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COVID-19 tax policy updates

Coronavirus Aid, Relief, and Economic Security (CARES) Act

COVID-19 stimulus: A taxpayer guide, a Deloitte Tax LLP publication, looks at the tax provisions in the new legislation and their potential implications for business and individual taxpayers.

COVID-19 stimulus: A taxpayer guide

Congress has approved, and President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a massive tax-and-spending package intended to provide additional economic relief to address the impact of the COVID-19 pandemic.

By some unofficial estimates, the tax and spending provisions in the legislation would increase the federal deficit by roughly $2 trillion. The Joint Committee on Taxation has estimated that the CARES Act’s tax provisions alone would reduce federal receipts by just over $591 billion between 2020 and 2030. No official score is currently available that measures the total revenue impact of the measure, however.

Potential taxpayer implications of CARES Act

The CARES Act includes several significant business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (NOL) and allow businesses and individuals to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years, suspend the excess business loss rules under section 461(l), accelerate refunds of previously generated corporate AMT credits, generally loosen the business interest limitation under section 163(j) from 30 percent to 50 percent (special partnership rules apply), and fix the “retail glitch” for qualified improvement property in the 2017 tax code overhaul known informally as the Tax Cuts and Jobs Act (TCJA, P.L. 115-97). Other technical corrections are also included in these tax provisions. The measure also adds an employee retention credit to encourage employers to maintain headcounts even if employees cannot report to work because of issues related to the coronavirus, a temporary provision allowing companies to defer remitting to the government the employee share of some payroll taxes, as well as a temporary repeal of aviation excise taxes and a temporary exception from the excise tax for alcohol used to produce hand sanitizer.

Relief to individual taxpayers would come in the form of direct cash payments, penalty-free access to retirement account savings to address virus-related financial hardships, and an expanded deduction for charitable contributions. Also included is a provision that would temporarily expand the scope of the tax exclusion for employer-provided educational assistance to include payments of qualified education loans by an employer to either an employee or a lender.

In addition, the measure contains a variety of nontax provisions to assist with coronavirus mitigation and response, including loans to help struggling businesses, aid to state and local governments, funding for health care providers, a substantial expansion of unemployment insurance, and a large supplemental funding package for agencies of the federal government. Those provisions, while important pieces of the package, are beyond the scope of this report.

Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended.

Breaking down Congress’s coronavirus relief bill

Jonathan Traub discusses how Congressional leaders are viewing the impact of the CARES Act to date, and how that may impact future COVID-19–related legislation. He also talks about the potential content and timing for additional legislation, what the sticking points might be, and key focus areas for taxpayers going forward.

COVID-19 legislative update

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When it comes to the 5-year NOL carryback provision in the CARES Act, it’s important to understand the differences between, and limitations of, state and federal NOLs. Brian Sullivan, managing director at Deloitte Tax, lays out considerations for NOLs in states where future income is expected, procedures to document and support NOLs, and key differences between conforming at the state level and conforming with the amendments to IRC 163(j) from the CARES Act.

Know your NOLs: Considerations for state taxpayers

Gaining clarity on net operating losses regulations at a state level

As a response to the business conditions related to COVID 19, certain federal and international tax regulations may allow cash to be retained or generated. Joe Carino highlights some of the provisions from the CARES Act, including optimizing the Net Operating Loss carryback provision, changes to the TCJA, accounting methods planning, as well as international tax planning considerations.

Cash Generation strategies - Federal and international

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As a response to businesses conditions related to COVID 19, state taxpayers may have opportunities to generate or save cash at a state and local level. Kirsten Gulotta discusses possibilities for indirect tax, along with ways to free up tax department personnel to focus on those areas by outsourcing compliance. Also David Hurrell discusses property tax cash-generation and savings opportunities that companies can consider.

Cash Generation Strategies – Indirect Tax and Property Tax

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Jon Traub, leader of Deloitte’s Tax Policy Group, discusses some of the areas of interest to tax departments found in the CARES (Coronavirus Aid, Relief, and Economic Security) Act. This includes a focus on the temporary provision allowing companies to delay the deposit of payroll taxes to the government, as well as the importance of focusing on guidance for implementation, and what additional legislation might be on the way.

The CARES Act – tax implications for employers 

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The particulars of the federal government’s relief bill are now public. In a new audio discussion, Deloitte Tax LLP policy leader Jonathan Traub leads a deep dive on the tax implications of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and how it may impact individuals and organizations. He also zooms out and explains where it fits into the Congressional multi-step action plan.

Get to know the CARES Act

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