As US Senate negotiators work towards an agreement on a coronavirus rescue package that could inject more than $2 trillion into the economy, we have reviewed the draft legislation for those provisions that are most likely to help our clients with any cash flow challenges.
The expectation is that the agreement will be signed on Tuesday, March 24, but as of the time of publication, it remains unsigned. We will send a further update in the event that the bill passes with significant changes. Stay tuned.
Here are the notable provisions:
Employers would be able to delay payment of employer payroll taxes: This provision allows employers to defer employment tax payments over two years, with half the amount required to be paid by December 31, 2021, and the other half by December 31, 2022.
You may be able to write down more of your losses for tax purposes: Net Operating Losses (NOL) are currently subject to a taxable income limitation, and they cannot be carried back to reduce income in a prior tax year. The provision in the current draft bill:
- Allows businesses to carry back NOL from 2018, 2019, or 2020 for five years. As a result, a firm could use a loss realized in 2020 to reduce its tax liability as far back as 2015;
- Temporarily removes the taxable income limitation to allow NOL to fully offset income; and
- Allows losses from pass-through entities to be included.
Alternative Minimum Tax payments (AMT) will be made available sooner: When the corporate AMT was repealed, AMT credits were made available as refundable credits over several years, ending in 2021. This new provision would allow companies to receive the entire AMT refund now.
You would be able to deduct more of your interest expenses: The limit for interest expenses that can be deducted for 2019 and 2020 would rise from 30% to 50% of taxable income.
Some businesses would be able to write off costs associated with qualified property improvements immediately: The legislation would correct an error that requires certain firms to depreciate investment over a longer period than was intended by Congress.
We appreciate that these are challenging times and the changes being made to current laws can be difficult to follow. If you have any questions on how the proposed rules could impact your business or need advice, please contact us here.