CARES ACT PROVIDES RELIEF TO MOLD BUILDERS By Michael J. Devereux II, CPA, CMP, Mueller Prost
ORelief and Economic Security (CARES) Act – the largest relief n March 27, 2020, President Trump signed the Coronavirus Aid,
package ever passed by Congress almost three times over – into law, thereby ushering a host of new lending and tax provisions available to mold builders.
The CARES Act made several taxpayer-favorable changes to the tax code that impact mold builders, some of which should provide much needed cash during the COVID-19 pandemic. The following provides a brief overview of the business tax provisions of the CARES Act. EMPLOYEE RETENTION CREDIT The CARES Act provides for a refundable payroll tax credit for 50% of the wages paid by eligible mold shops to certain employees during the COVID-19 pandemic. The credit is available to mold shops whose operations have been fully or partially suspended as a result of a government order or mold shops that experienced a greater than 50% reduction of quarterly receipts, measured on a year-over-year basis. The credit is equal to 50% of the qualified wages paid to employees from March 13, 2020, through December 31, 2020. The definition of qualified wages depends upon the number of average full-time employees in 2019. For mold shops that had more than 100 average number of full-time employees in 2019, only the wages of employees who are paid during a shutdown or face reduced hours as a result of the plant’s closure or reduced gross receipts are qualified wages. However, for employers with 100 or fewer full-time employees in 2019, qualified wages also include amounts paid to all employees due to the reduced gross receipts. Qualified wages include amounts paid or incurred to provide and maintain a group health plan (on a pro-rata basis) and are capped at $10,000, making the maximum amount of FICA payroll tax credit $5,000 per employee. Mold shops receiving Small Business Interruption loans are not eligible for the Employee Retention Credit. EMPLOYER FICA DEFERRAL This provision of the CARES Act allows mold builders to defer payment of their employer share of the Social Security tax (FICA at 6.2%) for payroll tax deposits required to be made between March 27, 2020, and December 31, 2020. The amounts otherwise due during this period will be due in two installments – the first on December 31, 2021, with the remainder due on December 31, 2022. 30
the american MOLD BUILDER | Issue 2 2020
Mold shops receiving loan forgiveness through the Paycheck Protection Program, however, are not eligible for the deferral for amounts due after they receive notification of forgiveness. NET OPERATING AND EXCESS BUSINESS LOSSES The CARES Act made two significant changes in the Net Operating Loss (NOL) rules and temporarily removed a limitation on business losses enacted by the Tax Cuts and Jobs Act of 2017 (TCJA). First, the CARES Act removes the 80% of taxable income limitation that was enacted as part of the TCJA. Losses generated in any tax year beginning after December 31, 2017, and before January 1, 2021, (tax years 2018, 2019 and 2020 for calendar-year taxpayers) may offset 100% of the taxable income to which the loss is carried. The 80% of taxable income limitation is reinstated for tax year beginning after December 31, 2020. Second, the CARES Act allows mold builders to carry their NOLs back to each of the five taxable years preceding any losses generated in tax years beginning after December 31, 2017, and before January 1, 2021, (2018, 2019 and 2020 calendar-year taxpayers). The IRS issued special guidance for taxpayers who have already filed their 2018 or 2019 tax returns and would like to avail themselves of the modified rules for NOLs. The CARES Act also delayed a provision originally enacted by the TCJA that limited “excess business losses for noncorporate taxpayers.” The TCJA had enacted a new limitation for owners of flow-through businesses (S Corporations, Partnerships or Sole Proprietorships). This provision, as enacted by the TCJA to be effective for tax years 2018 through 2025, limited business losses exceeding $250,000 ($500,000 in the case of married taxpayers filing a joint return) and were not eligible for carryback. The CARES Act allows excess business losses for tax years 2018 through 2020 and, if net operating losses are generated, allows for a five-year carryback period. Business owners should note, however, that the excess business loss limitation was just one way in which an owner’s loss could be limited. Taxpayers must still be at risk for and have sufficient basis to
