What to know about tax changes and other actions from the Families First Coronavirus Response Act, the Treasury, and the SBA
As funding and application guidelines for the SBA disaster relief grants and loans program change, visit our Coronavirus Resource Center for our latest information and guidance. You can also contact our national SBA loan task force or your CohnReznick engagement team for assistance with filing for these loans and providing required financial documentation.
On March 18, the president signed into law the Families First Coronavirus Response Act (the Act) to provide supplemental appropriations to support Americans during the COVID-19 outbreak.
The Act provides paid leave to those affected by COVID-19, as well as tax credits to certain employers, food and nutritional assistance, expanded unemployment insurance, and increased funding to health and nutrition programs, and requires certain insurers to fully cover testing and other services related to the virus.
In addition to the above legislation, other federal agencies have taken steps toward providing relief in the wake of the coronavirus outbreak. The Small Business Administration (SBA) has committed to providing disaster assistance loans of up to $2 million to eligible small businesses, and the IRS has deferred tax payments for individuals and corporations for up to 90 days, though taxpayers must still file their federal income tax returns timely (i.e., personal income tax returns are still due April 15, 2020).
Read on for more information about each of these changes.
IRS Notice 2020-17, released March 18, provides that federal income tax payments of up to $1 million for individuals and $10 million for corporations, previously due April 15, 2020, can be deferred for 90 days, to July 15, 2020. The deferral includes self-employment taxes for the 2019 tax year and 2020 estimated taxes due on April 15, 2020. Taxpayers that have tax liabilities in excess of these amounts must still pay the amount of federal income tax owed that is over those thresholds. Tax payments other than those noted above are required to be timely paid (including second-quarter estimated tax payments, which, for calendar-year taxpayers, are due on June 15, 2020).
Though payment may be deferred, taxpayers must still file their federal income tax returns or extensions by April 15, 2020.
“Americans should file their tax returns by April 15 because many will receive a refund,” Treasury Secretary Steven T. Mnuchin said in a Treasury news release. “Those filing will be able to take advantage of their refunds sooner.”
Individual states will set their own filing and payment requirements, although many states have indicated that they may follow the federal rules. Stay tuned, as we expect a number of states to publish guidance as events unfold.
Other IRS updates
Pursuant to IRS Notice 2020-15, high-deductible health plans (HDHPs) can cover coronavirus costs, including testing and treatment.
The IRS established a coronavirus web page focused on helping taxpayers affected by COVID-19. It will be updated as new information is available.
PROVISIONS INCLUDED IN THE ACT
The following measures contained in the Families First Coronavirus Response Act will be in effect for the period commencing 15 days after its enactment (April 2, 2020) through Dec. 31, 2020.
Coronavirus emergency leave
Government entities and private-sector employers with fewer than 500 workers must provide up to 12 weeks of job-protected leave for employees who must quarantine because of exposure to or symptoms of COVID-19, must care for a family member who must quarantine, or must care for a child under 18 whose school is closed because of the coronavirus.
Emergency paid sick leave
Government entities and private-sector employers with fewer than 500 employees must provide employees with paid sick leave (the greater of their normal wage or the local minimum wage) to those who must self-quarantine or otherwise care for their own coronavirus-related issues. Paid sick leave is also provided for those caring for family members who have been diagnosed or are in quarantine, and for those caring for children under age 18 whose school has closed because of the virus. Those caring for family members would only receive two-thirds of their regular wages. Sick leave and family and medical leave under the act will be excluded from employer FICA tax.
Full-time employees will receive 80 hours of sick leave; part-time employees will receive the equivalent of normal work hours in a two-week period.
Employers with fewer than 50 employees may, in cases where the leave requirement would jeopardize the viability of the business, be exempt from providing paid sick leave by the Secretary of Labor.
Tax credits for employers and the self-employed
The Act provides employers tax credits against the employer-provided portion of FICA for those covering paid time off for employees, up to $511 per day paid to employees caring for themselves or $200 per day for those caring for family members or children home from school. The credits are refundable to the extent that they exceed the employer’s payroll tax. The credit will be in effect through Dec. 31, 2020. Similar rules apply to self-employed taxpayers.
State Medicaid funding
The Act provides eligible states a 6.2 percentage point increase in their federal medical assistance percentages (FMAP). To be eligible, states must meet certain criteria including providing coverage of coronavirus testing without cost-sharing and not imposing additional premiums or strict eligibility standards.
Insurers are required to cover coronavirus tests and related services (provider visits for testing, etc.) without cost-sharing or prior authorization. Medicaid, Medicare, TRICARE, veterans’ health programs, the Indian Health Service, and coverage provided to federal employees will also be prohibited from cost-sharing. Although unrelated to the legislation, Vice President Mike Pence has stated that major non-government insurance companies have vowed to waive co-pays as well.
The Act grants liability protection by the Human Services Department for certain emergency response products, like face masks.
Nutritional assistance programs
The Act appropriates funds for various food assistance and supplemental nutrition programs (including WIC, TEFAP and SNAP). Households with children in schools closed because of the coronavirus may also receive additional aid for children eligible for free or reduced-price school meals.
Meal program waivers
To ensure that meals are provided, the USDA is permitted to waive certain requirements for nutritional content and rules requiring that food be provided in group settings. Additionally, the USDA can waive eligibility and certification requirements nationwide for various government food and nutritional programs. The USDA has already permitted numerous states to allow school systems to serve meals during prolonged coronavirus-related closures.
The Act appropriates funds for states to pay unemployment benefits. States may receive funding in proportion to their share of federal unemployment taxes paid. Part of the funding would be received after states meet certain certification requirements; receipt of the remainder would be contingent on an increase in unemployment claims, taking into consideration the effects of COVID-19.
SBA LOANS TO SMALL BUSINESSES IMPACTED BY COVID-19
The SBA will work directly with states and U.S. territories to provide targeted, low-interest disaster recovery loans to small businesses impacted by COVID-19. These “Economic Injury Disaster Loans” will offer up to $2 million in assistance to help bolster small businesses. The loans may be used to pay fixed debts, payroll, accounts payable, and other bills related to the impact of COVID-19. Small businesses without credit available elsewhere will be charged interest at 3.75% (2.75% for nonprofits). Businesses with credit elsewhere are not eligible for the loan. For additional details on the areas eligible for these SBA loans, along with application procedures, visit SBA’s COVID-19 web page.
WHAT DOES COHNREZNICK THINK?
COVID-19 poses an unprecedented challenge to many taxpayers. The Act, which we believe will be the first of many actions taken by the federal government, takes steps to curtail the economic impact of the virus in various ways, including mandating paid time off, providing employers tax credits, appropriating funds for food and nutritional programs, and broadening insurance coverage. The SBA and IRS have also taken steps of their own, the SBA by offering loans to eligible small businesses and the IRS by extending tax payment deadlines. Please consult your tax advisor for guidance in understanding how these changes may affect you or your business.
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
Webinar: Bolster Finance and Operations Against Coronavirus Disruption
On-Demand Webinar: Mitigating Coronavirus Disruption
Coronavirus Resource Center
InsightTreasury releases temporary regulations regarding waiving NOL carrybacks for certain consolidated groupsChris Wray, Cheryl JosephRead how consolidated groups can handle consolidated net operating losses (CNOLs) under the CARES Act with two additional split-waiver elections.
InsightNew IRS guidance on CARES Act waiver of 2020 required minimum distributions includes rollover deadline extensionDana FriedNotice 2020-51 also has a sample plan amendment for letting certain retirement plan participants choose whether to receive a 2020 required minimum distribution.
InsightIRS issues proposed regulations on non-deductibility of certain transportation fringe, transportation, and commuting expenses, including employer-provided employee parkingDana FriedThe IRS has updated guidelines related to “qualified transportation fringe” (QTF) expenses, including employer-provided employee parking expenses. Read more.