EMPLOYEE RETENTION CREDIT FOR EMPLOYERS SUBJECT TO CLOSURE DUE TO COVID-19
DELAY OF PAYMENT OF EMPLOYER PAYROLL TAXES
MODIFICATIONS FOR NET OPERATING LOSSES
- This section applies specifically to corporate entities.
- Net operating losses created in 2018, 2019, and 2020 may be carried back up to five years.
- The limitation of NOLs to 80% of taxable income has been removed through tax year 2020. NOLs will be able to offset 100% of taxable income.
- A technical correction was made to the TCJA language dictating when the 80% limitation / no-carryback rules became effective. The TCJA originally applied these rules to tax years ENDING after 12/31/17. This was correcting to tax years BEGINNING after 12/31/17.
- REITs are excluded from these changes.
COMMENTARY: Tax returns filed for tax years 2018 and 2019 that included NOLs should be reviewed to determine if amending such returns would be beneficial to the taxpayer. Tax returns for fiscal year entities that included NOLs should be reviewed to determine if the technical correction to the date the TCJA rules became effective necessitates amending returns.
MODIFICATION OF LIMITATION ON LOSSES FOR TAXPAYERS OTHER THAN CORPORATIONS
MODIFICATION OF CREDIT FOR PRIOR YEAR MINIMUM TAX LIABILITY OF CORPORATIONS
- Corporations carryforward credits generated by paying Alternative Minimum Tax.
- Corporate Alternative Minimum Tax was repealed effective in 2018.
- Corporations can claim refunds for all remaining AMT credits in 2018 and 2019.
MODIFICATION OF LIMITATION ON BUSINESS INTEREST
COMMENTARY: Tax returns filed for tax year 2019 that included a limitation of interest should be reviewed to determine if amending such returns would be beneficial to the taxpayer.
TECHNICAL AMENDMENTS REGARDING QUALIFIED IMPROVEMENT PROPERTY
COMMENTARY: Tax returns filed for tax years 2017, 2018, and 2019 should be reviewed to determine if qualifying property was placed into service, and if amending those returns would be beneficial to the taxpayer.
If it is determined that amending a 2017 or 2018 return is undesirable, a 3115 may be attached to a 2019 tax return to correct the depreciable life of assets placed into service in 2017 and 2018.
It is possible that the IRS may issue additional guidance that allows taxpayers to file a 3115 with 2019 tax returns and allow bonus depreciation on assets placed into service in 2017 and 2018 to be taken in the form of a 481(s) adjustment. However, no such guidance has been issued at this time.