Business Tax Provisions
- Employee Retention Credit for Employers Affected by Closure or Economic Hardship
The Act provides a refundable payroll tax credit for 50% of wages paid by eligible employers whose businesses were limited or closed by government orders. The credit is limited to $10,000 per employee for wages and compensation, including health benefits. Wages of furloughed employees or those that faced reduced hours as a result of their employers’ closure are eligible for the credit. For employers with 100 or fewer full-time employees, all employee wages are eligible, regardless of whether an employee is furloughed.
- Delayed Payment of the Employer Portion of Social Security Payroll Tax
The Act would allow employers (including the self-employed) to delay the payment of the employer portion of the Social Security payroll tax. Under current law, employers pay a 6.2 percent rate on covered employee payroll. Under the proposal, employers would owe half on Dec. 31, 2021 and the other half on Dec. 31, 2022.
- Changes to Business Interest Expense Limitations
The Tax Cuts & Jobs Act reduced the deductibility of interest to 30 percent of a firm’s adjusted taxable income. The CARES Act would allow businesses to increase the interest limitation to 50 percent of a firm’s adjusted taxable income for 2019 and 2020. There is also an election to use 2019 adjusted taxable income for taxable years beginning in 2020.
- Technical Corrections to Qualified Improvement Property Depreciation
The Act corrects an error in the TCJA to now allow interior improvements of buildings to be immediately expensed or depreciated over 15 years in the case of restaurant, retail and other property instead of having to depreciate those improvements over the life of the building.
- Limitations on Excess Business Losses are Delayed Until 2021
The bill modifies loss limitations for non-corporate taxpayers, retroactively turning off the excess active business loss limitation rule. It also turns off active farming loss rules for tax years beginning after December 31, 2017 and before December 31, 2020.
- Modification of Net Operating Losses
Businesses may carry back an NOL for taxable years beginning before 2021 to the prior five taxable years. The treatment of NOL carryforwards has also been modified. For tax years beginning before 2021, taxpayers will receive an NOL deduction equal to 100% of taxable income (rather than the 80% limitation in present law).
- Tax Credit Modifications for Prior Year Minimum Tax Liabilities for Corporations
The Act allows corporations to claim 100% of AMT credits in 2019 as fully refundable and provides an election to accelerate claims to 2018.