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The Check May Soon Be In the Mail: McConnell Introduces Tax Relief Legislation

March 20, 2020

By: Amanda Wilson & Ferran Arimon

On Thursday, Senate Majority Leader Mitch McConnell introduced tax relief legislation, which includes among other benefits, rebate checks to individuals and families. The Coronavirus Aid Relief and Economic Security Act would authorize the Internal Revenue Service to send rebate checks up to $1,200 for individuals and $2,400 for married couples, with an additional $500 per child. The payments would be reduced for individuals with incomes above $75,000 ($150,000 married couples), and would be eliminated for those individuals with incomes in excess of $99,000 ($198,000 married couples).

In addition, the Internal Revenue Service previously announced a 90-day extension to the normal April 15 deadline for paying incomes taxes for many individuals and corporations (discussed here). The legislation goes further to delay the actual tax filing deadline until July 15, and allows individuals and corporations to postpone paying their estimated tax obligations until October 15. The legislation also allows employers and self-employed workers to pay their 6.2% employer’s share of payroll taxes over the next two years. Employers can elect to pay half of their obligation by December 31, 2021, and the other half by December 31, 2022.

Other tax benefits found in the bill are:

  • Companies can immediately write off expenses for physical improvements to real property rather than depreciating over 39 years. This would fix a prior glitch in the Internal Revenue Code and is expected to be a significant benefit to the hospitality industry.
  • Businesses with net operating losses from 2018, 2019, and 2020 can carry back those losses up to 5 years, and the taxable income limitation is temporarily removed (i.e., net operating losses can fully offset income).
  • The 30% interest expense limitation introduced by the Tax Cuts and Jobs Act will be increased to 50%. This means businesses would be able to deduct interest expense up to 50% of their adjusted taxable income for 2019 and 2020.
  • The 10% early withdrawal penalty for disbursements out of qualifying retirement savings will be waived if individuals are responding to coronavirus-related circumstances. The income from the distribution would be recognized over three years rather than in the year of the disbursement, and the withdrawn funds can be recontributed within three years without being subject to the annual contribution caps.
  • To encourage charitable gifts, the 50% adjusted gross income limitation on charitable deductions for individuals is suspended, and the 10% limitation for corporations is increased to 25%.

This legislation has not yet been enacted, and has met with criticism by some Democrats. We will continue to monitor this situation and will update you on the progress of this or other tax relief legislation.

Be sure to visit our Taxing Times blog, as well as our Coronavirus (COVID-19) Response Team page, to keep up to date on the latest news.

This article is informational only. You should consult an attorney before acting or failing to act. The law may change rapidly and no warranty is given. LOWNDES DISCLAIMS ALL IMPLIED WARRANTIES AND WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. ALL ARTICLES ARE PROVIDED AS IS AND WITH ALL FAULTS. Consult a Lowndes attorney if you wish to establish an attorney/client relationship.

A member of the firm’s tax practice, Amanda Wilson concentrates on federal tax planning and structuring. She represents clients in a wide variety of complex federal tax matters with a particular emphasis on pass-through entities such as partnerships, S corporations and real estate investment trusts.

Specifically, Amanda focuses on advising clients on the formation, operation, acquisition and restructuring of such pass-through entities. In addition, she regularly advises clients on the structuring and operation of private equity funds, real estate funds and timber funds. Amanda is the author of the Bloomberg Tax Management Portfolio 718-3rd Edition, Partnerships- Disposition of Partnership Interests or Partnership Business; Partnership Termination.

Amanda regularly works in structuring deals to benefit from tax advantaged structures, including like-kind exchanges, new market tax credits, low income housing tax credits, qualified opportunity zones, and investment tax credits available for solar and other renewable energy. Amanda also has extensive experience in corporate planning and international tax matters, as well as federal tax controversy. Her practice before the Internal Revenue Service (IRS) includes providing advice on audits and appeals, drafting protests and ruling requests, and negotiating settlements.

Prior to joining the firm, Amanda worked for Sutherland Asbill & Brennan LLP (now Eversheds Sutherland), an Am Law 100 firm in the Atlanta office, where she was part of Sutherland’s Tax Practice Group. Amanda has also served as an adjunct professor at Emory University School of Law where she taught Partnership Taxation.

Amanda regularly contributes to the firm’s Taxing Times blog and is a regular panelist on tax webinars hosted by Strafford Publications.

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