The upheaval around the COVID-19 pandemic pushed back federal tax day, and now that the extended filing deadline is here, it may be time to do a final check of your tax strategy. Legislative updates over the past eight months bring new opportunities to minimize what your organization may owe for 2019. Here’s a summary of the major business tax updates that have occurred, and a checklist of timing evaluations to consider.

Summary of Key Business Tax Updates for 2019 Tax Optimization

Two major pieces of legislation took effect with benefits that could affect 2019 tax liabilities. A summary of some of the key updates from the Further Consolidated Appropriations Act, 2020 (FCAA) and the Coronavirus Aid, Response, and Economic Security Act (CARES) follows.

Select Provisions Modified by Recent Tax Legislation

Provision

Legislative Update

Changes

Opportunity

Section 179D

FCAA

Renewed the expired incentive for energy-efficient building and system upgrades retroactively to Jan. 1, 2018, and through Dec. 31, 2020.

Tax deductions between $.60 to $1.80 per square foot for upgrades to qualifying systems, which can be identified via cost segregation studies or other reviews. Rebates may be available for 2018 tax year as well.

Qualified Improvement Property

CARES Act

Gives qualified improvement property a 15-year depreciation recovery period retroactively for property placed in service after Dec. 31, 2017.

Claim 100% bonus depreciation benefits and optimize Section 179 expensing for 2018 and 2019 projects.

Net Operating Losses & Section 382 Limitation

CARES Act

Permits carryback of net operating losses to five previous years and removes 80% limitation on losses for 2018-2020.

Reduce 2019 tax liability and claim refunds for taxes paid in previous years.

Excess Business Loss Limitation

CARES Act

Removes limitations on business losses that had been put in place by the 2017 tax reform law

Non-corporate taxpayers may be able to reduce 2019 tax liabilities and claim refunds for taxes paid in 2018 or previous years.

Section 163(j) Business Interest Deduction

CARES Act

Increases deduction for business interest expense in 2019 and 2020 to 50% of adjusted taxable income

Reduce 2019 and 2020 tax liability, and potentially claim refunds for prior year taxes paid.

Corporate Alternative Minimum Tax

CARES Act

Accelerates recovery period for refundable corporate AMT credits into 2018 or 2019

The entire refundable corporate AMT credit can be taken in 2018 or 2019, and can be claimed as a refund for either year.

Timing Evaluation Checklist for 2019 Filings

As the adage goes, timing is everything. There may be items to address before 2019 tax returns are finalized.

  • Identify assets that may qualify for faster depreciation and bonus depreciation benefits in light of the retail glitch fix, and optimize depreciation decisions with the section 163(j) business interest expense limitation for certain real property trades or businesses
  • Assess whether your building improvements, renovations or other initiatives qualify for Section 179D or Section 45L energy-efficiency incentives
  • If your company has NOLs, estimate whether and when you will be able to deduct them and whether any ownership changes may limit your deduction
  • If you acquired a new business during the year, review your transaction expenses to determine whether they must be capitalized or can be deducted immediately
  • Assess whether your business activities qualify for the R&E tax credit
  • Analyze foreign sales or foreign operations for tax minimization opportunities
  • Review the tax accounting methods used in your business — including methods for prepaid expenses, vacation pay, advance payments and LIFO — to determine whether a change might be advantageous
  • Review the tax impact of any transactions with related parties
  • Review your company’s offerings for better or more tax-advantaged ways to reward employees
  • Review nonqualified deferred compensation arrangements and reporting practices for compliance with Section 409A
  • If you received or exercised any incentive stock options, calculate any regular and alternative minimum tax effects and take action to minimize those effects

For More Information

To learn more about the tax opportunities available to you, please contact a member of our team.  Check out our COVID-19 Resource Center for more information about how COVID-19 affects your organization.

Published on July 13, 2020