Section 2303: Modifications for Net Operating Losses (NOLs)

Temporary changes to the NOL carryback rules allow business to carryback certain losses. Under the TCJA, NOLs are subject to a taxable-income limitation, and they cannot be carried back to reduce income in a prior tax year. The relaxed rules provide that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. The provision also temporarily removes the 80% taxable income limitation to allow an NOL to fully offset income. These changes will allow companies to utilize losses and amend prior year returns.

Net Operating Loss Timeline

Section 2304: Modifications to Excess Business Loss Rules

Pass-through businesses and sole proprietorships can deduct excess business losses arising in 2018, 2019, and 2020. Previously, the deduction of excess business losses by noncorporate taxpayers for tax years beginning after Dec. 31, 2017 and ending before Jan. 1, 2026 were disallowed.

Section 2305: Modification of Minimum Tax Credit for Corporations

The corporate alternative minimum tax (AMT) was repealed as part of the TCJA, but corporate AMT credits were made available as refundable credits over several years, ending in 2021. This modification accelerates the ability of companies to recover those AMT credits, permitting companies to claim a refund now. This Act allows corporations to claim 100% of AMT credits in 2019.

Section 2306: Deductibility of Business Interest

The limitation on the deduction for business interest under §163(j) is temporarily and retroactively increased from 30% to 50% of taxable income (with adjustments) for 2019 and 2020.

Under a special rule for partnerships, the increase in the limitation will only apply in 2020. For partners that don't elect out, any excess business interest of the partnership for any tax year beginning in 2019 that is allocated to the partner will be treated as follows:

• 50% of the excess business interest will be treated as paid or accrued by the partner in the partner's first tax year beginning in 2020 and isn't subject to any limits in 2020.

• 50% of the excess business interest will be subject to the limitations §163(j)(4)(B)(ii) in the same manner as any other excess business interest that is allocated. Meaning it will remain suspended until the partnership allocates excess taxable income or excess interest income to the partner.

Taxpayers may elect out of the increase, for any tax year, in the time and manner IRS prescribes. Once made, the election can be revoked only with IRS consent. For partnerships, the election must be made by the partnership and can be made only for tax years beginning in 2020.

In addition, taxpayers can elect to calculate the interest limitation for their tax year beginning in 2020 using the adjusted taxable income for their last tax year beginning in 2019 as the relevant base. For partnerships, this election must be made by the partnership.

This provision applies to tax years beginning after Dec. 31, 2018.

Section 2307: Bonus Depreciation for Qualified Improvement Property

Finally, a technical correction to the TCJA for qualified improvement property. Under the TCJA, the 100% bonus depreciation rules apply to all MACRS property with a recovery period of 20 years or less. Before TCJA, qualified improvement property was depreciated as 39-year residential real property, unless it separately qualified as 15-year qualified leasehold improvement property, 15-year retail improvement property, or 15-year restaurant property. Congress eliminated the three separate categories of 15-year improvement properties with the intention of making all qualified improvement property 15-year property. However, it failed to do so, and as a result, qualified improvement property is depreciated as 39-year property and not qualified for bonus depreciation.

The CARES Act corrects this error by defining qualified improvement property as 15-year property, thus allowing 100% of improvements to be deducted in the year incurred. The change is made as if it was originally included in the TCJA and, thus, is effective for property acquired and placed in service after Sept. 27, 2017.

Self Employed Income Tax Credit - 2020 Returns

The FFCRA provides for sick leave and family leave credit for self employed on the 2020 tax returns.

1. Credit against Form 1040 SE tax - Will reduce estimated tax payments

2. Eligibility similar to that of employees

3. Credit for 100% of daily SE income for self care ($511/day cap)

4. 66.7% if caring for family member or child with school or daycare closed ($200/day cap)

5. 10 day limit for sick leave, 50 day limit for family leave

6. Based on period beginning 04/01/20 and ending 12/31/20

7. Treasury must provide guidance as to documentation self-employed must submit to claim credit

Filing Deadlines Extended

Filing Deadlines NOT Extended

Other Deadlines Extended (Or Not)

Small Business Debt Relief Program

This program will provide immediate relief to small businesses with non-disaster SBA loans, in particular 7(a), 504, and microloans. Under it, SBA will cover all loan payments on these SBA loans, including principal, interest, and fees, for six months. This relief will also be available to new borrowers who take out loans within six months of the President signing the bill into law.

Under this program:

• The SBA will also pay the principal and interest of new 7(a) loans issued prior to September 27, 2020.

• The SBA will pay the principal and interest of current 7(a) loans for a period of six months.

Which SBA loans are eligible for debt relief under this program?

7(a) loans not made under the Paycheck Protection Program (PPP), 504 loans, and microloans. Disaster loans are not eligible.

How does debt relief under this program work with a PPP loan?

Borrowers may separately apply for and take out a PPP loan, but debt relief under this program will not apply to a PPP loan.

How do I know if I’m eligible for a 7(a), 504, or microloan?

In general, businesses must meet size standards, be based in the U.S., be able to repay, and have a sound business purpose. To check whether your business is considered small, you will need your business’s 6-digit North American Industry Classification System (NAICS) code and 3-year average annual revenue.

What is a 7(a) loan and how do I apply?

7(a) loans are an affordable loan product of up to $5 million for borrowers who lack credit elsewhere and need access to versatile financing, providing short-term or long-term working capital and to purchase an existing business, refinance current business debt, or purchase furniture, fixtures and supplies. In the program, banks share a portion of the risk of the loan with SBA. There are many different types of 7(a) loans, you can visit this site to find the one that’s best for you. You apply for a 7(a) loan with a bank or a mission-based lender. SBA has a free referral service tool called Lender Match to help find a lender near you.

What is a 504 loan and how do I apply?

The 504 Loan Program provides loans of up to $5.5 million to approved small businesses with longterm, fixed-rate financing used to acquire fixed assets for expansion or modernization. It is a good option if you need to purchase real estate, buildings, and machinery. You apply through a Certified Development Company, which is a nonprofit corporation that promotes economic development. SBA has a free referral service tool called Lender Match to help find a lender near you.

What is a microloan and how do I apply?

The Microloan Program provides loans up to $50,000 to help small businesses and certain not-for profit childcare centers to start up and expand. The average microloan is about $13,000. These loans are delivered through mission-based lenders who are also able to provide business counseling. SBA has a free referral service tool called Lender Match to help find a microlender near you.

I am unfamiliar with SBA loans, can anyone help me apply?

Yes, SBA resource partners are available to help guide you through the loan application process. You can find your nearest Small Business Development Center (SBDC) or Women’s Business Center here.