Summary of Amendments to the Tax Cuts and Jobs Act of 2017

Below is a summary of one of the provisions of Title II - Rebates and Other Individual Provisions and Business Provisions from the Coronavirus Aid, Relief and Economic Security Act (CARES Act).
 

Summary

• Businesses now have the ability to claim any alternative minimum tax (AMT) credits in the full remaining amount of such credits for the years 2018 and 2019 through an expedited application process. 
• Deductions for paid interest have increased from 30% to 50% of an employer's adjustable taxable income. 
• A drafting error in the TCJA did not allow certain property improvements to be written off and instead required depreciation over the standard 39-year period.  Section 2307 of the CARES Act has corrected this error.
• Provides for a temporary exception for excise taxes related to the production of hand sanitizer.

Detailed Analysis

Alternate Minimum Tax Credits
As part of TCJA, the corporate AMT was eliminated and any remaining AMT credits that were generated prior to the TCJA were refundable for 2018 through 2022, but limited to 50% of any remaining AMT credit. The CARES Act eliminates the 50% cap so that corporations can now take the entire amount for 2018 and 2019 (or elect for the entire amount in 2018), resulting in larger refunds received in 2020. 

Taxpayers may file an application for a tentative refund pursuant to processes which will be determined by the Secretary of the Treasury. The IRS will be given 90 days to review the application and issue the refund. 

Business Interest Deduction Limitation
The TCJA provided that a business can only deduct interest to the extent such amount does not exceed 30% of earnings. Section 2306 of the CARES Act increases this from 30% to 50% for 2019 and 2020. In addition, this provision will allow businesses to elect to use their 2019 adjustable taxable income for 2020 to calculate the 50% limit. 

Qualified Improvement Property
In order to correct what was regarded as a drafting error in the TCJA, Section 2307 of the CARES Act amends the TCJA so companies may immediately write-off costs associated with improving the interior of non-residential property, rather than have such improvements depreciated over their useful life. This provision of the CARES Act retroactively applies to "qualified improvement property" in place in 2018 onward, allowing for amended prior year returns which would enable a business to claim 100% of the depreciation up-front. 

Tax Incentive for Production of Hand Sanitizer
Section 2308 of the CARES Act suspends any excise taxes applied on alcohol used to produce hand sanitizer. Specifically, taxpayers subject to the excise tax on distilled spirits will be excepted for distilled spirits removed in 2020 and used in or contained in hand sanitizer produced and distributed in response to the SARS-CoV-2 or COVID-19.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.