Tax Reliefs included in the CARES Act

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act” or “Act”), expected to be enacted by President Trump in the next few days, contains many tax relief measures for businesses to assist individuals and businesses impacted by the economic effects of the COVID-19 pandemic.  Here are some key provisions:

Net Operating Loss (“NOL”) Operating Rule Change

The Act will allow an NOL from tax years beginning in 2018 through 2020 to be carried back for five years.  The Act also allows two-year carryback of NOLs generated in the tax year beginning in 2017 and ending in 2018.

Excess Business Loss Limitation Suspension

The Act temporarily suspends the excess business loss limitation adopted as part of the 2017 Tax Reform through 2020.

Modification to Section 163(j) Business Interest Deduction Limitation

Currently, business interest deduction is limited to 30% of taxable income, adjusted by depreciation, amortization and tax.  The Act will temporarily increase this limitation percentage to 50% through 2020, allowing deduction that would have been otherwise limited.

Refundable AMT Credit

The entire amount of AMT credits that are currently scheduled to be refunded through 2025 can be refunded with an election.

Deferment of Employer Payroll Tax Payments

The Act defers payment date of 2020 employer payroll taxes. 50% of the deferred tax is to be paid by December 31, 2021 and the remainder by December 31, 2022.