COVID-19 continues to impact us all across the country, and recent legislation provides support to those struggling to navigate these uncertain times. RubinBrown has summarized key highlights of the COVID-19 legislation for businesses and not-for profit organizations. While this summary primarily highlights the federal programs, RubinBrown is also helping our clients to apply for numerous state and local incentive programs.
RubinBrown is ready to help you with practical advice on informing and supporting your employees as well as keeping your business or not-for-profit running. For more information and assistance deciphering the recent legislation, please call your RubinBrown contact or visit our contact page.
Tax Deadline & Payment Deferrals
- The IRS has deferred the April 15, 2020 due date for both filing returns and payment of tax to July 15, 2020. This is an automatic deferral of federal income tax returns and payments for the 2019 taxable year. As of now, tax returns originally due after April 15, 2020, such as Form 990 returns for tax-exempt organizations due May 15, 2020, remain due on their original date.
- The IRS has deferred the April 15, 2020 due date for first quarter estimated payments to July 15, 2020.
- Most states are offering similar 2019 income return filing and tax payment deferrals. The states are more varied on their deferrals for 2020 estimated payments. A comprehensive state deadline resource from the AICPA can be accessed here.
- Many states and localities are also deferring sales/use or property tax filing and payment deadlines.
U.S. Small Business Administration (SBA) Economic Injury Disaster & Paycheck Protection Loans
- The SBA can provide Economic Injury Disaster Loans (EIDL) to for-profit and not-for-profit organizations at interest rates of 3.75% and 2.75%, respectively. The loans are primarily targeted to organizations with less than 500 employees, although some exceptions apply. The loan term can be up to 30 years, is a maximum of $2 million, and comes with an immediate advance of $10,000 that will be forgiven in most situations. For more information or to apply with the SBA, click here.
- The Paycheck Protection Program Loan (PPP) provides an incentive for businesses and not-for-profits with less than 500 employees (or more in certain cases) as well as sole proprietors and independent contractors, to keep workers on the payroll. Borrowers are eligible for up to 100% forgiveness on the principal of the loans. Applications are being accepted now through SBA approved lenders for businesses and not-for-profits and starting April 10, 2020 for sole proprietors and independent contractors. These loans are available on a first come first served basis. View additional resources and a sample application here.
Tax Changes in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
- A technical correction allows qualified improvement property to be eligible for bonus depreciation retroactive to 2018.
- Reintroduces the carryback of net operating losses, arising from losses in tax years 2018-2020 to each of the five years preceding.
- Suspends loss limitations for taxpayers other than corporations until 2021. Losses in 2018 - 2020 can be used without limitation provided other requirements are met.
- For taxpayers who do not take out a PPP Loan, the Act creates an Employee Retention Credit allowing eligible employers to claim credits against the employers’ portion of Social Security tax (6.2% of wages) equal to 50% of qualified employee wages.
- For taxpayers not seeking forgiveness of a PPP Loan, the Act defers the employers’ portion of Social Security tax (6.2% of wages) on payroll, for all quarters before January 1, 2021 to December 31, 2021 (50%) and December 31, 2022 (50%). NOTE: The payroll tax deferral is available to any size company, not just companies with less than 500 employees.
- Reduces the business interest limitation by increasing the adjusted taxable income percentage threshold from 30% to 50%, for the 2019 and 2020 tax years.
- Accelerates the credit for prior year minimum tax for corporations and provides an election to claim the entire credit in 2018. A tentative refund must be filed by December 31, 2020.
- Temporarily suspends certain cash charitable contribution limits for corporations (and individuals).
- Excludes the production of hand sanitizer in 2020 from the alcohol excise tax paid by manufacturers.
Families First Coronavirus Response Act
- Employers with less than 500 employees are required to provide mandatory sick leave and paid family leave to eligible employees but may claim payroll tax credits equivalent to these costs. Certain self-employed individuals may also qualify for and claim the credits.
- Eligible employers paying qualified leave wages will be able to retain an amount of all federal employment taxes equal to the qualified leave wages plus allocable health plan expenses plus the employer’s share of Medicare tax imposed on the qualified leave wages. In certain circumstances, the employer may request advance payment from the Internal Revenue Service. See additional IRS guidance here.
People First Initiative
- The IRS will now allow taxpayers under an existing Installment Agreement to suspend payments between April 1, 2020 and July 15, 2020. See guidance from the IRS here.
- The IRS will continue to work their appeal cases but are not currently holding in-person appointments.
- In general, the IRS will not start new field, office, or correspondence audits at this time.
State and Local Incentive Programs
Many states and localities are offering loan and cash grant programs to support small businesses and nonprofit organizations affected by COVID-19. Examples include the following:
Our Commitment to You
We will continue to monitor the incentive programs, deadlines and regulations at the local, state, and federal levels associated with this pandemic, and the benefits available to your business.
We will continue to issue more factual information as it is finalized. The RubinBrown COVID-19 Resource Center will include all updates and additional resources.
Readers should not act upon information presented without individual professional consultation.
Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.