Special Tax Alert
With the Families First Coronavirus Response Act (FFCRA), Pub. L. 116-127, on the books for over eight weeks, the CARES Act, Pub. L. 116-136, on the books for seven weeks, and the Paycheck Protection Program and Health Care Enhancement Act (PPPHCEA), Pub. L. 116-139, being enacted almost three weeks ago, we thought it would be helpful if we look back and provide our observations in light of all the post-legislative guidance.
While the public has been struggling to understand, let alone address, the pandemic, the Internal Revenue Service (IRS) was yet again placed in a daunting position by Congress and the President of the United States: enforce new tax provisions that are effective immediately. The IRS has set out to address the challenge by issuing numerous Revenue Procedures, Notices, and Frequently Asked Questions in an effort to provide guidance as quickly as possible. As a result of that guidance, it is clear that in general, good things come to those who wait, as taxpayers have generally received a better answer by waiting for the new guidance to come out, than if they had applied the law based only on the statutory language. For example, prior to Notice 2020-26 (previously discussed in detail here), taxpayers might have filed a paper amended return to claim the carryback of a 2018 net operating loss (NOL). Notice 2020-26 allows taxpayers to file an application for a tentative refund instead (Form 1045 or Form 1139). The Notice was followed by an IRS announcement that the application for a tentative refund can be faxed rather than mailed so that it can be processed faster.
A&M Taxand Says: There are still numerous areas in which it is unclear how the new statutory provisions apply. The IRS has stated that additional guidance is forthcoming on a wide range of topics. If that guidance follows the approach of the guidance issued with respect to the FFCRA and the CARES Act, then it will generally be taxpayer favorable. As a result, taxpayers who are able to wait for guidance may be in a better position than those who are not. A&M Taxand is actively monitoring the guidance issued by the IRS, as well as the Treasury Department, the Small Business Administration (SBA), and the Department of Labor (DOL) in response to COVID-19. Our COVID-19 insight center includes all of the insights that we have released to date.
With that said, unfortunately, waiting is not always all that it is cracked up to be. For example, the CARES Act created the Paycheck Protection Program (PPP), which in essence provided a forgivable loan from the government for certain expenses. Although the PPP was touted as a way to infuse needed liquidity into the market, all the funds allocated to the program were gone in less than a week, while many would-be applicants were still navigating the process. While the PPPHCEA infused additional resources into the PPP program so additional loans will be granted, the additional funding is not expected to satisfy demand.
A&M Taxand Says: If you meet the qualification requirements for the PPP, then apply immediately. This truly is a great example of you snooze… you lose…