Tax Update Blog

Tax News & Views Forgiveness and HEROES Roundup

May 18, 2020 | Blog

By Daniel McNeil

SBA Releases PPP Forgiveness ApplicationJoe Kristan, Eide Bailly. “The Small Business Administration has released a form and instructions for borrowers under the Paycheck Protection Program to request loan forgiveness. The form lists documentation required for forgiveness requests. The documentation will support payroll costs, the number of full-time equivalent employees, and non-payroll costs eligible for forgiveness.”

 

House Approves Fourth Relief Package, Talks With GOP Continue – Jad Chamseddine & Alexis Gravely, Tax Notes ($). “The Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H. R. 6800) passed the House May 15 by a vote of 208 to 199. One Republican, Rep. Peter T. King of New York, supported the bill, and 14 Democrats voted against the measure.”

Despite Republicans’ overwhelming rejection of the bill, they share some priorities with Democrats, including support for expanding the employee retention tax credit. The provision would increase the credit from 50 percent to 80 percent of qualified wages and increase the per-employee limit to $15,000, as well as redefine a large employer as a business with more than 1,500 employees, instead of more than 100 employees, allowing more wages to qualify.

More information on the Employee Retention credit can be found here and here.

HEROES And CARES - A Tale Of Two Tax Provisions – Peter Reilly, Forbes.

The two provisions are “Limitation on excess business losses of non-corporate taxpayers restored and made permanent”, which the Joint Committee on Taxation scores as a tax increase of $246 billion and “ Elimination for 2020 and 2021 of Limitation on Deduction of State and Local Taxes” which scores as a tax decrease of $137 billion.

 

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

The article expresses multiple options for enhancing the research credit. Listed below are a few of those options:

  • Repeal changes enacted by the Tax Cuts and Jobs Act (TCJA): Beginning January 1, 2022, taxpayers will be required to capitalize and amortize research expenditures over five years. Prior to that date these expenditures are deductible under section 174.The American Innovation and Competitiveness Act (H.R. 4549) has attempted to roll back the TCJA’s changes to section 174.
  • Increase the credit rate under the alternative simplified credit (ASC): The ASC is an election taxpayers can make instead of the regular method of claiming the credit. However, in electing this method, a rate of 14% is provided rather than 20% under the regular method.

“There are a range of options for expanding the ASC rate. The Obama administration proposed raising it from 14 percent to 17 percent. In a 2019 report, Robert D. Atkinson of the Information Technology and Innovation Foundation suggested raising it to at least 25 percent. His report said the foundation calculated that ‘expanding the R&D tax credit would pay for itself from the additional revenue growth in 15 years.’”

  • Options directly related to the COVID-19 crisis: prorating expenses and qualifying wages paid to employees who would have been performing R&D activities if not for interruptions caused by the pandemic.

“Given the number of furloughs and stay-at-home orders that restrict what research activities can be done, companies may find when they calculate their current-year expenses that they reflect only nine to 10 months, rather than 12. Allowing taxpayers to prorate expenses over the time they were actually able to conduct research activities would provide an apples-to-apples comparison with prior years” Douglas Norton

  • Follow suit of other countries who allow expedited payment of research credits.

New Zealand decided to allow taxpayers to receive refunds for R&D credits a year early. Ireland is also willing to expedite the 2020 installments of payments of excess R&D credits for small and medium-size businesses with turnover of less than €3 million. Taxpayers must request expedited payments, and the Irish Revenue will review them before disbursing them. Spain also has a plan for small and medium-size entities that conduct R&D activities.

Learn more about the research credit here.

 

The IRS Cracks Open the Door to Electronic Communications – Procedurally Taxing. “On March 27, 2020 as part of the IRS’s response to COVID-19 the IRS issued an internal memorandum temporarily modifying the existing prohibitions against the acceptance of electronic signatures and use of email to send and receive documents.”

New conflict-of-interest guidelines for tax services – Anna Seto, CPA, and Joesph Tapajna, CPA, Journal of Accountancy. “The AICPA Tax Practice Responsibilities Committee has updated its Guidelines for Conflicts of Interest in the Performance of Tax

 

Coronavirus Relief Legislation Complicates TCJA Campaign – Stephanie Cumings, Tax Notes ($). “The IRS’s newest compliance campaign centered on the Tax Cuts and Jobs Act may need revisions given recent changes in response to the coronavirus pandemic.”

COVID-19 Crisis Could Cause Adverse Tax Consequences for Debtors – Emily L. Foster, Tax Notes($). “Debt issuers could face unintended tax consequences if they don’t consider the potential income exposure from significant debt modifications.”


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This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.