TagTax

Partnerships Can File Amended Returns to Cash in on CARES Act Benefits

By: Amanda Wilson

The Coronavirus Aid, Relief, and Economic Security Act (CARES) Act was signed into law by President Trump last month. As we have previously discussed, the CARES Act contains several tax law changes that are designed to allow taxpayers to file amended returns and obtain much needed cash flow in the form of tax refunds (a list of our prior articles on these tax changes can be found here under the heading Tax).

Unfortunately, taxpayers that are taxed as partnerships were facing an issue as a result of the Bipartisan Budget Act of 2015 (BBA), which went into effect for tax years beginning after December 31, 2017. Under the BBA, partnerships could no longer file amended returns for 2018 or later tax years, but rather had to file an administrative adjustment request. Any adjustments as a result of an administrative adjustment request are taken into account in the year that the request is filed.

Consequently, without corrective relief, a partnership trying to take advantage of the CARES Act tax changes by filing an administrative adjustment request now would only receive the benefit on its 2020 tax return, which would not be filed until 2021. This delay was clearly not what was intended with the CARES Act.

Fortunately, the Internal Revenue Service yesterday provided partnerships with relief by issuing Revenue Procedure 2020-23. This revenue procedure gives partnerships the ability to amend a return filed for 2018 or 2019 provided (i) the return was filed prior to the issuance of the revenue procedure, and (ii) the amended return is filed before September 30, 2020. Partnerships can file amended returns to take advantage of the CARES Act tax changes and get the benefit now of any available tax refunds.

The amended returns are allowed to take into account any tax changes brought by the CARES Act as well as any other changes the partnership is entitled to take under the tax code. To file an amended return, the partnership must file a Form 1065, with the amended return box checked and with “Filed Pursuant to Rev. Proc. 2020-23” written across the top of the form.

Amended returns can be filed electronically or by mail, although filing electronically may result in faster processing time given the likelihood of service center closures as a result of the coronavirus pandemic.

Partnerships currently under examination for the year being amended must send a copy of the amended return to the revenue agent coordinating the examination.

Businesses with NOLs or qualified improvement property should consult their tax advisors to see if they can benefit from these tax changes. If so, an amended return could result in a refund and some much needed additional cash flow.

Be sure to visit our Coronavirus (COVID-19) Resource Center page to keep up to date on the latest news.

CARES Act Provides Potential Cash Flow Opportunities for Businesses with NOLs

By: Amanda Wilson

The Coronavirus Aid, Relief, and Economic Security Act (CARES) Act, signed into law by President Trump last month, makes several important changes to the Net Operating Loss (NOL) provisions.

Specifically, the CARES Act allows for business to use NOLs from tax years starting prior to January 1, 2021, to fully offset their income, which is a change from the rule imposed by the 2017 Tax Cuts and Jobs Act limiting the offset to 80% of income.

The CARES Act also provides that taxpayers can, for tax years 2018, 2019, and 2020, carry back their NOLS to their five prior taxable years, which could result in a refund.

Businesses with NOLs should consult their tax advisors to see if they can benefit from these tax changes. If so, an amended return could result in a refund and some much needed additional cash flow.

Be sure to visit our Coronavirus (COVID-19) Response Team page to keep up to date on the latest news.

Executive Order Provides PPP Loans Not Subject to Florida Doc Stamps Tax

By: Amanda Wilson and Matt O’Kane

The Paycheck Protection Program included in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) allows businesses with 500 or fewer employees to receive federally-guaranteed loans to pay payroll costs, rent, and certain other expenses in an effort to keep these employees on their employer’s payroll. The program provides for subsequent loan forgiveness if the employer retains its employees and satisfies other requirements (a discussion of these requirements can be found here).

As Florida businesses rush to apply for Paycheck Protection Program loans, an unexpected cost of these loans was surfacing. The State of Florida imposes a documentary stamp tax on promissory notes and other written promises to pay a sum certain signed or delivered in the State of Florida. As a result, the tax would, absent governmental action, apply to Paycheck Protection Program loans.

On Monday, Governor DeSantis issued Executive Order Number 20-95, which provides that the Florida documentary stamp tax would not apply to any of these loans. Absent this action, Florida small businesses receiving these loans would have been subject to tax at the rate of 35 cents per $100 of principal (or portion thereof), subject to a maximum tax of $2,450. This executive order provides some additional relief for small businesses struggling in the face of the coronavirus pandemic.

It should be noted that the executive order was explicitly limited to Title I of the CARES Act, which governs the Paycheck Protection Program. The executive order does not extend to Title IV of the CARES Act, which provides for a $500 billion loan program for large businesses and municipalities.

Be sure to visit our Coronavirus (COVID-19) Response Team page to keep up-to-date on the latest news.

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