US Covid-19 response: important tax provisions to note for corporate taxpayers

The recently passed CARES Act (the Act) provides a number of stimulus provisions for US taxpayers. Some notable tax provisions for companies operating in the US:

Net operating losses (NOL)

NOLs arising in 2018, 2019 and 2020 can now be carried back to five prior years. Furthermore, the limitation on the use of NOLs to 80 percent of current taxable income has been removed until 2021 so that the NOL carryovers can now offset 100 percent of taxable income for a limited time.

Interest Expense Limitation - Section 163(j)

The Act loosed the restriction of the business interest deductions from 30% limitation to 50% in 2019 and 2020. Also the taxpayers can calculate their 2020 interest limitation using their 2019 income which is likely to be higher than income in 2020.

Alternative Minimum Tax refund

Corporate taxpayers can elect to receive a full refund of accumulated AMT credits in 2018 or 2019.

Employee Retention Credit

Employee retention credit is available via payroll tax obligations if the employer qualifies under the “significant declined in gross receipts” test (gross receipts in a calendar quarter are less than 50% of gross receipts for the same quarter in 2019). The credit provides a $5K credit per employee on a company's US payroll.

Further detail can be found on https://www.irs.gov/coronavirus/employee-retention-credit

Paycheck Protection Program

The Paycheck Protection Program is available to small and medium size businesses and is a forgivable government loan if 75 percent of the amount is used to keep the US workers on the payroll. The remainder of the proceeds can be used for rent, utilities, mortgage interest.

The best way to start the application is to contact your US banking institution. Further important detail on the PPP can be found on https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp