On March 26, 2020, the Senate passed a nearly $2 trillion economic stimulus known as CARES (Coronavirus Aid, Relief, and Economic Security) Act (Senate Amendment to H.R. 748). The bill contains numerous tax, grant and loan provisions designed to provide financial aid to individuals, businesses, nonprofits and state and local governments, to help address the fallout from COVID-19.
Individuals: 2020 recovery rebates for individuals
Provides checks of up to:
- $1,200 for single taxpayers
- $2,400 for married joint filers
- $500 for each dependent child
These checks are based on federal 2018 returns and are reduced for higher income taxpayers, with phaseouts beginning at $75,000 for single taxpayers and $150,000 for married joint filers, and ending for single taxpayers with incomes exceeding $99,000 and married joint filers with no children and incomes exceeding $198,000.
Taxpayers with little or no income tax liability, but at least $2,500 of qualifying income, would be able to receive:
- $600 for single taxpayers
- $1,200 for married joint filers
Qualifying income includes earned income, Social Security retirement benefits and certain compensation and pension benefits paid to veterans
.
Unemployment Insurance
The bill provides expanded unemployment insurance benefits:
- Creates a temporary Pandemic Unemployment Assistance program for those not traditionally eligible for unemployment benefits (self-employed, independent contractors, those with limited work history, and others) who are unable to work as a direct result of the coronavirus public health emergency.
- Provides payments to states to reimburse nonprofits, government agencies, and Indian tribes for half of the costs they incur through December 31, 2020 to pay unemployment benefits.
- Provides an additional $600 per week payment to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months.
- Provides funding to pay the cost of the first week of unemployment benefits for states that choose to pay recipients as soon as they become unemployed instead of waiting one week before the individual is eligible to receive benefits.
- Provides an additional 13 weeks of unemployment benefits to help those who remain unemployed after state unemployment benefits are no longer available.
- Provides funding to support “short-time compensation” programs, where employers reduce employee hours instead of laying off workers and the employees with reduced hours receive a pro-rated unemployment benefit. This provision would pay 100 percent of the costs they incur in providing this short-time compensation.
- Provides funding to support states which begin “short-time compensation” programs. This provision would pay 50 percent of the costs that a state incurs in providing short-time compensation.
Relaxation of Charitable Deduction Limits
: Allowance of $300 above the line deduction for charitable contributions in 2020. Suspends the 50 percent of adjusted gross income limitation for 2020. For corporations, the 10-percent limitation is increased to 25 percent of taxable income.
Special rules for use of retirement funds
: Waives the 10-percent early withdrawal for distributions up to $100,000 for coronavirus purposes. In addition, income attributable to such distributions would be subject to tax over three years and taxpayer may recontribute to an eligible retirement plan within three years without regard to the annual cap. Coronavirus-related distributions include distributions to an individual:
- Who is diagnosed with COVID-19;
- Whose spouse or dependent is diagnosed with COVID-19;
- Who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary.
Income tax exclusion for student loans
: Provide income tax exclusion for individuals who are receiving up to $5,250 in student loan repayment assistance from their employer.
Employee Retention Tax Credits
: Provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or whose (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. The credit is generally provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through Dec. 31, 2020.
Modification of limitation on business interest
: Temporarily increases the limitation on the ability to deduct interest expenses from 30 percent to 50 percent of taxable income for 2019 and 2020.
Technical amendment on qualified improvement property
: Enables businesses to immediately write off costs associated with improving facilities instead of depreciating them over the life of the building. Would allow amending a prior year return to take advantage of this provision and correct a drafting error in the 2017 tax reform law.
Modifications for net operating losses
: Provides that a net operating loss from 2018, 2019 or 2020 can be carried back five years, and temporarily removes the taxable income limitation to allow a net operating loss to fully offset income.
Modification of loss limitation for taxpayers other than corporations
: Allows pass-throughs and sole proprietors to benefit from the relaxed net operating loss carryback.
Modification of AMT credits
: Accelerates the ability for companies to claim eligible alternative minimum tax (AMT) credits now instead of as originally expected through 2021.
Forbearance of Residential Mortgage Loan Payments for Multifamily Properties with Federally Backed Loans:
Provides up to 90 days of forbearance for multifamily borrowers with a federally backed multifamily mortgage loan who have experienced a financial hardship. Borrowers receiving forbearance may not evict or charge late fees to tenants for the duration of the forbearance period. Applicable mortgages include loans to real property designed for five or more families that are purchased, insured or assisted by Fannie Mae, Freddie Mac or HUD.
Temporary Moratorium on Eviction Filings:
For 120 days beginning on the date of enactment, landlords are prohibited from initiating legal action to recover possession of a rental unit or to charge fees, penalties or other charges to the tenant related to such nonpayment of rent where the landlord’s mortgage on that property is insured, guaranteed, supplemented, protected, or assisted in any way by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program or the Violence Against Women Act of 1994.
