Alert

CARES Act: Highlights of the Tax Provisions

April 1, 2020

The Coronavirus Aid, Relief, and Economic Security (‘‘CARES”) Act contains a significant number of provisions that will impact individuals and business related to income taxes. In some cases, the Act allows for a refund of prior taxes paid to generate positive cash flow, while in others it reduces the amount of taxes due on 2019 income tax returns that will be filed in the next few months, as well as 2020 income tax returns. This summary is meant to highlight the tax provisions in the CARES Act and provide some potential planning ideas.

Provisions Applicable To Individuals

Early withdrawals from retirement plans and participant loans

Certain taxpayers directly impacted by COVID-19 are eligible for withdrawals of up to $100,000 from their qualified retirement plans. These amounts will not be considered income if repaid within three years. There are also rules allowing for loans from plans of up to $100,000, and those participants who already have loans outstanding can defer their repayments for one year. Click here to learn more on this provision.

Waiver of required minimum distributions

The CARES Act provides that no required minimum distribution needs to be taken from IRAs, employer defined contribution plans or 403(b) annuities during 2020. For those who turned age 70 ½ or retired in 2019, 2019 distributions that have not yet been taken do not need to be taken.

Recovery Rebates

A key provision of the CARES Act will send tax rebate payments to individuals. The rebates will be up to $1,200 per taxpayer or $2,400 for married couples that file jointly. There is an additional $500 rebate for each qualifying child. These amounts phase out at moderate income levels. There may be an opportunity to maximize your recovery rebate. Click here to learn more on this provision.

Charitable Contribution Changes

The Act provides an opportunity for individual taxpayers claiming the standard deduction to deduct $300 of cash charitable contributions from adjusted gross income. Click here to learn more on this provision.

For tax year 2020, the Act modifies the usual limitations on deductions of charitable contributions by individuals and corporations. The Act temporarily lifts the provision for individuals to 100 percent of adjusted gross income. Similarly, the Act raises the 10 percent of income limit on deductions by corporations to 25 percent of income. Click here to learn more on this provision.

Modification of limitation on losses for individuals

The Tax Cuts and Jobs Act introduced limits to “excess business losses” for non-corporate taxpayers for tax years beginning after 2017. The CARES Act removes this limitation for 2018, 2019 and 2020. Individuals who have filed their 2018 and/or 2019 returns and who were subject to these limits may have an opportunity to file an amended return and claim a refund. Click here to learn more on this provision.

Provisions Applicable To Businesses

Employee Retention Credit

Qualified businesses and tax exempt organizations that do not avail themselves of the CARES SBA forgivable loans can claim a refundable payroll tax credit for up to 50percent of qualified wages paid after March 12, 2020, and before January 1, 2021. The creditable wages are limited to $10,000 per employee, resulting in a maximum credit of $5,000. Wages include compensation paid to employees and health care costs paid for these workers. Click here to learn more on this provision.

Deferral of Employer payroll taxes

The due date for the employer share of employment taxes on OASDI wages (6.2% of wages up to $137,700 for 2020) due on or after March 27, 2020, and before January 1, 2021, is delayed. One half of these taxes will be due in 2021 and the other half will be due in 2022. Click here to learn more on this provision.

Changes to Mandated Paid Leave

Because an individual must be employed to take advantage of the new mandated paid leave provisions, an employee who was laid off on March 1, 2020, or later and who worked for the employer at least 30 days of the 60 days prior to being laid off, can be rehired and become eligible for the mandated leave. In addition, the Department of Labor has made clear that mandated paid FMLA is available even if an employee works a partial workweek. Click here to learn more on this provision.

Employer Payment of Employee Student Loans

After March 27, 2020, and before January 1, 2021, an employer can pay $5,250 of the principal and interest on an employee’s education loans without the amounts being taxable to the employee. Click here to learn more on this provision.

Changes to NOLS

The CARES Act has changed the treatment of Net Operating Losses (NOLs) that are generated in tax years 2018, 2019, and 2020 to permit them to be carried back up to five years. This will allow for an immediate claim for refund for taxpayers who had taxable income during the carryback time period. Additionally the limitation of only being able to offset 80% of taxable income has also been removed. Click here to learn more on this provision.

Changes to AMT Credit refunds

The Tax Cuts and Jobs Act eliminated AMT tax for corporate taxpayers’ tax years after 2017. As a result, corporate taxpayers were eligible to offset their income tax liability by the AMT and receive a refund of 50 percent of the excess for 2018, 2019 and 2020, with any remaining amount refunded in 2021. The CARES Act changed these rules to allow a refund of any excess credits immediately in 2019. There is also an election that can be made to have all the credit refunded as part of the 2018 tax return. The election to claim in 2018 may allow for an immediate filing of a refund claim. Click here to learn more on this provision.

Changes to limitations on deductibility of business interest expense

For tax years beginning in 2019 and 2020, the limit on the deductibility of business interest has been increased from 30% to 50% of adjusted taxable income. However, this provision does not apply to partnerships for tax years beginning in 2019, only for tax years beginning in 2020. There are some additional beneficial rules that apply to the computation in 2020 and partners will be able to deduct some of the excess business interest from 2019 in 2020. Click here to learn more on this provision.

Changes to depreciation for qualified improvement property

Qualified Improvement Property (“QIP”) is defined as an improvement made by the taxpayer to the interior portion of nonresidential real property placed in service at any date after the building itself has been placed in service. Due to errors in the Tax Cuts and Jobs Act, this property was generally considered to be depreciable over 39 years starting on or after January 1, 2018. This was less beneficial than under prior law.

The CARES Act has now corrected this error, and QIP is now eligible to be depreciated over 15 years and is also eligible for 100% bonus depreciation. These changes are retroactive to any qualifying property placed in service on or after January 1, 2018. Taxpayers will have the ability to amend returns to claim additional deductions and claim refunds or to correct in a current or future return when filed. Click here to learn more on this provision.

Tax Aspects of Government Provided Relief Loans

The CARES Act has many loans available for businesses. There are tax consequences that can follow depending on the loan program that a business participates in. The CARES Act has in some cases mitigated those potential negative consequences. Click here to learn more on this provision.

This is not a comprehensive review of any development or tax position. Do not rely on these brief summaries to take action without further reading into the underlying source documents and consultation into specific topics. It is not, and should not be construed as, accounting, legal, or written tax advice provided by Cherry Bekaert LLP to the reader. Your specific circumstances or needs, and other factors could affect the information contained herein. Please consult with your tax advisor before implementing any planning ideas or taking any actions based on discussion in this general explanation.


Provisions Applicable To Individuals

Additional Retirement Plan Distributions Available

The CARES Act facilitates payment of retirement plan funds to individuals affected by COVID-19. For these rules, an individual is affected by COVID-19 if the individual is diagnosed with COVID-19, has a spouse or dependent diagnosed with COVID-19 or experiences adverse financial conditions due to COVID-19 as a result of being quarantined, furloughed, laid off or having hours reduced, being unable to work due to lack of child care, or closing or reducing hours in a business the individual owns or operates.

During 2020, distributions from IRAs, employer retirement plans, 457(b) plans, and 403(b) annuities of up to $100,000 can be made to an individual affected by COVID-19 without a 10% additional tax. These distributions will be taxed ratably in 2020, 2021 and 2022, unless an individual elects otherwise. These amounts can also avoid taxation by being rolled back to an eligible retirement plan within three years.

These affected individuals can also borrow larger amounts from an employer’s retirement plan. Loans made after March 27, 2020, and before September 23, 2020 to these individuals can be $100,000 or the participant’s plan account balance, whichever is less. An affected individual with a loan outstanding on March 27, 2020, which requires payments between March 27 and December 31, 2020, can delay making those payments for one year. Subsequent payments will be adjusted for the delay of these payments and interest accruing during the delay.

Recovery Rebates for Individuals

The Act repurposes a section of the Internal Revenue Code that was used for rebates in 2001 and again in 2008. Section 6428 is newly named “2020 Recovery Rebates for Individuals”. The Act creates a tax credit for individual taxpayers against taxes generated in 2020 and authorizes an advance payment (“rebate”) of the credit to taxpayers immediately.

The 2020 credit is the sum of:

  • $1,200 for eligible individual taxpayers or $2,400 in case of joint return filers; and
  • $500 for each qualifying child of the taxpayer.

For this credit, a qualifying child follows the definitions used for the child tax credit in section 24(c). Children who are 17 and older do not qualify.

The credit is subject to limitations based on income and is phased out as a taxpayer’s adjusted gross income increases. The credit is reduced by 5% for income exceeding

  • $150,000 in the case of taxpayers filing a joint return
  • $112,500 in the case of a taxpayer filing as head of household or
  • $  75,000 in the case of all other individual taxpayers

The amount is completely phased out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children. For a typical family of four, the amount is completely phased out for those with adjusted gross incomes exceeding $218,000.

Example:  Married couple with two children and AGI of $190,000

Maximum credit: $2,400 + (2 x $500) = $3,400
AGI Phase out: ($190,000 – $150,000) x 5% = ($2,000)
Credit eligible for rebate $1,400

Nonresident alien individuals, individuals who are dependents of another taxpayer, estates and trusts, and taxpayers without valid Social Security numbers are not eligible for the credit.

The Act also provides for immediate advance payment of this credit to taxpayers. The IRS may use taxpayers’ 2019 returns, if filed, to determine eligibility for the credit and calculate an amount to pay. If 2019 returns are not yet filed, then the IRS may look to taxpayers’ 2018 returns for eligibility and calculation. If no returns are filed for either year, the IRS may look to Social Security payment information.

The actual credit will be calculated on the taxpayer’s 2020 Form 1040. Any advance rebate paid to the taxpayer will reduce the amount of credit in 2020, but not below -0-. In a win-win for taxpayers, the law is written to provide for a payment to taxpayers if the 2020 credit calculation exceeds the rebate already received by the taxpayer. And, if the actual 2020 credit is less than the rebate, the taxpayer is not required to pay back any of the excess cash received.

Example: Married couple with two children received rebate of $1,400 on May 15, 2020.

  • 2020 tax return AGI is $175,000.  Actual credit = $2,150 less rebate received $1,400 = $750.
    The additional credit computed on tax return and can be refunded.
  • 2020 tax return AGI is $225,000.  Actual credit = $-0- less rebate received $1,400 = -0-.
    Cannot reduce the credit below zero.  No re-payment of excess credit is required.

The IRS may issue rebate checks to taxpayers or make electronic deposits to bank accounts of record which taxpayers have authorized for tax refund deposits at any time in 2018, 2019 or more recently. The IRS is instructed to send a notice to the taxpayer within 15 days of distributing the rebate payment. The notice will indicate the amount of the payment and the method the IRS used to send the rebate to the taxpayer. The credit rebate expires at the end of 2020.

Planning Tip – Eligible taxpayers who have not yet filed their 2019 Form 1040 should consider if the rebate may be larger by filing their return as soon as possible, or by delaying filing so the calculation can be based on their 2018 tax return.

Allowance for partial above-the-line deduction for charitable contributions

The Act provides an opportunity for individual taxpayers claiming the standard deduction to deduct $300 of cash charitable contributions from adjusted gross income. Sometimes referred to as an “above-the-line” deduction.

Beginning in 2020, individual taxpayers who do not elect to itemize deductions can deduct up to $300 of cash contributions made to qualifying organizations. The new law excludes contributions to donor-advised funds or to certain private foundation supporting organizations. Excess contributions carried forward from prior years are also excluded from this provision.

Modification of limitations on charitable contributions during 2020

For tax year 2020, the Act modifies the usual limitations on deductions of charitable contributions by individuals and corporations. The Act temporarily lifts the provision that limits cash contribution deductions to 60% of adjusted gross income (AGI) for individuals and raises the cap to 100% of AGI. Similarly, the Act raises the 10%-of-income limit on deductions by corporations to 25% of income.

When an individual makes a qualified charitable contribution in 2020, such contribution may be allowed in full, but cannot exceed the taxpayer’s AGI. All other contribution deductions remain subject to the AGI limits and must be calculated and considered first before qualified contributions are considered under the raised AGI limit.

A corporation may deduct qualified charitable contributions in tax years beginning on or after January 1, 2020, up to 25% of its taxable income as modified by section 170(b). All other charitable contribution deductions remain subject to the 10%-of-income limit.

A qualified contribution is a cash contribution made during the 2020 calendar year to qualifying charitable organizations (i.e., 501(c)(3) and certain other charitable organizations), and the taxpayer elects to take advantage of these relaxed limits. Contributions to donor-advised funds or to certain private foundation supporting organizations are excluded.

This provision of the Act does not apply to partnerships and S corporations. The election to recognize these temporary limits will be made by the partner or S corporation shareholder that receives a pass through item on Schedule K -1 for a qualified contribution made by the partnership or S corporation.

The Act also temporarily raises the income limit for donations of food inventory by businesses during 2020 from 15% of taxable income to 25% of taxable income. See section170(e)(3)(C).

Modification of limitation on losses for taxpayers other than corporations

The Act modifies section 461(l), which was introduced in the Tax Cuts and Jobs Act of 2017 to limit the deduction of “excess business losses” by non-corporate taxpayers. Now, excess farm losses are no longer subject to limit and excess business losses are only limited for tax years 2021-2025.

The Act retroactively removes any limit to losses from farms and businesses for any tax year beginning after December 31, 2017. The reinstatement of deductions for excess farm losses is permanent. The reinstatement of deductions for excess business losses is temporary. Section 461(l) will again apply to business losses for tax years beginning after December 31, 2020, and before January 1, 2026.

Revised section 461(l) now allows any excess business loss to be treated as a “current year” net operating loss rather than a net operating loss at the “start of the next tax year”. Also, changes to this section clarify the calculation of an excess business loss by excluding the income from “performing services as an employee”, and changes clarify how capital gains and losses, net operating losses and the section 199A deduction are considered.

Provisions Applicable To Businesses

Employee Retention Credit

Qualified businesses and tax exempt organizations who do not avail themselves of the CARES SBA forgivable loans can claim a refundable payroll tax credit for up to 50% of qualified wages paid after March 12 and before January 1, 2021. The creditable wages are limited to $10,000 per employee, resulting in a maximum credit of $5,000. Wages include compensation paid to employees and health care costs paid for these workers.

Businesses and tax-exempt organizations can take advantage of this credit if their operations were suspended or partially suspended due to government orders limiting commerce, travel or group meetings due to COVID-19. In addition, businesses that had gross receipts during a quarter in 2020 that were less than 50% of gross receipts for the same quarter in 2019 can claim the credit for each quarter until the quarter following the quarter in which gross receipts are more than 80% of gross receipts for the same quarter in 2019. The credit is not available to governments.

For employers with more than 100 full-time employees, creditable wages are those paid to employees who were not providing services to the employer as a result of a business suspension or the specified decline in gross receipts. These wages cannot be in excess of the wages paid for working during an equivalent period during the 30 days before the suspension or decline in gross receipts and cannot include amounts paid for mandated FMLA or sick pay leave.

For employers with 100 or fewer full-time employees, whose operations were suspended or partially suspended due to government orders limiting commerce, travel or group meetings due to COVID-19, creditable wages are all wages paid to employees during the suspension period. For employers with 100 or fewer full-time employees who are entitled to the credit as a result of a decline in gross revenues, the creditable wages are those paid to employees beginning with the quarter in which gross receipts are less than 50% of gross receipts for the same quarter in 2019 and ending in the quarter following the quarter in which gross receipts are more than 80% of gross receipts for the same quarter in 2019.

For these rules, a full-time employee is one who is working at least 30 hours per week or 130 hours per month. An employer includes the entire controlled group of entities, including partnerships and corporations and using a 50% ownership test, affiliated service groups and organizations providing management functions to other organizations.

Deferral of Employer payroll taxes

The due date for the employer share of employment tax on OASDI wages (6.2% of wages up to $137,700 for 2020) due on or after March 27, 2020, and before January 1, 2021 is delayed. One half of these taxes will be due in 2021 and the other half will be due in 2022. Fifty percent of self-employment taxes are subject to the same delayed payment rule. If a third party (e.g., a professional employer organization or PEO) is responsible for these taxes, an employer needs to direct that person not to pay these amounts and the employer then assumes sole responsibility for the payment. Employers who have SBA loans forgiven cannot take advantage of this deferral.

Changes to Mandated Paid Leave

Because an individual must be employed to take advantage of the new mandated paid leave provisions, an employee who was laid off on March 1, 2020 or later and who worked for the employer at least 30 days of the 60 days prior to being laid off, can be rehired and becomes eligible for the mandated leave. In addition, the Department of Labor has made clear that mandated paid FMLA is available even if an employee works a partial workweek. Finally, the CARES Act makes clear that an employer can pay more than the wage amounts for which a payroll credit can be claimed and claim a tax credit only for the amount mandated to be paid.

Employer Payment of Employee Student Loans

After March 27, 2020, and before January 1, 2021, an employer can pay $5,250 of the principal and interest on an employee’s education loans, without the amounts being taxable to the employee. These payments can either be made directly to the lender or reimbursed to an employee. The loan must be the obligation of the employee and for the employee’s education or that of a spouse or dependent. The loan had to be for education of a student carrying at least a one-half full-time course load. An employee benefiting from a nontaxable loan repayment can also receive up to $5,250 in educational assistance during 2020.

Changes to NOLS

The CARES Act changed the treatment of NOLs that are generated in tax years 2018, 2019 and 2020. After the Tax Cuts and Jobs Act, NOLs generated in those years could only be used as a carryforward and the losses could only offset 80% of the taxable income in the year they were used. The CARES Act changed these rules.

Now the losses for 2018, 2019 and 2020 can be carried back up to five years. This will allow for an immediate claim for refund for taxpayers who had taxable income during the carryback period. Additionally, the limitation of only being able to offset 80% of taxable income has been removed.

For fiscal-year-end taxpayers that had a loss for their fiscal year ended in 2018 and may have generated an NOL but waived their carryback period, the CARES Act provides some relief. Those taxpayers now have 120 days from the date of enactment (July 27, 2020) in which to file a carryback claim and revoke that election. These NOLs will be subject to the prior laws two-year carryback rules and not the five-year carryback period under the CARES Act.

For taxpayers who were subject to a section 965 inclusion in any of the carryback years, they can elect to skip that year for purposes of the NOL carryback period. The carryback provision will need to be closely reviewed for any year in which there is a section 965 inclusion amount.

The taxpayer may elect to forego the carryback period entirely. To forego the carryback period years beginning in 2018 and 2019, the taxpayer would make that election on the tax return for the first year ending after the date of enactment. For calendar-year taxpayers this election would be made on the 2020 income tax returns.

Planning Note: Any taxpayer with a loss in 2018 should review the five prior years’ returns for a refund opportunity. Any refund claim could be filed immediately on Forms 1040X or 1120X. If a taxpayer has or is expecting a loss on a 2019 return, they should review the prior five years to determine whether there is a refund opportunity. If a refund opportunity exists, that refund claim can be filed on Forms 1045 or 1139 in many circumstances. The advantage of filing a Form 1045 or 1139 over a Form 1040 X or 1120X is that a Form 1045 or 1139 is required to be processed within 90 days by the IRS. Taxpayers should consider accelerating the filing of the 2019 income tax returns if it is expected to generate a loss that could generate a refund on a carryback claim.

Non-CARES Act Planning Note: As a reminder, if a corporation determines that it has overpaid its 2019 federal income tax, it may be entitled to claim a refund of that excess before it actually files its tax return. Corporate taxpayers can file Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, to generate this refund. The refund amount must exceed 10% of the estimated tax liability. An advantage of this form is that the IRS is required to act on it with 45 days. However, this claim must be filed by 15th day of the 4th month after the year end. For calendar year taxpayers this would be April 15th. This due date is NOT postponed by IRS Notice 2020-18. (See IRS FAQ 23).

Changes to AMT Credit refunds

The Tax Cuts and Jobs Act eliminated AMT tax for corporate taxpayers’ tax years after 2017. Taxpayers were eligible to offset their income tax liability by the AMT and receive a refund of 50% of the excess for the years 2018 – 2020 with any remaining amount refunded in 2021. The CARES Act changed these rules to allow a refund of any excess credits immediately in 2019. There is also an election that can be made to have all the credit refunded as part of the 2018 tax return. In order to make this election the taxpayer can file a Form 1139 to claim the refund. An advantage of filing a Form 1139 is that a Form 1139 is required to be processed within 90 days by the IRS.

Planning Note: Any taxpayer with an AMT credit carryover into 2019 should immediately review their situation to determine whether they would like to claim the remaining excess AMT credit on the 2019 income tax return when filed or they would like to make an election to file and claim on the 2018 tax return by filing a Form 1139.

Changes to limitations on deductibility of business interest expense

The CARES Act changed the treatment of business interest expense that is incurred in tax years 2019 and 2020. The Tax Cuts and Jobs Act of 2017 imposed a new limitation on the deductibility of business interest expense in tax years beginning after December 31, 2017. In general, taxpayers can deduct no more than the limit under the statute, which is 30% of their adjusted taxable income (“ATI”) plus 100% of business interest income (“BII”). Any excess is carried over to the subsequent tax year, and subjected to the same limitation; any disallowed excess business interest expense (“EBIE”) may be carried forward indefinitely. Furthermore, any EBIE of partnerships is passed through to the partners and reduces the adjusted basis of their partnership interest; the partners must carry over their respective share of EBIE to the next tax year, and may generally only treat such EBIE carried over as “paid or accrued” to the extent that the partnership that generated such EBIE generates sufficient excess taxable income (“ETI”, which is generally going to be the portion of ATI that hasn’t been utilized to deduct BIE at the partnership level). The CARES act temporarily modifies these rules for 2019 and 2020.

For tax years beginning in 2019 and 2020, the limit under the statute has been increased to 50% of ATI plus 100% of BII, unless a taxpayer specifically elects to not have this provision apply. However, this provision does not apply to partnerships for tax years beginning in 2019, but only for tax years beginning in 2020. Furthermore, all taxpayers can elect to substitute their 2019 ATI for their current ATI with respect to tax years beginning in 2020, to the extent that doing so allows them to deduct more BIE in 2020.

For partnerships, any disallowed EBIE that passes through to the partners for partnership tax years beginning in 2019 is carried forward by the partners to 2020; however, the CARES Act modifies the rule for 2020 and allows partners to deduct 50% of such EBIE without being subject to limitations. The remaining 50% of such 2019 EBIE is subject to the normal limitation and cannot be treated as paid or accrued until the partnership that allocated it to a partner allocates sufficient ETI or BII to such partner to absorb such EBIE carried over by such partner. Partners may also elect to not have this provision apply, and instead may subject 100% of such 2019 EBIE carried over to the normal limitation.

Planning Note: Any taxpayer (other than partnerships) with disallowed excess business interest expense should review their 2019 tax returns (if previously filed) to determine if more BIE can be deducted, and, if so, consider amending or superseding their previously filed tax returns. Taxpayers should consider accelerating the filing of the 2019 income tax returns if it is expected to reduce 2019 tax liability, or to generate a loss that could generate a refund on a carryback claim.

Changes to depreciation for qualified improvement property

Qualified Improvement Property (QIP) is defined as an improvement to the interior portion of nonresidential real property placed in service at any date after the building itself has been placed in service. It specifically excludes improvements to enlarge a building, improvements to elevators, escalators and any internal structural framework. This definition is much broader than the older definitions of Qualified Leasehold Improvement Property, Qualified Restaurant Property and Qualified Retail Improvement Property. Due to errors in the Tax Cuts and Jobs Act, this property was generally considered to be depreciable over 39 years starting after January 1, 2018. This was less beneficial than under prior law.

The CARES Act has corrected this error. This property is now eligible to be depreciated over 15 years and is also eligible for 100% bonus depreciation. These changes are retroactive to any property that was impacted by the Tax Cuts and Jobs Act and placed in service after January 1, 2018.

For taxpayers that have filed 2018 and 2019 tax returns using the longer class life with no bonus depreciation taken, the class life can be corrected, and the cumulative difference in depreciation expense can now be claimed.

There are several ways to claim this lost depreciation and the deduction associated with QIP previously capitalized needs to be analyzed in conjunction with additional provisions in the CARES Act, such as the treatment of net operating losses, to allow your business to maximize increased cash flow.

Tax Aspects of Government Provided Relief Loans

As a result of the CARES Act, the SBA is offering certain small business loans that will be eligible for forgiveness if used for certain expenses. The CARES Act specifically excludes from income the forgiveness of the loan. This provision provides a double benefit in that the expenses that generated the forgiveness are deductible yet the funds used to pay the expenses, the loans, do not create income.

Additionally, in some circumstances the government will provide grants to certain businesses. The CARES Act does not discuss the tax treatment of these grants. Therefore the normal tax rules would apply and these grants would generally be considered taxable income to the taxpayer receiving them.

In some circumstances the government may receive warrants, stock options, common or preferred stock and or other equity in exchange for certain loans or benefits under the CARES act. The CARES Act specifically requires the IRS to provide regulations or guidance to ensure that any such grant of equity to the government does not result in an ownership change under section 382 to limit the NOLs available.