The small business provisions of the CARES Act are supporting small businesses and not-for-profit organizations seeking economic assistance during this recession. However, the creation of multiple programs with overlapping objectives and different skill requirements makes facilitation more complicated, vague and non-neutral. The fiscal response to the COVID-19 pandemic requires policymakers to think about the sources of revenue that should be used to fill fiscal gaps. Tax policy experts have proposed wealth taxes, minimum (global) corporate taxes, excess profit taxes, and digital taxes as ways for governments to generate new revenue. Nebraska lawmakers may ultimately opt for a package of measures that includes both property tax breaks and renewed business incentives, but they should avoid doing so at the expense of decoupling CARES provisions aimed at increasing liquidity. House Democrats recently released a proposal to extend the child tax credit for one year as part of President Biden`s broader $1.9 trillion economic relief package. The COVID Tax Relief Act, 2020, enacted in late December 2020, allowed additional payments of up to $600 per adult for eligible individuals and up to $600 for each eligible child under the age of 17. The AGI thresholds above which payments were lowered were identical to those of the CARES Act. A little-discussed part of the CARES Act, passed in March to provide economic relief during the COVID-19 outbreak, is a correction to a design flaw in the 2017 Tax Cuts and Jobs Act, often referred to as “retail disruption.” Note: The COVID Tax Relief Act, 2020 extends the tax credits available to eligible employers for paid sick and family leave under the extended SLAP or FMLA until March 31, 2021. As a result, all references to these credits, which expire on December 31, 2020, have been updated to March 31, 2021. In addition to providing economic assistance to individuals and loans to businesses in difficulty during the coronavirus crisis, the CARES Act amended several tax provisions to increase liquidity to ensure businesses can survive a sharp decline in cash flow. The law also includes several new temporary amendments to the Tax Code.
For example, the legislation allows for a 100% business expense deduction for meals (instead of the current 50%), as long as the expenses are incurred for food or beverages provided by a restaurant (for expenses incurred after December 31, 2020 and before December 31, 2022). Similar extensions and amendments were made to several other provisions, including allowing businesses to make eligible disaster relief contributions of up to 100 per cent of taxable income and extending the availability of the Employment Opportunity Credit. President Biden and Congress should focus on areas of common ground and gradually find jobs to improve tax laws. A recently introduced bipartisan bill to support retirement savings is a good model of what incremental reform might look like. As of March 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided for indirect economic payments of up to $1,200 per adult for eligible individuals and $500 per eligible child under the age of 17. Payments have been reduced for individuals with adjusted gross income (RGA) greater than $75,000 ($150,000 for married couples filing joint returns). For a family of four, these economic impact payments provided up to $3,400 in direct financial assistance. The actions of the House Ways and Means Committee would further expand the relief measures created by the CARES Act and the Consolidated Credits Act of 2021 and go further through a significant expansion of existing tax credits and changes to the international tax system. Prior to the passage of the legislation, the IRS interpreted CARES (through Notice 2020-32 and Tax Decision 2020-27) to prohibit a deduction for an otherwise deductible expense if the funds used to pay the expenses came from a PPP loan. The law now allows businesses to deduct expenses, even if the funds used to pay for those expenses come from a PPP loan that has been made.
President Donald Trump signed the Consolidated Appropriation Act of 2021 (the Act) on December 27, 2020. Government tax revenues fell 5.5% in fiscal year 2020, due to a dismal final quarter (April to June) as states begin to feel the effects of the COVID-19 pandemic. While these early losses are certainly undesirable, they are manageable and much better than many feared. As U.S. businesses struggle to recover from the economic downturn, Congress and the White House continue to discuss a phase four aid package that could include everything from incentives for domestic travel and a payroll tax cut to more fundamental reforms such as the introduction of permanent full cost recovery. As the Senate debates the bailout package and moves through the budget voting process, policymakers should consider the trade-off between targeted economic relief and raising marginal tax rates in the tax code, which can distort incentives to generate revenue and prompt taxpayers to creatively adjust their AGI to receive payment in the upcoming tax season. According to the Tax Policy Center, about 60 percent of U.S. households paid no income tax in 2020, up from about 43 percent of households in 2019.
The law also provides for other changes that are favourable to taxpayers. These changes would apply to calendar quarters beginning after 2020. Further clarifications would apply retroactively to the coming into force of the CARES Act. The sooner federal politicians or regulators clarify tax issues regarding the Paycheck Protection Program (RAP), the more security businesses have if they accept economic relief to keep their businesses afloat. While the Biden campaign is certainly focused on raising taxes on the United States.