Tax News & Views Full-time Part-time Forgivable Loan Back to Work Roundup

April 27, 2020

500-Employee Count for PPP Loan Qualification Counts All Employees not Just Full Time Equivalents - Ed Zollars, Current Federal Tax Developments. "By contrast, for purposes of loan forgiveness, the CARES Act uses the standard of 'fulltime equivalent employees' to determine the extent to which the loan forgiveness amount will be reduced in the event of workforce reductions." Information from newly-added Q&A 36 from the Paycheck Protection Program Loans Frequently Asked Questions.

Additional Relief Legislation Is Here: What You Can Do Now - Adam Sweet, Eide Bailly. "And don’t forget, receiving the funding is just the first step. Knowing how to properly maximize your loan forgiveness can make a significant impact for your organization long term."

Congress Authorizes More Funds for PPP and EIDL and Says Farms Can Apply - Kristine Didgren, Ag Docket. "Agricultural Producers Are Eligible, but Borrowers Must Act Fast"

Professional Gamblers (and Other Gambling Businesses) Now Eligible for PPP Loans - Russ Fox, Taxable Talk. "If you’re a professional gambler and are out of business, now is the time to apply with your bank. While there was additional funding for PPP loans approved this week, it will likely be used up quickly."

CARES Act Triggers IRS to Allow Amended Returns For Partnerships Subject to BBA - Marilyn Ames, Procedurally Taxing. "Without any adjustments to the BBA partnership audit provisions, if a partnership files an AAR in 2020 for tax years ending in 2018 or 2019 in order to take advantage of the liberalized CARES net operating loss provisions, the partners could possibly have to wait until 2021 when they file their 2020 tax returns to see any effect."


Paycheck Protection Program Business Expenses - Lee Sheppard, Tax Notes ($). Come for the elitist food rant, stay for the perceptive analysis of deductibility of expenses funded with PPP loans. "Two things are going on here. First, Congress surely would have permitted normal business expense deductions against PPP loan proceeds if they’d thought about any need to say so explicitly. Second, there are sound legal and theoretical reasons why the tax benefit rules and related statutes shouldn’t apply to this question."

Employers Can Postpone Payroll Tax Payments Under CARES - Eide Bailly. "For many businesses, payroll taxes incurred during 2020 will be considered timely paid if 50% of the deferred amount is paid by December 31, 2021, and the remaining amount by December 31, 2022."

Economic Analysis: Should Prospering Businesses Qualify for Crisis Benefits? - Martin Sullivan, Tax Notes ($). "Echoing widespread anger that forgivable loans are available to employers who are not in financial distress, Sen. Ron Johnson, R-Wis., has floated a preliminary proposal that would place limits on all Paycheck Protection Program (PPP) loan forgiveness. Benefits would be reduced if income and gross receipts in 2020 exceed 2019 levels ('PPP Loan Forgiveness Needs Limits,' The Wall Street Journal, Apr. 22, 2020). Such a proposal would in effect be a tax on successful business operations and therefore must be carefully designed to keep the effective rate of tax low."

Related: PPP Loan Update - Is the Government Trying to Narrow the Pool of Eligible Borrowers  


Don't fall for these 4 common COVID-19 payment scams - Kay Bell, Don't Mess With Taxes.

Number 3:

Treasury or other government officials offer to help. Just like the pervasive fake Internal Revenue Service agent phone call con, these crooked coronavirus payment impersonators pretend to be from the Treasury Department or IRS or Social Security Administration. They say they can help you get a bigger check or get you your relief payment more quickly.

They can't because they are not real government officials. Don't give them any personal information. Definitely do not send them any money for their purported help. You don't have to pay a processing fee (or even any taxes) in order to obtain the COVID-19 relief stimulus payment.

It's sad that we can already call COVID-19 payment scams "common."


IRS Calls Some Employees Back To Work But Asks Them To BYOM (Bring Your Own Mask) - Kelly Phillips Erb, Forbes. "The agency has mostly been in shut down mode since March 24, 2020, when employees confirmed that some IRS call centers and return processing centers were closing in response to COVID-19."

IRS Recalling Thousands of Workers - Richard Rubin, Wall Street Journal ($). "The IRS is recalling some people who do work that must be done in person, according to an internal email released by Reps. Richard Neal (D., Mass.) and John Lewis (D., Ga.). In that email, IRS executives told workers they would be required to wear cloth face coverings and bring their own in case the government couldn’t provide them yet."


Historic Oil Price Burns Hole in State Budgets - Ulrik Boesen, Tax Policy Blog. "Alaska collects 50 percent of its revenue from severance taxes and a total of 81 percent of its revenue from taxes levied on the oil industry. North Dakota collects 53 percent of its revenue from severance taxes. Wyoming (22 percent) and New Mexico (20 percent) also generate a significant portion of state tax revenue from severance taxes on oil extraction, in addition to other taxes paid by the oil industry."

McConnell’s Attempt To Blame States For COVID-19 Budget Shortfalls Is Wrong And Dangerous - Richard Auzier, TaxVox. "Wisconsin has a fully funded pension program, while (ahem, senator) Kentucky has funded less than half of its pension obligations."

April 24th Afternoon State Tax Update - Katherine Loughead, Tax Policy Blog. "While some states spent much of the 11-year recovery from the Great Recession bulking up their rainy day funds to prepare for the next economic downturn, many states were so caught off guard by the 2007-2009 recession that they spent much of the past decade merely recovering from that recession instead of preparing for the next.."


Wells Fargo Loses STARS Appeal in Eighth Circuit - Amanda Athanasiou, Tax Notes ($). "The circuit court affirmed the lower court’s denial of Wells Fargo’s foreign tax credit claims arising from the STARS transaction, holding in an April 24 opinion that the transaction’s trust component lacked a nontax purpose or profit-making potential. The court also affirmed the bank’s liability for negligence penalties, although the three-judge panel was not unanimous on that issue."

"STARS" stands for "Structured Trust Advantaged Repackaged Securities." It was one of many great tax planning strategies marketed around the turn of this century that turned out to be too good to be true. The appeals court noted "Our conclusion is bolstered by our observation that, outside of its tax benefits, STARS's trust component was essentially comprised of economically meaningless and circular cash flows."

Buyer beware.

Free link to opinion here.


Lesson From The Tax Court: Using Legislative History To Clarify Ambiguous Text - Bran Camp, TaxProf Blog. "Tax statutes are difficult to read. Usually that is because they make precise use of complex terms of art. But sometimes the text is hard to follow because of poor drafting."


Why you should remit withheld employee taxes even if you have to stiff every one else. Tax Notes reports on a Texas U.S. District Court decision last week:

A couple that owned a hydraulic services company couldn’t discharge over $1 million in trust fund recovery penalties in bankruptcy because they had continued to pay other creditors.

From the opinion:

Plaintiffs were aware that withholding taxes had not been paid but nevertheless continued to sign and issue checks to creditors other than the IRS. Plaintiffs further failed to carry their burden in proving that the funds used were encumbered under § 6672. As such, the Court finds that Plaintiffs’ actions in signing checks, paying wages, and authorizing payments for SHS to payees other than the IRS all while aware that SHS had unpaid federal withholding taxes were willful and in violation of 26 U.S.C. § 6672(a).

So even when the taxpayers emerge from bankruptcy, they start in a $1 million hole.


Tax History: Tax Day Was Also Delayed During the Last Great Pandemic - Joseph Thorndike, Tax Notes. "Forms 1040 were still in short supply as April 1 drew near. Local collectors indicated some willingness to offer individual extensions for those unable to locate necessary forms, but BIR headquarters stood firm on the new April 1 deadline."

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