President signs bill that provides additional small business loan monies

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On April 24, President Trump signed the Paycheck Protection Program and Health Care Enhancement Act, which has been referred to as COVID 3.5. The Act includes additional money for the small-business loan program, as well as more funding for hospitals and testing. There are no tax provisions in the Act.

IRS Extends Additional Filing and Payment Deadlines

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On April 9, 2020, the Internal Revenue Service issued Notice 2020-23 which extends more tax deadlines to cover individuals, estates, corporations and others. This extension includes a variety of tax form filings and payment obligations that are due between April 1, 2020 and July 15, 2020, including estimated tax payments due June 15 and the deadline to claim refunds from 2016. The Notice also suspends associated interest, additions to tax, and penalties for late filing or late payment until July 15, 2020.

  • Individual income tax payments and return filings on Form 1040
  • Calendar year or fiscal year corporate income tax payments and return filings on Form 1120, 1120-H, 1120-S
  • Calendar year or fiscal year partnership return filings on Form 1065
  • Estate and trust income tax payments and return filings on Form 1041
  • Estate and generation-skipping transfer tax payments and return filings on Form 706
  • Gift and generation-skipping transfer tax payments and return filings on Form 709
  • Exempt organization business income tax and other payments and return filings on Form 990-T Exempt Organization Business Income Tax Return
  • Excise tax payments on investment income and return filings on Form 990-PF, Return of Private Foundation
  • Quarterly estimated income tax payments calculated on or submitted with Form 990-W, Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations, 1040-ES,  1041-ES, Estimated Income Tax for Estates and Trusts, and 1120-W, Estimated Tax for Corporations.

Previously, the IRS issued the following notices regarding the extension of various filing and payment deadlines:

  • On March 18, 2020, IRS issued Notice 2020-17, which postponed the due date for certain Federal income tax payments from April 15, 2020 until July 15, 2020 due to the novel coronavirus (COVID-19) emergency.
  • On March 20, 2020, the IRS issued Notice 2020-18, which also postponed until July 15, 2020 the filing date for 2019 federal income tax returns and 2020 federal estimated income tax payments that would otherwise be due on April 15, 2020.
  • On March 27, 2020, the IRS issued Notice 2020-20, which extended recent income tax filing and payment relief to those taxpayers who have gift tax or GST tax obligations otherwise due by April 15 to July 15, 2020. This Notice also announced that this 3-month period would be disregarded for purposes of calculating interest and penalties.

Please contact an ARM tax professional with any questions or to discuss in further detail.

Improvements to Interior Parts of Nonresidential Buildings

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This article is to alert you to a beneficial change in the tax rules for many improvements to interior parts of nonresidential buildings (‘‘qualified improvement property’’ or ‘‘QIP’’). You may recall that following the 2017 Tax Cuts and Jobs Act (‘‘TCJA’’), any QIP placed in service after Dec. 31, 2017 was not considered to be eligible for 100% bonus depreciation. Therefore, the cost of QIP had to be deducted over a 39-year period instead of entirely in the year the QIP was placed in service. That result was due to an inadvertent drafting error by Congress.

The 2020 Coronavirus Aid, Relief, and Economic Security Act (‘‘CARES Act’’) was signed into law on Mar. 27, 2020. The CARES Act corrects the TCJA drafting error for QIP. Thus, most businesses are now allowed to claim 100% bonus depreciation for QIP, as long as certain other requirements are met. What also is helpful is that the correction is retroactive, and it reaches back to apply to any QIP placed in service after Dec. 31, 2017. Unfortunately, improvements related to the enlargement of a building, any elevator or escalator, or the internal structural framework continue to be outside of the definition of QIP.

In the current business climate, you may not be in a position to undertake new capital expenditures, even if needed as a practical matter and even if the substitution of 100% bonus depreciation for a 39-year depreciation period significantly lowers the true cost of QIP. But it’s good to know that when you are ready to undertake qualifying improvements, the generous subsidy of 100% bonus depreciation will be available.

And, the retroactive effect of the CARES Act presents favorable opportunities for qualifying expenditures you’ve already made. We can revisit and add to documentation that you’ve already provided me to identify QIP expenditures.

For not-yet-filed returns, we can simply reflect the favorable treatment for QIP on the return.

If you’ve filed returns that didn’t claim 100% bonus depreciation for what may prove to be QIP, we can investigate based on available documentation as discussed above. If there is QIP that was in fact eligible for 100% bonus depreciation, note that IRS has, for past retroactive favorable depreciation changes, provided taxpayers with detailed guidance for how the benefit is claimed. That is, IRS clarified how much flexibility taxpayers have in choosing between a one-time downward adjustment to income on their current returns or an amendment to the return for the year the QIP was placed in service. I will monitor what your options are as anticipated IRS guidance for the QIP correction is released.

If you have any questions about the news shared above, or about how you can take advantage of it, please do not hesitate to contact us.