Tax Modifications

Employee Retention Credit
The bill includes a refundable tax credit for businesses to incentivize them to maintain idle workers on their payroll during the pandemic, if the business meets certain criteria. This credit is also available to all 501(c) non-profits.
 
The bill provides a tax credit of 50% of the wages paid to the employee, up to $5,000 per quarter. This credit is available to a business who must fully or partially suspend operations due to COVID-19 and can prove that as a result they’ve had 50% or greater loss in gross receipts compared to the same quarter of the last calendar year. The credit stops the quarter after the business has gross receipts great than 80% of the same quarter in the previous calendar year. This tax credit expires at the end of 2020.
 
If the employer has over 100 full-time employees, the credit is available for wages paid to employees when they weren’t providing services due to COVID-19 circumstances. However, for employers with 100 or fewer full-time employees, employee wages qualify whether the employer was open for business or closed due to COVID-19.
 
If a business opts to take advantage of this credit, they will not also be allowed to access the special SBA loans created in this legislation and discussed above.
 
Delay of Payment of Employer Payroll Taxes
The bill allows employers and self-employed individuals to defer payment of the employer share of Social Security tax. The employer must pay 50% of the deferred taxes by December 31, 2021 and the remaining deferred amounts by December 31, 2022.
 
QIP Deduction Fix
The 2017 Tax Cut and Jobs Act (TCJA) accidentally excluded “qualified improvement property (QIP)” i.e. interior renovations to a non-residential building, from a 100% first-year bonus depreciation for property placed in service between September 28, 2017, and December 31, 2022. The CARES Act fixes this by giving QIP a normal depreciation period of 15 as initially intended.
 
Net Operating Loss Carryback
The CARES Act further amended the business tax code by allowing businesses to take net operating losses (NOLs) earned in 2018, 2019, or 2020 and carry back those losses five years. In addition, the NOL limit of 80 percent of taxable income is also suspended, which means that companies can use NOLs to fully offset their taxable income.
 
Net Interest Deduction Limitation
The net interest deduction limitation has been expanded to 50 percent of EBITDA for 2019 and 2020. This will help increase liquidity for some businesses almost immediately.
 
Changes to the Charitable Deduction
Starting with the 2020 taxable year, up to $300 in cash charitable contributions will be allowed as an above the line deduction.
For individuals who itemize the 50% of AGI limitation is suspended for 2020. For corporations the limitation increases to 25% of taxable income.
In the case of any charitable contribution of food during 2020, the limit is changed from 15% to 25%