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Coronavirus Aid, Relief, and Economic Security (CARES) Act changes

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES Act). The legislation includes tax relief for businesses and individuals, including recovery rebates for certain individuals, changes to net operating losses Notice 2020-26 and Revenue Procedure 2020-24, and business interest expense limitations.

Due date adjustments

The deadline has moved from 4/15/20 to 7/15/20. Refer to Notice 2020-18.

Net operating losses

5-year carrybacks are now allowed for net operating losses (NOLs) incurred in 2018, 2019, and 2020. These carrybacks and carryforwards can also offset 100% of taxable income until 2021. Refer to Notice 2020-26 and Revenue Procedure 2020-24.
Elect out
To elect to relinquish the carryback:
  • 1041: Use the
    NOL
     screen in the
    Carryovers & NOL
     folder.
  • 1040 and 1120: Use the
    Elect
     screen in the
    Elections
     folder.
Carry back
To carry back a 2019 or 2018 net operating loss:
  • 1040: Go to the
    1045
     screen in the
    1045 & NOL
     folder and mark the
    Net operating loss carryback (5yr) on Form 1045
     checkbox. Then finish the carryback data entry.
  • 1120: Go to the
    1139
     screen in the
    Carryovers
     folder and mark the
    Calculate carryback of net operating loss
     checkbox. Then finish the carryback data entry.
  • 1041: Go to the
    NOL
     screen in the
    Carryovers & NOL
     folder and mark the
    Farm loss carryback on Form 1045
     checkbox. Note that a future update is coming and this is a temporary alternative. Then finish the carryback data entry.

Business interest expense limitation

The amount of business interest expense limitation increased from 30% to 50% of adjusted taxable income. This change is effective for the tax years beginning in 2019 and 2020. Taxpayers can elect not to apply for this increase by marking the
Election out of increased limitation
 box in the
990
 screen in the
Income & Deductions
 folder.
Beginning with 1120 version 19.3.8, UltraTax CS calculates the business interest expense limitation based on 50% of the adjusted taxable income. You can run a data mining report to see 1120 clients who have completed Form 8990.

Section 461 individual loss limitation

The provision for excess business loss limitations has been suspended for the tax years from 2018 to 2020. As of 1040 version 19.3.7, Form 461, Limitation on Business Losses will no longer calculate. Review completed returns previously limited by Form 461 and reprocess to change taxable income and update any net operating loss to carryover.

Qualified improvement property

As of UltraTax CS Platform update 19.3.3 and Fixed Assets 19.1.5, the Method/Life Wizard has been updated for Qualified Improvement Property. Improvement Property (Qualified), Leasehold Improvements (Qualified), Restaurant Building Improvements, and Retail Improvement Property will use a life of 15 and an ADS life of 20 if the asset is placed in service on or after 01/01/2018.

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