Division B of the Coronavirus Aid, Relief, and Economic Security (CARES) Act—Relief for Individuals, Families, and Businesses (R46279, Version 1)

Summary

A Congressional Research Service report, R46279 (Version 1), dated March 20, 2020, coordinated by Molly F. Sherlock with other analysts, on Division B of the CARES Act (S. 3548) as introduced in the Senate on March 19, 2020. Its Table 1 lists the tax provisions: 2020 recovery rebates of up to $1,200 ($2,400 for married joint filers) plus $500 per child, phasing out at 5% of adjusted gross income above $75,000 ($150,000 for joint returns); a filing deadline moved from April 15, 2020 to July 15, 2020; penalty-free retirement distributions up to $100,000; an above-the-line charitable deduction of up to $300; deferral of the employer share of Social Security payroll tax in installments, the second by December 31, 2022; and carrybacks for net operating losses from 2018, 2019 and 2020. It also notes the laws already enacted, P.L. 116-123 and P.L. 116-127.

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Division B of the Coronavirus Aid, Relief, and
Economic Security (CARES) Act—Relief for
Individuals, Families, and Businesses

Molly F. Sherlock, Coordinator
Specialist in Public Finance

Margot L. Crandall-Hollick
Acting Section Research Manager

Grant A. Driessen
Analyst in Public Finance

Jane G. Gravelle
Senior Specialist in Economic Policy

Donald J. Marples
Specialist in Public Finance

March 20, 2020

Congressional Research Service
7-....
www.crs.gov
R46279
Division B – Relief for Individuals, Families, and Businesses of the CARES Act

ongress is considering a number of proposals that seek to mitigate the economic effects of

C the COVID-19 pandemic. One such proposal, the Coronavirus Aid, Relief, and Economic
Security (CARES) Act (S. 3548), was introduced in the Senate on March 19, 2020.
Division B of S. 3548 includes tax relief for individuals and businesses, including
 a one-time rebate to taxpayers;
 a delay of the individual tax filing deadline for tax year 2019;
 modification of the tax treatment of certain retirement fund withdrawals and
charitable contributions;
 a delay of employer payroll taxes and taxes paid by certain corporations; and
 a variety of changes to the tax treatment of business income and net operating
losses.
This is the latest in a series of legislative packages addressing the COVID-19 pandemic. Two bills
have already been enacted into law: the Coronavirus Preparedness and Response Supplemental
Appropriations Act, 2020 (P.L. 116-123) and the Families First Coronavirus Response Act (P.L.
116-127).
This report briefly summarizes the major provisions in Division B of S. 3548 (Table 1).1 Links to
CRS resources that offer additional information are provided. Provision summaries reflect the
language in S. 3548 as introduced; legislative discussions concerning S. 3548 and other stimulus
proposals are ongoing.

1 Other tax-related provisions included in other divisions of the CARES Act, and not discussed in this report, include

changes that would temporarily suspend excise taxes related to aviation; provide a temporary tax exemption for certain
telehealth services; temporarily include certain over-the-counter medical costs as qualified medical expenses for tax
purposes; extend the sequestration on direct spending by one year, to 2030; and temporarily provide advance refunding
of payroll tax credits for sick leave and paid family leave. For more on the sick and family leave payroll tax credits, see
CRS Insight IN11243, Tax Credit for Paid Sick and Family Leave in the Families First Coronavirus Response Act
(H.R. 6201) (Updated), by Molly F. Sherlock.

Congressional Research Service 1
Division B – Relief for Individuals, Families, and Businesses of the CARES Act

Table 1. Provisions in Division B of the CARES Act (S. 3548)
Provision Description CRS Resources

Title I—Rebates and Other Individual Provisions

2020 recovery Credit against 2020 income taxes, but For more, see
rebates for advanced, generally based on 2018 income  CRS Insight IN11255, COVID-19
individuals tax returns. and Stimulus Payments to
Credit equals the greater of Individuals: How Did the 2008
(1) taxpayer’s net income tax liability up to Recovery Rebates Work?, by
$1,200 ($2,400 for married joint filers). Net Margot L. Crandall-Hollick.
income tax liability is income tax liability  CRS Insight IN11247, COVID-19
before the child tax credit and refundable tax and Stimulus Payments to
credits (like the EITC); or Individuals: Considerations on
(2) $600 ($1,200 for married joint filers) if Using Advanced Refundable Credits
the taxpayer has qualifying income. To have as Economic Stimulus, by Margot
qualifying income, taxpayer must have either L. Crandall-Hollick.
(a) at least $2,500 in total of earned income,  CRS Insight IN11256, COVID-19
social security income, or veterans’ benefits, and Direct Payments to Individuals:
or (b) gross income above the taxpayer’s Historical Precedents, by Gene
standard deduction and $1 of net income tax Falk.
liability.
 CRS Insight IN11234, Tax Cuts
Taxpayers eligible for the credit can also as Fiscal Stimulus: Comparing a
receive $500 for each child eligible for the Payroll Tax Cut to a One-Time Tax
child credit. Rebate, by Molly F. Sherlock and
The total credit phases out at a rate of 5% of Donald J. Marples.
adjusted gross income (AGI) above $75,000  CRS Report RS21126, Tax Cuts
($150,000 for married joint returns). and Economic Stimulus: How
All individuals must have social security Effective Are the Alternatives?, by
numbers. Jane G. Gravelle.
Taxpayers must have filed a 2018 return (or
file a 2019 return if they did not file a 2018
return) in order to get a rebate in 2020.
Otherwise, it can be claimed on a 2020
income tax return.
Delay of certain Tax filing deadline extended from April 15, For more on IRS administrative relief
deadlines 2020, to July 15, 2020, to align with the for tax filing deadlines following
extended payment deadline.a Allows disasters, see
individuals required to make estimated tax  CRS Report R45864, Tax Policy
payments to postpone such payments until and Disaster Recovery, by Molly F.
October 15, 2020. Sherlock and Jennifer Teefy.
Special rules for use For retirement plan distributions, the For more on disaster-related special
of retirement funds provision provides an exception to the 10% retirement fund access, see
early withdrawal penalty for distributions up  CRS Report R45864, Tax Policy
to $100,000 for coronavirus-related and Disaster Recovery, by Molly F.
purposes. Income from such distributions Sherlock and Jennifer Teefy.
would be recognized over three years, and
taxpayers can recontribute funds to an  CRS In Focus IF11447, COVID-
eligible retirement plan within three years 19: Social Insurance and Other
without regard to the year’s contribution Income-Support Options for Those
cap. Loan limits from retirement plans are Unable to Work, coordinated by
increased from $50,000 to $100,000 and Laura Haltzel.
repayment deadline is delayed.

Congressional Research Service 2
Division B – Relief for Individuals, Families, and Businesses of the CARES Act

Provision Description CRS Resources

Allowance of partial An above-the-line deduction for cash For more on the tax treatment of
above-the-line contributions of up to $300 is made available charitable contributions, see
deduction for for taxpayers not itemizing deductions. This  CRS Report R45922, Tax Issues
charitable deduction would be allowed to taxpayers Relating to Charitable Contributions
contributions who do not itemize deductions. and Organizations, by Jane G.
Gravelle, Donald J. Marples, and
Molly F. Sherlock.
 CRS In Focus IF11022, The
Charitable Deduction for
Individuals, by Margot L.
Crandall-Hollick and Molly F.
Sherlock.
Modification of Income limits apply to both individual and For more on disaster-related changes
limitations on charitable contribution deductions. This in charitable giving limits, see
charitable provision would suspend the 50% of AGI  CRS Report R45864, Tax Policy
contributions during limit on cash contributions for individuals for and Disaster Recovery, by Molly F.
2020 2020. The corporate deduction limit would Sherlock and Jennifer Teefy.
be increased from 10% of taxable income to
25% for cash contributions. The limit on the
deduction of food inventory would be For more on the tax treatment of
increased from 15% to 25%. The increased charitable contributions, see
limits do not apply to contributions to  CRS Report R45922, Tax Issues
private foundations and donor-advised funds. Relating to Charitable Contributions
and Organizations, by Jane G.
Gravelle, Donald J. Marples, and
Molly F. Sherlock.
 CRS In Focus IF11022, The
Charitable Deduction for
Individuals, by Margot L.
Crandall-Hollick and Molly F.
Sherlock.

Title II—Business Provisions

Delay of estimated Corporations would be allowed to postpone
tax payments for estimated tax payments to October 15,
corporations 2020.
Delay of payment of Employers and self-employed individuals For more, see
employer payroll would be able to defer, or postpone, the  CRS Insight IN11260, COVID-19
taxes employer share of the Social Security payroll Economic Stimulus: Business Payroll
tax. Deferred tax liability would be paid in Tax Cuts, by Molly F. Sherlock
two installments: one due by December 31, and Donald J. Marples.
2021, and the second by December 31,
2022. The Social Security trust funds would
not be affected.
Modifications for net The provision would allow carrybacks for up For more, see
operating losses to five years for net operating losses (NOLs)  CRS Insight IN11240, COVID-19:
recorded in tax years 2018, 2019, and 2020. Potential Role of Net Operating
NOL carryback capabilities were repealed by Loss (NOL) Carrybacks in
the 2017 tax revision (P.L. 115-97), and were Addressing the Economic Effects,
previously allowed for up to two years. This by Mark P. Keightley.
provision would also temporarily lift the
income limitation applicable to the corporate
income tax treatment of NOLs under
current law.

Congressional Research Service 3
Division B – Relief for Individuals, Families, and Businesses of the CARES Act

Provision Description CRS Resources

Modification of This provision allows taxpayers not subject For more, see
limitation on losses to the corporate income tax that incur  CRS Insight IN11240, COVID-19:
for taxpayers other NOLs, including pass-through businesses and Potential Role of Net Operating
than corporations sole proprietorships, to receive the Loss (NOL) Carrybacks in
temporary NOL carryback capabilities Addressing the Economic Effects,
provided to corporations, as described by Mark P. Keightley.
above.
Modification of credit The corporate alternative minimum tax For more on the corporate AMT
for prior year (AMT) was repealed by the 2017 tax before its repeal, see
minimum tax liability revision (P.L. 115-97). Corporations having  CRS In Focus IF10705, Tax
of corporations AMT credits (for prior year AMT payments) Reform: The Alternative Minimum
were allowed to claim the credits against Tax, by Donald J. Marples.
regular tax liability for tax years through
2021. This provision makes these credits
refundable.
Modification of The 2017 tax revision (P.L. 115-97) reduced For more, see
limitation on business the limit on the deduction for net interest  CRS Report R45186, Issues in
interest from 50% to 30% of adjusted taxable income International Corporate Taxation:
(income before taxes, interest deductions, The 2017 Revision (P.L. 115-97),
and depreciation, amortization or depletion by Jane G. Gravelle and Donald
deductions). P.L. 115-97 also eliminated the J. Marples.
rule that restricted net interest deduction
limits to firms with a debt-to-equity ratio
above 1.5. These revisions were adopted, in
part, to reduce profit-shifting by
multinational corporations (by borrowing in
the United States). This provision increases
the limit to 50% for 2019 and 2020.
Technical The 2017 tax revision (P.L. 115-97) For more, see
amendments increased the period for deducting the cost  CRS In Focus IF11187, Qualified
regarding qualified of qualified improvement property Improvement Property and the
improvement (leasehold, restaurant, and retail property 2017 Tax Revision (P.L. 115-97),
property improvements) from 15 years to 39 years. by Gary Guenther.
This change was apparently a technical error
that also prevented these investments from
being expensed immediately (sometimes
referred to as bonus depreciation). This
provision allows these investments to be
expensed.
Installments not to As part of the transition to a new For more, see
prevent credit or international tax regime under the 2017 tax  CRS Report R45186, Issues in
refund of revision (P.L. 115-97), firms were required International Corporate Taxation:
overpayments or to pay taxes on their prior untaxed foreign The 2017 Revision (P.L. 115-97),
increase estimated earnings (the repatriation tax). Firms could by Jane G. Gravelle and Donald
taxes elect to pay these taxes in eight annual J. Marples.
installments. Due to what was apparently a
technical error, firms that overpaid their
regular taxes in 2017 could not receive a
refund if they owed taxes on repatriations.
This provision allows firms to receive
refunds for 2017.

Congressional Research Service 4
Division B – Relief for Individuals, Families, and Businesses of the CARES Act

Restoration of The 2017 tax revision (P.L. 115-97) treats For more, see
limitation on stock owned by a foreign person as  CRS Report R45186, Issues in
downward attributable to a U.S. entity owned by the International Corporate Taxation:
attribution of stock foreign person (“downward attribution”). As The 2017 Revision (P.L. 115-97),
ownership in applying a result, stock owned by a foreign person by Jane G. Gravelle and Donald
constructive may generally be attributed to (1) a U.S. J. Marples.
ownership rules corporation, 10% of the value of the stock of
which is owned, directly or indirectly, by the
foreign person; (2) a U.S. partnership in
which the foreign person is a partner; and
(3) certain U.S. trusts if the foreign person is
a beneficiary or, in certain circumstances, a
grantor or a substantial owner. Downward
attribution rules can result in additional tax
to the U.S. entity under rules taxing certain
income of controlled foreign corporations.
This provision limits the application of the
downward application rules to a U.S.
corporation owning, directly or indirectly,
50% of the value of stock.

Source: CRS analysis of the CARES Act (S. 3548, as Introduced).
a. In guidance released on March 18, 2020, the U.S. Department of the Treasury announced that the tax
payment deadline had been extended from April 15, 2020, to July 15, 2020. This guidance did not extend
the April 15, 2020, filing deadline. See the U.S. Department of the Treasury’s March 18, 2020, press release,
“Treasury and IRS Issue Guidance on Deferring Tax Payments Due to COVID-19 Outbreak,” at
https://home.treasury.gov/news/press-releases/sm948. Subsequently, the Treasury announced via tweet that
the tax filing deadline would also be moved to July 15, 2020.

Author Contact Information

Molly F. Sherlock, Coordinator Jane G. Gravelle
Specialist in Public Finance Senior Specialist in Economic Policy
-redacted-@crs.loc.gov , 7-.... -redacted-@crs.loc.gov, 7-....
Margot L. Crandall-Hollick Donald J. Marples
Acting Section Research Manager Specialist in Public Finance
-redacted-@crs.loc.gov , 7-.... -redacted-@crs.loc.gov, 7-....
Grant A. Driessen
Analyst in Public Finance
-redacted-@crs.loc.gov, 7-....

Congressional Research Service R46279 · VERSION 1 · NEW 5
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