May 27, 2020
PPP Rules Move the Goal Post on Forgiveness for Business Owners - Eric Yauch, Tax Notes ($)
The interim final rules released late May 22 place new restrictions on the amounts paid to owner-employees of businesses that will be forgivable, which raises several issues, Anthony J. Nitti of RubinBrown LLP told Tax Notes.
Paycheck Protection Program (PPP) loans are generally forgivable as long as at least 75 percent of the proceeds are spent on payroll costs during the covered period, but those amounts are capped at $15,385 per employee. Everyone knew that, Nitti said, but what they didn’t know was that the amount for owner-employees would be further limited in the final rules to the lesser of $15,385 or 8/52 of 2019 compensation.
Legislate in haste, repent and regulate at leisure.
PPP Processing Fee, Reporting Guidance, and Potential Clawbacks - Brock Thaemlitz and Michael Holdren, Eide Bailly. "On May 21, the SBA released a procedural notice to inform PPP lenders of the reporting process of PPP loans and the collection of processing fees on fully disbursed loans."
What Late Tax Filers Need to Know - Tom Herman, Wall Street Journal ($). "While the new tax-filing deadline of July 15 might seem far off, many people who haven’t begun thinking about this annual ordeal should try harder to conquer their taxophobia. Even for those who pay someone to do their taxes or who rely on tax-prep software, it’s easy to underestimate how long it can take to collect all the necessary documents and other supporting material."
House Likely to Stick With Longer PPP Forgiveness Period - Jad Chamseddine, Tax Notes ($). "The bipartisan Paycheck Protection Program Flexibility Act of 2020 (H.R. 6886) will be on the House floor May 28, according to House Majority Leader Steny H. Hoyer, D-Md., despite the bill’s differences with a similar proposal in the Senate."
The House bill has a 24-week forgiveness period; the Senate wants 16 weeks, according to the report.
Net Operating Loss Carrybacks Are a Vital Source of Tax Relief for Struggling Firms in the Coronavirus Crisis - Karl Smith and Garrett Watson, Tax Policy Blog:
NOL deductions are an important part of a normal tax code. They ensure that taxes are applied to a firm’s average profitability and that the tax system does not penalize firms for having a volatile cash flow driven by the business cycle. This smooths out the tax burden during economic downturns. Prior to the CARES Act, firms could carry forward NOLs accrued indefinitely, but were prohibited from carrying back any NOLS to apply to taxable income from prior tax years. The prohibition on NOL carrybacks was made as part of the Tax Cuts and Jobs Act (TCJA), which undercut firms’ ability to obtain liquidity when they accrue losses during an economic downturn. NOL carrybacks are an important countercyclical tool in the tax code to help stabilize the economy during recessions.
The implication in articles in the New York Times and Washington Post that operating loss deductions are some sort of gimmick or giveaway is one of the worst themes in recent tax policy discourse.
Expanding The Child Tax Credit: Full Refundability And Larger Credit - Elaine Maag, TaxVox. "But when it comes to helping the lowest income families, Congress could get the biggest bang for the buck by focusing on full CTC refundability, ensuring that even families with no earnings could receive the full child credit."
What should you do if you threw out or destroyed that stimulus card? Members of Congress want to know, too - Lee Rood, Des Moines Register. "Scores of Iowans have contacted state Attorney General Tom Miller’s office, members of Iowa’s congressional delegation and Watchdog trying to find out what to do if they or a loved one accidentally threw out prepaid debit cards they didn’t realize contained stimulus payments from the federal government."
I almost did. They come in an unmarked envelope. Most junk comes with something more breathless (FREE STEAK DINNER!), and I felt the card in it, so I thought maybe I had gotten a replacement credit card.
Nearly $258 Billion In Stimulus Checks Paid With Most Going To California (Find Out How Your State Fared Here) - Kelly Phillips Erb, Forbes. "Utah taxpayers received the most money per check ($1,938), followed by Idaho ($1,872), South Dakota ($1,821), Nebraska ($1,815), and Wyoming ($1,806)."
Donor Reporting Rules Eased for Some Tax-Exempt Groups - Fred Stokeld, Tax Notes ($). "The final rules (T.D. 9898), released May 26, remove the regulatory requirement that exempt organizations other than section 501(c)(3) entities and section 527 political groups report to the IRS the names and addresses of their contributors of $5,000 or more."
Related: Donor Reporting No Longer Required for Non-501(c)(3) Organizations - Deb Nelson, Eide Bailly.
HSA contributions offer tax savings, but add to filing time - Kay Bell, Don't Mess With Taxes. "Yes, an HDHP and HSA is a bit of a filing pain, including adding Form 8889 to your annual tax tasks. But considering the ever-increasing costs of health care, it could be just the medical and tax prescription you need."Related: IRS Issues Health Savings Account (HSA) limits for 2021
Telework Taxation Uncertainties Remain as States Begin to Reopen - Paul Jones, Tax Notes ($):
“We’ve only seen guidance from about 10 or so states,” said Pilar Mata of the Tax Executives Institute. “What taxpayers need is certainty if they’re required to do withholding, or if their employees create nexus.”
Because of the pandemic, employees who live in one state and normally work in another have been working out of their home states, and “you might also have someone who goes to live at home with family in a different state, even across the country,” according to Jared Walczak of the Tax Foundation... Walczak noted that a single employee can establish nexus in a new state.
Iowa has provided the following guidance in its COVID-19 FAQ:
...while Iowa’s state of emergency in response to COVID-19, or similar declared state of emergency in the state where the worker normally worked prior to the COVID-19 pandemic, remains in effect, the Department will not consider the presence of one or more employees working remotely from within Iowa solely due to the COVID-19 pandemic, by itself, sufficient business activity within the state to establish Iowa corporate income tax nexus. Nor does the Department consider such presence by non-sales employees due to the pandemic sufficient, by itself, to cause a corporation to lose the protections of Public Law 86-272.
So How Long Does It Take to Read the Internal Revenue Code? - Jim Maule, Mauled Again. "The folks at TaxAct offer a free Tax Code sleep track which they have named Tax Code Coma."
I once put a crying infant niece to sleep explaining Sec. 338(h)(10) to her, so it definitely works -- as anybody who has been to one of my CPE presentations will understand.
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.