How the 2019 Coronavirus Relief Bill Helps Businesses (CARES Act)

Our other articles in this series:

1. 2019 IRS-California Tax Return, Contributions, Filing Deadline Extensions
2. All About Economic Stimulus Payments Under the CARES Act
3. How the 2019 Coronavirus Relief Bill Helps Individuals (CARES Act)

On March 27, 2020, The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law in response to the current COVID-19 crisis.  Here are a few of the key tax-related provisions of the law which may affect you:

• SBA Paycheck Protection Loan for the lesser of $10 million or 2.5 months of payroll, excluding annual salaries over $100,000. The term is 10 years at 4% interest, with no collateral or personal guarantee.  Repayment is deferred from 6 to 12 months, depending upon the lender. If the money is used to keep people employed or cover group healthcare benefits, lease and utility payments, some or all of the loan is forgiven, and that forgiveness does not generate taxable income. 
• The delay of employer payroll tax deposits for 2020 (50% due by December 31, 2021, and 50% due by December 31, 2022).  The eligible payroll taxes are the employer’s portion of Social Security taxes 6.2% of employee’s wages. Self-employed taxpayers can also defer this same portion.  Eligible employers must have experienced either:
  • Partial or full suspension of business operations during the calendar quarter due to governmental order that limited commerce, travel, or group meeting due to COVID-19, or
  • 50% decrease or more in gross receipts from the same quarter in 2019.
• A refundable employer retention credit equal to 50% of qualified wages against quarterly Social Security taxes, to offset up to $10,000 of wages paid per employee in 2020. Employers who take advantage of the Payroll Protection Loan discussed above, are not eligible.
• The reinstatement of NOL carrybacks for the 2018–2020 taxable years, and repeal of the 80% taxable income limitation for the 2018–2020 taxable years.
• A TCJA technical correction that classifies qualified improvement property as 15-year recovery period, allowing the bonus depreciation deduction to be claimed for such property retroactive as if it was included in the TCJA at the time of enactment.
• The deferral of excess business loss limitations until 2021.
• An increase in the business interest deduction limitations from 30% to 50% of adjusted taxable income for the 2019 and 2020 taxable year.
• A Cancellation of Debt (COD) exclusion of small business loans forgiven under the Act.

As always, if you have any questions please contact us.