The CARES Act for Businesses
The CARES Act is a $2 trillion economic relief package with numerous tax measures enacted on March 27, 2020. Due to the extensive number and technical nature of the provisions, please find an overview as they relate to businesses.
- The CARES Act provides eligible employers a credit against applicable employment taxes for each calendar quarter equal to 50 percent of the qualified wages with respect to each employee of the employer for the calendar quarter. This credit applies to wages paid after March 12, 2020, and before January 1, 2021. The amount of qualified wages with respect to any employee which may be taken into account for all calendar quarters is limited to $10,000. An “eligible employer” is any employer that was carrying on a trade or business during calendar year 2020, and whose operation is fully or partially suspended during the calendar quarter due to orders by a government authority due to COVID-19, or for which the calendar quarter is within a period of “significant decline in gross receipts”. A period of significant decline in gross receipts means a period beginning with the first calendar quarter beginning after December 31, 2019, for which gross receipts for the calendar quarter are less than 50% of gross receipts for the same calendar quarter in the prior year, and ending with the first calendar quarter in which gross receipts are greater than 80% of the gross receipts for the same calendar quarter in the prior year.
- Provides a retroactive technical correction for assets placed in service January 1, 2018 and forward deemed to be Qualified Improvement Property. This correction shortens the asset’s depreciable life from 39 years to 15 years; also, the property now meets the criteria for taking a bonus depreciation deduction.
- Modifies the charitable contribution limitations based on income for corporations and extends this to donation of food inventory.
- Allows employer to expand the definition of certain employee benefits to include employer’s ability to contribute up to $5,250 toward an employee’s student loan for payments made March 26, 2020 through December 31, 2020.
- Provides a deferral payment option for the employer portion of payroll taxes. Taxpayers will be able to defer paying the employer portion of certain payroll taxes through the end of 2020, with all 2020 deferred amounts due in two equal installments, one at the end of 2021, the other at the end of 2022. Taxes that can be deferred include the 6.2% employer portion of the Social Security (OASDI) payroll tax. THIS RELIEF IS NOT AVAILABLE IF THE TAXPAYER HAS HAD DEBT FORGIVENESS UNDER THE CARES ACT FOR CERTAIN LOANS UNDER THE SBA.CAUTION - THIS IS ONLY A DEFERRAL AND NOT A RELEASE OF SUCH OBLIGATION.
- Allows for 100% of Net Operating Losses arising in 2019 or 2020 to be carried back five years.
- Accelerates ability to claim certain minimum tax credits.
- Modifies the business interest expense limitation temporarily and retroactively from 30% to 50%. Additional special rules apply depending upon the business entity type.
- Provides additional funding options including the Paycheck Protection Program (referred to as PPP) under SBA 7(a) program guidance. The PPP does have a potential loan forgiveness portion.
Glickstein Laval Carris remains committed to be an advisor and resource for you. We encourage you to reach out to us for any questions you may have. While much of our staff is working remotely, we are still available by email or phone.