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Title II - Assistance for American Workers, Families and Businesses

Overview

Title II - Assistance for American Workers, Families and Businesses


Subtitle A - Unemployment Insurance Provisions

Pandemic Unemployment Assistance § 2102

Subtitle B - Rebates and Other Individual Provisions

Recovery Rebate/Credit § 2201

Hardship Withdrawals § 2202(a)

Plan Loans § 2202(b)

Plan Amendments § 2202(c)

Temporary Waiver of Required Minimum Distribution Rules for Certain Retirement Plans and Accounts § 2203

$300 Above-the-Line Charitable Deduction § 2204

Modification of Limitations of Individual Cash Charitable Contributions in 2020 § 2205

Increase in Ability to Claim Charitable Contribution Deduction for Food Inventory § 2205

Employer Education Payments Temporarily Excluded from Income § 2206

Employer Retention Credit for Employers § 2301

Delay of Employer Payroll Tax Payments § 2302

Temporary Repeal of Net Operating Loss (“NOL”) Limitations § 2303

Modification of Limitation on Losses of Noncorporate Taxpayers § 2304

Acceleration of Corporate Minimum Tax Credit § 2305

Interest Expense Deductibility Temporarily Increased § 2306

Bonus Depreciation for Qualified Improvement Property § 2307


Subtitle A - Unemployment Insurance Provisions

Pandemic Unemployment Assistance § 2102

As employers are making difficult decisions with their employees because of the COVID-19 pandemic and associated instructions and orders from various state and local authorities, the CARES Act expands unemployment assistance for individuals affected by the pandemic.

Under the CARES Act, a “covered individual” who has exhausted all state related unemployment benefits and is able to work, but cannot because of COVID-19, is eligible for up to 39 weeks of unemployment benefits. This is not available to individuals who can telework or who are receiving other paid leave benefits. This benefit is extended to self-employed individuals and independent contractors or those with limited work history. A covered individual is defined to include those who:

  • Are diagnosed with or have symptoms of COVID-19

  • Are caring for or have a household member who has been diagnosed with or has symptoms of COVID-19

  • Have a child whose school is closed because of a public health order

  • Are unable to go to work or are quarantined because of a public health order

  • Had to quit or had their job terminated because of COVID-19

In addition to state benefits, states can enter into agreement with the federal government to provide individuals receiving unemployment benefits with an additional $600 per week for up to four months. This amount will not reduce the state benefits an individual may receive.

Further, the CARES Act waives the one week waiting period before individuals become eligible for benefits.

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Subtitle B - Rebates and Other Individual Provisions

Recovery Rebate/Credit § 2201

The CARES Act provides for a direct cash benefit in the amount of $1,200 for eligible individual filers and $2,400 for eligible joint filers, plus an additional $500 for each eligible child. Those amounts are phased out based on the taxpayers’ income. The credit is refundable, and the IRS intends to issue cash payments to eligible taxpayers in the upcoming weeks. The payments will be “tax-free” in that taxpayers who receive the payments will not be required to include the payments in their 2020 taxable income.

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Hardship Withdrawals § 2202(a)

The Act permits a hardship withdrawal by a Qualified Individual of up to $100,000 from a qualified retirement plan or an IRA, if made on or after January 1, 2020, and before December 31, 2020. The withdrawal will be subject to income tax, but the additional 10% tax on early withdrawals will not apply. The distribution will be included in the individual’s taxable income ratably over a three-year period, beginning with the year of the distribution, unless the employee elects to have it all included in income in the year of receipt. The distribution may be repaid to a qualified plan or an IRA as a deemed rollover during the three-year period beginning on the date the distribution was received.

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Plan Loans § 2202(b)

The Act also revises the plan qualification rules governing plan loans for an employee who is a Qualified Individual described above.

  • The current retirement plan loan limits are doubled, to the lesser of $100,000 or 100% of the employee’s vested account balance in the plan, for a loan made to the Qualified Individual during the 180-day period beginning on the date of the enactment of the Act (i.e., by September 23, 2020).
  • The due date for the repayment by a Qualified Individual of any plan loan payment that would otherwise be required to be made during the period beginning on March 27, 2020 (the date of enactment of the Act) and ending on December 31, 2020, is deferred for one year. 

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Plan Amendments § 2202(c)

Plan amendments implementing the favorable hardship distribution and plan loan rules will not need to be adopted until the last day of the first plan year beginning on or after January 1, 2022 (or such later date as may be allowed by the Treasury Department). Governmental plans have an additional two years to be amended.

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Temporary Waiver of Required Minimum Distribution Rules for Certain Retirement Plans and Accounts § 2203

The Act temporarily waives the minimum distribution requirements for defined contribution plans (such as 401(k) plans), Section 457(b) deferred compensation plans maintained by a state or local government (but not a tax-exempt organization), and IRAs. This waiver applies for all required minimum distributions that otherwise would have been required to be made in 2020, including distributions to an individual who attained age 70½ in 2019, that would have needed to be made by April 1, 2020.

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$300 Above-the-Line Charitable Deduction § 2204

For tax years starting in 2020, an individual taxpayer who does not itemize is permitted to claim up to $300 in qualified charitable contributions. “Qualified charitable contributions” are (1) made in cash, (2) otherwise deductible under the Internal Revenue Code of 1986 (3) paid to an eligible charity, and (4) not made to establish a new, or maintain an existing, donor advised fund.

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Modification of Limitations of Individual Cash Charitable Contributions in 2020 § 2205

For cash contributions made to certain charitable organizations (for example, churches, hospitals, and medical research organizations), a taxpayer is generally permitted to claim a deduction up to the taxpayer’s adjusted gross income (“AGI”) for 2020. The taxpayer will be required to make an election for this treatment. To the extent an S corporation or partnership entity makes the contribution, such an election will be made at the owner level (instead of the entity level).

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Modification of Limitations of Corporate Cash Charitable Contributions in 2020 § 2205

For cash contributions made to certain charitable organizations (for example, churches, hospitals, and medical research organizations), a corporate taxpayer is generally permitted to claim a deduction up to 25% of its taxable income for taxable years starting after December 31, 2019.

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Increase in Ability to Claim Charitable Contribution Deduction for Food Inventory § 2205

In the case of donations of food inventory, C corporation donors may claim a deduction up to 25% of their taxable income; and taxpayers other than C corporations may claim deductions up to 25% of their aggregate net income.

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Employer Education Payments Temporarily Excluded from Income § 2206

For certain payments made by a taxpayer’s employer before January 1, 2021, not exceeding $5,250, those payments may be excluded from the taxpayer’s income for 2020. This includes the payment of certain education loans. This exclusion is designed to prevent the taxpayer from claiming a “double benefit” for related amounts, such as an interest deduction for student loan interest under Code Section 221.

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Subtitle C - Business Provisions

Employer Retention Credit for Employers § 2301

The Act provides a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees. In order to be an “eligible employer,” the taxpayer must have had its operations fully or partially suspended by government action, or experienced a greater than 50% reduction in quarterly receipts (as measured on a year-over-year basis). The definition of “wages” depends on whether the employer had 100 or fewer full-time employees, with smaller employers receiving better treatment under this provision. This credit is not available with respect to any employee allowed a Work Opportunity Credit under Code Section 21.

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Delay of Employer Payroll Tax Payments § 2302

The Act permits taxpayers to defer payment of the employer portion of certain payroll taxes through the end of 2020. Those payroll taxes include Social Security taxes. Taxpayers are permitted to defer 50% of the payment to December 31, 2021; and the remaining 50% to December 31, 2022. Given the risks associated with the deferral of payroll taxes, we highly recommend seeking counsel before taking advantage of this provision of the Act.

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Temporary Repeal of Net Operating Loss (“NOL”) Limitations § 2303

The Act temporarily removes limitations on the carryback of NOLs by permitting taxpayers to carryback NOLs up to five years.

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Modification of Limitation on Losses of Noncorporate Taxpayers § 2304

The Act permits noncorporate taxpayers to deduct excess business losses arising in 2018, 2019, or 2020. An “excess business loss” is the excess of (1) the taxpayer’s aggregate deductions from a trade or business over (2) the sum of the taxpayer’s aggregate trade or business gross income/gain plus $250,000.

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Acceleration of Corporate Minimum Tax Credit § 2305

The Act allows corporations to claim 100% of alternative minimum tax credits in 2019 or, by tentative refund claim, 2018.

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Interest Expense Deductibility Temporarily Increased § 2306

For tax years beginning in 2019 and 2020, the Act provides for an increase in the deductibility of interest expense under Section 163(j)(1) from 30% of AGI to 50%. A special rule is provided for partnerships and its partners.

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Bonus Depreciation for Qualified Improvement Property § 2307

The Act provides a technical correction to existing tax law by providing that certain “qualified improvement property” is 15-year property for depreciation purposes and, therefore, eligible for bonus depreciation.

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