Tax Week In A Nutshell 10.12.20
Hey party people, I'm back! Twitter quasi-demanded...ok so two people mentioned my updates...and I took action! I have still been writing these after my transition to RubinBrown, however, they are just circulated internally currently. But why not continue sharing the love? I'll house them here on my blog for now until they find a home. Let's see what happened last week!
After a period of relative quiet on the PPP front, there was a flurry of activity last week. First, the SBA and Treasury issued a new FAQ. FAQ 52 explains that the PPP repayment deferral period is extended to the date that SBA remits a borrower’s loan forgiveness amount to the lender, or 10 months after the end of a borrower’s loan forgiveness covered period if the borrower does not apply for loan forgiveness. Banks were inappropriately starting to demand upcoming repayment from borrowers, so this FAQ (even though the extension was already clear from the PPPFA) should help dismiss such requests.
In addition, Interim Final Rules make it easier for those with $50,000 or less in PPP loans to apply for loan forgiveness. While the new guidance doesn’t provide automatic “rubber-stamped” forgiveness as many were hoping, it exempts these borrowers from reductions in loan forgiveness related to reductions in full-time equivalent (FTE) employees or in salaries or wages.
Borrowers must still submit documentation along with the forgiveness application verifying payroll and non-payroll costs, as well as maintain (but not submit) records and documentation supporting PPP loan eligibility and compliance for six years after the date the loan is forgiven or repaid in full. Read Tony Nitti’s Forbes coverage on the topic here.
New Form 3508S and its instructions are provided as a loan forgiveness application for those with loans of $50,000 or less. The SBA estimates this new relaxed guidance will help ease forgiveness applications for 9 percent of outstanding PPP loans, consisting of small businesses with one or more employees.
Reminder that borrowers now have three loan forgiveness applications to fit their needs: Form 3508, 3508EZ, and 3508S.
Stimulus Talk Confusion
President Trump started the week ordering all stimulus talks to pause so the Senate could focus on confirming his Supreme Court nominee Amy Coney Barrett. Just days later he later would reverse course on that sentiment, asking for negotiations to continue and requesting a “bigger stimulus package” than has previously been offered. Adding to the confusion, a White House communications director later told reporters the administration would like a package below $2T (reminder – the House recently offered a package coming in at $2.2T, down from $3.4T in May).
House Speaker Pelosi and Treasury Secretary Mnuchin continued talks through the week, ultimately landing in the same place - far apart. On behalf of the White House, Mnuchin proposed a $1.8T relief package Friday that ultimately went nowhere. The differences continue to revolve around state support and implementing a plan for to control the virus. House Ways and Means Ranking Member Brady, along with House Republican Leader McCarthy introduced the Commitment to American GROWTH Act last week as well that includes several interesting tax proposals.
Despite continued relief talks, Senate Majority Leader McConnell stated his priority is confirming Amy Coney Barrett to the Supreme Court, even if a stimulus deal is reached, and reminded that some Senate Republicans feel the government has already provided enough stimulus. We will continue to monitor any progress of proposed legislation.
IRS Gets Hip, Adds Barcode Technology to Notices
First the IRS adds an Instagram account, now barcode technology; the possibilities are endless for our favorite governmental department! Notices CP14 and CP14A, which tell taxpayers they owe on unpaid taxes, will now contain QR bar codes linking back to IRS.gov when scanned by a smartphone. From there, taxpayers will have access to information needed to pay balances, set up payment agreements, or get more help.
The department is encouraging online activity, especially in light of the 5.3 million item backlog in physical mail piled up waiting to be processed outside IRS facilities.
*The cat in my post picture is meant to embody how I imagine the IRS felt after implementing the QR bar codes to notices.*
Final regulations were issued governing withholding on transfers of partnership interests engaged in activity within the United States by foreign persons. Guidance is provided on reporting requirement for foreign transferors and partnerships with foreign transferors, and withholding requirements of such transfers. [§§864(c)(8), 1445, 1446, 1461]
Revenue Ruling 2020-19 discusses if a change in basis of computing life insurance reserves occurs in certain situations stemming from the TCJA. [§807]
Revenue Procedure 2020-44 applies to contracts, including derivative contracts, debt instruments, insurance contracts, and lease agreements with terms referencing IBOR and modified to incorporate ISDA Fallback and ARRC Fallback.
A Pinch of SALT
You might have property/payroll/sales burned into your brain in regards to state income apportionment, but have you heard of “nowhere income”? Take a look at this Tax Foundation article to learn more and see if your state has a throwback or throwout rule.
That's all for this week - and as long as the RB Gods continue to permit, I'll keep sharing my updates here hopefully for your amusement and tutelage.
Information provided is for educational purposes only and not to be used as tax advice. Please contact your tax and business advisors to review your unique situation.