ITS Spotlight for Week ending 3 April 2020

In this episode, we review how President Trump signed into law the Coronavirus Aid Relief and Economic Security (CARES) Act.

Related topics Tax

This edition of the ITS Spotlight for week ending 3 April looks in detail at the Coronavirus Aid Relief and Economic Security (CARES) Act, including the modifications made to the tax code to offer taxpayers some relief.

Explore the two changes that directly have an impact on international tax for multinational organizations, and dive deeper into Net Operating Loss periods and how these can be carried back up to five years under the temporary changes if necessary.

It also looks at the workstreams the IRS has put into place to help with these modifications, and the guidance issued to IRS employees to help benefit the taxpayer.

This EY weekly spotlight begins with a look at how President Trump signed into law the Coronavirus Aid Relief and Economic Security Act (CARES) which includes, among other things, modifications to the tax code that are intended to provide economic relief to those affected by the COVID-19 pandemic.

Two of the tax changes — to the net operating loss rules under Section 172A, and temporary changes to the Section 163J interest deduction limitation — will have international tax implications for multinational organizations.

Briefly, the CARES Act temporarily suspends the 80% taxable income limitation on the use of a Net Operating Loss to offset taxable income for tax years beginning after 31 December 2017, and before 1 January 2021. Taxpayers may carry NOLs in this period back five years, as well as exclude a Section 965 transition tax year from the five-year carry back period.

Taxpayers may still carry NOLs forward if it is more advantageous. The carry back or carry forward of a NOL may also affect a taxpayer’s allowable foreign tax credits and, in some cases, the taxpayers Section 965 transition tax liability.

A senior IRS official was quoted as saying there are two workstreams developing guidance with respect to the CARES Act NOL amendments. One addresses procedural issues, with the second focusing on substantive issues including the interaction of the NOL changes with the code’s international tax provisions.

Guidance has also been issued to IRS employees on processing offers on compromise regarding Section 965 transition tax.

Learning outcomes

  • Understanding the Coronavirus Aid Relief and Economic Security (CARES) Act and the modifications to the tax code that have been implemented
  • Understand how these tax code changes affect multinational corporations
  • Explore how Net Operating Loss periods can now be carried back if deemed favorable to the taxpayer for up to five years, and how the Section 965 transition tax liability is being considered, as well as the workstreams implemented by the IRS to cope with these changes.

Podcast

Episode 2

Duration 05m 15s

In this series

Series overview
(Event List - Manual)

ITS Spotlight for Week ending 10 April 2020

In this episode, we review the final regulations implementing the hybrid mismatched rules under Sections 245A(e) and 267A.
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Episode 1

Duration
13m 48s

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ITS Spotlight for Week ending 3 April 2020

In this episode, we review how President Trump signed into law the Coronavirus Aid Relief and Economic Security (CARES) Act.
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Episode 2

Duration
05m 15s

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ITS Spotlight for Week ending 27 March 2020

In this episode, we review the enactment of the Coronavirus Aid Relief and Economic Security (CARES) Act.
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Episode 3

Duration
05m 32s

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ITS Spotlight for Week ending 20 March 2020

In this episode, we review the signing into law of the Families First Coronavirus Response Act, HR6102.
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Episode 4

Duration
08m 31s

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