In view of the coronavirus (COVID-19) pandemic, a massive United States spending bill was signed into law on 27 March – the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The act is primarily aimed at providing immediate liquidity to businesses and individuals. 

A brief summary of the corporate (and individual, where applicable) tax provisions is as follows.

Delay filing of and payment on federal income tax returns due 15 April 

Modification of net operating losses rules 

Accelerating refunds for prior-year alternative minimum tax credits 

Enhanced business interest expense deductibility 

Aside from the above, the act includes other tax provisions that could be of interest to taxpayers, e.g. enhanced charitable contribution deductibility for corporations and individuals making qualified cash contributions, 100-percent-bonus-depreciation for certain qualified improvement properties placed in service after 31 December 2017, a new employee retention credits for employers who are compelled to close their business due to the pandemic but will continue to pay their employees, recovery rebates in the form of direct cash payments for U.S. individuals (subject to phase-outs at certain income levels), receipt of “coronavirus distributions” from retirement plans without surcharge, etc.

Important note 

The full text of act is 880 pages in length. It is therefore important to note that the above is a highly simplified summary of some fairly complex provisions and taxpayers are strongly advised to consult their qualified U.S. tax advisors as to how these (and other) provisions could impact them before any action is taken with respect to any provision in the act.

Note: This article was published on Hong Kong General Chamber of Commerce’s Coronavirus Business Help Corner on 31 March. 

This article is contributed by Patrick Yip, Vice Chair, and Jennifer Shih, Tax Director of Deloitte China

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