UPDATED 3/29/2020
Business Tax Relief - CARES Act (Sec 2303 - 2308)
5 year Net Operating Loss (NOL) carryback without taxable income limitation (Sec 2303) – The Bill reverts to the pre-Tax Cuts and Jobs Act of 2017 (“TCJA”) treatment of NOL carrybacks.
Tax refund opportunity – Under the Bill, NOLs generated in tax years 2018, 2019, and 2020 could be carried back 5 years, allowing corporate taxpayers to amend earlier tax returns and potentially obtain a tax refund. In addition, the Bill temporarily allows NOLs to offset 100 percent of taxable income, instead of the 80 percent TCJA limitation.
Pass-throughs – The changes to the utilization of NOLs would also apply to pass-through entities
Excess Business Loss rules (Sec 2304) – The Bill temporarily suspends the Section 461(l) limitation on excess business losses for pass-through businesses and sole proprietors for the 2018, 2019, 2020 tax years.
Interest expense limitation (Sec 2306) – The TCJA limited interest deductions to roughly 30 percent of adjusted taxable income (“ATI”) (e.g., akin to 30 percent of EBITDA). The Bill increases this limitation to 50 percent of adjusted taxable income for tax years 2019 or 2020, thereby raising the limitation ceiling and potentially allowing for increased interest deductions.
QIP Bonus Depreciation (Sec 2307) – The Bill adopts a technical correction to the TCJA’s apparent oversight in excluding the eligibility of qualified improvement property (e.g., real estate/leasehold improvements) from eligibility for bonus depreciation (i.e., currently 100 percent) for tax years after 2017.
Feel free to reach out to Paula, Molly, or me with any questions. Also continue to follow EDGe on social media and on our EDGe blog for updates on other small business assistance measures.
Eric Glymph
Financial Strategist / Founder
EDGe Business Planning
www.EDGeBusinessPlanning.com
804-833-1792