Among its many provisions designed to stimulate the economy and provide relief to businesses, the CARES Act includes several tax provisions designed to do so through the US Internal Revenue Code. These tax provisions relate to industry-specific excise taxes, payroll taxes, income taxes and credits, charitable organizations, and tax-deferred retirement savings.

This Advisory focuses on the following income tax provisions in the CARES Act that impact businesses:

1. Businesses now generally can carry back a net operating loss (NOL) generated in 2018, 2019, or 2020 for up to five years. In addition, the annual limitation on the deduction of an NOL of 80 percent of taxable income is suspended until 2021. The CARES Act also suspends the limitation for noncorporate taxpayers on the deductibility of excess business losses until 2021.
2. The limitation on interest deduction, which otherwise permits businesses to deduct interest expense only up to 30 percent of adjusted taxable income, has been generally increased to 50 percent for 2019 and 2020.
3. Tax credits related to the repealed corporate alternative minimum tax (AMT) now can be refunded entirely in either 2018 or 2019, instead of over four years through 2021.
4. A technical error in the Tax Cuts & Jobs Act of 2017 (TCJA) has been fixed, making the cost of real property improvements eligible for immediate expensing under the “bonus” depreciation rules beginning in 2018.

We expect that most businesses will find these changes beneficial. However, as discussed in more detail below, there may be unintended tax consequences of carrying back NOLs. Legal questions also could arise from carrying back NOLs of recently acquired corporations.

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To be prepared for Payroll Protection Program (PPP), please have the following ready and available:

1. PPP application form 2483 (blank form below) version 4/20 complete in its entirety by an authorized representative of the company, include addendum if requested (worksheet below);
2. Additional PPP info form – should add up to amount requested, your best guess as to how funds will be used (worksheet below); and
3. Supporting payroll information that supports the amount requested.  Further guidance on payroll calculations can be found at the Treasury web

Documents to support their payroll/loan amount request must be attached.  Supporting payroll documentation includes, but is not limited to: 

• 2019 W3
• 2019 IRS quarterly 940, 941 or 944 payroll tax reports
• 2019 business tax return
• 2019 personal tax return (if the business files as a sole proprietorship or single entity LLC)
• Third party payroll processing documents

WORKSHEET          BORROWER APPLICATION FORM

FIND A LENDER

On Friday, March 27, the President signed and enacted into law the Federal stimulus bill in response to the COVID-19 virus, known as the CARES Act. Many key provisions in the Act benefit small businesses and nonprofit agencies, including the small business loan programs administered through the U.S. Small Business Administration (SBA), like the Economic Injury Disaster Loan (EIDL) Program, and those directly administered through the CARES Act. known as the Paycheck Protection Program (P3). We created a comparison of these programs.

Continue to comparison of programs:

BLUE & CO.

All 501c entities are eligible to apply for a COVID-19 EIDL loan.  This includes sorority or fraternity organizations, house corporations and other similar nonprofit organizations. The loan provides working capital of up to $2 million to small businesses and can be used for payroll, accounts payable, debt payments and other bills that could have been paid had the disaster not occurred.

Blue & Co. can complete the application process with the SBA for organizations interested for a fee not to exceed $1,750.  Completing the application does not guarantee approval or fund payout.  Formal approval of loan requests will come directly from the SBA. 

DOWNLOAD DATA SHEET

The information requested in the attached form must be completed in its entirety and the form emailed to anovotney@blueandco.com.