March 23 2020

USA – COVID-19 Tax Relief

House Passes Bill Providing Testing, Employment Relief; 90-Day Waiver of Penalties and Interest on Tax Payments

As coronavirus (COVID-19) continues to spread, rattling financial markets, forcing the closures of businesses and schools, and cancelling major public events across the country, the Trump Administration and Congress began taking steps to mitigate the impact on Americans. On March 13, 2020, President Trump declared a national emergency, which frees up $50 billion in funding for state and local governments to use in fighting the pandemic.

Meanwhile, the House, after working closely with Administration officials, passed the Families First Coronavirus Response Act (H.R. 6201) early in the morning on March 14, 2020. Over the following days, it became clear that changes, described as technical corrections, needed to be made to the bill as passed by the House. An amended version of the bill was passed by the House on March 16, 2020 by unanimous consent, as the majority of House members were on recess for the week, and the bill was sent to the Senate. The President

has indicated his support for the bill. The Senate is expected to take up the bill, but is also considering significant changes to it while also considering an even larger stimulus or relief package. The bill as passed increases funding for testing and extends paid sick leave to employees all over the country affected by the pandemic.

PAID LEAVE

The bill passed by the House requires employers with fewer than 500 employees to provide paid sick leave to employees who are forced to stay home due to infection or to care for a family member (“qualified paid sick leave”) or due to quarantining (“qualified family leave”). The bill compensates employers and the self-employed for this paid leave in the form of a tax credit.

In the case of sick leave wages paid by an employer to an employee, the employer receives a refundable credit against its share of either the OASDI and the RRTA portion (as applicable) of the payroll tax. The credit can be claimed on a quarterly basis, equal to 100 percent of the amount of sick leave wages paid under the new law. The amount of the credit is limited to $200 per day. However, the credit is increased to $511 per day if the employee if the employee is on leave because he or she:

  • is subject to a federal, state or local quarantine or isolation order related to COVID-19;
  • has been advised by a health care provider to self quarantine due to concerns related to COVID-19; or
  • is experiencing symptoms of COVID-19 and seeking a medical diagnosis

The amount of total hours of paid sick leave is limited by the new law.

For family leave wages paid by an employer, a separate refundable payroll tax credit applies, with different limitations. The 100 percent credit against the employer’s share of the payroll tax is limited to $200 per day, up to an aggregate of $10,000.

For self-employed persons, the credit is allowed against regular income taxes. The limit on sick leave wages is determined by multiplying the number of days (subject to limitation) the self-employed person is unable to perform services in the trade or business by the lesser of 67% of the taxpayer’s average daily self-employment income, or $200 ($511 in the case of the three scenarios that

also apply to the employer payroll tax credit). The same calculation is made for family leave wages, with days unable to perform services (no more than 50) multiplied by the lesser of 67% of the taxpayer’s average daily self-employment income, or $200. The new law provides numerous requirements, limitations and definitions relating to the application of the mandate, as well as the credit.

COMMENT. As mentioned above, these provisions are all temporary. The credits are applicable from the date selected by the Secretary of the Treasury (which must be within 15 days of the date of enactment) until December 31, 2020. The tax provisions do not make changes to the Internal Revenue Code.

PENALTY AND INTEREST WAIVER

On March 17, 2020, Treasury Secretary Steven Mnuchin announced that, while the due date for filing 2019 tax returns would not be postponed, the IRS would waive penalties and interest on tax payments for 90 days. The waiver only applies to individual taxpayers owing up to $1 million in taxes and corporations owing up to $10 million in taxes. At the time of publication, the IRS and Treasury had not yet issued guidance on how the waiver would be implemented. Secretary Mnuchin stated that taxpayers are encouraged to still file timely returns, as the IRS is still processing them and many taxpayers receive refunds, which could be beneficial during the current crisis.

ADDITIONAL GUIDANCE

The IRS announced in Notice 2020-15 that a health plan that satisfies the requirements of a high deductible health plan (HDHP) under the Internal Revenue Code, and thus allows individuals to deduct contributions to a health savings account, will not cease to be qualified as an HDHP if it allows for COVID-19 testing. This includes testing to be done with deductibles below the minimum deductible for an HDHP, including a $0 deductible.

(Fonte: Wolter Kluwer – Tax Briefing – 17/03/20)

NOTICE REGARDING NYC EMPLOYEE RETENTION GRANT PROGRAM AND NYC SMALL BUSINESS CONTINUITY FUND.

NYC employee retention grant program

The City is offering small businesses with 1-4 employees a grant to cover 40% of payroll costs for two months to help retain employees. Businesses can access up to $27,000.

Businesses, including non-profits, must:

  • Be located within the five boroughs of New York City
  • Demonstrate that the COVID-19 outbreak caused at least a 25% decrease in revenue
  • Employ 1- 4 employees in total across all locations
  • Have been in operation for at least 6 months
  • Have no outstanding tax liens or legal judgements

NYC small business continuity fund

Businesses with fewer than 100 employees who have seen sales decreases of 25% or more will be eligible for zero interest loans of up to $75,000 to help mitigate losses in profit.

Businesses must:

  • Be located within the five boroughs of New York City
  • Demonstrate that the COVID-19 outbreak caused at least a 25% decrease in revenue
  • Employ 99 employees or fewer in total across all locations
  • Demonstrate ability to repay the loan
  • Have no outstanding tax liens or legal judgements

As part of the applications, you will be required to demonstrate a revenue decrease by providing

documentation such as: point-of-sales reports, bank statements, quarterly sales tax filings, 2019 tax

returns, or CPA-certified profit & loss statements.

If you need any further information please contact Lucia Tognacci at l.tognacci@diacrongroup.com

Please find below the Memorandum on identification of essential critical infrastructure workers during covid-19 response issued by CISA on March 19th, 2020.

CISA MEMORANDUM - Covid-19 USA

CISA MEMORANDUM - Covid-19 USA

CISA developed an initial list of “Essential Critical Infrastructure Workers” to help State and local officials as they work to protect their communities, while ensuring continuity of functions critical to public health and safety, as well as economic and national security. The list can also inform critical infrastructure community decision-making to determine the sectors, sub-sectors, segments, or critical functions that should continue normal operations, appropriately modified to account for Centers for Disease Control (CDC) workforce and customer protection guidance.