The CARES Act rolls back several revenue-generating provisions of the Tax Cuts and Jobs Act (TCJA). This will help free up cash for some individuals and businesses during the COVID-19 crisis.
The new law temporarily scales back TCJA deduction limitations on:
- Net operating losses (NOLs),
- Business tax losses sustained by individuals,
- Business interest expense, and
- Certain itemized charitable deductions by individuals and charitable deductions for corporations.
The new law also accelerates the recovery of credits for prior-year corporate alternative minimum tax (AMT) liability.
Significant for the hard-hit restaurant and retail sectors, the CARES Act also fixes a TCJA drafting error for real estate qualified improvement property (QIP). Congress originally intended to permanently install a 15-year depreciation period for QIP, making it eligible for first-year bonus depreciation in tax years after the TCJA took effect. Unfortunately, due to a drafting glitch, QIP wasn’t added to the list of property with a 15-year depreciation period — instead, it was left subject to a 39-year depreciation period. The CARES Act retroactively corrects this mistake and allows you to choose between first-year bonus depreciation and 15-year depreciation for QIP expenditures.
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Source: Thomson Reuters