The following are the relevant general business tax provisions under the Coronavirus Aid, Relief and Economic Security Act.
Several provisions from the TCJA are altered, including:
- Net operating losses: Net operating losses can now offset 100% of taxable income for 2018, 2019 and 2020, rather than the 80% under the TCJA. Net operating losses incurred in these years can now be carried back to the previous five years for a refund.
- Loss limitations for noncorporate taxpayers: Internal Revenue Code section 461(l) regarding the limitations of “excess business losses” incurred by noncorporate taxpayers is deferred until 2021.
- Section 163(j) interest limitation: A taxpayer’s adjusted taxable income limit increased to 50% from 30% for the 2019 and 2020 tax years.
- Qualified improvement property: Fixing the “retail glitch,” qualified improvement property is now 15-year property, eligible for bonus depreciation, and is retroactive to 2018.
- Refundable tax credits: Unused minimum tax credits (MTC) are allowed to be refunded in 2018 and 2019.
Employee retention credit
Quarterly credits are available to employers that have experienced a full or partial suspension in their operations due to COVID-19 against certain employer payroll taxes, subject to certain restrictions.
Payroll tax deferral
Payment of the employer (not employee) portion of the FICA 6.2% payroll tax liability is deferred with half coming due in 2021 and remaining half due in 2022. The deferral applies to 50% of self-employment tax liability as well.