March 27, 2020
Dear WZ Client:
The C.A.R.E.S bill moves on to the House, which is reported to be planning a vote for this morning. If approved, the legislation would then proceed to the President to be signed.
In regards to the C.A.R.E.S act and its porovisions, Wagner & Zwerman LLP has initiated a joint COVID-19 collaboration group with our friends and associates from Falcon Rappaport and Berkman PLLC. This response group will address Disaster Relief Loans and help implementing all provisions of the C.A.R.E.S. act. More information on this collaboration to follow this afternoon.
The following are some of the bill’s key proposed provisions:
Relief for Individuals
- Direct payments of $1,200 would be sent to most middle-income and lower-income individual taxpayers ($2,400 for joint taxpayers). The payment amount begins to phase out at $75,000 for singles and $150,000 for joint taxpayers at 5 percent per dollar of qualified income, or $50 per $1,000 earned. It phases out entirely at $99,000 for single taxpayers and $198,000 for joint taxpayers.
- Expanded unemployment insurance for laid-off workers would allow for four months of full pay (typically three). Maximum unemployment insurance benefit would be raised by $600 per week for all workers including self-employed.
- Required minimum distribution rules would be temporarily waived for certain retirement plans.
- Federal student loan payments would be postponed without interest accruing through September 30, 2020.
- Homeowners with federally backed mortgages could request loan forbearance for an initial period of 180 days due to financial hardships caused by COVID-19.
Relief for Businesses and Nonprofits
- $367 billion loan program would be available for small businesses and nonprofits. The loans could be forgiven if businesses continue to pay their employees through the crisis.
- Creditworthiness requirements for Economic Injury Disaster Loans (EIDL) would be temporarily eliminated, and $10 billion would be appropriated to the EIDL program to expedite payments to applicants.
- The deadline for depositing employer payroll taxes would be deferred to be payable over the next two years – half due on December 31, 2021 and half due on December 31, 2022.
- Certain employers would receive a refundable payroll tax credit of up to $5,000 for each employee on the payroll.
- The bill lowers the amounts that employers must pay for paid sick and family leave under the Families First Coronavirus Response Act to the amounts covered by the refundable payroll tax credit ($511 per day for employee sick leave or $200 per day for family leave).
- Limitations on excess business losses would be delayed until 2021.
- Net operating losses (NOLs) earned in 2018, 2019 or 2020 could be carried back five years. The NOL limit of 80 percent of taxable income would also be suspended. Loss limitations would be modified for non-corporate taxpayers as well, including rules governing excess farm losses.
- The net interest deduction limitation, which currently limits businesses’ ability to deduct interest paid on their tax returns to 30 percent of earnings before interest, tax, depreciation, and amortization (EBITDA), would be expanded to 50 percent of EBITDA for 2019 and 2020.
- The bill includes a technical amendment regarding qualified improvement property.
Relief for Industries, States and Cities
- $500 billion lending fund for industries, cities and states would include $25 billion for passenger airlines, $4 billion for cargo airlines, and $3 billion for industry contractors.
- Healthcare system would receive more than $150 billion, including funding for hospitals, research, treatment and supplies.
- State and local governments would receive $150 billion to address Coronavirus-related spending shortages.
- Charitable Contribution Incentives – The bill includes a new above-the-line deduction for charitable contributions up to $300. The incentive applies to contributions made in 2020 and would be claimed on tax forms next year.
- The existing cap on annual charitable contributions for those who itemize would be lifted, raising it from 60 percent of adjusted gross income to 100 percent. For corporations, the bill raises the annual limit from 10 percent to 25 percent.
We remain committed to providing you with the most up-to-date information as we know it. As always, we are in this together with you.