CARES Act: Tax Credits and Relief for Florida Businesses
Explore this section:
- Employee Retention Credit for Employers Of All Sizes
- Delay Of Payment of Employer Payroll Taxes
- Tax Modifications Applicable to Businesses
- Net Operating Losses
- Modification of Limitation on Losses for Taxpayers Other Than Corporations
- Modification of Credit for Prior Year Minimum Tax Liability of Corporations
- Modifications of Limitation on Business Interest
Employee Retention Credit for Employers of All Sizes Subject to Closure Due to COVID-19
The CARES Act grants eligible employers a credit against employment taxes equal to 50 percent of qualified wages paid to employees who are not working due to the employer’s full or partial cessation of business or a significant decline in gross receipts. The credit can be claimed on a quarterly basis, but the amount of wages, including health benefits, for which the credit can be claimed, is limited to $10,000 in the aggregate, per employee, for all calendar quarters. The provision contains several requirements defining qualified wages, qualified employees, and qualified employers. The credit applies to wages paid after March 12, 2020, and before January 1, 2021. The following are importation details regarding the tax credit:
- A partial cessation means the business stops operating dues to orders from a government authority limiting commerce, travel, or group meetings due to COVID-19.
- A significant decline in gross receipts means the gross receipts for the calendar quarter are less than 50% of the gross receipts for the same calendar quarter in the prior years.
- The credit is refundable under certain circumstances.
- An employer that receives small business interruption loan under the CARES Act may not claim the employee retention credit.
Delay of Payment of Employer Payroll Taxes
The CARES Act defers the payment of payroll taxes. Payroll taxes due from the period beginning on the date the CARES Act is signed into law and ending on December 31, 2020, are deferred. The entirety of payroll taxes incurred by employers, and 50 percent of payroll taxes incurred by self-employed persons qualify for the deferral. Half of the deferred payroll taxes are due on December 31, 2021, with the remainder due on December 31, 2022.
The purpose of this provision is to free up business cash flow and incentivize the retention of employees, and applies only to the employer’s share of employment taxes. The share of employment taxes withheld from employee compensation must be collected and remitted. The deferral does not apply if a taxpayer has had a business interruption loan forgiven.
Tax Modifications Applicable to Businesses
Net Operating Losses
The CARES Act allows for a five-year carryback of net operating losses (NOLs) arising in 2018, 2019, or 2020 by a business. Businesses will be able to amend or modify tax returns for tax years dating back to 2013 in order to take advantage of the carryback.
The 2017 tax reform act provided that NOL carryovers could be used to offset a maximum of 80% of a taxpayer’s taxable income. The CARES Act would lift that restriction for 2020 and reinstate it (with modifications) for tax years beginning after December 31, 2020.
Modification of Limitation on Losses for Taxpayers Other Than Corporations
The CARES Act modifies loss limitation rules applicable to sole proprietors and pass-through entities to allow them to take advantage of the NOL carryback.
The purpose of this provision is to free up business cash flow and incentivize the retention of employees, and applies only to the employer’s share of employment taxes. The share of employment taxes withheld from employee compensation must be collected and remitted. The deferral does not apply if a taxpayer has had a business interruption loan forgiven.
Modification of Credit for Prior Year Minimum Tax Liability of Corporations
The 2017 tax reform act eliminated the alternative minimum tax for corporations for tax years after 2017 but allowed corporations to claim a refundable portion of any unused minimum tax credits through 2021. The amount of the refundable credit is limited to 50 percent of any excess minimum tax in 2018 through 2020, before being fully refundable in 2021. The CARES Act accelerates the year for which a fully refundable credit can be claimed to 2019 and allows corporations to elect to claim the fully refundable minimum tax credits in 2018.
Modifications of Limitation on Business Interest
The 2017 tax reform act limited the amount of allowable deductions for business interest (regardless of the type of entity) for tax years beginning after 2017. The limitation is generally the amount of business interest income for the year plus 30 percent of the taxpayer’s adjusted taxable income for the year. The limitation does not apply to taxpayers with average annual gross receipts for the prior three year below an inflation-adjusted amount. For 2020, this amount is $26 million or less
The provisions provided on this webpage are not legal advice. For specific legal advice related to the CARES Act, contact Jonathan Osborne.
