Tax News & Views Research Credit Roundup

May 4, 2020

Recession and the Research Credit - Marie Sapirie, Tax Notes ($). “The rapidly unfolding economic crisis might be a good opportunity to make the credit more generous, because it would support the twin goals of encouraging innovation in key industries and helping drive job creation”

“One thing that this crisis has shown is how vital it is to have increased technological research, especially in areas like the biomedical field, and to have that research performed by American companies in America. A more robust research credit would go a long way towards supporting that goal,” said Robert J. Kovacev of Norton Rose Fulbright US LLP.

Neal Plans PPP Fix to Provide Expenses Deduction – Jad Chamseddine and Eric Yauch, Tax Notes ($). “The top House taxwriter intends to take legislative action to make expenses funded with coronavirus relief small business loans deductible, a move that would countervail recent IRS guidance.”

Senate Finance Committee Chair Chuck Grassley, R-Iowa, while not committing to make changes to the Paycheck Protection Program (PPP) in legislation now being negotiated in Congress, was also quick to share his disappointment with IRS guidance (Notice 2020-32, 2020-21 IRB 1) released April 30 that forgivable loans under the program are not tax deductible.

“The intent was to maximize small businesses’ ability to maintain liquidity, retain their employees and recover from this health crisis as quickly as possible,” Grassley said in a statement. “This notice is contrary to that intent.”

More on PPP expenditure treatment here.

COVID-19 payments going to foreign students, as well as dead people – Kay Bell, Don’t Mess With Taxes. “Confused about who gets coronavirus relief payments? Apparently so is the Internal Revenue Service's distribution system.”

Should Employers Get A Tax Opinion For Paid Sick Leave Credits? – Jason B. Freeman, Forbes. “With the passage of the Families First Coronavirus Response Act  (FFCRA) last month, tax attorneys are now being called upon to provide tax opinions on whether businesses are entitled to payroll tax credits with respect to paid sick leave.”

More information on the Families First Coronavirus Response Act can be found here.

Lawmakers Set Markers for Expanding Tax Relief During Pandemic – Jad Chamseddine, Tax Notes ($). “A bipartisan pair of House taxwriters wants coronavirus relief funds to be made available for dependents regardless of their age, while congressional Democrats are also pushing for expanded tax relief.”

The CARES Act limited the availability of the $500-per-child addition to taxpayers’ economic impact payments to dependents under the age of 16, meaning older dependent children and dependent adults, such as college students and those with disabilities, were left out. The new bill would strike the language on qualifying children from the CARES Act and instead define dependents using section 152.

Rich Americans Seize Historic Chance to Pass On Wealth Tax-Free – Ben Steverman, Bloomberg. “The simplest way for the rich to take advantage of the low rates is to loan cash or other assets to family members. Heirs can borrow millions of dollars, then invest the money and profit from any upside.”

Corporate Groups Limited to Maximum $20 Million in PPP Borrowing – Ed Zollars, CPA, Current Federal Tax Developments. “The Small Business Administration has published yet another Interim Final Regulation for the PPP loan program.  While much of the document relates to issues of interest to non-bank lenders, one key piece of guidance was issued that limits the amount of loans for corporate groups.”

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