Business Tax Updates at 4-1-20

The 2020 Busy Season Has Become a Dizzy Season.Those of us living in Florida are accustomed to how hurricanes approach and how we prepare. For a period of several days to a few weeks, we go from a casual awareness, to keen interest, to a significant effort to prepare for a storm of unknown direction or intensity; then, in many cases, recovery. We could think of ourselves as being in a period that we could call Hurricane Covid-19. We have gone from a scant mention of this new virus spreading in Asia just over 90 days ago, to a complete change in our lifestyle. Our government at all levels has moved from periodic watches, to warnings, to new rules, definitely changing the pattern of our lives. Months from now we will be overanalyzing how well they, and we, did in preparing for, managing and recovering from this pervasive killer. We are amazed at the cooperation across most of the county, except for those “Covidiots” wanting to make their own way. Let’s pray we see a rousing success after the storm passes, in spite of the sacrifice of lost lives and economic turmoil.While state and local governments, as well as our civil and civic servants, are making heroic efforts with the resources that they have, only the federal government has the ability to spend massive amounts of money that they don’t have to help us through this “crisis.” This is a time that we need them to do that, then put our American entrepreneurial spirit back to work. Whether this is the right plan at the right time, we don’t know. But it is before us, so we suggest that you embrace it.What we have now are three freshly passed laws of the last two weeks, estimated to cost near $2.3 trillion. There is no way to know what path we individually take, how many businesses will seek one of the new loan programs, no way to know how many employees will have been put on leave or unemployment, what their benefit costs will be, or how soon the economy can recover, stopping the sudden hemorrhaging of health, commerce and jobs occurring the last few weeks and into the future.Here’s how the wind has blown on the major business support legislation in place now. We are not discussing here any of the wage support tax credits, which will be very helpful to the economy and very expensive, as those were revealed in our previous memos.Net operating losses carried forward after 2017 were limited in the last major tax reform bill to an offset of only 80% of future annual taxable income, and NOL carrybacks for those losses were eliminated. The CARES Act restores (through 2020) the ability to carry back losses for the last five years, and delays the current 80% limitation on carry forward losses from 2018 until years beginning in 2021.Non corporate taxpayer loss limits of $250,000 per person after 2017 has been delayed until after 2020.Corporate AMT liability credits outstanding could not previously be fully refundable until 2021, but those refunds are now available in 2019.Business interest deductions had been limited to 30% of Adjustable Taxable income, but are now limited to 50% in 2019 and 2020.In a technical correction back to 2017 that we all expected to be fixed, a wide variety of interior, non-load-bearing building improvements (qualified improvement property (QIP)) are now eligible for bonus depreciation (and hence a 100% write-off) or for treatment as 15-year MACRS property.Single employer pension plan sponsors can now defer accrued contributions, normally due by the extended filing date in 2020, until January 1, 2021.SBA 7(a) guaranteed loans made after February 14 and before July 1, 2020 and forgiven under the CARES Act are not treated as taxable discharge of indebtedness if the proceeds are used for one of several permitted purposes. It appears that you can deduct any expenses paid with the proceeds, but are not taxed on the cancellation.Remember this is all new law, so it will take time for regulations, forms and software to catch up. In some cases, amended returns may be recommended, which we can help you with.