Much has happened in the world since March 1, 2020. Since that time, we have seen a pandemic, significant stock market and employment losses, a recovery in the stock market and in employment, and protests. Much legislation and regulations have been passed in response, and I reported on the following items at a meeting of the Pittsburgh Planned Giving Council on June 9, 2020:
- The $2 trillion Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law by President Trump on March 27, 2020. This legislation provides assistance to workers and businesses that have been adversely affected by the COVID-19 pandemic. The legislation provides loans to businesses, a boost to unemployment insurance, and will enable direct cash payments to some Americans.
- Payroll Protection Program (“PPP”) loans were included in the CARES Act and have been widely publicized. If the loans can be forgiven, the loans operate more like grants. PPP loans are administered by banks through the Small Business Administration (“SBA”). In general, the loans are still available, complicated and it is difficult to obtain answers to questions.
- Nonitemizer Deduction: Under the CARES Act, taxpayers who donated cash to charity are eligible in 2020 for an above the line tax deduction up to $300. This provision is a great improvement over the Tax Cut and Jobs Act which greatly limited taxpayers eligible to itemize deductions.
- Increased Deduction Limits: Donors in 2020 may take a charitable tax deduction of up to 100% of their adjusted gross income (increased from 60% but only for 2020).
- Increased Cap on Corporate Deductions: The cap on corporate donors is also raised from 10% of taxable income to 25% for 2020, and from 15% to 25% on corporate food donations.
- Good Faith Certification for PPP Loans: In response to some large corporations receiving PPP loans and arguably not in need of such loans, the Treasury issued a “safe harbor” on May 14, 2020. Borrowers receiving loans of less than $2M in principal (together with affiliates) will automatically be deemed to have made the required certification concerning the necessity of receiving PPP loans in good faith. Under this safe harbor, the SBA will review all loans greater than $2M for compliance with program requirements. If a business does not qualify for the PPP loan based on necessity, then they must repay the loan proceeds and will not be eligible for loan forgiveness.
- PPP Flexibility Act of 2020. President Trump signed this Act into law on June 5, 2020. Under this Act, the covered period for PPP loan forgiveness has been extended to 24 weeks (increased from 8) from the loan’s origination date, but no later than December 31, 2020. The percentage of funds required to be used toward payroll costs has been reduced from 75% to 60%. This means that allowable nonpayroll costs such as rent, utilities and mortgage interest has increased to 40%. The Act also extended the deadline to rehire employees to avoid a reduction in PPP loan forgiveness from June 30 to December 31, 2020. For PPP loans that are not forgiven, the repayment period increases from 2 to 5 years. Finally, the Act provides that the payroll tax deferral applies to all PPP borrowers, even those that do not have their PPP loan forgiven. With these changes, businesses have a much higher probability that their PPP loan will be forgiven.
- More on individual tax planning: Under the CARES Act, retirement account owners who are age 70.5 and up do not have to take a required minimum distribution for 2020 at all.
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