Understanding and utilizing tax provisions (CARES Act)

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act. EY Tax has developed a bundle of solutions applicable to the CARES Act to help business leaders better understand and enhance their tax strategies.

Related topics COVID-19

How EY can help you

EY Tax COVID-19 Response Tracker Tool (interactive)

This is an interactive tool that tracks changes in tax policy and stimulus to help users efficiently and interactively evaluate stimulus opportunities as they apply to a company's global footprint. The tool gives the user the ability to filter for summarized reports by country, state (US only) and tax type to identify the stimulus and legislation applicable to each stakeholder as well as tracking of quantified impacts and implementation action items.

Employee retention credit

The CARES Act created a refundable employee retention credit of up to $5,000 per employee. Primary provisions include:

  • Eligible employer definition
  • Qualified wages definition
  • Refundable credit definition
  • Refundable credit recovery process
  • Credit overlap with other tax provisions

The underlying rules require significant analysis on governmental shutdown orders, revenue changes based on aggregation rules, determinations of qualifying wages and benefits, paid leave credit overlaps and other adjustments. Trade-offs with other CARES Act stimulus measures also require analysis.

CARES Act Tax Impact and NOL Assessment Tool

The CARES Act modified current tax law in order to provide liquidity to businesses through provisions that include:

  • Changing the carryback period to five years for any net operating loss (NOL) arising in 2018, 2019 or 2020
  • Temporarily removing the 80% limitation on the use of NOLs
  • Increasing the election of the Internal Revenue Code section 163(j) limitation from 30% to 50%
  • Correcting Tax Cuts and Jobs Act effective dates (qualified improvement property cost)
  • Accelerating alternative minimum tax refund allowances

These modifications create amended return opportunities and complex tax calculations that include interactions with global intangible low-taxed income, base erosion and anti-abuse tax, and other tax inputs. Additionally, we are in the final phases of testing a CARES Act engine capable of efficiently assisting with modeling these tax calculations.

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