Presented by Minnesota Manufacturing Executives (MME)

Accounting Sponsor

Clint Seehusen, CPA
DS+B CPAs + Business Advisors
222 South 9th Street, Ste 3000
Minneapolis, MN 55402
CSeehusen@dsb-cpa.com
612-630-5084

“Our teams create roadmaps that help manufacturing business leaders make confident decisions and stay focused on the profitable growth of the company.”
– Clint Seehusen

Justin Spinler, CPA
DS+B CPAs + Business Advisors
222 South 9th Street, Ste 3000
Minneapolis, MN 55402
jspinler@dsb-cpa.com
612-359-9630

Important CARES Act Business Tax Provisions

By Clint Seehusen, CPA, & Justin Spinler, CPA

President Trump signed the much-anticipated U.S. $2.2 trillion emergency economic stimulus package on Friday, March 27, 2020. It is known as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), H.R. 748.

While IRS pronouncements and clarifications as they relate to this important legislation will continue through 2020, we will be updating our website when additional information is received. For now, here are some of the key business tax provisions that can apply to manufacturers.

2301 – Employee Retention Credit

This is a refundable payroll tax credit. There is eligibility for employers whose operations have been suspended. It includes employers with less than 100 employees in 2019; all wages are eligible, regardless of whether the employee is actually furloughed:

  • 50% of qualified wages, which includes health benefits, for each employee, capped at $10,000 per employee
  • Business must be ordered closed or gross receipts fall to less than 50% of the same quarter in the prior year

Note: The credit is not available to employers receiving Small Business Interruption Loans (ask your CPA for more detail). Wages do not include amounts taken into account for the earlier passed required paid sick leave or paid family leave in the Families First Coronavirus Response Act.

2302 – Employer Payroll Tax Deferral

This is a deferral of the employer portion of Social Security taxes and applies to all taxes due on 2020 wages, beginning on the date of enactment.

  • The taxes will be due on December 31 of each year of 2021 and 2022.
  • 50% in 2021, 50% in 2022 for payroll taxes between enactment date and 1/1/2021
  • Self-employment taxes get this same deferral.

Note: The deferral will not be available to employers receiving forgiveness of their Small Business Interruption Loans (ask your CPA for more details).

2307 – 100% Bonus Depreciation for Qualified Improvement Property (QIP)

This is the long-awaited technical correction to the 2017 Tax Act for Qualified Restaurant, Qualified Retail and Qualified Leasehold Improvement Property for Bonus Depreciation, now making this property eligible for the 100% Bonus Depreciation.

  • Applicable to all such property put into service after December 31, 2017
  • QIP is 15-year property, therefore eligible for bonus depreciation
  • 20-year ADS life

Note: The can apply to amended returns.

2306 – Deductible Interest Expense

This provision relates to the limitation that some Corporations and Partnerships found themselves hitting with regards to the deduction of interest expense on their returns for 2019 and 2018.

  • 163(j) limit calculated with 50% of adjusted taxable income (ATI) instead of 30% for taxable years beginning in 2019 or 2020
  • Can elect to use 2019 adjusted taxable income for the 2020 calculation
  • Increased limitation does not apply to partnerships for 2019, but will apply in 2020

Note: This temporarily changes the limitation of deductible interest in a given year from 30% of ATI to 50% of ATI for 2019 and 2020.

2303 – Net Operating Losses (NOLs)

This section changes the rules for Net Operating Losses that occur in tax years beginning after December 31, 2017. The IRS recently provided new procedures for carrybacks of NOLs in Revenue Procedure 2020-24.

  • Pre-2021 years have no taxable income limit
  • Post-2020 years have the 80% limit
  • 5-year carrybacks for NOLs arising in years beginning in 2018-2020
  • Eligible partnerships can file amended partnership returns using Form 1065 (Revenue Procedure 2020-23)

2304 – Noncorporate Loss Limitation of § 461(l)

This section applies to excess business losses for non-corporate taxpayers (limited to $250,000; $500,000 married filing jointly) that would have applied to all tax years beginning after December 31, 2017, and ending before January 1, 2026.

  • Limitations only apply to taxable years beginning after 2020
  • Excess business losses are no longer subject to the loss limitations for years 2018, 2019 and 2020

 Note: That means that the limitations will apply in 2021 to 2025.

 2305 – Minimum Tax Credit

This section changes the 50% of the excess Minimum Tax Credit that would have

applied in 2018, 2019 and 2020 to not apply for these tax years, but not be allowed

at a full 100% for Corporate taxpayers.

  • Corporate credit for prior year AMT fully refundable in 2019
  • Can elect to take refund in 2018

THE ABOVE DESCRIPTIONS ARE BASED UPON THE EARLY ANALYSIS AND OBSERVATIONS OF THE CARES Act H.R.748. THEY ARE SUBJECT TO FURTHER ANALYSIS AND POTENTIAL REGULATIONS AND GUIDANCE FROM THE IRS. THEY SHOULD NOT BE CONSIDERED ADVICE, BUT SIMPLY INFORMATION.