US tax developments relating to COVID-19

Posted -

Current as of April 9, 2020

In March, President Trump signed a $2.2 trillion coronavirus rescue package.  Our March 30 post outlined the highlights of that package as they apply to companies doing business in the US as well as US citizens resident in Canada.

On April 9, 2020, the Department of Treasury and the Internal Revenue Service announced additional measures to assist businesses and individuals. This post highlights key points of the most recent pronouncements.

Tax Deadlines

As discussed in our previous posts,  all US federal income extensions and tax returns otherwise due on April 15, 2020 are now automatically extended until July 15, 2020.  The July 15, 2020 deadline now also applies to all tax returns with an original due date of May 15, 2020 or June 15, 2020, as well as all installment payments that are due May 15, 2020 or June 15, 2020.  The June 15 due date that is provided to US citizens abroad is included in the July extended deadline.

A discussion of corporate state tax due dates follows at the end of this post.

Net Operating Losses

As discussed in our previous post, the 2017 Tax Act eliminated the ability for corporations to carry back Net Operating Losses (“NOLs”).  Under the new law, a corporation can carry back losses from any tax year beginning after December 31, 2017 and ending before January 1, 2021.  Losses arising in those taxation years may be carried back five years.  As well, the 80% limitation on NOL carryovers has been eliminated for said years.

The IRS has now issued Revenue Procedure 2020-24 (PDF)  to provide guidance to taxpayers with net operating losses that are carried back under the new law by providing procedures for:

  • waiving the carryback period in the case of a net operating loss arising in a taxable year beginning after Dec. 31, 2017, and before Jan. 1, 2021,
  • disregarding certain amounts of foreign income subject to transition tax that would normally have been included as income during the five-year carryback period, and
  • waiving a carryback period, reducing a carryback period, or revoking an election to waive a carryback period for a taxable year that began before Jan. 1, 2018, and ended after Dec. 31, 2017.

The IRS has also granted a six-month extension of time to apply for a quick refund from a loss carryback claim for a net operating loss that arose in any taxable year that began during calendar year 2018 and that ended on or before June 30, 2019.

Amending Partnership Returns

The IRS is now permitting partnerships that are subject to the Centralized Audit Regime to file amended partnership returns using a Form 1065, U.S. Return of Partnership Income in order to benefit from the provision in the CARES Act. Such partnerships that have already filed their 2019 partnership returns would not ordinarily be permitted to file amended returns. Absent the ability to file amended returns, they would be required to rely on Administrative Adjustment Requests in order to avail themselves of the other provisions in the CARES Act.

State Corporate Extensions

Most states have now also extended corporate deadlines and payments.  As of today, the following is a summary of where states that impose a corporate income tax stand[1]:

No Change to Original Due Date (unless otherwise indicated April 15):  Arkansas, Florida (4/30), Minnesota, Mississippi (5/15).

In-between Due Dates:  Connecticut (6/15), Idaho (6/15), Montana (5/15), and New Hampshire (6/15).

July 15th or later– Alabama, Alaska(8/14), Arizona, California, Colorado, Delaware, DC, Georgia, Hawaii (7/20), Illinois, Indiana, Iowa(7/31), Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan (7/31), Minnesota (payment due date is not extended), Missouri, Nebraska, New Jersey, New Mexico, New York State, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia (payment due date is 6/1), West Virginia and Wisconsin.

Individuals – Economic Impact Payment

U.S. residents will receive the Economic Impact Payment of up to $1,200 for Individual taxpayers, up to $2,400 for married filing jointly, and an additional $500 per qualifying child. No additional action is required for taxpayers who have filed a tax return for 2018 or 2019. The IRS has provided a quick and easy way to check the status and other relevant information pertaining to the Economic Impact Payment, click here.

If you have any questions on how COVID-19 US rescue package may affect you or your business, please reach out to one of the following members of the Zeifmans US Tax Team today:

Stanley Abrahamsa@zeifmans.ca | 416.256.4000 ext. 356

Lorynne Schreiberls@zeifmans.ca | 416.256.4000 ext. 387

Chaim Rosnercyr@zeifmans.ca | 416.256.4000 ext. 315

Kobi Rosenkr@zeifmans.ca | 416.256.4000 ext. 296

Suggested supplemental insights

Treasury Department and IRS announce extension for US federal income tax filing

[1] AICPA, “State Tax Filing Guidance for Coronavirus Pandemic” https://www.aicpa.org/content/dam/aicpa/advocacy/tax/downloadabledocuments/coronavirus-state-filing-relief.pdf