May 19 Tax Alert: Business Aid and Tax Provisions in Pending HEROES Act
On May 15, the House passed H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act providing over $3 trillion to federal agencies, state and local governments, small businesses, and individuals.
It does not appear that the bill will pass in the Senate and the President has said he will veto it.
Key business aid and tax provisions of the bill are:
Paycheck Protection Program (PPP)
The bill would:
- Extend the PPP authorization period to December 31 from June 30. The program could expire sooner if its first-come, first-served funds are exhausted.
- Extend the forgiveness period to cover costs incurred over 24 weeks or through December 31, whichever comes first.
- Bar the SBA from limiting loan forgiveness for expenses other than payroll and expand forgivable expenditures to include payments on refinanced disaster loans and interest payments on additional types of debt.
- Maintain forgiveness amounts for businesses that were unable to rehire employees or resume business levels as of February 15 or find similarly qualified workers by the end of the year.
- Allow companies to deduct the payroll, rent and other costs that the PPP loans covered. The IRS had ruled that those expenses are not deductible if the loan is forgiven.
The bill provides for an additional round of stimulus payments which could be as much as $1,200 per individual plus an additional $1,200 per dependent for up to 3 dependents (i.e. per-family total of $6,000). It would also make full-time students younger than 24 years of age and adult dependents eligible for the $500 per child payment.
State and Local Tax Deduction
The bill suspends the $10,000 cap on the state and local income tax deduction for 2020 and 2021.
Employee Retention Credit
Enhancements to the Employee Retention Credit have also been proposed. The bill increases the Employee Retention Credit from $5,000 per qualifying employee for the year to $12,000 per qualifying employee for the quarter by increasing the percentage of qualified wages from 50% to 80%, and increasing the wage limit per employee from $10,000 for the year to $15,000 per quarter (limited to $45,000 for the calendar year).
The bill scales back the net operating loss relief provided in the CARES Act. It repeals the CARES Act’s excess business losses provision, limits operating loss carrybacks permitted by the CARES Act so that losses arising in 2018, 2019 and 2020 cannot be carried back prior to 2018, and also disallows net operating losses (NOL) carrybacks for companies that do not meet certain requirements for executive compensation, dividends, and stock buybacks.
Modifications and increases to Earned Income Tax Credit, Child Tax Credit, Dependent Care have also been proposed in the bill.
Sax will continue to update you as further details are made available. Reach out to your Sax advisor or email [email protected] with questions. For more and on-going information relative to your state and business, visit Sax’s COVID-19 Resource Center.