limitations: The bill repeals the Sec. 461(l) excess loss limitation. Sec. 461(l) was added to the Code by the law known as the Tax Cuts and Jobs Act, P.L. 115-97, and it disallows excess business losses of non-corporate taxpayers if the amount of the loss exceeds $250,000 ($500,000 for married taxpayers filing jointly).

Corporate alternative minimum tax (AMT): The bill modifies the AMT credit for corporations to make it a refundable credit for 2018 tax years.

Interest limitation: For tax years beginning in 2019 and 2020, Sec. 163(j) is amended to increase the adjusted taxable income percentage from 30% to 50%. Also, taxpayers can elect to use 2019 income in place of 2020 for the computation.

Qualified improvement property: The bill also makes technical corrections regarding qualified improvement property under Sec. 168 by making it 15-year property.

Aviation taxes: Various aviation excise taxes are suspended until 2021.

Health plans: The rules for high-deductible health plans (HDHPs) are amended to allow them to cover telehealth and other remote care services without charging a deductible.

Contact Us: Got questions? Our top tax advisors are ready with answers about how this impacts you and your business.. We will keep you apprised of details as they become available. For more Coronavirus updates visit our homepage www.fuoco.com.