Enjoy your Special Edition of the June 2020 newsletter covering the 4th piece of COVID-19 legislation. Keep in mind this has not been enacted into law.
The second June Newsletter concerning answers to your PPP Loan Application and Process questions and other webinars will be published later this week.
As Congress debates yet another Coronavirus Legislative package, the media has announced information concerning the legislation that may cause your office to get questions. A summary of the TAX Provisions of the HEROES Act has been included in this newsletter. Though not current law, it is important to know what is being considered.
The package is “dead on arrival” in the Senate but some of the key parts of the package may survive in a NEW Senate created bill. Many extended provisions, technical corrections, another stimulus check, and increased budgets to implement are all part of the package.
Trump has stated if the package is passed “as is” he will veto so we will wait and see what the Senate addresses, changes or modifies. We should be prepared for some kind of bill to eventually pass and when it does Basics and Beyond will be there to keep you informed.
In This Issue
- Returning Deceased Clients Stimulus Payments
- Practitioner Priority Service is Open
- PPP Loan Guidance and Forgiveness Application Issued
- Guidance from the Social Security Administration on the Stimulus Payments
- HEROES Act Summary
- Applicable Federal Rate Tables for June 2020
Issue 1: Returning Deceased Clients Stimulus Payments
You should return the payment as described below.
If the payment was a paper check:
- Write “Void” in the endorsement section on the back of the check.
- Mail the voided Treasury check immediately to the appropriate IRS location listed below.
- Do not staple, bend, or paper clip the check.
- Include a note stating the reason for returning the check.
If the payment was a paper check and you have cashed it, or if the payment was a direct deposit:
- Submit a personal check, money order, etc., immediately to the appropriate IRS location listed below.
- Write on the check/money order made payable to “U.S. Treasury” and write 2020 EIP, and the taxpayer identification number (social security number, or individual taxpayer identification number) of the recipient of the check.
- Include a brief explanation of the reason for returning the EIP.
For your paper check, here are the IRS mailing addresses to use based on the state:
|If the Client Lived in||Then mail to this address|
|Maine, Maryland, Massachusetts, New Hampshire, Vermont||Andover Internal Revenue Service
310 Lowell St.
Andover, MA 01810
|Georgia, Iowa, Kansas, Kentucky, Virginia||Atlanta Internal Revenue Service
4800 Buford Hwy
Chamblee, GA 30341
|Florida, Louisiana, Mississippi, Oklahoma, Texas||Austin Internal Revenue Service
3651 S Interregional Hwy 35
Austin, TX 78741
|New York||Brookhaven Internal Revenue Service
5000 Corporate Ct.
Holtsville, NY 11742
|Alaska, Arizona, California, Colorado, Hawaii, Nevada, New Mexico, Oregon, Utah, Washington, Wisconsin, Wyoming||Fresno Internal Revenue Service
5045 E Butler Avenue
Fresno, CA 93888
|Arkansas, Connecticut, Delaware, Indiana, Michigan, Minnesota, Missouri, Montana, Nebraska, New Jersey, Ohio, West Virginia||Kansas City Internal Revenue Service
333 W Pershing Rd.
Kansas City, MO 64108
|Alabama, North Carolina, North Dakota, South Carolina, South Dakota, Tennessee||Memphis Internal Revenue Service
5333 Getwell Rd.
Memphis, TN 38118
|District of Columbia, Idaho, Illinois, Pennsylvania, Rhode Island||Philadelphia Internal Revenue Service
2970 Market St.
Philadelphia, PA 19104
|District of Columbia, Idaho, Illinois, Pennsylvania, Rhode Island||Philadelphia Internal Revenue Service
2970 Market St.
Philadelphia, PA 19104
|A foreign country, U.S. possession or territory*, or use an APO or FPO address, or file Form 2555 or 4563, or are a dual-status alien.||Austin Internal Revenue Service
3651 S Interregional Hwy 35
Austin, TX 78741
Issue 2: Practitioner Priority Service is Open
The Practitioner Priority Service® (PPS) is the first point of contact for account-related issues. The IRS Practitioner Priority Service® is a professional support line that staffed by IRS customer service representatives specially trained to handle practitioners’ accounts questions. You may contact PPS at 866-860-4259. PPS is available to all tax professionals with valid third-party authorizations, i.e., Forms 2848, 8821 and/or 8655.
PPS service hours are weekdays:
- 7 a.m. to 7 p.m. local time (Alaska and Hawaii follow Pacific time)
- 8 a.m. to 8 p.m. local time for Puerto Rico
Issue 3: Economic Impact Payments – Social Security Issues
Direct Express Card Holders – If the client used the IRS’ Non-Filer Tool to enter dependent information, they will not receive your automatic $1,200 payment on their Direct Express card. They will receive both the $1,200 payment and each child’s $500 payment on a non-Direct Express bank account they can provide, or by mail if they left bank information empty, and only if the IRS has not already processed the $1,200 payment.
If the client started receiving Social Security (retirement, survivors, disability) or Supplemental Security Income (SSI) before January 1, 2020, and did not file a tax return in 2019 or 2018, and have a qualifying child under 17, the deadline established by the IRS to enter information in its Non-Filer Tool has passed. The client will still receive the automatic $1,200 payment on the Direct Express card, but they will need to file a tax return next year to get a $500 payment per qualifying child. Social Security and SSI recipients who started receiving their monthly benefit on or after January 1, 2020 may still use the Non-Filer Tool for their qualifying child.
Supplemental Security Income (SSI) Recipients – Please note that the Social Security Administration we will not consider economic impact payments as income for SSI recipients, and the payments are excluded from resources for 12 months. The IRS has processed most economic impact payments to SSI recipients who are dually entitled to SSI and Social Security, and to SSI recipients if they filed a 2019 or 2018 tax return.
Social Security Beneficiaries – The IRS has processed most economic impact payments for Social Security (retirement, survivors, disability) beneficiaries whether they did or did not file a 2019 or 2018 tax return, except for a beneficiary who did not file a 2019 or 2018 tax return who also has a representative payee. If the beneficiary used the IRS’ Non-Filer Tool, the IRS is processing payments weekly, even if the beneficiary may have a representative payee.
How will the IRS send my economic impact payment (EIP) if I have a representative payee? – If the client filed a 2019 or 2018 tax return: The $1,200 EIP was or will be sent to the bank account provided on the tax return for an electronic tax refund, or mailed to the address provided on the tax return if a tax refund was mailed or if there was no refund.
If the client did not file a 2019 or 2018 tax return: An Individual Representative Payee should begin receiving EIPs for their SSI recipient(s) in late May from the IRS to the same direct deposit account or Direct Express card as the recipient’s monthly SSI payment. The Social Security Administration is waiting for confirmation from the IRS when it will mail paper check EIPs to payees. For an Organizational Representative Payee, the schedule detailed above is the same, except that the payee may receive the EIP electronically or by paper check in the mail.
How should a representative payee use a beneficiary’s economic impact payment (EIP)? – The EIP belongs to the Social Security or SSI beneficiary. It is not a Social Security or SSI benefit. A representative payee should discuss the EIP with the beneficiary. If the beneficiary wants to use the EIP independently, the representative payee should provide the EIP to the beneficiary. If the beneficiary asks the representative payee for assistance in using the EIP in a specific manner or saving it, the representative payee can provide that assistance outside the role of a representative payee.
What responsibilities does the representative payee have in managing the beneficiary’s economic impact payment (EIP)? – Under the Social Security Act, a representative payee is only responsible for managing Social Security or SSI benefits. An EIP is not such a benefit. A representative payee should discuss the EIP with the beneficiary. If the beneficiary wants to use the EIP independently, the representative payee should provide the EIP to the beneficiary. If the beneficiary asks the representative payee for assistance in using the EIP in a specific manner or saving it, the representative payee can provide that assistance outside the role of a representative payee.
How should representative payees account for the economic impact payment (EIP) when completing the annual Representative Payee Report (i.e., annual accounting form)? – Because an EIP is not a Social Security or SSI benefit, representative payees are not required to account for the EIP when they complete their annual accounting form.
METABank Issued Debit Cards
Phone: 800-240-8100 (Money Network) #1 Customer Assistance, #2 Lost or stolen card
1st withdrawal – no cost
Subsequent withdrawals $2.00 each + charge from ATM Bank owner
ATM Balance inquiry $.25 charge
Lost or Stolen Card – $7.50
Card Replacement $17.00 + additional charge for priority shipment
Bank Teller Over the Counter withdraw – first withdrawal fee – after $5.00 (assume this is at a METABank Bank – other fees could be charges at your personal bank
ATM withdrawal limit $1,000 per day
Issue 4: Overview of the Health and Economic Recover Omnibus Solutions Act (HEROES)
On May 15, 2020, the House passed the HEROES Act. The Senate basically said it was dead on arrival and the President stated he would Veto the bill in its current version. BUT the press has been very active on this issue and you may get questions from your clients concerning provisions of the ACT. Here are the key points of the Act to provide you some basic information to address the client’s questions. You should always state that this HAS NOT BECOME LAW. Chances are some of the bill may make it to law at some point in 2020.
- 20101 – Dependents taken into account in determining credit and rebates
Makes all dependents eligible for the $500 qualifying child amount in the Economic Impact Payments made under the CARES Act, previously only applicable to children below age 17. This allows households with dependents who are full-time students below age 24 and adult dependents to also receive the $500 amount. This provision is effective retroactive to the date of enactment of the CARES Act.
- 20102 – Individuals providing taxpayer identification numbers taken into account in determining credit and rebates
Allows Economic Impact Payments to be made to an individual who provides a Taxpayer Identification Number, rather than a Social Security Number. This provision is effective retroactive to the date of enactment of the CARES Act.
- 20103 – 2020 recovery rebates not subject to reduction or offset with respect to past-due support
Exempts Economic Impact Payments from reduction or offset with respect to past-due child support.
- 20104 – Protection of 2020 Economic Impact Payments
Protects Economic Impact Payments from any form of transfer, assignment, execution, levy, attachment, garnishment, legal process, bankruptcy or insolvency law, and any other means of capture prohibited for payments made under Chapter 7 Subchapter 2 of the Social Security Act.
- 20105 – Payments to representative payees and fiduciaries
Amends the CARES Act to clarify that, for an individual whose Economic Impact Payment was paid based on a Social Security Benefit Statement or Social Security Equivalent Benefit Statement, any Economic Impact Payment made to a representative payee or fiduciary shall only be used for the benefit of the person for whom the payment was intended. This provision is effective retroactive to the date of enactment of the CARES Act.
- 20106 – Application to taxpayers with respect to whom advance payment has already been made
When the amendments to the Economic Impact Payments described above increase the amount of advance payments a taxpayer is eligible for, Treasury shall issue a rebate equal to the taxpayers’ redetermined rebate less the previously issued rebate.
- 20111 – Additional recovery rebates to individuals
Provides a $1,200 refundable tax credit for each family member that shall be paid out in advance payments, similar to the Economic Impact Payments in the CARES Act.
The credit is $1,200 for a single taxpayer ($2,400 for joint filers), in addition to $1,200 per dependent up to a maximum of 3 dependents.
The credit phases out starting at $75,000 of modified adjusted gross income ($112,500 for head of household filers and $150,000 for joint filers) at a rate of $5 per $100 of income.
Treasury shall issue this credit as an advance payment based on the information on 2018 or 2019 tax returns. Treasury shall issue advance payments for Social Security Old-Age, Survivors, and Disability Insurance beneficiaries, Supplemental Security Income recipients, Railroad Retirement Board beneficiaries, and Veterans Administration beneficiaries who did not file returns for 2018 or 2019 based on information provided by the Social Security Administration, the Railroad Retirement Board, and the Veterans Administration.
Treasury shall conduct outreach to non-filers to inform them of how to file for their advance payment. Taxpayers receiving an advance payment that exceeds their maximum eligible credit based on 2020 information will not be required to repay any amount of the payment to the Treasury.
If the credit based on 2020 information exceeds the amount of the advance payment, taxpayers can claim the difference on their 2020 tax returns. The recovery rebate improvements in §201 through 205 of this division generally apply to these additional rebates. Additionally, Treasury is instructed to make payments to the territories that relate to the cost of providing the credits for each territory.
- 20121 – Strengthening the earned income tax credit for individuals with no qualifying children for 2020
Expands the eligibility and the amount of the earned income tax credit for taxpayers with no qualifying children (the “childless EITC”) for 2020.
In particular, the minimum age to claim the childless EITC is reduced from 25 to 19 (except for full-time students) and the upper age limit for the childless EITC is increased from age 65 to age 66.
This section also increases childless EITC amount by increasing the credit percentage and phaseout percentage from 7.65% to 15.3 %, increasing the earned income amount to $9,720, increasing the phaseout amount to $11,490. Under these parameters, the maximum credit amount in 2020 increases from $538 to $1,487.
- 20122 – Taxpayer eligible for childless earned income credit in case of qualifying children who fail to meet certain identification requirements
Repeals the provision prohibiting an EITC-eligible taxpayer with qualifying children from taking the childless EITC if he or she cannot claim the EITC with respect to qualifying children due to failure to meet child identification requirements (including a valid SSN for qualifying children).
Accordingly, individuals who do not claim the EITC with respect to qualifying children due to failure to meet identification requirements would now be able claim the childless EITC.
- 20123 – Credit allowed in case of certain separated spouse
Allows a married but separated individual to be treated as not married for purposes of the EITC if a joint return is not filed.
Thus, the EITC may be claimed by the individual on a separate return. This rule only applies if the taxpayer lives with a qualifying child for more than one-half of the taxable year and either does not have the same principal place of abode as his or her spouse for the last six months of the year, or has a separation decree, instrument, or agreement and doesn’t live with his or her spouse by the end of the taxable year.
This change aligns the EITC eligibility requirements with present-day family law practice.
- 20124 – Elimination of disqualified investment income test
Eliminates the disqualified investment income test so that individuals are able to claim the EITC without regard to the amount of certain investment income.
- 20125. Application of earned income tax credit in possessions of the United States
Instructs Treasury to make payments to the territories that relate to the cost of each territory’s EITC. The possessions must provide Treasury with annual reports on the estimate of costs and a statement of costs with respect to the preceding year.
- 20126 – Temporary special rule for determining earned income for purposes of earned income tax credit
Allows taxpayers in 2020, for purposes of computing the EITC, to substitute their 2019 earned income for their 2020 earned income if their 2020 earned income is less than their 2019 earned income.
- 20131. Child tax credit improvements for 2020
Makes the child tax credit (“CTC”) fully refundable for 2020 and increases the amount to $3,000 per child ($3,600 for a child under age 6).
The provision also makes 17-year-olds qualifying children.
The provision requires the Secretary to make best efforts to provide the enhanced credit in the form of an advanced payment.
- 20132 – Application of child tax credit in territories
Instructs Treasury to make payments to each “mirror code” territory for the cost of the territories’ CTC. This amount is determined by Treasury based on information provided by the territorial governments. Puerto Rico, which does not have a mirror code, will receive the refundable CTC by having its residents file for the CTC with the IRS. For American Samoa, which does not have a mirror code, Treasury is instructed to make payments in an amount estimated by Treasury as being equal to the aggregate benefits that would have been provided if American Samoa had a mirror code in place.
- 20141 – Refundability and enhancement of child and dependent care tax credit for 2020
Makes the child and dependent care tax credit (“CDCTC”) fully refundable for 2020 and increases the maximum credit rate to 50%. Amends the phaseout threshold to begin at $120,000 instead of $15,000. Doubles the amount of child and dependent care expenses that are eligible for the credit to $6,000 for one qualifying individual and $12,000 for two or more qualifying individuals.
- 20142 – Increase in exclusion for employer-provided dependent care assistance for 2020
Increases the exclusion for employer-provided dependent care assistance from $5,000 to $10,500 (from $2,500 to $5,250 in the case of a separate return filed by a married individual) for 2020.
- 20151 – Increase in carryover for health flexible spending arrangements in 2020
Permits cafeteria plans and health flexible spending arrangements to allow participants to carry over up to $2,750 in unused benefits or contributions from 2020 to 2021.
- 20152 – Carryover for dependent care flexible spending arrangements in 2020
Permits cafeteria plans and dependent care flexible spending arrangements to allow participants to carry over up to the annual maximum amount of unused dependent care assistance benefits or contributions from 2020 to 2021.
- 20153 – Carryover of paid time off in 2020
Permits cafeteria plans to allow participants to carry over unused paid time off from 2020 to 2021.
- 20154 – Change in election amount in 2020
Permits cafeteria plans and health flexible spending arrangements to allow participants to make one-time elections for any reason to a health FSA or to the amount of paid time off. Such onetime election is allowed between the date of enactment and December 31, 2020.
- 20155. Extension of grace periods, etc. in 2020
Permits cafeteria plans, health flexible spending arrangements, and dependent care flexible spending arrangements to provide an extension of the grace period for the 2020 plan year to 12 months after the end of the 2020 plan year. Extension of the grace period will allow benefits or contributions from these plans or arrangements to be used for expenses incurred up to 12 months after the end of the plan year. Permits cafeteria plans and health flexible spending arrangements to allow employees who cease participation in the plan (e.g. due to being terminated) to continue to receive reimbursements from unused contributions for the rest of the plan year (including the grace period as extended above).
- 20156 – Plan amendments
Permits retroactive amendments to cafeteria plans, health flexible spending arrangements, and dependent care arrangements for the purposes of this subtitle .
- 20161 – Elimination for 2020 and 2021 of limitation on deduction of state and local taxes
Eliminates the limitation on the deduction for state and local taxes for taxable years beginning on or after January 1, 2020 and on or before December 31, 2021.
- 20201 – Increase in above-the-line deduction for certain expenses of elementary and secondary school teachers
Doubles the above-the-line deduction for certain unreimbursed out-of-pocket expenses for elementary and secondary school teachers from $250 to $500. This amount is adjusted for inflation.
- 20202 – Above-the-line deduction allowed for certain expenses of first responders
Provides a $500 above-the-line deduction for unreimbursed expenses of professional first responders related to the cost of uniforms or tuition and fees related to training. This deduction is indexed to inflation.
- 20203 – Temporary above-the-line deduction for supplies and equipment of first responders and COVID-19 front-line employees
Provides a $500 above-the-line deduction for 2020 for the uniforms, supplies, and equipment of first responders and COVID-19 front-line employees. COVID-19 front-line employees are those that perform at least 1,000 hours of essential work, as defined for pandemic premium pay reimbursable from the COVID-19 Heroes Fund.
- 20204 – Payroll credit for certain pandemic-related employee benefit expenses paid by employers
Provides a 30% refundable payroll tax credit for expenses reimbursed or paid for the benefit of an employee for reasonable and necessary personal, family, living, or funeral expenses incurred as a result of the presidentially declared disaster related to COVID-19.
The credit percentage is 50% for expenses paid to employees if a substantial portion of the services performed by the employee is essential work, as defined for pandemic premium pay reimbursable from the COVID-19 Heroes Fund. No credit is allowed if the expenses are provided in a manner which discriminates in favor of highly compensated employees. The Social Security and Railroad Retirement trust funds are held harmless under this provision, through a General Fund transfer of lost receipts as a result of this credit.
- 20211 – Improvements to employee retention credit
Increases the applicable percentage of qualified wages reimbursed through the employee retention credit from 50% to 80%.
Modifies the gross receipts requirement to allow a partial credit, phased in for a decline in gross receipts between 10% and 50% compared to the same calendar quarter of the previous year.
Increases the limit on wages taken into account per employee from $10,000 for the year to $15,000 per quarter (limited to $45,000 for the calendar year).
Replaces the 100-employee delineation for determining the relevant qualified wage base with a definition of large employer. A large employer is an employer with greater than 1,500 full time employees and gross receipts of greater than $41,500,000 in 2019.
Allows state and local governments and certain federal instrumentalities to claim the credit in the event they are paying wages to employees while their operations are fully or partially shut down.
Clarifies that group health plan expenses can be considered qualified wages even when no other wages are paid to the employee, consistent with recent revisions to IRS guidance on this issue.
This provision also clarifies that wages paid by an employer for lost tips will not trigger the wage limitation in section 2301(c)(3)(B) of the CARES Acts.
All provisions apply retroactively to the effective date included in § 2301 of the CARES Act.
- 20212 – Payroll credit for certain fixed expenses of employers subject to closure by reason of COVID-19
Provides a 50% refundable payroll tax credit for qualified fixed costs. Qualified fixed costs include covered rent obligations, covered mortgage obligations, and covered utility payments. These terms have the same definitions as the definitions provided in §1106 of the CARES Act, relating to forgiveness of Paycheck Protection Program loans.
For each quarter, qualified expenses eligible for this credit are limited to 25% of qualified wages (as defined in the employee retention credit) or 6.25% of 2019 gross receipts (which annualizes to 25%), with a maximum of $50,000. This credit is limited to employers with no more than 1,500 full-time equivalent employees or no more than $41,500,000 in gross receipts in 2019.
Additionally, employers must be subject to a full or partial suspension due to a COVID-19 government order or have a decline in gross receipts of at least 20% compared to the same calendar quarter of the preceding year.
This credit is phased in for employers with a decline in gross receipts between 10% and 50%.
The Social Security and Railroad Retirement trust funds are held harmless under this provision, through a General Fund transfer of lost receipts as a result of this credit. The section applies to qualified fixed expenses paid or accrued from March 12, 2020 until December 31, 2020.
- 20213 – Business interruption credit for the self-employed
Provides a 90% refundable individual income tax credit for certain self-employed individuals who have experienced a significant loss of income. The credit may be claimed on “qualified self-employment income” which is the loss in gross income for self-employment that exceeds a 10% reduction from 2019 to 2020, scaled using the ratio of net earnings from self-employment to gross income from self-employment in 2019.
The amount of qualified self-employment income taken into account cannot exceed the reduction in adjusted gross income from 2019 to 2020, and is capped at $45,000.
The credit phases out starting at $60,000 of adjusted gross income ($120,000 for married filing jointly) at a rate of $50 for every $100 of income.
- 20221 – Extension of credits
Extends the refundable payroll tax credits for paid sick and family leave, enacted in the Families First Coronavirus Response Act, through the end of 2021.
This provision is effective as if included in FFCRA.
- 20222 – Repeal of reduced rate of credit for certain leave
Coordinates changes made to the requirement to provide paid sick time to allow employers to claim up to $511 per day, rather than $200 per day for leave for caregivers of individuals subject to a coronavirus related stay at home order and parents providing for children affected by a coronavirus related school closure. This provision applies to days on or after the date of enactment of this Act.
- 20223 – Increase in limitations on credits for paid family leave
Coordinates changes made to the requirement to provide emergency paid family and medical leave to allow employers to claim up to $12,000 in refundable payroll tax credits, rather than $10,000. Allows individuals to claim the credit for a maximum of 60 days (corresponding to the $12,000 amount) rather than 50 days. This provision is effective as if included in FFCRA.
- 20224 – Election to use prior year net earnings from self-employment in determining average daily self-employment income
Allows individuals to elect to use their average daily self-employment income from 2019 rather than 2020 to compute the credit. This provision is effective as if included in FFCRA.
- 20225 – Federal, state, and local governments allowed tax credits for paid sick and paid family and medical leave
Removes the exclusion disallowing the paid sick and family leave credits enacted in the Families First Coronavirus Response Act for Federal, state, and local governments. It makes conforming changes to the definition of qualified wages to align the credit with the intent that the credit cover the leave required by the respective mandates. This provision is effective as if included in FFCRA.
- 20226 – Certain technical improvements
Makes technical changes coordinating the definitions of qualified wages within the paid sick leave, paid family and medical leave, and the exclusion of such leave from employer OASDI tax. This provision is effective as if included in FFCRA.
- 20227 – Credits not allowed for certain large employers
Provides that, notwithstanding other changes in this Act requiring that employers with 500 or more employees provide required paid sick leave and paid family and medical leave, these employers are not eligible for payroll tax credits for these wages. This restriction does not apply to federal, state, and local governments. This provision applies to wages paid after the date of enactment.
- 20231 – Payroll tax deferral allowed for recipients of certain loan forgiveness.
Allows businesses receiving Paycheck Protection Program loan forgiveness to defer payment of payroll taxes under §2302 of the CARES Act.
- 20232 – Emergency financial aid grants
Excludes emergency financial aid grants made to students from gross income and holds students harmless for purposes of determining eligibility for higher education tax incentives.
- 20233 – Certain loan forgiveness and other business financial assistance under CARES Act not includable in gross income
Excludes certain loan forgiveness by the Small Business Administration, emergency EIDL grants, and certain loan payments from the gross income of the ultimate recipient.
- 20234 – Authority to waive certain information reporting requirements
Provides the Secretary of the Treasury with the authority to waive information reporting requirements under Chapter 61 of the Code with respect to income that is exempt from tax as excludible loan forgiveness under the Paycheck Protection Program or under §§ 332 or 333 of this Act.
- 20235 – Clarification of treatment of expenses paid or incurred with proceeds from certain grants and loans
Clarifies that expenses paid or incurred with proceeds from Payment Protection Program loans that are forgiven pursuant to §1106(b) of the CARES Act and certain loan forgiveness by Small Business Administration, emergency EIDL grants, and certain loan payments that are not included in gross income under § 333 of this Act do not result in a denial of any deduction or basis of any asset for federal tax purposes This provision also clarifies the order in which §1106(i) of the CARES Act and relevant provisions of the Internal Revenue Code apply.
- 20236 – Reinstatement of certain protections for taxpayer return information
Restores certain taxpayer protections under § 6103 of the Internal Revenue Code that were modified by the CARES Act, retroactively effective as of the date of the FUTURE Act.
Net Operating Losses §20301
Limitation on excess businesses losses of non-corporate taxpayers restored and made permanent. Amends changes made by the CARES Act to §461(l) of the Code, which provides that an excess business loss of a taxpayer (other than a corporation) is not allowed for a taxable year.
Excess business losses are treated as net operating losses in the next succeeding taxable year. An excess business loss exists if taxpayer’s total deductions from all trades or businesses exceed all income from such trades or businesses, plus $250,000 ($500,000 for joint filers).
The CARES Act suspended this provision for taxable years beginning in 2018, 2019 and 2020. Under current law (as amended by CARES), this provision applies for taxable years beginning on or after January 1, 2021, and beginning before December 31, 2025.
This section amends current law to apply the provision to taxable years beginning on or after January 1, 2018, as was the case before CARES passed.
In addition, this section makes the provision permanent, and repeals §461(j) of the Code as a deadwood provision. This provision is made effective retroactive to the date of enactment of the CARES Act.
- 20302 – Certain taxpayers allowed carryback of net operating losses arising in 2019 and 2020
Amends the CARES Act changes to §172 of the Code. Under current law (as amended by CARES), taxpayers with a loss in 2018, 2019 or 2020 may apply those losses to the preceding five taxable years.
This section amends the provisions of CARES that provide for net operating loss carrybacks by limiting carrybacks to taxable years beginning on or after January 1, 2018.
In addition, this provision prohibits taxpayers with excessive executive compensation or excessive stock buybacks and dividends from carrying back losses. This provision is made effective retroactive to the date of enactment of the CARES Act.
- 301. Waiver of Required Minimum Distributions for 2019
Under current law, generally at the age of 72, individuals must take a required minimum distribution (“RMD”) from their defined contribution plans and IRAs. Due to the market downturn resulting from the COVID-19 pandemic, the balances in these accounts have sharply decreased – in many instances, the market has reduced taxpayers’ accounts more than what their RMD would have been. Therefore, the recently enacted CARES Act waived RMDs for 2020, allowing individuals to keep funds in their retirement plans.
This provision expands this relief further by providing that 2019 RMDs would be waived for defined contribution plans and IRAs.
- 302. Waiver of 60-Day Rule in case of Rollover of Otherwise Required Minimum Distributions in 2019 and 2020
This provision further expands the 2020 RMD relief in the CARES Act by providing that:
The RMDs made for 2019 would be permitted to be rolled back to a plan or IRA without regard to the 60-day requirement if the rollover is made by November 30, 2020.
RMDs made for 2020 would be permitted to be rolled back to a plan or IRA without regard to the 60-day requirement if the rollover is made by November 30, 2020.
- 303. Employee Certification as to Eligibility for Increased CARES Act Loan Limits from Employer Plan
The CARES Act permits eligible retirement plans to rely on an employee’s certification that the employee qualifies to receive a coronavirus-related distribution. Technically, it appears that a plan cannot rely on such a certification for purposes of determining whether an employee is eligible for the special loan rules. In past disaster relief, the IRS has generally permitted reliance on reasonable representations by an employee in a similar context, absent actual knowledge to the contrary. But in the past, the statute has not had a specific employee certification provision that applies for distributions but not loans. This provision provides a statutory clarification.
- 304 – Exclusion of Benefits Provided to Volunteer Firefighters and Emergency Medical Responders Made Permanent
Almost 70% of firefighters and emergency medical services (“EMS”) personnel are volunteers, 71% of fire departments are exclusively staffed by volunteers, and 91% of all US fire department use volunteer firefighters and EMTs to some degree.
Therefore, at the end of last year, the SECURE Act reinstated for one year the exclusions for qualified State or local tax benefits and qualified reimbursement payments provided to members of qualified volunteer emergency response organizations and increases the exclusion for qualified reimbursement payments to $50 for each month during which a volunteer performs services. This would allow volunteer fire and EMS personnel for 2020 to receive nominal recruitment and retention incentives without those incentives being considered as taxable income.
The COVID-19 pandemic places an enormous amount of strain on these volunteer personnel as they are exposing themselves to COVID-19 and are responding to a much higher than normal call volume. Therefore, the provision would make permanent these amendments to §139B.
- 305 – Application of Special Rules to Money Purchase Pension Plans
The CARES Act provided for early distribution and loan relief for retirement plans during the coronavirus relief period. While this relief was intended to apply to all qualified retirement plans, there were questions as to whether it would apply to money purchase pension plans (“MPPP”). MPPPs are a type of defined-contribution retirement plan offered by some employers. This provision would clarify that MPPPs would benefit from the legislation.
- 90001: Amendments to PPP
- Extension of the covered period from June 30 to December 31.
- Clarifies the definition of a tribal business concern to prevent them from being held to inapplicable HUBZone requirements.
- Makes a technical clarification to ensure hospitals in bankruptcy still qualify for PPP loans due to the essential nature of their operations.
- Extends eligibility to all nonprofits of all sizes and clarifies the eligibility of housing cooperatives.
- Clarifies the inclusion of small, local news broadcast entities.
- Clarifies that loan terms extend through the end of the covered period.
- Establishes a minimum maturity on PPP loans of 5 years to enable borrowers to amortize loans over a longer period of time, which lowers monthly payments.
- Clarifies that PPP loans cannot be calculated on a compound basis, saving borrowers money over the long-term.
Modifications to PPP Funds, including:
- A carve out of 25% of the existing funds on the date of enactment to be used specifically for small businesses with 10 or fewer employees to guarantee they are fully able to access PPP assistance.
- A carve out of 25% of the existing funds on the date of enactment solely for the use of all nonprofits, no matter their size or type but requiring that at least half this amount go to small nonprofits under the 500-employee threshold.
- Establishes an additional set aside of existing funds of the lesser of 25% or $10 billion specifically for community financial institutions, such as Community Development Financial Institutions (CDFIs), Minority Development Institutions (MDIs), SBA microlenders, and SBA Certified Development Companies (CDCs) and
- Mandates that any returned amounts due to the cancellation of a covered loan shall be redistributed through loans to small businesses with 10 or fewer employees.
- Alleviates burdens to borrowers deemed ineligible due to prior criminal history; and
- Establishes technical assistance grants for small community financial institutions and small depository institutions and credits with assets of less than $10 billion; and
- Makes a technical amendment to a section title.
- 90004 – Amendments to PPP Loan Forgiveness
- Adds flexibility in the covered period for borrowers by extending the 8-week period to 24 weeks and extends the covered period from June 30 to December 31.
- Harmonizes the use of proceeds with forgiveness.
- Mandates forgiveness data collection and reporting.
- Creates a safe harbor for borrowers who cannot rehire in the prescribed timeframe.
- Eliminates the 75/25 rule on use of loan proceeds.
- Clarifies the hold harmless provision for lenders.
- 90005 – Improved Coordination Between PPP and Employee Retention Tax Credit
Clarifies the coordination between the Employee Retention Tax Credit and the PPP loans to ensure borrowers can take advantage of both types of assistance.
- 90006 – Taxability of Subsidy for Certain Loan Payments
Ensures the principal and interest loan assistance is not treated as taxable income to small business borrowers.
- 90007 – Prohibiting Conflicts of Interest for Small Business Programs under the CARES ACT
Clarifies that the conflict of interest standards set forth in the law apply to PPP funds.
- 90008 – Flexibility in Deferral of Payments of 7(a) Loans
Allows the SBA Administrator to give lenders the ability to extend loan deferments, including payment of principal and interest for one year if the borrower provides documentation justifying the additional deferment and gives the Administrator the ability to purchase the loan in order to provide the stated relief if the loan cannot be purchased on the secondary market.
- 110501 – Payments for private education loan borrowers as a result of the COVID–19 national emergency
This section extends existing CARES Act student loan payment and consumer protections, such as debt collection prohibitions, to private loan borrowers, who are currently not covered by the CARES Act, and provides up to $10,000 in debt relief to be applied to a private student loan. The Treasury Department will make monthly payments on behalf of the borrower up to $10,000 until September 2021.
- 110502 – Additional protections for private student loan borrowers
As Treasury will be making payments on behalf of borrowers under this title, this section requires private student servicing companies that receive funds to offer income driven repayment plans, and payments or forbearance under this title will not impact applicable State statutes of limitation. Furthermore, this section instructs Treasury to apply any unused portion of the up to $10,000 forgiveness amount to any remaining outstanding private loan balance when borrower payments resume.
- 120102 – Employee Eligibility and Employer Clarification
This section temporarily suspends, until December 31, 2022, the current 1,250-hour eligibility requirement and reduces the tenure eligibility requirement from 12 months to 90 days under non-emergency Family and Medical Leave Act (FMLA). This will ensure rampant unemployment and furloughs do not leave workers unable to qualify for FMLA benefits in the near future. This section also clarifies that public agencies are covered under the Family and Medical Leave Act of 1993, regardless of the number of employees.
- 120103 – Emergency Leave Extension
This section extends the availability of Emergency Family and Medical Leave benefits from December 31, 2020 to December 31, 2021.
- 120104 – Emergency Leave Definitions
This section provides private sector and public sector employees who have been on the job for at least 30 calendar days with the right take up to 12 weeks of job-protected paid leave under the Family and Medical Leave Act, regardless of the size of their employers.
Employees can take this leave to: (1) self-isolate because they were diagnosed with COVID-19, (2) obtain a medical diagnosis or to care for symptoms of COVID-19, (3) comply with a recommendation or order to self-isolate because physical presence at work currently not covered by the CARES Act, and provides up to $10,000 in debt relief to be applied to a private student loan. The Treasury Department will make monthly payments on behalf of the borrower up to $10,000 until September 2021.
- 120106 – Paid Leave
This section ensures that workers are provided with a full 12 weeks of paid emergency FMLA leave and such leave does not count towards an employee’s 12 weeks of non-emergency unpaid FMLA leave. This section also clarifies that only the employee can decide to take emergency FMLA leave concurrently with any other paid leave they have available.
- 120107 – Wage Rate
This section ensures employees will receive a benefit from their employers that will be no less than two-thirds of the employee’s usual pay, up to $200 a day, but no less than the applicable minimum wage in their area.
- 120109 – Intermittent Leave
This section clarifies that employees can take leave intermittently or on a reduced work schedule, regardless of a previous agreement between an employer and employee.
- 120113 – Amendments to the Families First Emergency Family and Medical Leave Expansion Act
- Clarifies that employees who work under a multiemployer collective bargaining agreement and whose employers pay into a multiemployer plan are provided with leave.
- Eliminates provisions that allow employers of health care providers and emergency responders the ability to exclude their employees from emergency FMLA leave.
- Eliminates provisions that restrict employees from exercising a private right of action against employers, with fewer than 50 employees.
- 120115 – Paid Sick Time Requirement.
- Allows eligible employees to use paid sick leave for the uses allowed under the emergency FMLA.
- For each 12-month period, entitles eligible full-time employees to two workweeks (80 hours) of emergency paid sick leave. For each 12-month period, eligible part-time employees are entitled to the hours of emergency paid sick leave that equals the typical number of hours that they work in a typical two-week period.
- Ensures employees receive emergency paid sick leave in addition to any existing employer-provided paid leave.
- Clarifies that employees can take leave intermittently or on a reduced work schedule, regardless of a previous agreement between an employer and employee.
- Allows employers to require requests for paid sick leave to be supported by basic documentation, but not before 7 days after the employee has returned to work.
- Requires employees, to provide their employers with notice of need to take leave as soon as is practicable.
- Clarifies that full emergency paid sick leave is available to employees where they begin employment with a new employer.
- Requires employers to restore employees to their positions after returning from paid sick leave.
- 120116 – Sunset
This section extends the availability of emergency paid sick leave from December 31, 2020 to December 31, 2021.
- 120117- Definitions
This section eliminates the large employer exemption and clarifies that nonprofit organizations are covered employers. This section ensures that full-time and part-time employees earn full wage replacement (up to $511 per day) for all emergency paid sick leave uses.
- 120118 – Emergency Paid Sick Leave for Employees of the Department of Veterans Affairs and the Transportation Security Administration for Purposes Relating to COVID-19.
This section ensures employees of the Department of Veterans Affairs and Transportation Security Administration are eligible for paid sick days.
- 190802 – Death and Disability Benefits for Public Safety Officers Impacted by COVID-19
Amends the Public Safety Officers’ Benefits Program (PSOB) to establish a presumption that officers who die or are disabled because of COVID-19 infection are eligible to receive disability and death benefits. Ensures that officers who were injured or disabled during or because of the September 11, 2001 attacks, and whose injuries in combination with a COVID-19 illness result in disability or death, may apply for PSOB disability or death benefits.
Issue 4: PPP Loan Guidance – Will a borrower’s PPP loan forgiveness amount be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?
No. As an exercise of the Administrator’s and the Secretary’s authority under §1106(d)(6) of the CARES Act to prescribe regulations granting de minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation.
The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.
Issue 5: PPP Loan Forgiveness Application
The PPP Loan Forgiveness Application has been released and can be found on the SBA.gov website. Under the new procedures, a borrower must request the forgiveness of PPP loan proceeds by filing SBA Form 3508, Paycheck Protection Program Loan Forgiveness Application. The application has four components:
(1) the PPP Loan Forgiveness Calculation Form.
(2) PPP Schedule A;
(3) the PPP Schedule A Worksheet; and
(4) an (optional) PPP Borrower Demographic Information Form.
Borrowers are required to submit items (1) and (2) to their lender.
Non-Cash Compensation Payroll Costs. The SBA’s guidance distinguishes between cash compensation payroll costs and non-cash compensation payroll costs. The former is subject to the prorated limit discussed above. The latter (non-cash compensation) is not. Non-cash compensation payroll costs include the following items:
- The total amount paid by the borrower for employer contributions for employee health insurance, including employer contributions to a self-insured, employer-sponsored group health plan, but excluding any pre-tax or after-tax contributions by employees.
- The total amount paid by the borrower for employer contributions to employee retirement plans but excluding any pre-tax or after-tax contributions by employees.
- The total amount paid by the borrower for employer state and local taxes assessed on employee compensation (e.g., state unemployment insurance tax), but not including any taxes withheld from employee earnings.
Compensation to Owners. The SBA’s guidance allows for the forgiveness of amounts paid to owners (e.g., owner-employees, a self-employed individual, or general partner). The amount eligible for forgiveness is capped at the lower of (1) $15,385 (the eight-week equivalent of $100,000 per year) for each individual or (2) the eight-week equivalent of the owner’s applicable compensation in 2019, whichever is lower.
Eligible Nonpayroll Costs. Nonpayroll costs eligible for forgiveness consist of the following categories:
- Covered Mortgage Obligations. The amount of business mortgage interest payments during the Covered Period for any business mortgage obligation on real or personal property incurred before February 15, 2020. The guidance defines “business mortgage interest payments” as payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property that was incurred before February 15, 2020.
- Covered Rent Obligations. The amount of business rent or lease payments for real or personal property during the Covered Period pursuant to lease agreements that were in force before February 15, 2020.
- Covered Utility Payments. The amount of business utility payments during the Covered Period for business utilities for which service began before February 15, 2020. The guidance defines “business utility payments” as business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020.
Issue 6: IRS has Provided Applicable Federal Rate Tables for June 2020 – Rev Rul 2020-12
| Table 1
Applicable Federal Rates (AFR) for June 2020
|Period for Compounding|
Adjusted AFR for June 2020
|Period for Compounding|
|Short-term adjusted AFR||0.14%||0.14%||0.14%||0.14%|
|Mid-term adjusted AFR||0.33%||0.33%||0.33%||0.33%|
|Long-term adjusted AFR||0.77%||0.77%||0.77%||0.77%|
Rates Under § 382 for June 2020
|Adjusted federal long-term rate for the current month||.77%|
|Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.)||1.09%|
Appropriate Percentages Under § 42(b)(1) for June 2020
|Note: Under § 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, cannot be less than 9%.|
|Appropriate percentage for the 70% present value low-income housing credit||7.16%|
|Appropriate percentage for the 30% present value low-income housing credit||3.07%|
Table 5 Rate Under § 7520 for June 2020
|Applicable federal rate for determining the present value of an annuity, an interest in life or a term of years, or a remainder or reversionary interest||0.6%|
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