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The Coronavirus Aid, Relief, and Economic Security, or “(CARES) Act”

March 25, 2020

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, H.R. 748, currently being debated in the Senate, contains a host of tax measures as part of a $2 trillion aid package designed to help the economy as it suffers from the effects of the coronavirus pandemic. While the focus of the legislation is not tax, a large number of tax provisions are included in the over-600-page bill.  

Highlights of tentative tax provisions: 

  • Recovery Rebates: The bill provides for payments to taxpayers — “recovery rebates” — which are being treated as advance refunds of a 2020 tax credit.
  • Payroll Tax Credit Refunds: The bill provides for advance refunding of the payroll tax credits enacted last week in the Families First Coronavirus Response Act, P.L. 116-127.
  • Employee Retention Credit: The bill creates an employee retention credit for employers that close due to the coronavirus pandemic. 
  • Retirement Plans: Taxpayers can take up to $100,000 in coronavirus-related distributions from retirement plans without being subject to the Sec. 72(t) 10% additional tax for early distributions.
  • Charitable Deductions: The bill creates an above-the-line charitable deduction for 2020 (not to exceed $300). 
  • Payroll Tax Delay: The bill delays payment of 50% of 2020 employer payroll taxes until Dec. 31, 2021; the other 50% will be due by Dec. 31, 2022.
  • Net Operating Losses: The bill temporarily repeals the 80% income limitation for net operating loss deductions for years beginning before 2021. 
  • Health Plans: The rules for high-deductible health plans (HDHPs) are amended to allow them to cover telehealth and other remote care services without charging a deductible.
  • Qualified Improvement Property: The bill also makes technical corrections regarding qualified improvement property under Sec. 168 by making it 15-year property.

Resource:
Journal of Accountancy: CARES Act Tax Provisions Aim to Stabilize Pandemic-Ravaged Economy

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